GCPL is seeing uptick in rural segment, says Vivek Gambhir

Vivek Gambhir, managing director, Godrej Consumer Products Ltd (GCPL), in an interview with Swati Khandelwal of Zee Business talks about his company's African business, strategy to meet the challenges and rural growth, among others.

Your Indian business has contributed to growth despite revenue from African business not being as good. What is the situation with the Africa business?

We are pleased with our performance in the Indian business, which has been consistently delivering double-digit growth, sales as well as margin expansion. The margin expansion is led by the significant investments in advertisements. In international business, Indonesia is performing very well with both topline and margin growth. Africa has been a challenge over the last quarter on the margins front due to certain reasons, including South Africa, which is going through a significant macroeconomic turmoil. There is a lag between the rise in input costs due to currency devaluation and some of the price hikes that we have been able to take. We have been spending significantly in advertisements and have launched a number of different brands in hair extension and wet hair portfolio across various parts of Africa. This upfront investment in marketing had dampened margins in the previous quarter, too. Having said that, we are very confident of a stronger performance in both topline and bottomline from our Africa business. If our Indonesian and Indian businesses' performance sustains in the second half of the year, then the second half of the year should be strong in both topline and bottomline for overall GCPL.

How does rural growth pan out in the first half as far as the consumption story goes?

Across the board, we are seeing a rise in our rural growth, which has been doing nearly 2X of urban growth. MSPs increases, the government's stimulus and various social programmes have helped us to see healthy momentum.

Advertisement expenses have gone up 20%. Is this related to new product launches or you have plans to increase it?

Ad expenses have gone up due to new launches in India. We had a few exciting launches like a comprehensive male grooming range, first powered liquid hand wash in India, and we intend to fully fund them with adequate advertisement support. Despite the expansion of 25% in advertising and promotion, we were able to deliver a very healthy margin expansion. Thus we will continue to back our new launches with adequate marketing support as we feel very confident that there is enough room to deliver healthy and profitable growth.

Which markets do you see outperforming in the next 2-3 years?

We are able to see a good amount of recovery in India and Indonesia and across Africa and the US. Demand continues to be steady in East Africa, West Africa and the US. The challenge seems to be in Argentina and South Africa. So we will have to wait and see that what happens there.

Do you have plans to grow organically and inorganically?

Over the next one to two years, our focus will be on driving volume growth organically. There is a tremendous headroom for growth in the areas in which we have participated in terms of both penetration and consumption. We have certain exciting products in the pipeline across all categories. So with a combination of strong focus on distribution launches and much tighter execution, we will continue to outperform in the industry.

The first half of this fiscal has been very volatile. What is your outlook for the second half?

For FY19, our efforts will be to deliver both topline and bottomline ahead of the FY18 performance, and in the second half our efforts will be on to do better than H1.