Global investors meet: Godrej Consumer to invest Rs 500 cr in Tamil Nadu

The company which already has a strong market share in the state aims to set up a multi-category factory

Godrej Consumer Products (GCPL) has announced fresh investments in Tamil Nadu as part of the Global Investors Meet in the state. The company’s managing director and chief executive officer Sudhir Sitapati talks to Shine Jacob on Tamil Nadu investments, acquisition plans in hair colour space, synergy post the acquisition of the consumer products business of Raymond Consumer Care (RCCL), among others.

After so many years, you are coming out with a capital expenditure plan for investments in Tamil Nadu and Gwalior. Can you throw some light on it?

We are roughly investing Rs 500 crore each in Tamil Nadu and Gwalior - in the Southern and Northern parts of the country. It will be a unique factory in the sense that it is going to be a multi-category factory. We had factories in the past, which used to be single-category factories. For example, we already had a soap factory in Gwalior. We have a single-category factory in Puducherry. Some of the earlier imperatives like tax savings have given way to imperatives on logistics. When you set up new capacities, you will have to set up where it is logistically the best and similarly multi-category. Earlier in the old tax regime, pre-GST, we used to make high margins in some places, low margins in some other places. Now, it is all getting driven by economics as a criterion and multi-category factories make sense. In the olden days, high-margin products were made in tax exempt geographies and low-margin products were made in areas close to the market. There would not be much tax savings. Logistics costs could be bigger than tax savings. We will make every product that we make in Chennai, except two new products that we have acquired, which are deodorants and condoms. We acquired it after the plants were conceptualised.

These are the two substantial capex plans for India and they will serve us for quite a long time. The government of Tamil Nadu is extremely progressive and deals like a professional body.

You recently launched a new liquid detergent 'Godrej Fab' in South India at a disruptive price point. Why did you choose South India for the launch?

Godrej is the pioneer in liquid detergents in India with Ezee, which was used for woolens in the North. The liquid detergent market has really taken off all over India, particularly in the South. We believe that Fab is a good entry into the category, both in terms of product quality and price, which is very attractive at Rs 99. The reason we chose the South as a test market is because the current liquid market is much larger in the South than it is anywhere else. Generally, new categories do better in the South and then they go upwards. It is early days, but the market is responding really well. Godrej has always had a good market share in the South. We operate in seven categories – soaps, household insecticides, hair colour, air fresheners, liquid detergents, deodorants and condoms. In almost all the categories, the market share in the South is very good. Tamil Nadu in particular is very strong.

Are you looking at any inorganic growth opportunities, especially for acquisitions in the hair colour segment?

We are constantly looking and evaluating for acquisitions. If good opportunities come, we will look at it.

How do you see the calendar year 2024 for Godrej and the industry?

We are quite positive. For the last two to three years, premium categories have been doing well, while mass categories are not doing that well. I hope this trend reverses.

It is nine months since you acquired Raymond Consumer Care Ltd. How are you looking at the synergy?

In terms of cost synergy, it has worked very well. We have integrated those operations entirely, integrated distributors and made it one common distributor margin. In all aspects, it worked well. Now, we are ready and are poised to get supernormal growth.

You recently indicated that the rural market demand is muted, why do you think so?

Markets are slightly better than in the second quarter. Generally, the rural demand is tough. I want to put it like this. In the past, rural areas used to outflow the urban sector. I think there are signs that things will become better in Q4. There is no rapid change that I can say, but can generally say that it is better than the past. Certainly no dramatic change in the trajectory.  In overseas markets, Indonesia is doing really well for us. It is the second important market for our company’s profit. Around 100 per cent of our company’s profit is coming from India and Indonesia. Both Africa and Latin America are having ups and downs.