Innovation is in the Godrej DNA

Innovation is in the Godrej DNA
Innovation is in the Godrej DNA

Vivek Gambhir is Managing Director, Godrej Consumer Products Limited (GCPL), and the key architect of the firm's 3x3 strategy to drive international expansion. He talks 'India Global Business' through the strategy and the consumer giant's over-arching goals with a specific eye on emerging markets like Africa. How would you describe GCPL′s Africa strategy and how does it fit into the 3X3 plans Over the past few years, we have been scaling up our international presence with acquisitions that fit well in our “3 by 3” strategy - a presence in emerging markets in Asia, Africa and Latin America through three core categories - hair care, home care and personal care. These strategic acquisitions have strongly aided our growth story. Through them, we have both extended our core businesses and implicitly broadened our presence to a wider canvas. Establishing a strong foothold in Africa is a key part of our strategy, both in terms of business size today, as well as potential for the future. Africa contributes 31 per cent of our revenues from international businesses, with annualised revenues of $200 million. We now have a growing business presence in South Africa, Mozambique, Nigeria, Kenya, Ghana, Uganda, Tanzania and Angola in the hair extensions, hair cosmetics, hair colours, household insecticides and personal wash categories. We are making our largest investment outside of India, in Africa. We are convinced about the tremendous potential that Africa offers; it has one of the fastest growing consumer markets in the world, with a young population. This provides tremendous opportunities for both driving penetration and increasing consumption across our core categories. Our hair care and hair extension businesses are performing well and we have learnt a lot about what it takes to be successful in the region. We also believe that these can, over time, provide a strong distribution and marketing platform for taking other home and personal care products from the Godrej portfolio to the African consumer. What are the kind of acquisitions you would highlight in the continent in recent times In 2006, we made our foray into Africa with the acquisition of the Rapidol hair care business. Today, Godrej South Africa as it is called, is a leading hair care company. Our products are available in over 16 countries in Africa. In fact, it would be rare to find a household in Africa, which has not been touched by our brands. We have exciting and ambitious plans of being a dominant player in both the ethnic and Caucasian segments in Africa. Our flagship brand, Inecto's permanent hair colour, is the market leader in ethnic hair care and has been offering African women up to 100 per cent grey coverage for over 60 years now. Our Inecto Superblack guaranteed permanent hair colour, is the number one selling SKU in the African ethnic hair industry. We added Kinky, a leading brand in dry hair, to our portfolio in 2008. In 2010, we acquired Tura, a prominent beauty brand. In 2011, we entered into a partnership with Darling Group Holdings, a leading pan-African hair care company, and acquired a 51% stake in the business. Darling, which has operations in 14 countries across Africa, is a market leader in hair extension products; a category which it has pioneered in the continent, with a comprehensive presence across West, East and South Africa. Our plan was to gradually acquire the remaining stake over the next five years. The Darling brand stands for beauty and is an enabler for every African woman to transform the way she looks. It has tremendous affinity with salons and is the preferred brand for stylists across Africa. Darling enjoys market leadership in most of the countries that it operates in and dominates the landscape in East Africa, where it has been consistently ranked a 'Superbrand'. We manufacture locally and our products are used by over 100 million African consumers. To further consolidate our leadership position in South Africa, we acquired Frika, which enjoys a premium positioning in the South African hair care industry, in 2015. Last year, we acquired Canon Chemicals Limited, a Kenya based company, which manufactures and distributes products in the personal and home categories. We also acquired, Strength of Nature LLC (SON), a leading company of hair care products for women of African descent. This acquisition helps scale up our presence in Africa by being at the forefront of serving the hair care needs of women of African descent. SON complements our portfolio in Africa by building on our leadership position in dry hair care and hair colours in the region. The acquisition also enables us to turbo-charge creating a strong platform for wet hair care products in Africa and forge a stronger presence in the $1.8 billion global wet hair care category. SON's strong presence in the USA, with deep distribution and world-class manufacturing, additionally provides attractive opportunities for this growth. Would you say Godrej is a popular name in the region If so, what are the factors behind this popularity As a company, we follow a multi-local strategy. This means that we focus on maximising the potential of all our local brands in their respective geographies. In Africa, we parent many strong brands like Inecto, Darling, Kinky, Frika and Valon. These will be very popular either across Africa or in the specific markets that they serve. Darling, for example, would be the largest brand pan- Africa in the hair category. These brands have been invested in and built over the last few decades and enjoy strong equity with their consumers. Godrej, for us, is much more of a corporate and employer brand. It represents that parentage that supports and nurtures our businesses across the world. The Indian government has identified Africa as a thrust area for economic cooperation. What support, if any, do you expect from the Indian government Through CII and the Exim Bank, the government has been very supportive of investments and exports into Africa, especially in the infrastructure space. A stronger focus on partnerships within the government will create tremendous equity for both India and Indian companies in Africa. This will go a long way in nurturing economic cooperation between the two nations. How receptive are African governments to investments from Indian companies The African government has been very receptive and encouraging of our investments in the country. Most governments particularly support investments that result in employment, manufacturing and technology transfer. We believe Africa and India have a lot in common in terms of culture, entrepreneurship and frugal innovation. There is also a meaningful Indian diaspora in many parts of Africa. We haven't faced any challenges as a group from a regulatory or government stand-point. Our experience has encouraged us to continue to invest in Africa and accelerate our growth trajectory. What are some of your CSR initiatives in Africa Giving back to the community has always been very important to us. Brighter Giving, our skill- based volunteering program, provides Godrejites with volunteering opportunities. In East Africa for example, our teams have empowered girls through vocational training. Facilitated hair dressing and beauty therapy training, along with entrepreneurship, soft and life skills, enables these girls to find sustainable employment opportunities. Over 1,600 girls have been trained since we started this programme in 2012. We plan to train 3,000 girls in the next two years. In South Africa, our team members volunteer time to teach volleyball, cricket, soccer, table tennis, athletics and gardening. Robert Reilly, Exports Manager at Godrej South Africa, now juggles travelling across Africa and coaching soccer to 30 young children. Similarly, in West Africa, Godrejites partner with local schools to teach children and help schools improve infrastructure. Many volunteer with the local government on blood donation and tree plantation drives. During Godrej Global Volunteering Day in December, 2016, over 250 Godrejites volunteered their time for social activities ranging from school adoption drives to spending time with the homeless. What are your future plans and which are some of the countries of focus Africa is a key priority market for us and hair care is one of our core focus areas. So, in that sense, this fits in well with our 3 by 3 approach - a presence in three business categories (personal care, hair care and home care) in three geographies (Asia, Africa and Latin America). Having said that, 3 by 3 is not a static definition. It has been evolving over time. For instance, air care was not a big area for us 5-6 years ago. Now, it contributes 6 per cent to our revenues and is an important part of our home care portfolio. Air care could be an interesting category to explore, given that we have knowledge of building the category in India and Indonesia. Given our focus on serving the hair care needs of women of African descent, we are now adding a consumer overlay to our 3 by 3 approach. This is a very underserved market and provides significant opportunities for us, globally. So, we are extending our focus from hair care for women in Africa to include hair care for all women of African descent. In our household insecticides business, Good knight is currently sold in the aerosol format in Africa. We are evaluating more formats to introduce in Nigeria and in other countries. What sets Godrej apart in international markets Over the last couple of years, we have organised our international business operations into clusters - India & SAARC, Africa, Latin America & Europe and Rest of Asia. The purpose of this restructuring was to drive more agility, provide greater focus and enable more cross-pollination, while sustaining the entrepreneurial spirit of our unique multi-local model. Our operating model is quite unique. We follow an approach of 'cooperative federalism', which is centred on values-based partnering and operational autonomy at the local level. Unlike traditional MNCs, we have a multi-local model, where operational accountability and P&L ownership rests with the country head. This helps sustain the entrepreneurial spirit that has made these companies successful, while providing the benefits of strong processes and scale that Godrej brings. Our premiumisation approach is also very calibrated. It is about offering superior quality products at affordable prices. As middle-class incomes increase and as the mass population increasingly seeks products with higher order benefits, we feel that we are well positioned to grow with the desires of our consumers. Core to our premiumisation approach, is what we call democratisation in our categories. We want to be able to provide benefits and products hitherto not considered affordable by mass consumers. We believe that this makes our approach quite distinctive - bringing great quality and delightful products to the masses and convincing consumers to up-trade to these products. Innovation is in our DNA as a company and since our innovation team is entirely in-house, we are agile and prepared to launch a new variant within a week of picking-up a style. Most MNCs are typically modelled on selling the same brand across different countries. They have global categories and tend to centralise management of these brands. Our approach however, is not to copy and paste. We have strong local brands in our different geographies and our focus is on investing in and making them much stronger. This, we believe, is our competitive advantage. We understand and can cater to local consumer needs and preferences and create high quality, affordable products, tailored specifically for African consumers. What is your overall outlook for the Indian FMCG sector The medium term prospects of the industry look promising. Penetration and consumption rates are still low in most categories, which offers ample headroom for growth. As disposable incomes increase, we will see increasing aspirations from both urban and rural Indians that will drive demand. Over the last few months, because of demonetisation, growth was temporarily impacted. However, the recovery has been faster than anticipated and we expect the situation to return to normal by the beginning of fiscal year 2017-18. A smooth implementation of the GST should provide a bigger impetus for growth going forward. We have a robust innovation agenda for the year ahead, both in our India and international markets. We will continue to invest behind these innovations and drive them to full potential.

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