Godrej Consumer Products: Where science rocks

Godrej's growth has been driven by a stringent execution of the 3x3 strategy, ie, the desire to build a sizeable business in three geographies (Asia, Africa and Latin America) across three categories (personal care, home care and hair care). The idea is to leverage products in fast growing, similarly structured markets for the benefit of the overall company. The execution of this strategy has been a combination of organic growth and acquisitions (rather than joint ventures).

One of Godrej's strengths lies in its ability to question the status quo and reinvent itself despite a long and illustrious history of 118 years. This is very visible in the R&D division of GCPL. 

“About nine years ago, we started driving a project to challenge all assumptions that we had about our development processes and products,” points out Sunder Mahadeva, head of R&D. 

For example, all testing and validation processes were thoroughly analysed to see whether they are still relevant. “In some cases, we found that lengthy evaluation processes were inherited from the past, when ingredient quality was not uniform. Today, input material is clearly specified and such processes are no longer relevant. Taking them out greatly reduces our development time vs our competitors and increases our flexibility accordingly. In other cases, we asked if a product that had a particular active ingredient at 3 percent could also be made with only 2 percent active ingredient based on a better understanding of customer use cases. Again, such analysis allowed us to drive down cost,” he adds.

The process seems to work. The company was able to launch a number of blockbuster successes in the past. For example, the Argentinian business sold hair colouring cream in sachets. Godrej assumed that a similar product would be a great opportunity for a ‘mastige’ (mass prestige) application in India. “The leading hair colour cream player at that point had a non-sachet based hair care solution for around Rs 150; we could have come up with an offer around Rs 130. Rather than that, we decided to upgrade our existing hair colour powder customers who would spend Rs 15 per colouring to a cream-based product and aimed for a target price of Rs 30,” says Sunder.

Creating packaging with local suppliers was key in attaining this goal. Machines for filling the cream into the sachets were procured from local vendors at about one fourth of the cost of the imported machines in the Argentinian factory. Productivity in the factory was increased by reducing cycle time in half, from six to three hours. The standard wisdom was that ingredients for the cream had to be mixed hot and cooled down. The team experimented successfully with a 75 percent hot/25 percent cold mixture, which brought down cooling times without affecting product stability. Washing times were reduced by adding colour from the bottom of the mixer rather than from the top, reducing splash, a technique borrowed from the toothpaste making process. 

Target prices were met via a number of other process innovations, creating a new segment and feeding cost optimisation measures back to Argentina to improve business performance over there.

As the example shows, India's frugal champions master the art of market creation by catering to the world's underserved six billion customers, a formidable opportunity now and in the future.

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Dr Wilfried Aulbur is the managing partner at Roland Berger, and author of 'Riding the Tiger'

Above article is based on an extract from the book 'Riding the Tiger'