New Delhi: Godrej Consumer Products Ltd (GCPL) is betting on reducing food inflation, tax cuts and the upcoming salary committee to raise consumer demand over the next 12 to 18 months, CEO Sudhir Sitapati said.
Although the company expects its core soap business to suffer headwinds as inflation stabilizes and government welfare programs are impacted by rising palm oil prices, the company expects demand to increase.
In the March quarter, GCPL reported a 6% increase in merger volume and revenue increased by 6.2% ₹35,979,500. But the company's broader strategy depends on the hub of emerging categories such as pet care, liquid detergents and deodorants, and it sees higher growth potential even as its soap segment remains under pressure.
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Key Highlights
Sitapati expressed confidence in the outlook for FMCG demand, citing factors such as reducing food inflation and government tax cuts and welfare plans.
“We have a look at consumer demand in the next 12 months for various reasons. The effect of El Nino basically accounted for food prices in India last year. Food price inflation has a direct impact on consumption of fast-moving consumer goods. Now, El Nino has reversed, and the inflation rate of food prices has dropped during the January-March period,” he added, adding: “We should see some kind of demand come back.”
GCPL's performance in the March quarter reflects this cautious optimism. The consolidated revenue of its operations rose by 6.2% to reach ₹359.795 billion, profit ₹4.119 million, with ₹1893.21 million losses a year ago. For fiscal 24, the company's operating revenue increased by 2%, totaling ₹14,364.29 million.
However, the company acknowledged the ongoing challenges posed by inflationary pressures, especially the sharp rise in palm oil prices, which affected its EBITDA margins.
Sitapati calls the peak of inflation “short-term fragments” and defends the company's decision to limit price increases, passing only 15-16% of the price of palm oil to consumers, rather than shocking the market at higher prices.
Focus on future categories
Going forward, GCPL is shifting its focus to high-growth, low-quality categories, even as the soap business continues to feel the impact of rising input costs. The company believes there are huge growth opportunities in shower gels, liquid detergents, deodorants, air fresheners, pet care and sexual health.
In 2023, GCPL acquired Raymond Consumer Care Ltd (RCCL)’s rapidly growing consumer goods business and added brands such as Park Avenue Deodorants and Kamasutra sexual health products to its portfolio. In April 2024, the company launched the pet care brand “Godrej Ninja” in Tamil Nadu, leveraging the group’s marketing and manufacturing advantages.
Additionally, GCPL has made a strong move with the launch of Fab Liquid liquid detergents for the price of ₹99, reach annual revenue operation rate ₹Rs 250 crore in 12 months. The company has also launched more affordable products within its deodorization range, including ₹99 antiperspirants, obstacles and reduced price kamasutra deodorant.
Another part that is expected to grow is pesticides.
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GCPL's brand Goodknight and took a hit, growing double-digit growth in the March quarter. The company also aims to undermine the illegal scent stick market and drive product and consumer awareness through innovations in its electricity and aroma formats, such as patent molecule (RMF).
prospect
GCPL expects unit batch growth in the mid-26 fiscal year, high unit volume revenue growth and 2-digit EBITDA growth in FY25.
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The company expects profits to be gained once palm oil prices stabilize, which will help support margins in the coming quarters.
Sitapati's focus on GCPL's “Tomorrow category” will help the company's short-term challenges and position it for long-term success, which remains optimistic.
