Unfazed by competition from Reliance Industries, expect broad-based growth in FY24; says Godrej Consumer

Godrej Consumer Products Ltd is unimpressed by the prospect of competition from Reliance’s entry into the FMCG sector, after experiencing several disruptions, including the high-profile entry of Baba Ramdev’s Patanjali, according to a senior company official.

Godrej Consumer Products Ltd (GCPL) CFO Sameer Shah told PTI that the company is betting on its brand equity, wide range of portfolios and innovations to fend off competition.

“We have witnessed multiple disruptions in the FMCG sector. In 2005-2006, everyone said that modern retail will enter the sector by private label and FMCG players will find it very difficult to compete. After 17-18 years nothing has changed with retail playing modern.”

Shah was responding to an inquiry about how Reliance’s entry into FMCG will change the competitive landscape of the sector.

“It’s too early to call,” he said, adding, “We saw Patanjali a few years ago. Five to six years ago, they were expected to compete for every FMCG player, so the going is going to be tough. But we haven’t seen that kind of Progress or any competitive high intensity. Let’s see how it shapes over a period of time.”

According to Shah, 45 percent of GCPL’s revenue comes from the Indian market, while global markets such as Indonesia and Africa contribute the rest.

Reliance Industries, led by billionaire Mukesh Abani through its spin-off unit Reliance Retail, has entered the FMCG segment. It states ambitions to be a relevant player in the $110 billion Fast Moving Consumer Goods (FMCG) sector.

Although the products of RCPL, the FMCG arm and wholly owned subsidiary of Reliance Retail Ventures Limited (RRVL), are only available in select markets. It made them 30 to 35 percent cheaper.

On the domestic consumer goods industry front, Shah said he expects a gradual recovery in FY24 and broad-based growth for GCPL ahead of the industry.

He said, “We expect the consumer goods sector to continue its gradual recovery, especially in the countryside, during the year due to the decline in inflation, especially in commodities, and we expect lower prices and an improvement in trading volume.”

Plus, FY24 will be an election year, and Shah expects welfare spending to rise. This will in some way boost rural consumption.

“Specifically for GCPL, we expect along with overall services that a lot of our internal initiatives will also drive GCPL growth, ahead of the growth of the FMCG segment in India,” said Shah.

When asked about growth segments, he said it would be broad.

“We expect growth to be led by both categories, which are home care and personal care for fiscal ’24,” he said.

On any potential impact from aggressive pricing by Reliance Consumer for soaps, detergents, etc., Shah said, “I think pricing is not a big deal because if all players see a competitive threat, they will also fit into pricing. Especially in a benign commodity environment environment, we also have Godrej NO1 brand, and it’s Rs 115 for a pack of 5, which is actually less than the Rs 25 price point.”

RCPL has priced its soap at Rs 25 (for 110g), which is significantly less than the products of the leading brands.

“If the price point is leverage, I’m sure a lot of companies, especially large companies like us, will cater to it,” he said.

Moreover, in such a benign environment, consumers are looking for tried, tested and trusted brands.

He added, “There are categories like hair color, where consumers are very brand loyal and find it very difficult to switch to a new brand even and unless there is a real conversion.”

GCPL is a leading company in the domestic hair dye market.

“We will keep our eyes and ears open and if we see any competitive threat, then we will have our own responses, tactical or strategic,” he said.

Furthermore, GCPL operates in categories such as Household Insecticides (HI), which is a standardized category. According to Shah HI, it is a classic FMCG, a class of drugs, where you need endorsements, bifurcations, technology and molecules in the backend.

“We will grow our categories and have been leaders in innovation and we will continue to press that lever as well to continue our growth trajectory forward,” he said.

Last week, GCPL said it expected to report double-digit volume and value growth for the quarter ending most recently in March.

According to Shah, “It was better than our internal expectations.”

“We have registered double-digit price and value growth,” Shah said, adding, “There are two reasons for the growth. We have seen a gradual recovery in rural areas, especially in commodities, where some categories are seeing price declines.” .

GCPL has reduced the price of its soaps and also category based initiatives, particularly in hair colors and air fresheners in the last 9-12 months, which has also driven growth.

He added “It’s a mixture of the two. Our performance at international level has been reasonably decent except in Africa, where it’s been paused by elections and demonization in Nigeria.”