Volumes to recover after two quarters along with margins: Godrej Consumer

FMCG major Godrej Consumer Products Ltd (GCPL) is expecting volume growth to recover gradually next fiscal along with improvement in margins, coming out from the consumption slowdown and inflationary pressures, according to company Managing Director & CEO Sudhir Sitapati.

The company will continue to focus on three existing categories - Household Insecticides, Air Care and Hair Colours - in both domestic as well as international markets for growth, as it believes there is "plenty of opportunities" in these areas.

The Godrej group FMCG arm expects to have a "low volume growth and gradual improvement in EBITDA" for the ongoing January-March and coming April-June quarters.

"As next year progresses, I expect volume growth to gradually recover but the EBITDA journey and the margin journey to go up continuously. I expect after two quarters or so, volumes will go up and margins will be a steady story going up," Sitapati told PTI.

Terming the current situation in the market as "unprecedented", the slowdown in the volumes is largely on account of inflation in the market.

"Given our portfolio, a lot of this volume loss is inventory led. Typically what happens when you take up prices, suddenly inventory is reduced at home in the pipeline. I hope at least some of this volume growth comes back, Sitapati added.

Even in the past, when the market faces this kind of massive inflation in the short term, there is a very sharp contraction in volume and then goes back to some kind of number, not the normative number.

The long-term objective for a company like GCPL is to move to double-digit volume growth. This year, with this kind of inflation, if we get a moderate volume growth, that would be good, he added.

Like other FMCG makers, GCPL had last week also reported a price-driven high single-digit growth in its revenue from operations in Q3, though its volume growth in the domestic market was flat.

Sitapati said some volume growth should come back in the current quarter.

" it takes a few quarters for it to come back. I do not think it will come back in a quarter or two. I think it should take two to three quarters for some amount of volume growth to come back, he added.

However, Sitapati said there is a silver lining with GCPL and that is its margin story, which is better.

All leading FMCG companies, in their respective quarter results declared for October-December period, have reported a decline in the consumptions impacted by inflationary pressure, especially in the rural market.

I actually feel there is a general slowdown in consumption, largely driven by inflation and pricing, he said.

Sitapati believes presently GCPL's category penetrations are very low and pretty underdeveloped and should focus on existing categories rather than do new things.

The three big categories are our Household Insecticides, Air Care and Hair Colours businesses, both in India and abroad - at GCPL. Almost half the business is international. These are the portfolios we would focus on anywhere in the world, he added.

The company as per its retail strategy would remain channel agnostics and follow the consumer first policy and be present whether online or offline, wherever shoppers shop.

Like others, GCPL also witnessed a rapid growth in the sales numbers after the pandemic and had also launched some digital native brands in baby care and in some product innovations.

Consumers are increasingly shopping on e-commerce and therefore we have got a dedicated e-commerce team like many other companies, and our team is growing really fast. But I would still say that our strategy is not a channel strategy as much as it's a consumer strategy, and channel serves that need, he said.

Over Capex, Sitapati said it has projects lined up for innovations and capital for automation, though he did not share any numbers.

A lot of companies need to automate and invest more in the capital in the near future. I feel like that is the appropriate strategy for companies to spend on Capex and automation, he added.