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Former Godrej Consumer Products MD launches new chocolate brand LuvIt

Ex-Godrej Consumer head Mahendran launches confectionery brand, to move into beverages soon; but experts say his main challenge would be distribution

T E Narasimhan  |  Chennai 

Close to two years after signing off as managing director of Godrej Consumer Products (GCPL), Arumugham Mahendran, 59, is back to his first love – building new businesses on his own. Mahendran-led Global Consumer Products (GCP) on Tuesday formally entered the FMCG space with the launch of a new chocolate brand ‘LuvIt’.

The brand will be pitted against some formidable names in the Rs 7,000 chocolate market in India, which is dominated by Mondelez’s Cadbury, Nestle’s KitKat and others. Mondelez has around 70 per cent share, while Nestle and the Ferrero Group have a share of 18 per cent and 8 per cent respectively.

Launched across nine variants, LuvIt is available at price points ranging from Rs 5 to Rs 45. The Rs 7,000 crore Indian chocolate market has been growing at a CAGR of over 20 per cent and with new players coming in, this number is expected to grow. The southern states account for almost 30 per cent of the national chocolate market and over 80 per cent of the southern market is concentrated in urban centers. Actor Siddharth who is the “chocolate-boy” of South India has been signed on as the brand ambassador.

Chocolates will, however, be just the beginning for GCP, which is backed by Goldman Sachs and Mitsui Global. There are plans to get into beverages, personal care and many other household products. The Bengalaru-based company has acquired ‘Cherio’ through which it is planning to make its footprint in beverages. Incidentally, Mahendran has brought the Cherio brand from GoodLife Industries, a company that was promoted by him way back in 1996.

“We are entering the FMCG space and will expand it further across other categories”, said Mahendran who built the brand GoodKnight, which was later acquired by Godrej.

Mahendran, who is the chairman and managing director of GCP, says LuvIt will be an umbrella brand under which there will also be a sub-brand. The company aims to capture white spaces in the confectionery and value added beverages categories, where innovation and brand creation has been lacking.

He added, brand names will vary across segments. “Brand cannot be universal, but a company can be,” said Mahendran, adding that Cherio will be an umbrella brand for beverages and will be launched in a few months. In a phased manner, the company is planning to launch packaged drinking water, health- based drinks and dairy-based flavoured milks. Mahendran did not rule out entering into ready-to-eat or cook products, including noodles, and is in the process of developing snacks.

By leveraging a combination of disruptive product innovation, large scale brand building, focused distribution infrastructure and a highly experience top team, Mahendran believes its right to ‘win is high’.

Harish Bijoor, CEO of Harish Bijoor Consults Inc, a private-label consulting firm that specialises in brand and business strategy, said that while the company has got an excellent and credible team, the challenge is distribution which is going to be a weakness. The question is how the company is going to establish its distribution muscle.

Mahendran doesn’t seem to too worried on this front as he has roped in quite a few big names, including Anuradha Narasimhan, who has joined as executive vice president - sales and marketing, from Britannia Industries where she was VP - Marketing . Kamal Agarwal has joined as EVP – Finance, HR and IT. His prior assignment was CFO, Indian Subcontinent, Ferrero Group.

Mahendran said GCP would leverage all three channels – traditional retailers including mom & pop shops, modern retail and e-commerce. Besides, the company will be on a par over the years with the market leaders when it comes to points of sale. For chocolates, the market leader has around 200,000 to 300,000 point of sales; for detergent, in south alone the required points of sale is around 600,000-700,000 and for fruit drinks and beverages, the number is around 400,000. Initially the company will have 75,000 retailers and will double the number in six months.

LuvIt Chocolates will be distributed and retailed across southern states through a network of 80 distributors. The products will be available across supermarkets, large and small grocers, general stores, bakeries and chemists.

GCP received Rs 315 crore in funding from Goldman Sachs and Mitsui last year and is targeting a revenue of around Rs 1,250 crore over the next five years. The three shareholders – Mahendran Holdings, Goldman Sachs and Mitsui Global – hold equal stakes in the company. Initially, the company will focus on southern markets and in two years aims to be a pan-India player, besides presence in West Asia, ASEAN and South Asian markets.

Mahendran doesn’t rule out acquisitions for faster growth. “We could look at inorganic opportunities across the categories, especially in the food and beverages,” he said, adding that in the immediate future the company may not raise money since it is well capitalised.

First Published: Tue, April 28 2015. 21:18 IST
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