Price hikes in Q2 will be bigger than Q1: Godrej Consumer Products CFO

Godrej Consumer Products is planning to increase prices higher than it did in Q1 (it took an 18 per cent price increase in the first quarter) before it starts to reduce them to pass on the benefit of lower commodity costs to the consumer. Sameer Shah, chief financial officer, Godrej Consumer Products, in an interview with Sharleen D’Souza, talks about how demand is panning out and more. Edited excerpts: 

How is demand panning out, especially in rural India?
 

The overall demand continues to be gradually improving. There is no big-bang sequential improvement in demand. Rural demand was very weak but that is showing improvement compared to urban. With some macros like inflation stabilising now and the monsoon being good, this recovery will continue.
 

You are already sitting on high-cost inventory from the first quarter. Will you take further price hikes in the second?
 

Price increase may be a little higher in Q2 (FY23) as compared to Q1 (18 per cent). In the next quarter, we will see that quantum (of price increases) coming down.
 

In homecare and other parts of personal care, price increases would be relatively low.
 

We are of the view that the (commodity) prices will start coming down. But I think it has come off much ahead of time, especially the quantum. At current levels of palm oil, we do expect the prices to be in the plus/minus 10 percentage range for the next 12-18 months.
 

How do you plan to increase your market share, especially in soaps, which is a highly penetrated category?
 

The strategy in soaps is to gain market share and since this is a highly penetrated category, we cannot drive the penetration. But we are a distant number two player. There is definitely big headroom in terms of gaining market share. In the last decade on average we gained 60-70 basis points every year. The task in the non-personal wash space is to drive category penetration because the penetration rates in categories or formats within household insecticides or even in hair colours are very low. The job is to get consumers into these categories and formats. Once that happens, the category will grow.
 

Will you focus on pushing your current innovations into the market, or launch new products?
 

For the next 12-18 months, the focus will be more on the core because there’s a lot that can happen there. We have been building the non-mosquito portfolio and have bought into the one for cockroaches. We are the market leader in cockroach insecticides and that’s a good 10-15 per cent of our portfolio. We will continue to double down on that.
 

How will your advertising spend evolve?
 

It will go up to a little less than high single digits as a percent¬age of sales in India and globa¬lly between mid and high single digits on a full-year basis.
 

When do you expect recovery in the Indonesian markets?

It may be painful for a couple of quarters but the underlying performance is better now. The overall reported results should start improving dramatically in one or two quarters.