Mumbai: Godrej Consumer Products Ltd (GCPL) is set to increase prices of soaps and detergents following market leader Hindustan Unilever Ltd (HUL). Although personal care products, which fall under the so-called fast moving consumer goods (FMCG) category, posted healthy sales growth in the last quarter, margins remain under pressure, GCPL’s chief operating officer Rakesh Kumar Sinha said in an interview.
There are expectations of a price hike in soaps this quarter. Will you hike prices?
HUL had done its last hike in October by 5.5-6%, and ours is due now. In the near future, we plan to raise prices of soaps and detergents somewhere near the same range or may be a little lesser than HUL.
Growth mode: Sinha says Godrej Consumer will not pass on all benefits.
Have you been affected by the slowdown in the economy?
Despite the slowdown in economy, the FMCG sector has not yet been impacted. On the contrary, it witnessed robust growth and till September there was no slowdown. During the good times, people opted for high investments like real estate, cars, etc. But with the slowdown in economy, consumers are cautious and have reduced making such big investments. This has helped the consumers to have more cash, which helped the growth of FMCG companies. However, after the results are declared in the next quarter, we’ll get a better picture on the impact on the FMCG sector.
Sectors like durables, real estate and others are the first ones to get impacted in a downturn, while FMCG purchases are the last ones to be pruned by consumers. And when consumers start curtailing spending in FMCG, the impact will be first felt in the premium segment.
Do you have a margin improvement programme?
It’s a constant thing and we always focus on cost reduction in supply chain and inventories.
Are you confident your company will continue to sustain sales momentum at a time when there is a slowdown across sectors?
For the sales momentum it is yes, but the bottom line is under pressure. The sales of FMCG companies are increasing, but margins are under constant pressure.
Palm oil prices have halved. Will this benefit GCPL?
Lower commodity prices will help. Palm oil prices have come down by 50% from the peak and a part of it will go back to the consumers. As we did not pass on the entire price hike to the consumers, similarly we will not pass the entire benefit due to fall in commodity prices to the consumers.
What are your advertising and promotion spends last year and your forecast for this year?
The company plans to spend around 25-30% more...compared with last year.