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Earnings

Godrej Consumer hopes for double-digit volume growth in FY20

Updated : May 06, 2019 04:30 PM IST

Godrej Consumer is expecting a recovery in the financial year 2020 on the back of various factors including a stable government and "good" monsoon, said Vivek Gambhir, managing director and CEO of the company.

“We certainly expect the situation to improve in FY20 with the factors such as stable government at the centre and a good monsoon," Gambhir said.

The company's earnings disappointed for the second quarter in a row as revenue, EBITDA and margins came in below estimates.

Gambhir said the slowdown was a surprise as "we were planning for a strong quarter."

“For the first 9 months we delivered 10 percent sales growth in India. It was largely volume led and so we were counting on building on this good momentum that we had seen over the last 9 months. Consumption took a hit, we saw a moderation in rural demand but we also saw a slowdown in some pockets of urban as well,” he said.

"General trade and wholesale slowed down. There seems to be some liquidity pressure in the channel as well and lower food inflation is impacting farm incomes as well. With wages not growing, it is impacting consumer confidence,” he added.

According to him, the business was further impacted by prolonged winter and delayed summer.

Talking about the rural-urban split, he said, “Our rural business is about 30 percent of our overall sales and for the FMCG industry as a whole, rural is about 35 percent of sales. So in that sense, our rural sales are lower and that is where we see a big opportunity through more affordable high-quality products. We see significant opportunities to drive rural growth in the future.”

When asked about advertising spend, Gambhir said, “We have been continuing to back our innovations with a very competitive level of marketing spends. One of the big differentiators, always for us, has been our ability to launch game-changing affordable innovations. As our innovation agenda continues, we will keep on investing adequately for our brands and our new launches.”

On the business front, he said the company is focusing on innovation-led growth for hair colours and household insecticides.

Talking about international markets, he said, “Indonesia has been on a strong momentum. The performance last year was very strong both on the topline and bottom line. In Africa, the scale-up continues. Africa did reasonably well for us. The big challenge was in South Africa but ex-South African the African cluster performed relatively well for us.”

“As far as Latin America is concerned, it’s a challenging macroeconomic situation with hyperinflation in Argentina. The team is taking lots of corrective actions in place and so we are also hoping for a much stronger performance from Latin America this year,” he added.
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