Volumes should recover after two quarters as well as margins: Godrej Consumer

According to the company’s Managing Director and CEO, Sudhir Sitapati, FMCG company Godrej Consumer Products Ltd (GCPL) expects volume growth to pick up gradually in the next fiscal year and margins improving, in slowing consumption and inflationary pressures.

The company will continue to focus on three existing categories – household insecticides, air care and hair color – in both domestic and international markets for growth, as it believes there are “many opportunities” in these areas.

Godrej Group’s FMCG arm expects “low volume growth and gradual improvement in EBITDA” for the January-March and April-June quarters.

“As the next year progresses, I expect volume growth to gradually recover, but the EBITDA path and the margin path to steadily increase. I expect that after about two quarters, volumes increase and margins increase steadily,” Sitapati said. said PTI.

Calling the current market situation “unprecedented”, the slowdown in volumes is largely due to market inflation.

“Given our portfolio, a lot of that loss in volume is due to inventory. Typically what happens when you raise prices, inventory is suddenly reduced at your place in the pipeline. Hopefully at least some of that volume growth will come back,” Sitapati added.

Even in the past, when the market faced this kind of massive short-term inflation, there would be a very sharp contraction in volume and then it would go back to some kind of number, not the normative number.

The long-term goal for a company like GCPL is to move into double-digit volume growth. This year, with that kind of inflation, if we get moderate volume growth, that would be good, he added.

Like other FMCG makers, GCPL also last week reported high single-digit price-led growth in third-quarter operating revenue, although its volume growth in the domestic market was lagging. stable.

Sitapati said some volume growth should return in the current quarter.

“it takes a few quarters for it to come back. I don’t think he’ll be back in one or two quarters. I think it would take two to three quarters for some volume growth to come back,” he added.

However, Sitapati said there was a silver lining with GCPL and it was his margin story, which was better.

All major FMCG companies, in their respective quarterly results reported for the October-December period, reported lower consumptions affected by inflationary pressure, especially in the rural market.

I actually think there is a general slowdown in consumption, largely due to inflation and prices, he said.

Sitapati believes that currently GCPL’s category penetrations are very weak and quite underdeveloped and should focus on existing categories rather than doing new things.

The three major categories are our Household Insecticides, Air Care and Hair Colors businesses, both in India and overseas – at GCPL. Nearly half of the activity is international. These are the portfolios we would focus on anywhere in the world, he added.

The company, in line with its retail strategy, would remain channel-agnostic, follow the consumer-first policy, and be present, whether online or offline, wherever shoppers shop.

Like others, GCPL also experienced rapid growth in sales numbers post-pandemic and also launched some digital native brands in baby care and some product innovations.

Consumers are buying more and more on e-commerce and so we have a dedicated e-commerce team like many other companies, and our team is growing very quickly. But I would still say that our strategy is not so much a channel strategy as a consumption strategy, and the channel meets that need, he said.

As for Capex, Sitapati said he has plans in sight for innovations and capital for automation, though he didn’t share any numbers.

Many companies need to automate and invest more capital in the near future. I think that’s the right strategy for companies to spend on Capex and automation, he added.

(Only the title and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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