Godrej Consumer Products, the hair colours and soaps major, intends to increase its contribution from rural sales to 50 per cent in one year, from 38 per cent right now. In an interview with PRADIPTA MUKHERJEE, GCPL vice-chairman Hoshedar K Press says that among other plans, the company is targeting consolidation of its FMCG businesses and is banking on goods and services tax (GST) implementation, which would enable it to have common depot and supply chain strategies. Edited excerpts:
What is the outlook for the current year?
We currently have a cash surplus of around Rs 100 crore. In the short-term, we would be looking at re-doing our supply chain and logistics costs once the goods and services tax (GST) is implemented from April 2010, and CST is phased out from 4 per cent to nil. We also intend to consolidate the FMCG companies in the Godrej Group, and so, post-GST implementation, we would be looking at how the group FMCG companies can get together to use common depots and supply chain. This would not only reduce cost of operations but also enable reduction of inventory levels.
Any particular strategies to ensure sales growth?
We are going to focus strongly on rural sales. Currently, rural sales make up around 38 per cent of our turnover. We intend to take it to 50 per cent within a year. We have project ‘Dharti’ for rural India and we cover close to 17,000 villages. We intend to cover 50,000 villages soon. This also means that the 4,000 sub-stockists we have in rural areas in India would be more than doubled, creating more employment opportunities.
We expect better margins in the coming quarters, especially because commodity prices and prices of vegetable oils are favourably inclined. In fact, our profits grew over 78 per cent in the last quarter, primarily because of commodity prices going down, although last year was quite bad.
Any account movement within the organisation?
We have recently outsourced our information technology (IT) requirements to Hewlett-Packard (HP). So, while we have retained the core team of close to seven people, the remaining (23 people) have been shifted to H-P payrolls. H-P will take care of both our software and hardware requirements for all kinds of operations.
What is the outlook for GCPL’s international business?
The outbreak of swine flu in the UK has actually pushed up sales of our Cuticura hand sanitiser by 15 per cent. Around 25 per cent of our sales comes from international business right now, which we intend to take to 50 per cent through launch of new products, especially hair colours, and through acquisitions. We would spend close to Rs 1,000 crore on acquisitions, especially brands that are into hair colours.
Companies that we acquired in the past, like Rapidol, are now sourcing close to 50 per cent of their raw materials from India, while in the Middle East, we use third-party manufacturers for soaps.
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You are merging Godrej Sara Lee with GCPL?
The joint venture (JV) between GCPL and Godrej Sara Lee (GSL) will help the company achieve better prices for raw material procurement, since bulk purchase usually ensures better prices. If we buy for two companies, we would be procuring more products and so can demand better prices.
Godrej Group, owned by Godrej Industries and Godrej & Boyce, has a 49 per cent stake in Godrej Sara Lee. We may also look at buying out the 51 per cent share of Sara Lee under the right circumstances and conditions. We have already announced that we are buying the stake of Godrej Industries in the 40-year old Godrej Sara Lee and the deal is consolidated.