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Business News/ Companies / People/  Our entire advantage is based on agility: Godrej Consumer Products MD
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Our entire advantage is based on agility: Godrej Consumer Products MD

Vivek Gambhir speaks in an interview about the new task at hand and challenges he faces in his new role

Gambhir says Godrej’s rural reach now is 50,000 villages and will be increased to 70,000 villages in another three years. Photo: Sameer Joshi/Mint (Sameer Joshi/Mint)Premium
Gambhir says Godrej’s rural reach now is 50,000 villages and will be increased to 70,000 villages in another three years. Photo: Sameer Joshi/Mint

(Sameer Joshi/Mint)

Mumbai: On Monday, Vivek Gambhir took over from A. Mahendran as managing director of Godrej Consumer Products Ltd (GCPL). As founding partner of the India unit of Bain and Co., Gambhir’s interaction with the company began in 2007 when the consultancy firm pitched for Leap Frog, a growth programme at GCPL. He ended up joining the maker of Cinthol soaps and Hit insecticides in 2009 as chief strategy officer, a role specially created for him, and successfully completed the project in 2012.

Gambhir has overseen nine acquisitions that helped the company earn close to 40% of its revenue from international operations. In the past three years, he also oversaw the integration of the erstwhile Godrej Sara Lee business with GCPL along with Nisa Godrej, executive director at the group, and set up a family business board (FBB) where he is secretary. Gambhir’s responsibilities extended to group companies in defining the 10x10 strategy in 2011, which will see the Godrej Group growing its revenues 10 times in 10 years. In an interview on Tuesday, Gambhir spoke about the new task on hand and challenges he faces in his new role. Edited excerpts:

Did you have any apprehensions while taking on this role?

My initial apprehensions were that there is still a fair amount of work that was left to be done in my existing role. But, I also felt that I was getting comfortable in my existing role and that meant it was time to move into a new role. Also, it was coincided with the timing of Mahendran deciding to do something else. If that didn’t happen, then perhaps this would have taken place a few years later.

How do you work with Adi Godrej and Nisa Godrej?

The family plays a very constructive role. Adi is the voice of reason, a shoulder to lean on if you need to. He also give us as much independence as needed. He is operationally very knowledgable and yet not very involved. Nisa partners so very well with me in terms of the innovation agenda. Being a family member, she understands best what the Godrej brand really means.

Where do you expect GCPL to be in the next two-three years?

By 2020, we aspire to be a $5 billion company from a $1.2 billion company today. The revenues split from domestic and international operations will be about 60:40, similar to what we have at present (56:44).

What is the kind of growth rate needed to achieve this?

Last three years, we grew at about 35%. So, in the remaining years, we need to grow at 23% or so. But then, the thinking is if we can grow at the mid-20s for the next three years, we can grow in the low 20s in the remaining four.

Don’t you think that achieving this kind of growth rate would be tough in fiscal year 2014, given that value growth is tapering and consumer spending remains subdued?

Yes, that is true. But for us, we are premiumizing the soap category with Cinthol. Volume is less important in hair colours. So there too we will see good growth. While soap volume will have challenges, I think hair and insecticides will give us enough growth.

The Indian economy has registered its lowest growth in a decade. Does that worry you?

During hard times, it is about getting a lot more efficient and squeezing out inefficiencies. So even last year, given the economic growth was the lowest in a decade, we grew at 20% in India. If we can deliver 20% growth in a tough environment, then with monsoon coming in on time and economic reforms taking place, it could result in higher GDP (gross domestic product) growth, and our performance should improve. So, 20% growth on an organic basis is a good objective for us to drive towards.

What are the immediate tasks on hand?

The task at hand is to figure out what kind of processes and team we require to gain this scale. Along with that, the big imperative for us is that as a local company, we are far more agile than our competitors. Our entire advantage is based on agility. A lot of my thinking is also how do we stay agile as we grow. This involves spending time with people, faster decision-making as they work closer together.

What are the issues that keep you occupied now?

The big challenges are: We are three category players in India—No. 1 in hair colour, No. 1 in insecticides and No. 2 in soaps. Our first biggest priority is retain and extend leadership. Second is innovation, accelerating the pipeline. Third is getting the systems, technologies in place. Then there is the deepening of distribution reach in both urban and rural markets. Our rural reach three years ago was 35,000 villages, and it is now is 50,000 villages. We will increase it to 70,000 villages in another three years.

Do you plan to get into new categories?

Our idea of 3x3 is to be in three continents, and when we enter a new geography, it has to be with a player in one of those categories. Once, we are in a geography, we are much more open to look at new categories. For instance, in India, we are clear we won’t do food. But within home and personal care, everything is fair game for us. As the opportunities arise, we will look at them. For instance, historically we were a toilet soaps player; now we have entered shower gels. Over time, we will look at face wash, body wash and skin cream as well. Similarly, in Indonesia we have the scale to look at other categories as well.

In foods, you have Godrej Tyson. Do you plan to consolidate it with the company?

Our fundamental belief is that food is a very different business, both in terms of distribution and innovation cycles. Our belief is that there are so many opportunities in the home and personal care. Why distract ourselves to pursue food? Also, we tried food before and haven’t been very successful. For instance, the Hershey joint venture.

How much of your sales comes from premium products?

Today, 25% of our sales in India comes from premium products. The goal is to get to about 40% in three years. Three years ago, premium products contributed just 15-16% of our overall revenues. The definition of premium, according to Nielsen, is products priced at 20% or higher than the average product category price.

How much of your revenue comes from new launches?

The innovation rate, as defined by Nielsen, is revenue from products launched this year or in the previous two years. This does not include just packaging change. It has to be a new product code. That percentage is about 14%, and we want it to be 20% in three years for India. Internationally, the innovation rate is higher at 18-19%, and we want that to go up to 25% in three years.

You are perceived as a mass to mid-value products company compared with L’Oreal or Procter and Gamble, which are seen as companies catering to urban consumers. Is that perception changing?

For us, it is a selective premiumization. It follows the increase in income. We want to be able to provide the consumers with more products if they have the appetite to spend. At the same time, there are opportunities at the bottom of the pyramid. So, the strategy is nuanced.

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Published: 05 Jul 2013, 12:04 AM IST
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