Unfazed by competition from Reliance Industries, expect broad-based growth in FY24; says Godrej Consumer
Godrej Consumer Products Ltd is unfazed by the prospect of competition from Reliance's entry into the FMCG sector, having seen multiple disruptions, including the high-profile entry of Baba Ramdev's Patanjali, according to a top company official.
Godrej Consumer Products Ltd is unfazed by the prospect of competition from Reliance's entry into the FMCG sector, having seen multiple disruptions, including the high-profile entry of Baba Ramdev's Patanjali, according to a top company official.
The company is betting on its brand equity, wide range of portfolios and innovations to ward off competition, Godrej Consumer Products Ltd (GCPL) CFO Sameer Shah told PTI.
"We have seen multiple disruptions in the FMCG sector. In 2005-06 every one said that modern retail would take the sector by storm with private labels and FMCG players would find it very difficult to compete. After 17-18 years nothing has changed with modern retail play," he said.
Shah was responding to a query on how the entry of Reliance in the FMCG segment would change the competitive landscape of the sector.
"It's too early to call on," he said adding, "We have seen Patanjali a few years back. Five to six years back the expectation was they would take on every FMCG player and hence going would be tough. But we have not seen that kind of headway or any high competitive intensity. Let's see how it shapes up over a period of time."
According to Shah, GCPL's 45 per cent of revenue comes from the Indian market, while the rest is contributed by the global markets such as Indonesia and Africa.
Billionaire Mukesh Abani-led Reliance Industries through its step-down unit Reliance Retail has entered into the FMCG segment. It articulates ambitions to be a relevant player in the USD 110-billion FMCG (Fast Moving Consumer Goods) segment.
Though products of RCPL, the FMCG arm and wholly-owned subsidiary of Reliance Retail Ventures Limited (RRVL), are available only in selected markets. It has priced them 30 to 35 per cent lesser.
Over the domestic FMCG industry, Shah said he expects a gradual recovery in FY24 and broad-based growth for GCPL ahead of the industry.
"We do expect for the FMCG sector, a continuation of gradual recovery, especially in the rural one during the course of the year because of the easing inflation, especially in the commodities, We expect price drops and better volume," he said.
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Besides FY24 would be an election year, and Shah expects social welfare spending would go up. This will in a way boost rural consumption.
"Specifically for GCPL, we expect alongside macro favours lot of our internal initiatives should also result in GCPL's growth, much ahead of the sector growth of the FMCG in India," said Shah.
When asked about the segments for growth, he said it would be broad.
"We expect the growth to be led by both the categories, which is home care and personal care for FY24," he said.
Over any probable impact from the aggressive pricing by Reliance Consumer for soaps, detergent etc, Shah said, "I think the pricing is not much of an issue because if all the players see a competitive threat, they will also match the prices. Especially in the environment of benign commodity environment, we also have a brand Godrej NO1, which is Rs 115 for a pack of 5, which is actually lower than in terms of the price point of Rs 25."
RCPL has priced its soaps at Rs 25 (for 110 GM), which is much lower than the products of leading brands.
"If the price point is the leverage then I am sure lots of companies, especially big size companies like us will match it," he said.
Moreover, in such a benign environment, consumers are going for tried, tested and trusted brands.
"There are categories like Hair Color, where the consumers are extremely brand loyal and they find it very difficult to switch to a new brand until and unless there is a meaningful shift," he added.
GCPL is a leading player in the domestic Hair Color market.
"We will keep our eyes and ear open and If we see any competitive threat, then we will have our own responses, tactically or strategically," he said.
Moreover, GCPL operates in categories like household insecticides (HI), which is a consolidated category. According to Shah HI is a classical FMCG, it is a pharma kind of category, where you need approvals, ramifications, technology and molecules in the backend.
"We will grow our categories and we have been an innovation leader and would continue to press that lever also to continue our growth trajectory ahead," he said.
Last week, GCPL said it expects to deliver a double-digit volume and value growth for the recently concluded March quarter.
According to Shah"It was better than our own internal expectation."
"We have clocked a double-digit value growth and value growth," he said adding "There are two reasons for growth. We have seen a gradual recovery in rural, special within staples, where in some categories have price drop," said Shah.
GCPL had reduced the price of its soaps and also category-driven initiatives, especially in hair colours and air fresheners in the last 9-12 months have also driven the growth.
"It's a combination of both. Internationally our performance has been reasonably decent except Africa, where it has temporary pause because of election and demonetisation in Nigeria," he added.
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