As I write this letter the world is still going through an unprecedented health crisisbut showing signs of a sustainable recovery from the global pandemic. The environment ofvolatility and uncertainty continues to impact our day-to-day lives and the way we conductbusiness. Our top priority during these times was the safety of our workforce and toachieve that we have implemented various safety guidelines and protocols to ensure theirwell-being.
The fiscal year 2020-21 started on a subdued note with the outbreak of Covid-19 aroundthe world and its subsequent impact on the global economy. Most nations had implementedstrict lockdown measures and as a result world economic output contracted by 3.3 % in2020 as compared to growth of 2.8% in the previous year. However governments and centralbanks of the major economies worked in tandem to ensure both stability and sustainabilityof their economies by introducing accommodating fiscal and monetary policies. The centralbanks started lowering interest rates to ease monetary policies ensuring liquidity in themarkets. These policy measures had a positive impact on global economies and along withthe subsequent relaxation in lockdown restrictions resulted in consumer demand andspending continuing to increase steadily.
India too was impacted by this health crisis and the first nationwide lockdown wasannounced in March 2020 in an attempt to curb its further outbreak. Business activitieswere completely halted and this once in a century like an event resulted in a sharpdecline in demand for all types of goods and services except for essential goods andservices. In such economic conditions overall GDP unsurprisingly contracted by 8.0 % in2020 compared to growth of 4.0% in 2019. The swift actions on the part of the Governmentof India and the RBI ensured an appropriate economic response.
The tobacco industry too faced pressure as farmers were left with high stockpiles oftobacco leaf due to sudden cancellation of auctions and the unavailability of buyers. Inaddition the shift in consumer demand towards essential products and the operatingrestrictions of pandemic together contributed to weaker demand for tobacco products. Therecovery in consumer demand post easing of lockdowns provided the industry and farmers anopportunity to resume their business operations. We are cautiously optimistic of a gradualrecovery in tobacco related products demand in the near term.
In these market conditions I am satisfiedwith the Company's stable performance duringthe year. The financial performance was most impacted in first half of the year asfactories were temporarily closed and demand also declined with the restriction on publicmovement. With the gradual reopening of the economy in the second half of the year theCompany was able to recover its sales and post resilient results in the subsequentquarters. Domestic cigarette volume declined by 19.8% during the year. While ourinternational business remained flat as compared to last year although exports ofunmanufactured tobacco and cut tobacco picked up from Q2 onwards. Our 24Seven conveniencestores declined 13.5% in gross sales due to closure of stores and lower footfall in thefirst half of the year contributing 9.6% to total net sales. As a part of our corestrategy we remained focused and committed to enhancing operational efficiency at thestore level to deliver strong growth and an increasing financial contribution to theCompany. The total number of stores was 93 at the end of March 2021. In summary 24Sevenclosed the year on a stronger note and on a promising growth trajectory. As anorganization we continue to remain fully committed in complying with the regulatoryrequirements ensuring quality products best processes and practices and undertakingvarious CSR initiatives to ensure the welfare of tobacco farmers and their communities. Weare a people-oriented Company and therefore I am proud of the recognition that GodfreyPhillips has been accorded as one of India's Best Companies to Work For thirdyear in a row. In conclusion I would like to thank all our employees for their dedicationand commitment in maintaining business continuity during the most challenging of timesthe senior management for their strategic vision and unwavering leadership during achallenging year and to all our customers channel partners the tobacco farmingcommunity distributors and shareholders for their continuous support and confidence inour company.
With best wishes and warm regards R. A. Shah
The financial year 2020-21 was one of the most challenging years with the outbreak ofthe Covid-19 pandemic resulting in the widespread shutdown of economic and communityactivities around the world and the subsequent waves of the coronavirus continue to have adevastating impact on the society. However on a positive note the ongoing vaccinationdrive and stricter adherence to Covid-19 protocols have enabled a steady economic recoveryin several countries including India.
For the Company through the year the top priority was to ensure the wellbeing of ouremployees. It is our belief that a high performing organisation is defined by empatheticmanagement of people and talent. It is this unwavering commitment to the PeopleFirst' philosophy and this value at the core of all our business strategy which hashelped Company to overcome the two waves of pandemic.
The leadership remained committed to this employee centric vision even during pandemic;the validation of this humanistic way of managing business has come with the recognitionof your Company as India's Best Companies to Work For' for third consecutive year.This fundamental value has also inspired business resilience. Despite the challengingeconomic environment your Company delivered Gross Sales of Rs. 6408 Crore in the fiscalyear 2020-21 a decline of 10.3%. Of this the International Business Gross Sales were Rs597 Crore which remained flat as compared to last year. Several measures taken by theCompany to optimize the cost with a view to offset the effect of decline in top-lineresulted in a Net Profit of Rs. 357 Crore a decline of 8.0% over the last year. Overallthe business was clearly impacted by Covid-19 induced lockdowns and restrictions duringthe year but we continue to remain fully committed to creating long term value for ourshareholders. The Board of Directors was pleased to recommend the dividend of Rs. 24 pershare for the financial year which is same as paid for the last financial year.
The tobacco industry was one of the most impacted industries given the complete andpartial lockdown of factories disruptions in supply chains restrictions on publicmovement and the priority for essential products during the year. In line with thecigarette industry
Godfrey Phillips registered a decline of 19.8% in domestic cigarette volumes. Howeverthe Company has been able to deliver year on year growth in its major operating segment ofRegular Sized Filter Tipped (RSFT) cigarettes. Our chewing and confectionary businessGross Sales also declined to Rs. 121 Crore largely due to supply chain disruptions causedby the restrictions put in place by State authorities. The strategy of Godfrey Phillips inthis business area remains clear and consistent with a focus on the premium pan masalasegment. In line with this the Company also launched an innovative pan masala during theyear marketed as Pan Vilas Flavour Blast. We remain committed to enhance theprofitability of this business segment.
Godfrey Phillips operates the 24Seven convenience store chain with 93 stores innorthern part of India. During the year Gross Sales declined by 13.5% to Rs. 355 Croredue to lower footfall reduced operating days and hours amidst the Covid-19 pandemic. I ampleased that the stores serviced the consumers during the lockdown by providing all typesof essential products and we ensured minimum personal contact at the point of sale toenhance consumer and employee confidence. Our store expansion plans are currently on holdand we continue to implement a cost rationalization program to further improve store levelprofitability in near term. The Company has swiftly adapted to the new operatingenvironment with limited disruptions and the business has continued its long-term growthtrajectory while supporting the local communities in which we operate. Our dedicated CSRteam have provided aid with dry ration and distribution of safety kits in partnership withlocal bodies in addition to the long-term comprehensive community development programs wehave undertaken for marginalised tobacco farmers over the years.
Godfrey Phillips will continue to strengthen its core business of tobacco by launchingproducts in accordance with changing consumer preferences and expanding its productportfolio. The Company further aims to penetrate deeper into key geographies and expandingits distribution footprint through increased digitalization. The Company's 24Seven retailbusiness will continue to focus on meeting customer needs while delivering greaterconvenience value and quality.
Finally I am very proud of how the Godfrey Phillips leadership team has stayed focusedon the business and together delivered a relatively stable financial and operationalperformance this year. I would like to again acknowledge the efforts of each and every oneof our team members for their adaptability resilience and contribution during anexceptionally difficult year. Lastly I would like to thank all our consumers businesspartners distributors and shareholders for their continued support. With our clearstrategic direction Godfrey Phillips is well positioned to drive profitable growth in thecoming years.
Warm regards Bina Modi