Godrej to focus more on own brands as the licensing agreement with Sara Lee ends in two years.
It took almost a year for the Godrej group to take full control of the joint venture company Godrej Sara Lee. But now that it has, the question remains: what happens to the Sara Lee brands in its portfolio?
These brands - Ambi Pur, Brylcreem and Kiwi - have been licensed to the joint venture under an agreement that has a five-year lock-in.
This lock-in comes to an end in June 2012. Till then the Godrej group retains the right to manufacture, market and distribute these products despite a change of hands globally. Ambi Pur, for the record, has been sold to Procter & Gamble, while Brylcreem is with Unilever now. Only Kiwi remains, but not for long as Sara Lee scouts for buyers to offload non-core businesses in its bid to focus on its core food & beverage business.
“In the event Sara Lee or the new owner chooses to withdraw the agreement, they have to do so with adequate notice,” Group Chairman Adi Godrej said, after his company Godrej Consumer Products (GCPL) announced on Thursday that it was buying out Sara Lee’s 51 per cent stake in the joint venture. GCPL held 49 per cent of Godrej Sara Lee. “But they have to compensate us for the value of the brands,” he said.
For now, the status quo remains, which means it is business as usual for the team handling the Sara Lee portfolio at the company, now a fully-owned subsidiary of GCPL. Says Tarun Arora, vice-president, sales & marketing, Godrej Sara Lee, “Nothing changes for us. We continue with our business plans as they are.”
Despite this, the fact remains that the group’s priorities lie elsewhere.
It is the domestic products - Goodknight, Hit and Jet - that the company is actually betting on. No surprises there given that these brands contribute 85 per cent to the company’s turnover at the moment. The balance 15 per cent comes from the Sara Lee brands.
Its flagship mosquito repellant brand Goodknight, in the last few years, has grown aggressively on the back of new product development and innovation, explains Arora. “We have the Advance Range, which is driving growth for us,” he explains. “‘The products here include a dual mode liquid vaporiser, which is a refill product, a low-smoke coil and an aerosol,” he says. The company also launched a mosquito repellent cream recently to the fill the gap for one in its product portfolio, explains Arora.
“There are more products in the pipeline, which we will launch appropriately,” he says.
Goodknight will be taken to rural areas. It will also be rolled out internationally, says Mahendran. “This is something we propose to do aggressively,” he says.
Household insecticides, incidentally, is roughly Rs 2,200 crore in size in India. The organised portion, which makes up the bulk up of the market, comprises coils, the dominant segment, followed by electrical devices such as liquid vaporisers, and aerosols. At an overall level, Godrej Sara Lee has a dominant share in household insecticides with over 34 per cent value share, followed by Reckitt Benckiser at about 23 per cent and S C Johnson at about 19 per cent respectively.
Of this over 34 per cent, Goodknight has a share of 23.8 per cent share, followed by Hit at about 6.2 per cent and Jet at about 4.9 per cent respectively.
Hit, in contrast, operates in the aerosol segment only, where it is the leader, while Jet, a regional brand, operates in the coils segment. It is the leading brand in Andhra Pradesh.
GCPL is already the second-largest household insecticide player in Asia outside of Japan, with the 51 per cent acquisition of the Sara Lee stake in the Indian joint venture as well as the recent buyout of Megasari Makmur in Indonesia.
“So eyeing the global number two position in this segment is a natural extension of our strategy,” says A Mahendran, managing director, Godrej Sara Lee and director of the group’s FMCG Cell. “The endeavour is clear,” he says. “We want to move up there, for which we will use both the organic and inorganic routes to achieve it,” he says.
For instance, GCPL has already placed its bid for Sara Lee’s insecticide business. It still awaits the outcome there.
Then there are products from acquired companies such as Megasari that could make their way onto shop shelves in India.
