Godrej Industries was started by Ardeshir Godrej. He was an unsuccessful lawyer, later he started manufacturing surgical equipments, but failed. He worked as an assistant as well in the pharmacy store but left that too. One day he read a newspaper article by the police commissioner of Mumbai who called for better security of homes & offices due to the rise of burglary incidents. After reading that he decided to try to make the best lock. He learned all about locks, took a loan in 1897 in a tiny shed in central Mumbai, the 29-year-old started manufacturing anchor brand locks. The company has 3000+ acres in Mumbai.
Here is the complete Godrej Group at a glance!
What are the top material issues on the mind of FMCG company Godrej Consumer Products Limited? And what are they planning to do regarding the same?
The novel coronavirus outbreak in the last quarter of fiscal year 2020 has significantly affected the consumer goods industry. However, at the time of this materiality exercise, the outbreak did not have a noteworthy impact. From the risk management perspective, we are monitoring and acting against the outbreak in line with our internal crisis management plan, which is overseen by the Global Risk Committee.
From the perspective of this materiality analysis, the outbreak has been treated as a singular event which occurred towards the end of the reporting cycle, rather than as a long-term and substantial risk to the business. During the reporting cycle, the pandemic was still developing and there was a high degree of uncertainty regarding its nature and progression. The materiality of this pandemic will be revaluated in the next reporting year in terms of the global and national response to the outbreak, the level of impact on our business and supply chains, and the likelihood of such events recurring in the future
About the Company
Godrej Consumer Products is a part of the over 123-year-young Godrej Group. Today, their Group enjoys the patronage of 1.15 billion consumers globally, across different businesses. In line with their 3 by 3 approach to international expansion, they are building presence in three emerging markets, namely Asia, Africa, and Latin America, across three categories (home care, personal care, and hair care).
They rank among the largest household insecticide and hair care players in the emerging markets. In household insecticides, they are the leader in India and Indonesia and are expanding footprint in Africa. They are the leader in serving the hair care needs of women of African descent and are the number one player in hair colour products in India and sub-Saharan Africa, and among the leading players in Latin America. They rank second in soap products in India, first in air freshener products in India and Indonesia, and lead in wet tissue product in Indonesia.
But for us, it is very important that besides our strong financial performance and innovative, much-loved products, we remain a good company. Approximately 23 per cent of the promoter holding in the Godrej Group is held in trusts that invest in the environment, health, and education. We are also bringing together our passion and purpose to make a difference through our Good & Green approach to build a more inclusive and greener India.
At the heart of it all is our talented team. We take much pride in fostering an inspiring workplace with an agile and high-performing culture. We are also deeply committed to recognising and valuing diversity across our teams.
Letter to shareholders
Over the last decade, GCPL has transformed into an emerging markets FMCG leader. While we are very proud of our achievements as a company, I believe we are only as good as what we do next.
Before I share with you my reflections on what we need to do going forward to build towards this, I want to take stock of where we are today; the good news, and the bad.
Our performance in fiscal year 2020 was not good. Sales declined around 4 per cent and Profit Before Tax (pre exceptions) was flat. March 2020 was particularly impacted by the spread of the COVID-19 pandemic and the eventual lockdown in many geographies where we operate. This resulted in virtually no sales in the latter part of the month.
The bad news
Our performance in fiscal year 2020 was not good. Sales declined around 4 per cent and Profit Before Tax (pre exceptions) was flat. March 2020 was particularly impacted by the spread of the COVID-19 pandemic and the eventual lockdown in many geographies where we operate. This resulted in virtually no sales in the latter part of the month
We now have with COVID-19, a health, humanitarian and economic crisis of epic proportions to contend with. The excellence we will require now, going against water rather than with water, to perform and take market share, means a significant step up in ways we probably haven’t even realised yet.
The good news
In our internal conversations, I have been telling our people – Yes, there is no denying that this is a bad situation. But, we are also fortunate that GCPL is an FMCG company with a robust portfolio to deliver in a COVID-19 world. Eighty per cent of our product portfolio comprises health (household insecticides), hygiene, and value for money products. Many of our innovations have started playing out fully in the last couple of months and we have seen high growth in household insecticides and hygiene. We have gained share across categories in India and our exit market shares in March were our highest ever.
While we don’t get to choose market conditions or the intensity of our competitors, and certainly not a global pandemic, we do choose our attitude in the face of these. Godrej was founded in a crisis; as part of India’s freedom and swadeshi movement in 1897, and also during the bubonic plague that year. We first made soap in 1918 (also the first soap in the world to be made from vegetable oil and not animal fat) during the Spanish flu pandemic. So, as we see it, 2020 could be our ‘second beginning’ for the next 123 years of Godrej.
We need to do more of what we do and do it even better. There is tremendous scope to leverage our global category insights (in household insecticides, hygiene, hair care, and air care) and unique multi-local approach to create long-term growth in our geographies. We will do this by offering amazing quality products at affordable prices. But more importantly, while helping solve significant global problems, including protecting our consumers from viruses and insect borne diseases. Our approach – low cost manufacturing; value for money, disruptive, sustainable products; very strong go to market capabilities – is focused on creating this delight for our consumers
What particularly drives me is this opportunity to innovate for very disruptive products that create penetration and actually solve real problems for our consumers. Our one rupee paper-based mosquito repellent, Goodknight Fast Card for example, broke barriers, and drove penetration and reach in rural India where electricity is a problem and people cannot use electric mosquito repellents. Godrej Expert Rich Créme, which democratised hair colour créme colouring in India, is a créme hair colour in a sachet which costs just r30 and compares in quality to much higher priced products. Our Mr. Magic powder-to-liquid hand wash, will do just the same with democratising hand washing, which is a key tool to keep us safe from disease.
We are focusing our efforts and going where the demand is – in household insecticides, hygiene, and value for money. We have several new launches; strongly price-enabled, across geographies, to create more goodness. It is not just our categories; our channels too are seeing a shift, and we will be doubling down on platforms like e-commerce and chemists. Like Dharnesh Gordhon, our new Africa cluster business head, keeps reminding us, a crisis is a terrible thing to waste.
Household Insecticides Business
2020 will be the Year of Resurgence for our household insecticides business. This is our largest and most critical category globally. We are going where the consumer demand is and the demand is to protect their health. We see this as a long-term area of focus. People are definitely being more careful; they don’t want to take chances and want to protect themselves from insect borne diseases like malaria and dengue, which are on the rise.
In fact, if anything, our struggle initially was enabling supply to meet demand, which has been very strong in the last couple of months. We are scaling up our supply systems and have never had stronger portfolios across price points and formats, in India and Indonesia, to serve this. We are also making a foray into this category in Africa, where it is still underserved.
Our household insecticides strategy is multi-pronged. We want to drive penetration with lower price point products, drive premiumisation with very efficacious and safe electrical products, as well as meet the consumer need for natural-based products. Our largest, most profitable format is liquid vaporisers. Last year, we launched Goodknight Gold Flash, India’s most powerful liquid vapouriser and the only one with visible vapours, a major breakthrough in technology and efficacy
In the last couple of years, we have been impacted by unorganised incense sticks players, whose products are not just part of an unorganised market, but also illegal and dangerous to use. Our mistake was to spend too much time in conversations and messaging about how they are illegal, instead of reacting quickly enough. But, we have corrected the missteps we made on that front. We also have a full naturals range of coils, incense sticks, fly spray, liquid vapouriser, and personal mosquito repellent products on offer.
There is significant opportunity to innovate and grow our hygiene portfolio, which is currently 26 per cent of our global business, by expanding our existing strongholds in soaps in India, and wet wipes and disinfectants in Indonesia.
In response to COVID-19, we launched sanitiser products across our India and SAARC, Indonesia, Africa, Latin America, and USA businesses in just a few weeks. In many of these markets, it was the first time we were entering the category. We will now be scaling these up into full portfolios with multiple product offerings
I am also particularly excited because this is the year for my dream product and dream technology – our Mr. Magic hand wash. It is the first powder-to-liquid hand wash in the world, very sustainable, and available at just r15. We see in it, the potential to build out and democratise sanitation and hand washing across countries.
We are also pivoting our existing categories and products for more relevance in these spaces. In air care for example, we have launched new products with dual benefits of sanitation and air care. You will now see our innovation engine in full throttle.
Ensure full potential growth for India and Indonesia; turnaround for Africa. Be very prudent on costs
Our businesses in India and Indonesia, which make up roughly 70 per cent of our overall business, are very profitable, and have similar portfolios in health, hygiene, and value for money. There are significant opportunities for growth here, especially given the current consumer demand trends, and we are well poised to leverage this.
We have big dreams for our Africa business and one of our largest investments outside of India, is in the sub-continent. Africa, with its diverse countries, can be quite volatile on the macro-economic front. But where things are tough, there is also a lot of opportunity. Africa has a young, fast-growing, urbanising population with growing aspirations. There is much to yet start unearthing as infrastructure, industrialisation and digital leapfrog. We see tremendous opportunity here, to innovate and grow sustainably both in hair care and household insecticides, while also ‘doing good’.
Our African business and its ecosystem is also very women-focused; we have two African women on our Board, 65 per cent of our team members are women and our consumer base is almost exclusively women. So, it is of great personal interest to me. Ardeshir Godrej, founder of the Godrej Group, left behind a legacy in India that is now over 100 years old; I would love to leave behind the legacy of a very purposeful and successful company in Africa.
However, our performance in Africa, over the last few years, has not been up to the mark. As we drive the turnaround, it is very reassuring to be partnering with someone with the experience and passion of Dharnesh Gordhon, our new South Africa-born CEO of Godrej Africa, USA and Middle East.
Cost remains a focus, with Project Pi and newer opportunities we are seeing to be more efficient. We are also laser focused on cash and receivables during this time.
Risks and Opportunities
Broad emerging markets portfolio
In fiscal year 2010, 23 per cent of our overall revenues were derived from international businesses. In fiscal year 2020, it is 46 per cent, with Indonesia and Africa accounting for 41 per cent.
Focused approach to category choices
We have moved from an over 50 per cent soaps portfolio in 2010 to a more balanced and strategic category portfolio. Today, we have three core categories, namely household insecticides, personal wash, and hair care. We have entered into a new category to serve the hair care needs of African women. Air care, which we forayed into a few years ago in India, has now become the fourth global category for us.
Brands and their Value
Top 10 brands contribute ~70 per cent of revenue
Geographies and their Products
India and SAARC
Range of home care and personal care products, household insecticides, hair colour, liquid detergents, soaps, and air fresheners
Sub-Saharan Africa and USA
Range of products across hair extensions, hair care, hair colour, personal wash, home care, and household insecticides
Range of household and personal care products – household insecticides, air fresheners, hair colour, and wet wipes
Range of hair colour, hair care, depilatory products, and colour cosmetics
Innovation is core to our strategy. As category leaders, we are very focused on driving innovation-led growth and seeking new ways to disrupt our categories. Democratising while making superior-quality, delightfully designed products is particularly important given our focus on emerging markets. At the same time, we are also pursuing attractive adjacencies and creating new engines of growth to broaden our portfolio.
We follow a multifaceted process of design thinking, consumer centricity, and market analytics to accelerate, populate, and deliver our innovation pipeline, thereby enabling us to reimagine our brands and create new ones. We are also ramping up capabilities, investing significantly in R&D, and cross-pollinating learning and products across geographies.
Approximately 23 per cent of the promoter holding of the Godrej Group is held in trusts that invest in the environment, healthcare, and education.
Innovating for sustainable packaging
In a FMCG business, packaging plays a very important role in maintaining product integrity.
1. Reduce packaging consumption per unit of production by 20 per cent from the base year of fiscal year 2018
Approach • Process improvements to make packaging more efficient
Ensure that 100 per cent of the packaging material is recyclable, reusable, recoverable, or compostable
Approach • Upgrade to newer technologies and innovate packaging raw materials
Use at least 10 per cent post-consumer recycled (PCR) content in plastic packaging
Approach • Partner with research organisations and start-up enterprises to develop packaging materials as alternatives to plastic and enable the use of recycled plastic instead of virgin material
Expenditure on R&D
Profit & Loss
GCPL generated a Free cash flow of Rs 1521 Cr in 2019. In 2020 it generated Rs 1436 Cr.