Godrej Consumer targets double-digit volume growth

Mumbai: Godrej Consumer Products (GCPL) aims for double-digit volume growth in the medium term, mainly through category development, Sudhir Sitapati said at an analyst meeting, his first major interaction after taking the lead of MD & CEO of GCPL.
According to a Motilal Oswal research report, 50% of that amount would come from penetration gains in half of the portfolio. The rest would consist of 15% of moderate market share gains in half of the portfolio, 25% of market growth driven by consumption and 10% of breakthrough innovations. “The most important highlight of Sudhir’s presentation was to increase the focus and capacity on category development, which (we think) to some extent was lacking in Godrej (until now),” said a report from ICICI Securities.
He is aware that increasing category penetration and development – something the former Sitapati organization, Hindustan Unilever implemented in a targeted fashion – will require resources. The ICICI Securities report added: “The margin for increased investment must be created in an inflationary commodity environment. ”
Sitapati highlighted several measures to generate cost savings, including improved gross margins (through a better mix), lower discounts, reduced overheads and the elimination of non-multimedia ATL (au- above the line). In an indication that the innovation process, which GCPL has stepped up over the past decade, could be streamlined, Sitapati said the focus will be more on the core, with fewer more significant innovations. In its report, Emkay Global Financial Services said: highlighting the strengths of GCPL, including the culture of innovation, economy spirit and obsession with product quality, Sudhir highlighted several weaknesses, including the development of weak categories, too much innovation with less focus on the core, the lack of global collaboration and the absence of a frugal cost structure with low investments in automation.
High complexity can lead to a lack of focus on the kernel. For example, GCPL’s inventory, according to the Motilal Oswal report, is 1.7 times greater than ideal levels and, therefore, reduction of inventory management units (SKUs) will be a key area. The Indian business, the report adds, has 500 SKUs, but most stores only keep 12 SKUs.


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