Sales growth of Gillette India Ltd during the June quarter was a modest 10.8%, but significant improvement in its profitability led to net profit rising by 31%. During the quarter, consumer product categories have been under pressure. All-round price increases led to consumers becoming stingier, switching to cheaper products or even curtailing discretionary consumption.
But Gillette operates in a category that is known to be relatively insulated from such problems. Consumers are generally loyal to their razors and don’t switch brands easily. Gillette also follows a very sensible strategy of affordable pricing for its razors, knowing that customers will come back to buy blades, on which it can get higher margins. That gives it an annuity income that is the envy of any consumer company.
Still, its grooming business did see some impact of the slowdown; product sales grew by just 12%. Some of its business is dependent on consumers switching from cheaper double-blade razors to more expensive twin-edge products. In a slowdown, that rate could get affected. But growth in the grooming products business was still better than that of toothbrushes and batteries, which grew by 8% and 6%, respectively.
Gillette’s overall sales grew by 10.8% to Rs184 crore. Grooming contributes to nearly three-fourths of revenue.
Even though sales growth was subdued, profits grew at a much faster pace. The grooming segment’s profit grew by 25% and oral care profits were up 2.5 times. Operating profits during the quarter were a surprise, growing by 85%. Material costs declined by 10% during the quarter, chiefly due to a reduction in traded goods.
Its profit before tax and exceptional items nearly doubled to Rs58.6 crore. But an exceptional income of Rs14 crore in the June 2008 quarter slowed net profit growth to 28% this year.
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