Godrej Industries Ltd and Associated Companies (GILAC) aims to achieve sales of Rs 80,000 crore by 2021, an ambitious goal set by the Group two years ago to grow the turnover eightfold. Of this, Rs 35,000 crore is expected from Godrej Consumer Products Ltd (GCPL). Chief Strategy Officer Vivek Gambhir is designated to take the reins of GCPL as managing director in June. He talks to Abhineet Kumar about his plans for GCPL. Edited excerpts:
Godrej Industries set an ambitious target of reaching Rs 80,000 crore group turnover two years ago. How is it progressing to achieve that?
It is not a target; it is an objective and aspiration. We grew by about 21 per cent in the period from 2005 to 2010. We wanted to set the next hurdle or milestone for ourselves and we felt it is logical to have a target, which is aspirational in nature. It implies a CAGR (compounded annual growth rate) of 26 per cent.
We are trending in the low 30s right now. But in the first few years, you have to be over 30 because at some time, the base catches up to you. So we are technically ahead of track. However, growing on 26 per cent at a much larger portfolio is more challenging. You have to grow 30 per cent plus in the first few years. So even though you have lower growth at higher base, you achieve the target of 26 per cent.
What would be the contribution of Godrej Consumer Products (GCPL) in this and how do you plan to achieve it when you take the reins of the company in June?
GCPL’s aspiration is to be a Rs 30,000-35,000 crore turnover company by then, from Rs 4,851 crore 2011-12. GCPL is gradually making moves towards becoming an emerging markets multinational and it has been largely about two to three years that it has happened. We are at the point where over 40 per cent of our revenue is coming from outside India. So in that sense, we have been really able to establish a business in emerging markets outside India.
As India gets younger and disposable income of people increases, there is a huge internal shift going on in terms of how we participate. While we have a very strong presence in catering to the mass market, we also have a lot of opportunity in premiumisation of FMCG categories. So over the last 12 months, there are a lot of exciting innovations that have come in such as launch of air fragrances through brand ‘aer’, re-launch of Cinthol with a premium positioning and entry into creme segment in hair colour.
Is premiumisation going to be the single-largest theme for growth?
We will continue to become more innovative with a lot more cross pollination of products we acquired in emerging markets. So now our range of air freshners is based on technology from Stella, which is the brand from Megasari Makmur that we acquired in Indonesia. We launched hair crems in sachets in India based on technology from issue that we acquired in Argentina. We now launched home insecticides of the Good Night brand in Nigeria last month. We will continue to cross pollinate a lot more.
We launched Renew occasion hair colour brand in South Africa and that brand has already gained a 20 per cent market of the occasion hair colour in a year. That was again based on technology for hair colour in India tailored for occasion hair in South Africa. So, there will be far more synergy capture, far more harmonisation, far more cross pollination for products and categories across geographies.
What about inorganic growth, the company has so far favoured this route for growth?
We are completely comfortable with our current geographic foot print, so over the next three years, I do not expect us to enter any new geography inorganically. In our current geography, India included, if we find any interesting targets we are very open to it. But over the next two to three years at least, our bias is to consolidate our presence in existing foot print, drive that foot print to full potential and not necessarily open up any new frontier.
Which categories of your portfolio is expected to contribute the most?
GCPL’s biggest category is home insecticides. Within that, Good Knight and Hit are the two big brands. The second-largest category is personal wash and skin cleansing. Within that, Godrej No 1 and Cinthol are the two main brands. The third category is hair colour.
In terms of growth rate, we will probably see the highest growth rate in hair colour. But the base is also smaller there. The second highest growth is with insecticides. Third highest is skin cleansing with opportunity in premiumisation. With Cinthol, we entered the shower gel category.
What has fuelled the shift in the strategy from inorganic to organic, especially when your growth ambition is rather ambitious?
We are seeing so much growth in this footprint. Africa can be a big game changer for us. Indonesia has delivered very good performance. A lot more potential in Indonesia still exists. Indian portfolio continues to do exceptionally well. There is so much growth in India. We are not seeing any significant need to get into newer geography at least in the near future.
Singapore’s sovereign wealth fund Temasek invested Rs 685 crore a year ago. How has the company benefited from it?
Some of that has been used to pay down debt. We had borrowed money for prior acquisitions. We also have some obligations coming up. Our Darling acquisition in Africa was a phased acquisition. So some of the money will be used to pay the future phases of the Darling acquisition.
We generally like to keep very conservative debt to equity ratio. We are okay going up to 1.0 debt equity ratio. Right now, it is 0.5 and that is very good situation to be in.
