GCPL to grow via new product lines

CNBC, Moneycontrol, 03 November 2014

Personal care company Godrej Consumer Products on Saturday reported a solid 20.3 percent jump in July-September quarter consolidated net profit at Rs 234.5 crore, as against Rs 195 crore in the corresponding quarter previous year.

Adi Godrej, Chairman, Godrej Group sees green shoots in home and personal care business, which improved to 4.5 percent compared to 3 percent quarter-on-quarter.

Backed by recent rise in dengue and malaria, Vivek Gambhir, MD, Godrej Consumer Products expects growth to resurge in terms of company’s household insecticides business, after they witnessed weak sales due to frail monsoon.

Furthermore, Godrej Consumer Products’ market share in insecticides business has augmented but with a slow growth attributable to company’s high base last year.

Going ahead, the FMCG major will continue to grow via newer variants of product lines, he adds.

Below is the verbatim transcript of Adi Godrej and Vivek Gambhir's interview:

Q: It’s been a slightly slow quarter in terms of certain segments for you. There has been a bit of a slowdown in the insecticides business, what was the reason for that and do you think that trend could continue for the next couple of quarters?

Godrej: The insecticides growth in this quarter was low and that is because the monsoon starts in July and August was pretty poor and whenever there is a poor monsoon mosquito infestation is low and we have seen this in the past also it came on a very strong monsoon last year when we had 24 percent growth in the insecticides business in the same quarter.

In September the insecticides growth picked up and we feel that now the growth in the insecticides industry will pickup but although we grew only 2 percent in the previous quarter, our growth was much higher than for the category as a whole. So, our market share has improved and we think we will pick up and the insecticides business will be back on track.

The other very important fact in our insecticide business is that Good knight fast card has done exceedingly well. It has gone to Rs 100 crore turnover in less than a year. So this is a very important SKU for increased penetration and increased growth in this category for us in the future.

Q: Even the soaps category has contracted a bit. There is an overall softness in the numbers; insecticide is more pronounced but the overall India business has also grown by just 7 percent. Is this a question of the India story or is it the question of greater competition?

Gambhir: If you look at our performance in both soap and hair colours, we have seen some very good growth. So in soap we had about 13 percent growth, which is much better than the previous quarters. In hair colours our growth was 9 percent and that entire growth was volume driven. What dragged our performance as Mr. Godrej was saying was much more the performance in the insecticides business because of the deficient monsoon and that is almost half of our business in India.

If you look at fast moving consumer goods (FMCG), what we are beginning to start seeing is some early signs of revival. If you look at the industry data in home and personal care, in Q1 the growth was about 3 percent. In Q2 that growth rate has inched up to about 4.5 percent. So while it is nowhere close to the potential of the Indian FMCG market, what is encouraging now is that the environmental indicators seem to be trending in the right direction and even within Q2 what we found was that while July and August were very weak, September was quite good.

Q: What would you estimate or target be for the full year?

Gambhir: We do not want to give any specific guidance but last year our business grew at about 15 percent in India. Our hope would be to at least get to close to that number this year as well.

Q: Coming back to the point about the slowdown in the insecticides business – it is very unfortunate that the rise of dengue and malaria incidence in the country, we have seen a big rise in the past one-two months. I guess that will help companies like yours quite a bit. Can you give us any indication of what the pick up in growth could look like in terms of quantum? Could it be 10 percent, could it be 15 percent and also how much has your market share improved to?

Godrej: We think we will grow very strongly in the household insecticides business during the second half because last year in the second half the growth was relatively lower and this year we expect a strong growth in the second half even as Vivek mentioned in September the growth has been good and as you rightly pointed out the incidence of dengue and malaria have increased and this will increase consumption of our products. So we expect second half growth to be much stronger than in the first half.

Q: Is the company looking to expand into newer segments?

Godrej: I do not think we will expand into totally new segments. We are expanding into newer products and adjacencies to our sector but if you ask me suddenly, will we get into toothpaste or something like that – no, not likely. We will stick to the areas we are strong in, we will move to adjacencies. We have built a strong business, for example in air fresheners and such expansions into adjacent areas we will look at.

Gambhir: Over the last two or three months we have launched two very interesting brands. One is a brand called Protekt in the health and wellness space and we have hand sanitisers, hand washes, mosquito sprays as part of that brand and last month we launched a new brand called B:Blunt which is a premium hair are and styling brand. It’s a salon inspired brand for consumers to prep style and transform their hair at home. Later on this week we will extend the Godrej No 1 platform and launch a face wash in the country. This face wash will have a very unique packaging. It will be the first multiuse sachet at a price point of Rs 10.