‘GCPL’s focus on new mkts with mini insecticide packs’
3 min read . Updated: 08 Feb 2023, 12:38 AM IST
PremiumIf you look at universal penetration (for FMCG), it is always the low unit price packs that drive penetration, says Sudhir Sitapati, CEO & MD, GCPL
New Delhi: Godrej Consumer Products Ltd, which leads the household insecticide market, announced the roll-out of Goodknight mini liquid and ₹50 Hit spray packs in its effort to reach out to 100-million low-income households. Household insecticide brands Hit and GoodKnight contribute around 40% of its domestic business. Chief executive and managing director Sudhir Sitapati said in an interview the move is in line with its efforts to drive penetration of the category in a sluggish market. He said inflation is showing signs of moderation. In FY22, GCPL posted $1.6 billion in revenues. Edited excerpts:
Are the new launches an outcome of inflation hurting household demand and therefore the move to offer affordable products?
If you look at universal penetration (for FMCG) it is always low unit price packs (that drive penetration). In hair colour business, too, we have introduced a ₹30 rupee sachet that helped penetration. Household insecticide is one of the categories that has not used low unit (pack) as it’s an aerosol, and not easy to replicate. So, the strategy was about finding ways to democratize the categories. We have seen that every time you reach a price point in terms of accessibility, you get a large number of new consumers suddenly. It has less to do with this round of inflation, and more to do with driving category development
What’s your investment behind this launch?
I can’t share a number, but it will be at a very high scale and focused on rural and uncovered markets. One thing that GCPL has done is in the last 1 to 1.5 years, even in times when our gross margins diluted, we continued to spend on advertising. Those numbers are in public domain …there are exponential jumps. We are committed to continuously increase it because we think that in FMCG, you have to bring access, use media, and do distribution, for growth.
What is your outlook for Q4 and FY2024?
On the margins front it is pretty good. Some part of volumes will do better as hyperinflation is gone off. I hope these new products will also give volumes.
Will the launches raise the contribution of household insecticides to your overall business?
In the last five years, the category has not done well for us. The innovations will certainly change the fortunes of household insecticides, not only for us but for the industry because the market is flooded with illegal and cheap incense sticks that maybe efficacious, but not safe.
With companies indicating signs of moderation in some commodities—what will be the trajectory of price hikes?A lot of commodities have really deflated in the last three-to-four months. So the inflation you’re seeing in the market is a consequence of the high prices that were there six-to-eight months ago. We have exposure to palm oil, to crude oil, but even things like wheat and all in the last three, four months, there’s been a significant deflation. Many of us didn’t take up prices to the extent at which we faced inflation, which is why we saw the gross margin hit. In the short-to-medium term, unless the commodity situation goes up, I don’t see price hikes. I see in categories, like in soaps and all, price drops.
Competition has been stepping up investments, especially on the D2C front, what is your M&A strategy?
It’s not proper for me to give specifics, but as a company that’s a pretty cash rich company, we have strong growth ambitions. So we’re constantly evaluating inorganic opportunities at the right price, at the right strategic fit. We have a department of M&A—they are looking at these things all the time.
