As managing director of Godrej Consumer Products, A Mahendran believes that foreign direct investment (FDI) in multi-brand retail is not going to have any impact on traditional outlets that FMCG (fast-moving consumer goods) players depend on. In an interview with Shine Jacob, he discusses on the firm’s strategies, price rise and acquisition. Edited excerpts:
What sort of an input cost pressure are you facing In the backdrop of a weakening rupee versus dollar scenario? Input prices went up last year. It will impact all the players in the soap industry. But we will go for a price increase only with the industry. Just because there is a cost push, we will not go for it. we believe in price increases rather than adopting measures like weight reduction. But it will not happen just like that.
Last year you went on an acquisition drive. Are you looking for anything similar this year? What exactly is your focus of growth -- organic or inorganic? No, we are not looking for any acquisitions this year. Last year, we did a lot of them, this year we are looking more a kind of an integration of acquisitions that we have done. Organic growth is our focus. We are expecting an overall growth of more than 20 per cent. In the first and second quarters of this financial year also, we have grown more than 20 per cent. We expect to maintain the same growth rate in the coming quarters.
Do you have plans to introduce any new products that you acquired abroad to India? There are some plans to introduce some of the products that we have acquired abroad to India. When you are acquiring, you will get some good technologies also. The category in which we have acquired is hair colour and insecticides with some good technologies.
We will try and bring it, subject to the Indian market.
We are introducing an Argentinian hair colour technology in India, some time next year. We also want to introduce one of our products in India to Indonesia.
As an FMCG player, what is your take on the proposed FDI (foreign direct investment) in multi-brand retail? We market our brands through traditional outlets, which are the biggest in India. Nearly 95 per cent of all FMCG players sell their products through traditional outlets. Within that, there are some Indian companies like Reliance, RPG, Aditya Birla and Future Group. In India, the modern retail in India is only five per cent. What is the big deal, if in this small space of five per cent some multinationals also come in to do their modern retail. It is foolish to make a big issue out of it.
The country’s retail outlets total more roughly 9 million. The modern retail outlets today hardly total 3,000. So what do they mean by protesting against this? Even if allowance is given to multinationals, how many outlets can they start? It is not going to affect the macro outlets. The traditional outlets are growing by 10 per cent every year.
What is your organic growth strategy in the coming years? Introduction of new products is what we are looking at. If you ask about our single most organic strategy, I’d say It is to give new products to consumers across the three categories — premium, middle class and lower middle class. We would look to innovate and bring in new products in soaps, household insecticides and hair colour.
Generally we want to focus on three categories with a three by three strategy, focusing on Asia, Africa and Latin America. Our international business is only one-third of the total GCPL business. But both domestic and international business are growing at the same pace.
Do you think there is scope for e-commerce in the FMCG sectors, especially for players like you? I don’t think e-commerce has much future as far as FMCG players are concerned. This is mainly because of the extent of traditional outlets to the rural India, which is more than 8 million.