The US firm has sold its non-food business worldwide, but its Indian JV retains the rights for Kiwi, Brylcreem and Ambi Pur
Sara Lee Corporation’s move to focus on its core food and drinks business in the US has altered the portfolio equations in the company permanently. Its body-care business, with key brands such as Radox, Sanex etc, is now in the custody of rival Unilever. Its air-care business, represented by another biggie Ambi Pur, has gone to another giant Procter & Gamble. This change of hands globally has meant that portfolio equations at the regional and country level will also undergo a transformation.
So what does the rejig mean for Sara Lee’s brands in India? Sara Lee has a 51:49 joint venture with the Godrej group since 1995 in India. “The international company, however, brought its brands Ambi Pur, Brylcreem and Kiwi into the joint venture only a few years ago”, says A Mahendran, managing director, Godrej Sara Lee.
“So we continue to retain the licensing rights to manufacture, market and distribute these products by virtue of a five-year lock-in that exists,” he says. “Only two-and-a-half years of the lock-in has been exhausted. We still have another two-and-a-half years to go,” he adds.
That means the Godrej group is unlikely to offload these brands from the joint venture just yet despite the change of hands at the global level. “The question doesn’t arise as the licensing agreement has a five-year lock-in,” reiterates Mahendran.
The Sara Lee brands contribute just about 15-20 per cent to the overall sales of the joint-venture company. In the last financial year, net sales of the company stood at Rs 755 crore. Analysts estimate that net sales this year could be in the region of about Rs 900 crore if growth rates of about 14-15 per cent — the same as last year — are maintained. The company, therefore, would be disinclined to part with the brands at this stage so that no incremental growth is lost.
“The brands may not be huge, but they still contribute in some way to the turnover. Why would the company want to lose that at this stage?,” says an analyst with a brokerage firm in Mumbai.
Their retention becomes imperative in the light of another key development: the group is looking to acquire the 51-per-cent-stake of Sara Lee in the joint venture in the next few months for a consideration of Rs 800 crore, which is likely to be funded via debt.
So that will give full control of the business to the Indian group. And with no plans to offload the Sara Lee brands just yet, even its current portfolio stays put. As Mahendran says, “We continue to invest behind these brands.”
But with 80 per cent of the company’s turnover coming from the insecticide business, mainly Goodknight, Hit and Jet, it’s obvious where the management’s priorities lie. “Of course, the insecticide business will be the key. But we are not ignoring the Sara Lee brands at the same time,” Mahendran says.
In the last few months, for instance, the company launched a few variants of Brylcreem and Ambi Pur in the market. “We launched a hybrid version of Brylcreem gel that combines properties of our wet-look gel and our ultra-strong gel, which are already there in the marketplace,” says Tarun Arora, vice-president, sales & marketing, Godrej Sara Lee
“We also launched a new Aroma-Therapy range of Ambi Pur. This comes in addition to regular fragrances such as lavender, white-lily, aqua and vanilla that are part of the product portfolio,” he says.
As far as Kiwi goes, the company at the moment is test-marketing a low-priced express shoe-shine sponge in Tamil Nadu. It already has a higher-priced variant in the market. “This higher-priced variant is available at Rs 45. We are test-marketing the lower-priced variant at Rs 5. If it works, you can imagine the impact on sales,” says Arora.
With three times the number of products in its shoe-care portfolio than arch rival Cherry Blossom, Godrej Sara Lee has been quick in terms of new launches under Kiwi. It is also considered to be the aggressive of the two with innovative products such as shoe, shampoos, polish-on-the-go through a sponge range, polish for sportswear etc.
But it continues to trail behind rival Cherry Blossom in the traditional shoe-polish market, which is the largest in the shoe-care segment, despite pioneering newer segments such as the sponge segment, where growth is said to be faster. “Cherry Blossom has been in the traditional shoe-polish space for a long time. Their historical presence helps them,” says Arora.
The company however is banking on newer segments in the shoe-care space to help it improve market share for Kiwi, whose overall value share is 19 per cent at the moment. “The traditional shoe-polish market is actually de-growing. So that should help us in the long run because we have been ahead of the curve when it comes to identifying changing consumer preferences,” says Arora.
