GCPL will go for up to 10 launches next year

Viveat Susan Pinto, Business Standard, 10 February 2015

Godrej Consumer Products Limited returned to double-digit sales growth across its three product categories of personal wash, hair colour and household insecticides for the three months ended December. This came after a long time, the managing director, Vivek Gambhir, tells Viveat Susan Pinto. The former Bain & Company partner, among the new consumer goods chief executives in India, explains what led to this performance. Excerpts:

What explains the growth in your three categories of operation?

I would pin it down to the recovery, notably, on the urban side. We were possibly the first consumer goods company to indicate that a recovery on the urban side was around the corner. We went out on a limb and said the second half of the current financial year would be better than the first half. We were also of view that this year could be better than the previous one. I think our results in the quarter have borne this out.

We had 11 per cent growth in soaps, 16 per cent in household insecticides and 10 per cent in hair colour. The latter, in particular, was all volume-led growth and that too on a high base. In soaps, we saw three-four per cent volume growth when the market in general has been lower. Household insecticides recovered after the slump in the previous quarter, which was on account of a delayed monsoon. In all, the December quarter numbers have been reasonably good.

What was the urban and rural sales growth?

In the December quarter, rural growth for us was 16 per cent and urban growth was 13 per cent. In the past, rural growth was at least eight percentage points more than urban. So, while rural was ahead of urban in the the December quarter, the pace of growth was not as sharp as before. This trend of a slower rural growth and a sharper urban growth will increase.

How are you poised to take advantage of this urban recovery?

If you look at our urban-rural sales skew, 73 per cent is urban and 27 per cent is rural. We stand to gain with our distribution strengths and product portfolio skewed towards the urban areas. But we are not ignoring rural altogether. Our push into rural will be there. Because our base is lower in rural, I think we should see decent growth coming out of rural, too. We continue to expand our direct reach across the country. We will also push more premium products across our three categories of operation.

Will you increase the number of launches as the environment improves?

Yes. Two years ago, we launched seven to eight products. That came down to five to six last year as the slowdown set in. We will get back to nine to 10 next year.
To answer your question: we will accelerate the pace of our launches and most of them will be in the premium parts of the home and personal care market.

Will you increase advertising and sales promotion expenditure as your launches move up?

We have kept advertising and sales promotion at around 10-12 per cent of sales. While advertising expenditure will not move up significantly, I expect promotional spending to increase.
Companies will have room to take it up with commodity prices being benign. So instead of cutting prices, I see more action on the sales promotions front.