MUMBAI: Godrej Consumer Products (GCPL) is aiming at a double-digit volume growth in the medium term, mainly on the back of category development, Sudhir Sitapati said at an analyst meet, his first major interaction after taking over as MD & CEO of GCPL.
According to a Motilal Oswal research report, 50 per cent of this would come from penetration gains in half of the portfolio. The rest would be made of 15 per cent from moderate market share gains in half of the portfolio, 25 per cent from consumption-led market growth, and 10 per cent from disruptive innovation. “The single-most important highlight of Sudhir’s presentation was to increase focus and ability on category development, which (we believe) to some extent, was missing in Godrej (till now),” said a report by ICICI Securities.
It is cognisant that increasing penetration and category development — something that Sitapati’s former organisation Hindustan Unilever has implemented in a focused manner — will require resources. The ICICI Securities report added, “The headroom for increased investments has to be created in an inflationary raw material environment.”
Sitapati highlighted multiple measures for driving cost savings, including improving gross margins (through a better mix), lower discounts, reducing overheads, and eliminating non-media ATL (above-the-line). In an indication that the innovation process, which GCPL stepped up over the last decade, could be streamlined, Sitapati said the focus will be more on the core, with fewer, bigger innovations.In its report, Emkay Global Financial Services said, “Apart from highlighting GCPL’s strengths, including innovation culture, cost-saving mindset and obsession with product quality, Sudhir pointed out several weaknesses, including low category development, too much innovation with less focus on core, lack of global collaboration and lack of a frugal cost structure with low investments in automation.”
High complexity can lead to lack of focus on the core. For instance, GCPL’s inventory, said the Motilal Oswal report, is 1.7x higher than ideal levels and hence reduction of stock keeping units (SKUs) will be a key focus area. The India business, the report added, has 500 SKUs, but most stores maintain only 12 SKUs.
