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ShareGodrej Consumer Products Ltd is focusing on a strategy of investing in a smaller portfolio and has plans to grow its international and domestic businesses. Dalip Sehgal, managing director of the consumer goods firm talks about the company's plans and strategy.
What is the strategy that you are looking at?
The strategy is three fold; one is focusing on primarily three brands -- No. 1 in the soaps portfolio; Cinthol in soaps, deodorant and talcum powder, and Expert in hair care. We have 8-9 other brands but we will not put large sums of money behind them. Bulk of the advertising money will go towards the three brands. And whenever there is an opportunity, for example, in winter there is a brand called Ezee liquid detergent that sells a lot. So we will focus on it for 3-4 months. The idea is to have a smaller portfolio to invest. Secondly, the strategy is to focus on fewer innovations, clear and bigger innovations. And make sure that whichever innovation we put in the market, we support it. The other thing is increasing our reach in the rural areas. Our plan is to go up from 4,000 small towns to 8,000 in three years; and from 16,000 villages last year to 50,000 villages in three years. The strategy in rural regions is to focus on lower priced packs like Rs5 and Rs10, and the focus there will be No. 1 soaps, Rs 6 Cinthol soap, Rs5 Godrej Henna pack and Rs10 Godrej Expert sachets.
How much are the low-priced units contributing to your sales?
For our hair colour business, 70% of sales are through Rs10 sachets. For soaps, about 30-40% of our business comes from Rs5 and Rs10 price points. Our rural sales contribution was about 38% in March, now it is 42% and our sense is that about 50% of our business will come from the rural markets in three years.
How is talcum powder as a category doing for you?
Talcum powder as a category is stagnant because deodorant is growing faster, showing 30-40% growth, while talc has marginal growth. We have a presence in talcum powder with Cinthol. Our focus right now is to build the brand in deodorant and let that drive the talc business. We have done the Hrithik Roshan campaign for Cinthol.
Any strategy on highlighting brands region wise?
All the three brands -- No. 1, Cinthol and Expert -- are quite popular. Expert, of course, is national. If you look at No. 1 it is very strong in North, West and parts of South. Cinthol is very strong in Tamil Nadu, Andhra Pradesh and Maharashtra. So in that sense most of our investments are happening regionally. For No. 1, we are not advertising on a national scale. We are spending more money on regional scale, on-ground activity and behind the brands.
Are you looking at increasing your international presence organically?
We have two businesses in South Africa -- Rapidol and Kinky. Rapidol is the market leader in hair colour and Kinky is the lead player in hair extensions. Now one big opportunity for us is to organically expand these two businesses across Africa, because African hair is similar across countries. And there is also an opportunity for us to take these to different continents and other countries -- Bangladesh, Nepal and Pakistan.
What are your plans for Godrej Sara Lee and are you looking at buying Sara Lee's household care unit?
The joint venture still runs independently, 51% is owned by Sara Lee Corp while 49% is under Godrej Consumer Products. As far as Sara Lee is concerned, they are still looking at buyers for their household care business. We would be interested for sure but since these things haven't happened yet, it is difficult to comment on them. But, of course, we would have an interest because Good Knight is the market leader in the household care category.
Why is it taking so long?
Because of Sara Lee. Earlier they wanted to sell the entire business together. Internationally these things take time. Will it happen or not, I do not know.
Any particular plan for the Godrej SCA Hygiene business?
The Snuggies business is essentially a regional brand, selling in South (Kerala and Tamil Nadu). And we have taken over the balance stake from the joint venture that we had with SCA Hygiene to build it on our own. Diaper market is not very large in India; there are players like P&G and there are a lot of gray imports. The intention is to build it in the pockets of South. It is a very unique category; a consumer who gets into it gets out of it after three years. That makes the market even more difficult.
What is your outlook on commodity input price front?
I think oil prices have come off their peak. Last year, they was very high and dropped quite substantially during March-April. But by and large our outlook on palm oil, our key raw material, is that it will remain weak. Overall expectation is that prices will remain soft.
Now that Unilever is focusing on its mass-end soap brands and competing directly with you, how does the fight look like to you?
It is an acknowledgement. I don't think people buy brands only on one vector-- price; I think people buy brands on a bundle of benefits-- value, quality, imagery, the whole relationship that they build with a particular brand. Most players have cut costs by 20-25% from March; we have not taken any price hike in the first half of this fiscal. Aping another brand in the market will not help. Just like No. 1 cannot be a Lux. It would be stupid of No. 1 to be trying to be a Lux. Most of advertisements last year has film actresses saying, "Dus ka yeh, paanch ka woh" like it was some bus stop market'. This is a beauty-care market and not a 'bus-stop market'. But people are moving away from price-led advertising and realising that there are other factors that matter to the consumer.
What kind of savings are you aiming by consolidating your FMCG divisions?
We are using the common synergies of the units to deal with modern trade, distribution and rural markets. Earlier we had separate sales teams for each company, now there is a common team that deals with the modern trade. Huge costs will be saved through consolidation of warehouses. Where each company used 35 warehouses earlier, now all will be using only 32 warehouses collectively.
