1.THE FAST MOVING CONSUMER GOODS SECTOR The Indian FMCG sector is the fourth largest sector in the economy with an estimated size of Rs.1,300 billion. The sector has shown an average annual growth of about 11% per annum over the last decade. Unlike the developed markets, which are prominently dominated by few large players, India‘s FMCG market is highly
fragmented and a considerable part of the market comprises of unorganized players selling unbranded and unpackaged products. There are approximately 12-13 million retail stores in India, out of which 9 million are FMCG kirana stores. India FMCG sectors‘ significant characteristics can be listed as strong MNC presence,
well established distribution network, intense competition between the organised and unorganised players and low operational cost. Easy availability of important raw materials, cheaper labor costs and presence across the entire value chain gives India a competitive advantage. Products which have a swift turnover and relatively low cost are known as Fast Moving Consumer Goods (FMCG). FMCG items are those which generally get replaced within a year. Examples of FMCG commonly include a wide range of repeatedly purchased consumer products such as toiletries, soap, cosmetics, oral care products, shaving products and detergents, as well as other non-durables such as glassware, bulbs, batteries, paper products, and plastic goods. Penetration level and per capita consumption in many product categories is very low compared to world average standards representing the unexploited market potential. Mushrooming Indian population, particularly the middle class and the rural segments, presents the huge untapped opportunity to FMCG players. A distinct feature of the FMCG industry is the presence of international players through their subsidiaries (HLL, P&G, Nestle), which ensures innovative product launches in the market from their parent's portfolio. 7
Our country has a varied agro-climatic condition that enables to offer extended raw material base suitable for many FMCG sub sections like food processing industries etc. India is the one of the major producer of livestock, milk, sugarcane, coconut, spices and cashew and is the second largest producer of rice, wheat and fruits & vegetables. Similarly, India has an abundant supply of caustic soda and soda ash, the chief raw materials required in the production of soaps and detergents, which enables the household section of the industry to excel and grow. The accessibility of these raw materials gives India the location advantage.
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2.INTRODUCTION TO GODREJ Godrej Group is one of the largest conglomerates based in Mumbai, India, involved in various industries that include appliances, precision equipment, machine tools, furniture, healthcare, interior solutions, office equipment, food-processing, security, materials handling and industrial storage solutions, construction and information technology. Its products include Locks, access control systems, security systems and safes, typewriters and word processors, rocket launchers, refrigerators and furniture, outsourcing services, machine tools and process equipment, cosmetics and detergents, engineering workstations, medical diagnostics and aerospace equipment, edible oils and chemical, mosquito repellents, car perfumes, chicken and agri-products, material handling equipment like Forklift trucks, stackers, tyre handlers, sweeping machines, access equipments etc. The Group is headed by Adi Godrej and Jamshyd Godrej. Ardeshir Godrej (Ardeshir), a lawyer, founded the Godrej group in 1897. He gave up law and started a locks manufacturing venture. Soon, he expanded his business by manufacturing safes and security equipments and also ventured into toilet soaps business. After Ardeshir, his brother Pirojsha Godrej led the venture towards becoming a vibrant,
multi-business
company.
The
company was incorporated with limited liability
in
1932,
under
the
Indian
Companies Act, 1913. By 2003, the Godrej group had emerged as one of the
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largest privately held diversified industrial corporations in India. As godrej continued its operations it expanded its areas to consumer goods by setting up Godrej Soaps Ltd, which later got changed to Godrej consumer products ltd. This Project deals with Godrej Consumer Products Ltd. as a part of FMCG sector.
Godrej Consumer Products Ltd is one of the leading Fast Moving Consumer Goods (FMCG) companies in India. The company is the market leader in personal, hair, household and fabric care products. The company operates in two segments namely soaps and personal care. The soap segment includes the Godrej brand and other brand toilet soaps and personal care segment includes hair color, shaving cream and gel, talcum powder, deodorant, fairness cream, liquid detergent and other toiletries. They also undertake contract manufacturing of toilet soap for third parties. GCPL has five manufacturing facilities in India at Malanpur (Madhya Pradesh), Guwahati (Assam), Baddi- Thana (Himachal Pradesh), Baddi- Katha (Himachal Pradesh) and Sikkim. GCPL operates in the domestic and international markets and currently is looking at creating a MNC image world over.
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3.HISTORY Godrej Consumer Products Ltd was incorporated on November 29, 2000 as a public company and was promoted by Godrej & Boyce Manufacturing Company. The Consumer Products business was part of the erstwhile Godrej Soaps Limited (GSL). The liabilities and assets pertaining to the consumer products business of Godrej Soaps Ltd together with the factories situated at Malanpur and Silvassa along with the marketing, selling, distribution and related facilities have been transferred to the company with effect form April 1, 2001. Also, the company set up a new factory at Guwahati in Assam for manufacture of hair colour and toiletries during its first year of operations. The srcin of GPCL can be linked down to 1897 when Godrej group (holding company) was set up by its founders Ardeshir and Pirojsha Godrej.
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4.PRODUCT DETAILS Products offered by Godrej are divided into three main categories
Home care
Personal wash
Hair care
4.1.HOME CARE
Goodnight- A mosquito repellent -Good Knight is the only fully entrenched
brand in HI with significant presence in all the formats. Good Knight grew from strength to strength launching Mats followed by Liquid Vaporisers, coils, lotions and aerosols.
Jet-JET Brand is the regional jewel for Godrej Household Products, with more
than 80% Market Share in coil in india
Godrej Dish wash- It‘s a special dish washing formula th at works wonders with
grease removal.
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Ezee- It is a fabric softner that works well with woolleens(lauchned in 1983 and a
market leader in that category.)
Genteel- Liquid detergent brand that specializes in wolleen fabric care washing.
Hit- With increasing knowledge of pests, hit is becoming ppopular amongst
consumers in urban households.
4.2.PERSONAL WASH
SOAPS
CINTHOL- soap with longlasting effect of freshness
GODREJ Fairglow- soap with fairness formula
Godrej no1- Indias largest selling grade 1 soap
Godrej vigil- grade 1 health soap
GODREJ SHAVING CREAM HAIR SOAP –SHIKAKAI, CROWNING GLORY GODREJ PROTEKT-SANITISER 13
The company is among the largest marketer of toilet soaps in the country with leading brands such as Cinthol, Fairglow. Godrej No 1. Fairglow, India's first fairness soap created marketing history as one of the most successful innovations.
During the year 2002-03, the company launched Godrej No. 1 Ayurvedic soap and Godrej FairGlow Saffron in the southern markets of Karnataka and Andhra Pradesh. They re-launched their flagship brand Cinthol in a new range of soaps, talc and deo sprays. Cinthol Regular and Fresh soaps were also launched in an attractive new packaging. During the year 2007-08, the company launched Godrej No 1 soap in Papaya and Lotus variant
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4.3.HAIR CARE
HAIR COLOUR
–
Godrej expert
–
Colour Soft
–
Renew
NATURAL HAIR COLOUR
–
Keshkala
–
Kali mehendi
–
Nupur mehendi
ANOOP HAIR OIL The company is the leader in the hair colour category in India. They have a vast product range from Godrej Renew Colours soft Liquid Hair Colours, Godrej Liquid & Powder Hair Dyes to Godrej Kesh Kala Oil, Nupur based Hair Dyes.
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During the year 2007-08, the company launched Godrej Renew Powder Hair Colour. Also, they entered the unbranded mehendi powder market by launching 100 per cent natural mehendi branded 'Godrej Nupur'.
4.4OTHERS In May 2003, the company acquired the trademark and copyright relating to the brand Snuggy for a total consideration of Rs. 5.9 crore and re-launched as Godrej Snuggy baby diapers in the market.
4.5RECENTLY LAUNCHED
Godrej has come out with home and car fragranced spray refresheners called Godrej Aer which comes in several forms of fancy packaging.
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4.6 A whole Range of Godrej Consumer Products sold in the National and International Market
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5. MISSION ,OBJECTIVE AND VISION “Brighter Living”-the tagline of the company itself suggests its motive of business
That is to provide those mass of the consumers, those products and services where a difference in quality at the same price could enhance the living of all. GPCL‟s Vision -―To deliver superior value for our stakeholders by providing leading
quality, affordable home and personal care products that enhance the quality of life of consumers in high growth emerging markets. We will achieve this through enduring trust, relentless innovation, passion for our consumers and a strong entrepreneurial spirit.‖ Godrej strongly believes that their brand is not what they say it is but its what the customer believes it to be. Therefore the prime objective is by gaining market reputation through customer satisfaction. GPCL has promoted a 4 Step Objective process towards a ―Brighter Living‖
Progression: To progress hand in hand with the customer. Customer is
believed to be a star.
Expression: To give the customers products and services and allow them to
express themselves.
Empathy: To dig deep into the heart of India to know the customer very well.
Experience: To provide and experience of excellence to the consumers.
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On a long-term perspective, GPCL aims at a 10 x 10 objective which means that they wish to be 10 times bigger than the current position within a period of 10 years.
The Man Behind what Godrej Consumer Products Ltd. Is Today!
Adi Godrej- Chairman
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6. SWOT ANALYSIS Godrej has been holding a strong position in the market where it comes to fast moving consumer goods, however as a company one must understand the wholesome aspect of the companies strengths, weaknesses, opportunities and threats.
6.1.STRENGTHS
Leader among India‟s FMCG companies
Godrej has a firm foothold in the fast moving consumer goods segment being in this area since the very beginning.
Some brands in 100 most trusted brands
Godrej is known for its quality being the best at that affordable price. Most of the Indian Masses would go for products from godrej because of the customer satisfaction and trust built by this company over decades (reference to Godrej Group)
Presence in more than 60 countries spread amongst 4 continents
Godrej has not only captured the Indian market but also since a while is looking into international business. Capturing the 3 continents of Asia, Africa & latin America. GPCL‘s key international businesses include Rapidol, Kinky, Darling Group,
Tura in the African continent, Godrej Global Mideast FZE in UAE, Megasari Makmur Group in Indonesia, Issue Group and Argencos in Argentina and Keyline Brands in the United Kingdom.
Over 1,300 full-time employees
Such a huge employee base adds to the strength of the organisation.
Widespread distribution network across India
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GCPL has a widespread distribution network across India. It has a presence in both the urban and rural markets, enabling it to benefit from the opportunities in both segments. It has a sales team which comprise of over 250 staff spread across the country. It has a network of 33 C&F agents and as on February 29, 2008. It had 1,273 distributors, 142 super stockists and 3,175 sub stockists to support the sales team in India. Its distributors and sub stockists cover around 650,000 retailers in India. GCPL has linked its major distributors in India through a system called ‗Sampark‘, a collaborative planning, forecasting and
replenishment system with its ERP system leading to reduced inventory levels.
Recognized Godrej Research & Development Centre
The research and development activities broadly comprise of various processes for developing new products, standardising new analytical methods and identifying substitutes for key raw materials. Through this research and development centre, GCPL continuously interact with consumers to obtain feedback on its products and information obtained is leveraged to complement new product development activities. The Godrej Research & Development Centre is recognised by the Department of Science and Technology, New Delhi.
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6.2.WEAKNESSES
Market share is limited due to presence of other strong FMCG brands.
Godrej has a strong foothold in the market but the % of market share is lesser in comparison to the level of operations and this is basically due to the monopolistic competition.
Godrej products has stiff competition from big domestic players and international brands
As godrej moves forward to capture international business, so are other companies in India which make the position of godrej weaker in the market facing more competition in terms of sales. Since the mentality of the consumer is moving from LOCAL- IMPORTED.
Absence of Superior or premium products for Personal wash and Household care
Godrej caters to the masses but unlike its competitors doesn‘t not have any premium products that gives an edge over the middleclass standard.
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6.3.OPPORTUNITIES
Tap rural markets and increase penetration in urban area
Godrej has an opportunities to explore the rural markets by establishing a stronger distribution network enabling the rural people to get their products at a fair price.
Mergers and acquisitions to strengthen the brand
Inorder to capture the personal and home care segment at an international level , mergers will be most helpful in n ot only spreading godrej‘s prod ucts but also gaining those companies products and bringing them into India. Acquisitions on the other hand help in gaining international presence and spreading a touch of godrej‘s better living strategy world wide.
Increasing purchasing power of people thereby increasing demand
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6.4.THREATS
Intense and increasing competition amongst other FMCG companies
FDI in retail thereby allowing international brands FDI in retail sector is posing to be a threat to the local companies.
Competition from unbranded and local products
Price fluctuation of Inputs Vegetable oil is a key ingredient for soaps and other related washing products which is currently being exposed to price fluctuations that can cause losses to the company
Foreign Exchange losses Due to the number of acquisitions made by the company the difference in the agreement amount and the payment date amount due to currency conversion can pose a threat to incur high foreign exchange losses.
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7. COMPETITION –
In the soaps category, GCPL brands compete with ‗Lux‘ and ‗Lifebuoy‘ Hindustan Unilever Limited, ‗Nirma‘ – Nirma.
–
In the hair colours category, its products compete for market share with ‗Black Rose‘ ‗Super Vasmol‘ and ‗L‘Oreal‘.
–
Competitors in shaving cream category are ‗Gillette‘, ‗Palmolive‘ and ‗Old Spice‘.
–
In the liquid detergent category GCPL brands ‗Ezee‘ and ‗Genteel‘, compete with ‗Safewash- Wipro‘ and ‗Surf Excel- Hindustan Unilever Limited‘.
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8. AQUISITONS ,MERGERS & JOINT VENTURES International Business has contributed to the growth of Godrej Consumer Products Ltd. All this could not have been achieved without the mergers and acquisitions that the company has undergone over the past 8-9 years.
In October 2005, the company acquired 100% ownership in Keyline Brands Ltd, a UK based FMCG. This acquisition gives the company, ownership of several international strong brands and trademarks including Cuticura, Erasmic and Apart in many countries.
In September 2006, the company acquired the South African business of Rapidol, UK with their subsidiary Rapidol International.
In March 2007, they formed a 50:50 joint venture company known as Godrej SCA Hygiene Ltd along with SCA Hygiene Products AB, Sweden which will manufacture and market paper based absorbent hygiene products, specifically sanitary napkins and baby diapers, in India, Nepal and Bhutan. Their joint venture company, Godrej SCA Hygiene Ltd launched Libero baby diapers, Tena and Libresse and also they re-launched Snuggy brand as 'Snuggy Dry' in the states of Kerala and Tamil Nadu.
In October 2007, the company acquired Global Mid East FZE which was 100% subsidiary of Godrej International Ltd.
In April 2008, the company acquired 100% stake in Kinky Group Properties Ltd, South Africa that is one of the leaders in South African Hair Category. This acquisition gives the company an opportunity to enter into a new line of business and diversify their hair product portfolio.
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In 2009 GPCL bought 49% stake in Godrej Sara lee and the rest 51% before the fiscal year end.
With effect from 1st April 2010, Godrej group merged Godrej Consumer Products Ltd and Godrej Household Products Ltd. Into Godrej Consumer Products Ltd. No new share were issued since it all belonged to the same Holding Company.
In 2010, GCPL had bought out Latin America‘s Issue Group, a market leader
in hair-colour in Argentina, Peru, Uruguay and Paraguay. In less than two weeks time, the firm acquired another Argentinian hair care company Argencos.
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In march 2010 the company spent Rs100 crore-Rs125 crore to acquire Tura, a Nigerian beauty products company. This is the company‘s third acquisition in
Africa.
In April 2010, GCPL acquired Megasari —a leading consumer products company in Indonesia, which has notched up revenues of $120 million in the past fiscal with estimated profit-after-tax margins of 11%-12%. It is also the second-largest player in the insecticides market, enjoying 35% market share of Indonesia‘s household insecticides market (with a total size of $150 million,
growing at 20%). It also has 45% market share (of a total $68 million market, growing at 45%) in the air-care segment and 80% market share of the $21million wipes market (growing at 45%). Megasari has 15% share of the breakfast cereals market.
As part of the 3 x 3 strategy of Godrej Consumer Products Ltd., in 2011-12 godrej has undertaken 2 major acquisitions .
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Godrej Consumer Products (GCPL) has acquired 51% stake in a leading pan-African hair care company, DGH Mauritius Pvt. Limited of Darling Group Holdings, for over
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Rs 500 crore, making this its biggest global acquisition so far.
The agreement was signed on June 1 st ,2011 for the acquisition to take place in 3 phases over the next two years. The deal has been structured in such a way that GCPL would be able to acquire up to 100% of Darling Group Holdings after a period of 5 years on a predetermined formula for valuation.
To that extent, funding the acquisition would not be a drag on GCPL's balance sheet. The company already had around Rs 200 crore cash on its books. More cash came in from the amount (Rs 177 crore) it received for the termination of Kiwi license in India, while the balance was funded through debt.
Established in 1982, the Darling Group is a leading manufacturer and distributor of various hair extension products, including braids, weave-ons, ponytails, wigs and human hair products. With revenues of around Rs 1,000 crore, Darling Group is a market leader in hair extension products. Darling and Amigos are said to be household names for the African woman.
"The Darling Group enables us to take our presence in Africa to the next level. Our aspiration is to touch the lives of at least 100 million consumers across Africa in the next 5 years through superior quality innovative products at affordable prices. Over 500 million Indians use at least one Godrej product on a daily basis. We would like to build a similar kind of trust and relationship with the African consumer and delight them," said Adi Godrej, chairman, GCPL.
―Darling Group‘s business in South Africa, Mozambique and Nigeria which represents about 45% of the group‘s business. The group‘s well spread
manufacturing facilities also offer us significant production efficiencies. I strongly believe that the introduction of this business, aided by our brand 30
Kinky opens up immense opportunities for us in the African continent.‖- A Mahendran,Managing Director, GPCL
The acquisition, which is expected to be EPS accretive from year one, provides an opportunity for GCPL to build a global, premium ethnic hair care brand across Africa. Hair extension is amongst the highest per capita spend personal care categories in Africa. GCPL gained Rs 2.50 on the BSE post such news.
The acquisition leapfrogs Godrej to being a leading player in hair care across sub-Saharan Africa, building on the existing strong market share positions that GCPL currently has in hair colours in more than 14 sub-Saharan African countries through its Inecto brand. Past acquisitions of Rapidol and Kinky in South Africa have already given GCPL leading positions in the fast growing South African ethnic hair care market.
Godrej Consumer Products Ltd. had seeked advice from Jones Day for this Acquisition.
In January 2012,Godrej also entered into an agreement for acquisition of 60% stake in Cosmetica Nacional, a leading hair colourant and cosmetics company based in Chile .
The Company also has a strong presence in the colour cosmetics segment ―Pamela Grant‖ is the seco nd largest brand in the colour cosmetics market. Cosmetica Nacional also has popular heritage brands including ―Illicit‖ and ―U2‖.The Company exports to 7 countries in Latin America – this acquisition
will enable Godrej to strengthen its foothold in the LatAm region.
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The sum for which Cosmetica Nacional was aquired remained undisclosed, however GPCL said that the deal was 9 times the compa ny‘s EBITDA (that was 20% then), there by the deal size came roughly to rs.200 crore. The acquisition has been completed in April 2012.
Cosmetica Nacional has more than a 30 percent market share in Chile and had annual sales of about $36 million in 2011.This has been GPCL‘s 3rd acquisition in Latin America within two years, after it bought hair care companies Issue Group and Argencos.
"The Chilean business will strengthen our presence in the region and set us on a firm footing to achieve our plans for Latin America," Chairman Godrej said.
Inorder to fund the above acquisitions Godrej Consumer Products Ltd. Decided to sell 4.9% stake by the
issue of 16,707,317 equity shares of face
value ` 1/- each at a premium of ` 409 per equity share to Baytree Investments (Mauritius) Pte. Ltd. on a preferential basis. The firm is an arm of Singapore based investment firm Temasek. The reason for choosing a preferential allotment was that the cost of QIP would have been significant .The pricing was higher than the floor price calculated as per the SEBI ICDR regulations. The issue proceeds aggregating ` 685 crore was proposed to be used for general corporate purpose including retirement of debts.
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In the last four years Godrej Consumer Products Ltd, has acquired nine firms all over Asia, Africa and Latin America showing how well it has carried on its
3x3 strategy.
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9. CORPORATE STRATEGY-The Growth Strategy Godrej Consumer Products Ltd as a part of their long-term plan has set up a 10 x 10 concept. The company has set an ambitious target of growing 10 times over the next 10 years from its current turnover of over Rs 4,850 crore through acquisitions as well as normal expansion in both domestic and international markets.
―We want to be 10 times as in size in 10 years time, w hich is a compound annual growth rate of about 26 per cent,‖ Godrej Consumer Products Ltd (GCPL) Chairman
Mr Adi Godrej said in a analyst call.
Elaborating the strategy, he said: ―We hope to achieve about 15 per cent to 20 per
cent organic growth and the b alance through inorganic growth.‖
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9.1
FOUR
FOLD
GROWTH
STRATEGY
Strengthening the core business-
Expanding in Developing markets- 3 x 3 Strategy
Strenghtinging rural presence
Building new growth Platforms
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9.1.1Strengthening Core Business
Godrej Consumer Products Limited , post its merger with Godrej Household Products Ltd., has put a straight forward focus on building its brand equity by excelling in the three fields of Personal Wash, Household care and Hair care. The existing products of godrej that form a core of its business include
Godrej No1 , Cinthol Soap
Ezee
Good night- mosquito repellent
Godrej Hair Dye
Nupur Mehendi
These Five main products have been innovated & amended since their launch by -
Adding features to the existing product
-
Removing different versions or options in colours etc
-
Changing the packaging options suited best to the consumer e.g. in rural areas Rs. 5-10 Packs for hair dye would do good while in urban areas super saver hair dye packs would do good.
So Godrej is ensuring that its core products remain at the top by giving strong focus on them.
Br and F ocus: By concentrating on providing quality as per Godrej standards and
upkeeping the brand name of Godrej.
L eader shi p F ocus: Godrej has been able to maintain its position in the market where
it comes to rankings. It still is No 1 in Insecticides and Liquid detergents in India and 36
No 2 in toilet soaps in India.
Category F ocus: Godrej has focused on what the company is best at producing that is
household care, personal wash and hair care products and improving the products under the same category
Results in FY 2011-2012 prove the same:
Brand Recognitions in domestic operations in core categories
GoodKnight ranked 2nd in Household Care by Brand equity.
Cinthol ranked 9th in Personal Care by Brand equity.
Godrej No. 1 ranked 16th in Personal Care by Brand equity.
Godrej Expert Powder Hair Colour ranked 25th in Personal Care by Brand equity.
3 of GCPL‘s Brands viz. Cinthol, GoodKnight and Godrej No. 1 ranked in 100
Most Trusted Brands by Brand equity.
Godrej Expert Powder Hair Colour –Care- Voted Product of the year 2012 in powder hair colour category.
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9.1.2EXPANDING in DEVELOPING MARKETS -3 x 3 Strategy
In order to achieve this, Godrej has implemented a 3 x 3 Strategy for Growth through Acquisitions Mergers and Joint ventures in the fiscal year 2010-2011 to be implemented over a period of time.
The ‗3x3 strategy‘ basically involves penetration deeper into Asia, Africa and South
America, with three product segments —personal wash, hair care and insecticides. It is ―It (the 3x3 strategy) is part of our globalisation strategy where we are
concentrating on three categories and three continents. We are focusing on these continents to understand the market better. Our strategy always has been to focus on developing countries, because they have high populations. Even consumption of our products is high in these places,‖ said Hoshedar K Press, vice chairman, GCPL.
―Our DNA is in our vision, which is to be an emerging market multinational. It plays
to our strengths. Having had this long history with the Indian consumer, we have become very good at anticipating their unique set of needs. It gives us the competitive advantage over global MNCs. Therefore, our vision of becoming an emerging market MNC is spot on. The 3x3 strategy is an articulation of how we will get there. South America, Africa and Asia are large markets. Home care, hair care, personal wash are categories we are strong in and that's what we will take to the international market. ― -
Shashank Sinha, President, International Business as to Times of India.
GPCL has been rapidly expanding globally and in the past few years it has been acquiring companies and brands in international markets like Indonesia, South America and Africa.
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The company has also identified Africa as a key market for growth and is aiming to be the largest Indian FMCG firm on the continent.
‖..Our wish is to be the largest Indian FMCG company in Africa too. You have other
Indian FMCG companies which are in Africa, but Godrej Consumed products will be the largest there,‖ GCPL Managing Director Mr A Mahendran said.
Overall for the fiscal year 2011-2012 international busniess has contributed 38% to the total business For the fiscal ended March 31, 2012, Africa contributed 23 per cent to the GCPL‘s international business. In FY 2011 -12, GCPL‘s sales from its main
international markets of Asia (excluding India), Latin America, Africa and Europe stood at Rs 513 crore.
SOME OF THE ACQUISITIONS AS A PART OF „3x3‟ STRATEGY
MegasariIndonesia
• Acquired in april 2010 • a leading consumer products company in Indonesia, which has notched up revenues of $120 million in the past fiscal with estimated profitafter-tax margins of 11%-12%. • The company spent Rs100 crore-Rs125 crore to acquire this beauty
Tura -Nigeria
products company in March 2010 . •This is the company‘s third acquisition in Africa.
Godrej Sara Lee
• GPCL aquired 49% stake in this company in 2009 • looking at acquiring the rest sometime later.
Cosmetica Nacional -Chile
• In January 2012 GCPL acquired 60 per cent stake in Chilean hair colour firm Cosmetica Nacional for an approximate amount of Rs.200 crores.
Darling Holding Group- Pan African
• In June 2011, GCPLhas acquired 51% stake in a leading pan-African hair care company, DGH Mauritius Pvt. Limited of Darling Group Holdings, for over Rs 500 crore, making this its biggest global acquisition so far.
IssueAmerica GroupLatin
• In 2010 GPCL and bought out market leader in hair-colour in Argentina, Peru, Uruguay Paraguay.
Argencos-Latin America
• In 2010 , in two weeks again bought another argentinian hair care company for hair styling cream
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GPCL‘s capabilities across these categories is well established, they have a str ong
understanding of the dynamics of these business and are well positioned to leverage their distribution and supply chain efficiencies as well as our strengths in terms of brand management, technology and manufacturing to create immense value.
THIS
IS
THE
DIAGRAMATIC
REPRESENTATION
OF
HOW
INTERNATIONAL BUSINESS THROUGH
„3X3‟
STRATEGY
HAS
HELPED
IN
GROWTH
OF GODREJ
CONSUMER PRODUCTS LTD.
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9.1.3STRENGTHENING RURAL PRESENCE
The main aim of Godrej is making sure the product reaches the consumer. This is done by the sales and distribution network. Which currently comprises of 250 staff across the country, More than 33 Carry and Forwarding agents, Approximately 1273 distributors and 650000 retailers in India. As of Today it reaches out to more than 46 lakh outlets. Approximatily 70 % of India‘s Population resides in rural areas, therefore strengthening rural presence is
essential component of Growth Strategy. Godrej‘s rural salience has increased over the year by over 8000 villages and targeting
a figure of 50000 villages in all. The per capita consumption of soap in India is one of the lowest in the world. Indian marketers are looking at ways to push higher usage. One way to do this is to increase penetration in the rural areas which would create this additional volume. Godrej Consumer Products Ltd has a very effective strategy towards aiming at creating a rural presence. Along with promotion on mass media like Doordarshan, Godrej also uses the vans, as below the line promotional activities to promote products in the rural areas. These van play music and provides free gifts to the audience, which has gathered in the village choupal. Thereafter the van sell the brands to few shops in the village that are able to sell these brands on the basis of the top of the mind recall, because of recent promotions & trials of the free gifts. These campaigns & trials also generate a lot of word of mouth publicity for the brands. This strategy reduces the tine gap between promotion, demonstration and actual sale. If the time between, when the promotional message is received and the product is actually purchased by the consumers is large, rural 41
consumers cannot be expected to remember the brand name. This can jeopardize the entire
rural
promotional
campaign.
The above diagram gives the ratio of salience to sales and the contribution of growth to sales in the rural areas. GCPL‘s increased rural thrust along with rising income levels in rural areas and shift
in lifestyles there would benefit GCPL. Though poor monsoon may be a dampener in the short term, GCPL would not see significant drop in volumes due to its ―value for money‖ pricing. GCPL has been focusing on cost efficiency and productivity across
the manufacturing processes in order to contain its expenses. It is covered for raw material price increase for 2-3 months and has pricing advantage to pass on slight price hike to consumers.
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9.1.4BUILDING NEW GROWTH PLATFORMS
Godrej has always aimed at giving the consumers something to look forward to which includes new products in the existing range of products as well as new conceptualized products.
Godrej will continue to leverage innovation as a differentiator and have a strong innovation pipeline in place to introduce exciting and disruptive new products like Godrej Advanced Powder Hair Colour and Hit Magic Paper. They are also simultaneously building a best in class supply chain and future ready sales organisation to support our business, while fostering a culture of professional entrepreneurism. In addition to this, Gorej has also completed the integration of logistics and CFAs, leading to key synergy benefits and a far more streamlined organization. Today, GPCL is keen on further enhancing their Demand Driven Supply Chain. As a part of this effort, they have efficiently managed our relations with suppliers and dealers and reduced inventory and time to market. They have also implemented a lean supply chain through integrated planning, network optimization and a consumer centric supply chain. These initiatives, along with flexible and scalable IT systems, offer immense benefits and savings. GPCL‘s supply chain enhancements have resulted in additional capacity across coils,
aerosols and toilet soaps. Further, debottlenecking initiatives combined with the strategic sourcing of raw material and packaging material is also resulting in much improved productivity. Additional cost efficiencies are being driven through energy conservation and the deployment of lean and six sigma principles. After having completed the domestic SAP integration, Godrej is now in the process of
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a phased migration of its international operations to SAP. Godrej has ensured consumers enough reasons to remain excited about their products and return to buy more. In line with this objective, they have dramatically strengthened their R&D capabilities. Over the next three years, the endeavor will be to re-launch or innovate across our product portfolio and create products with meaningful differentiation. Godrej has a dedicated design and innovation cell and are employing design driven thinking to accelerate the time to market and to improve the odds of success. Some of Godrej consumer Products Ltd.‘s innovations and launches this year are:
In Personal Wash, launched a new variant of Godrej No. 1, Saffron and Milk Cream. Both milk and saffron are natural ingredients that beautify the skin and respond to the expressed need of soap users looking for a product with limited artificial constituents. They have also introduced the Godrej Expert powder hair colour range in three variants – Original, Care and Advanced. Godrej Expert Original, trusted by over 40 million consumers, has now been made available in a new pack with the time-tested Colour Lock Formula. Godrej Expert Care is a herbal-based formulation with henna and amla. It cares for the hair and keeps it strong while colouring. This has been made available in three shades – Gentle Black, Natural Brown and Burgundy On the international front, Godrej has been modifying their global products to suit consumer tastes in different geographies. HIT Magic is undisputedly the most innovative product that has been launched in Indonesia, a paper format mosquito repellent. HIT Extra is a power electric mosquito repellant which has been successfully launched this year. Godrej launched a series of new air and care freshners called Godrej Aer. They come
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in fancy packaging in 3 types of fragrances. They have also introduced Stella Duo, an air freshener with a dual fragrance in the Indonesian market. In Hair Care, we have launched 10 new shades in Renew hair colour and 3 new shades in Inecto powder hair colour in South Africa. Godrej has also launched Abha Herbal Black Henna in Sri Lanka. They have introduced an ammonia free hair colour under our Issue brand in Argentina – Issue Precious Secrets hair colour with a three dimensional gloss feature. The new Salon Selectives brand in the UK has a range of shampoos, conditioners, mousses, sprays, gels and oils.
Hit
Magic
Indonesia
Paper and
is
has one
replaced of
coils
Godrej‘s
innovations.
Godrej re-entered the market of car and home fragrances in India with Godrej Aer this fiscal year 45
10. PERSONAL OPINION Godrej Consumer Products Ltd. Is a very well reputed company having the best of the management to undertake its operations, having the best of the strategies developed, yet while studying this company I felt there were certain areas more focus could be laid upon. In terms of opportunities Godrej should look at expanding into
a)Oral Care. From one of the articles in the newspapers it was understood that godrej is willing for an inorganic entry into the oral care segment but I feel entering the organic way in oral care segment will help godrej gain a higher market share over all.
b)Hair care Hair Care does not only involve hairdyes, it should also launch products like shampoos and conditioners and bring in the concept of special shampoos to be used after using their hair dyes. This is one of the strategies used by Loreal and helps in gaining a foot hold in the consumers life by using same company products for several things.
In terms of Strategies that Godrej could Focus on more or introduce.
a)Rural Production & Distribution By having a good supply chain and sales and distribution network is not sufficient. The needs of those in Urban areas are much more different than that of the Rural
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areas. Therefore Godrej Consumer Products Ltd should look into product customization for the rural areas. For Example: Having Hair dye solutions in one time usage packets is one such instance it can aim for better distribution in rural areas, where people cannot afford to bulk buy at one point of time. Having Soaps that are in small bars that have natural features which could be used for hair as well could do good for the rural areas
b)High End products Although godrej is aiming at catering to the masses, it should alongside the regular products launch premium products as well. Godrej has come up with Hair dyes of different prices and different qualities. The same should be done for soaps as well as household care products. Like ITC has come out with shower gels which are high priced but cater not only to the masses but also the upper classes.
c)Inter holding Group Promotional Activities Godrej Consumer Products being a part of Godrej holding should make use of firms like Godrej Boyce to promote there products and vice versa.
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d)Making use of Acquisitions Godrej should bring the products of their various acquire companies to India so that it can have an advantage of Innovation and an edge over the competitors in terms of saved R&D costs.
e) Customer Care Centre Having studied the customer front of godrej, I feel that godrej should have a developed customer care center to cater to the after service needs and also to get an opinion on the current market satisfaction.
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11. Godrej Consumer Products Ltd- As the Shareholders and Prospective Investors See it The shares are listed on both the Major stock exchanges in India – BSE and NSE. As of 30th June FIIs have invested 340322576 shares. The share price has been
A recent study conducted by Motilal Oswal states that investing in godrej is at a neutral position for long-term perspective For short-term perspective one could make a gain on a daily change in script value by Rs.7-10. 11.1 Key in vestment arguments
Market leadership and strong 20%+ growth in the domestic household insecticides business is the key growth driver for the company GCPL has a low tax base with 65% of its sales coming from excise free and tax free zones. 11.2 Key investment risks
Increasing contribution of acquisitions will likely increase margin volatility for GCPL in the future Aggressive competition in the soap segments may lead to pricing pressures which 49
may negatively affect the margins. 11.3 Recent developments
GCPL launched AER air fresheners during the quarter. The product has home and car variants. The company has received pioneer tax status in Nigeria resulting in a tax reversal of INR165m (INR80m after minority interest). 11.4 Valuation and view
Revised
EPS estimates upwards by 2-3% for FY12 and FY13 at INR17.2 and
INR21.9. It is believed that the risk reward ratio is unfavorable at 27.6x FY13E and 22.7x FY14E earnings. Therefore maintaining a Neutral opinion. 11.5 Sector view
Motilal Oswal has a cautious view on the sector on back of the inflationary pressure which might impact volumes as well as profit margins of companies. Companies with low competitive pressures and broad product portfolios will be able to better with stand any slowdown in a particular segment. Longer term prospects bright, given rising incomes and low penetration.
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12.CORPORATE SOCIAL RESPONSIBILITY In conjunction with GCPL‘s vision for ―brighter living‖ for all stakeholders, the
company has developed a long- term vision for playing an active part in creating a more inclusive and greener India. This vision has been named ―Godrej Good & Green‖.
Good & Green is founded on shared value initiatives. The concept of shared value is defined as policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates. As part of Good & Green, the Group aspires by 2020, to create a more employable Indian workforce, a greener India and innovate for good and green products. GCPL has made considerable progress on its Good & Green aspirations in the last year. They kick started their initiatives around Employability, through the introduction of two shared value projects in Front Line Sales and Beauty and Hair Care. The pilots in Front Line Sales have started in the Raisen district of Madhya Pradesh, Raipur district of Chattisgarh and in Cuttack in Odisha. This programme aims at training rural underprivileged youth in sales. Participants certified by Godrej through this programme will be given the opportunity to get a job with a Godrej distributor or sub-stockist in these areas. The Beauty, Hair Care and Mehendi programme, ‗Godrej Saloni‘ has been launched in 5 community locations in Mumbai, in partnership with
NGOs. More than 350 women from nearby communities are expected to complete this three-month programme and receive their certification in May 2012. Post certification, the participants will be ready to operate as self-employed beauticians and hairdressers. In order to equip them for this, the company will also aid with training in entrepreneurship and provide them with starter kits. 51
A number of initiatives have been undertaken at GCPL on Greener India. GCPL is striving towards reducing specific energy consumption, utilizing a higher proportion of renewable energy sources, becoming carbon neutral and water positive and eliminating solid waste sent to landfills.
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13.CONCLUSION Going forward, Godrej Consumer Products Ltd. will continue to take strides towards executing its strategy. I believe there are significant opportunities to create value and derive synergies across geographies and business categories and are working on several initiatives to drive this. To create long-term shareholder value, GCPL is shifting focus from the low-margin soaps segment, to the more profitable product segments of home and hair products. In fiscal year 2010, GCPL's personal wash segment accounted for 41% of revenues and home care 20%; the situation has reversed in fiscal year 2012, where home care now accounts for 47% of revenues and personal wash 22%. As of now the home insecticide business is GCPL's strongest segment due to the acquisitios in Indonesia. In India, the company holds 37% share in the INR 35 billion home insecticide market, growing at 20% annually due to low penetration in both urban and rural areas. GCPL's Hit and Good Knight brands compete with Reckitt Benckiser's Mortein and S.C. Johnson's All Out, each of which currently hold approximately 17% market share. GCPL is well positioned to lead market penetration efforts in a country where awareness about insect-borne diseases is on the rise. The under penetration and low competition characteristics of home insecticide market in India are the same in other developing countries; hence the Megasari acquisition and planned launch of home insecticides through African subsidiaries will result in high revenue growth in the immediate future.
In hair color, the Godrej brand is positioned as the low-priced, branded, powder-based cover-up product in India. It holds 29% market share compared to its premium-priced competitor L'Oreal OR with 18% market share. Within the low-priced category,
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Godrej enjoys pricing power as it sells at a premium of 5%-10% to other regional powder products and is a price-setter in this category. The overall hair color market also has low penetration of approximately 50% across India, and through its low price point Godrej is driving trials and new customer conversions by helping consumers switch from homemade remedies. Its acquisition of the Kinky and Darling hair product companies in Africa will allow GCPL to use local brands to introduce its lowpriced products in the burgeoning African hair care market.
In my opinion, GCPL's weakest competitive position is within soaps. The soap market is intensely competitive with foreign and local players competing on price. The leading player in India, Hindustan Unilever, or HUL, holds 40% market share compared to Godrej-branded soaps holding 10%. GCPL is a price follower in this segment and can never hope to overtake HUL, but will continue to hold its place in the market. It is known as the 'value-for-money' product as its soap bar size is much larger but sells at the same price as HUL.
Overall, GCPL is looking to graduate from being a home-grown Indian company to a global consumer products firm via its overseas acquisitions. In doing so, it is looking to expand its area of expertise. However, this acquisition spree comes with the downside of pressured returns on invested capital and exposes the company to significant risks of execution. GCPL currently faces four major risks:
integration of acquired businesses,
large debt load from the recent acquisitions spree,
increased currency exposure, and
high country risk.
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First, the company has recently carried out many international acquisitions, including the Darling acquisition .The success of the company greatly depends on the profitable integration of these businesses into the GCPL fold.
Second, the large amount of debt that the company currently carries on its books puts an additional constraint on management while deciding a balanced capital allocation between investing for growth and maintaining a prudent capital structure. This balance will be hard to maintain going forward, as the company can use its cash flows either for capital investments or for loan repayments.
Third, GCPL has foreign currency exposure through foreign debt and foreign currency revenues. While the company has hedged its short-term currency exposure for its loan repayments, it is unable to effectively hedge its long-term currency exposure.
Finally, the country risk is on the rise with the international expansion of GCPL into countries with which it is unfamiliar. Most of the developing economies in which GCPL conducts business suffer from high inflation and high political uncertainty. It is hard to hedge these risks, and having made cash acquisitions in most of the cases, the risk of execution lies with GCPL. Owing to these four key risks, there is high uncertainty around the company's future performance. However Godrej Consumer Products Ltd. carries the brand name of Godrej which definitely will not be let down to the shareholders and customers and prospective investors because of the efficient and highly experienced Leadership & Management team that the company has.
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14.BIBLIOGRAPHY INTERNET
http://breport.myiris.com/MOTOSW/GODCONPR_20120807.pdf www.godrejcp.com- Press releases, Annual report 2011-2012, Strategy Update
www.moneycontrol.com
www.indiatimes.com- Times of India and Economic times
www.thehindubusinessline.com
www.mbaskool.com
www.scribd.com
www.slideshare.net
NEWSPAPER Business Standard-Mumbai Jun 18, 2009
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