Monarch Of Indian FMCG Sector

As a leading authority of Godrej Group of companies, Adi Godrej is aptly titled ‘The monarch of Indian FMCG Sector.’ Currently spending a lot of time on reading and interacting with mediapersons and industry people, he takes out time to speak up his mind on FMCG Godrej brands, retailing and its future in an interview with Retailer.

Q: What is your take on the changing consumerism in India for FMCG goods? Which categories are ready for a dynamic growth path?

A: Buoyant economic growth in India has augmented consumerism. Superior media penetration and enhanced connectivity are making consumers more aware and discerning. Their needs and aspirations are evolving. With time becoming a luxury for Indians, convenience has a major influence on purchase decisions. The FMCG sector is already gearing up to enter new categories, outlining fresh marketing plans to change with the consumer mindset. While the consumption of FMCG products are across the board and across all categories, but with rising retail activity, growth is being witnessed in urban as well as rural markets. Also, it is geographically spread across the country.

Some categories such as soaps and detergents are already heavily penetrated and, hence, going forward. These two categories will grow in single digits. However, under-penetrated categories will grow faster in the time to come. Growth rate will come from population increase, income increase and penetration increase. The lower the penetration of products, higher will be the growth rate.

Q: Is competition becoming overkill in the FMCG industry?

A: I would say branding is an extremely important aspect for FMCG companies. It is the name of the game and it is truly about your offering. If a company makes a better offering, then the brand will be perceived to be more useful to consumers. However, it has never been seen that an unknown brand makes a big offer and succeeds. If a big brand makes a good offer, it will be successful.

However, the main strategic strength comes from differentiation, which could be price-based, communication-based or product-based. Thus the barriers to entry are strong brands, strong technology and strong positioning. The most important challenge today is to keep the brand contemporary and strong as branding in FMCG today has become even more important.

Q: How are private labels affecting the industry?

Private labels could affect branded players. However, worldwide, personal care is not a very big contributor to private labels, as it happens more so in food products. Hence personal care and household care are not really affected. Modern retailing provides a good display for FMCG companies and impulse buying plays a crucial role. Modern retailing will benefit the FMCG sector especially in relatively upmarket products.

Q: How is organised retailing contributing to the growth of FMCG industry?

A: Organised retail is currently 6 per cent of the total FMCG off-take and is growing at 30 per cent per annum, while general retailing is growing at 10 per cent per annum. Going forward, the trend will be that share of organised retailing will increase. Organised retailing will be an important factor only if their share accounts for 20 per cent.

Q: How do you perceive the growth of Indian retail?

A: The organised retail was a meager of 2 per cent till a decade ago and today it is 6 to 7 per cent of the total retail of the country, as compared to developed countries, where it is between 40 to 75 per cent of the total retail. The organised retail is still the lowest in the country but now for the last one decade, the retail is evolving and modern retailing is rising across the country. Currently, when we talk about retailing, we must adopt latest IT for consumers as well as retailers’ convenience in our stores. Godrej was among the first to adopt ERP systems as IT enable them to connect to their consumers in a right way. Today retailers are burdened with high realty rates, but it does not mean that it is the peak and will crash. The high rental rates are because of short supply and as soon as we get more retail and commercial space in the coming years, the rental rates will come down.

Q: What reforms are important for faster growth?

A: One should never be satisfied with the pace of reforms. There is always a lot more that can be done. I think that the government has tackled reforms well. The fact that there is a constant pace of reforms is exhibiting itself in the high growth for the last few years in a row now.

But clearly, India should reform more rapidly in all directions. we need more to globalise our economy, we need to liberalise our economy and need to privatise our economy. It has not worked anywhere in the world. Faster pace of reforms will certainly help.

Q: Please tell us more about the new-fangled Brand Godrej?

A: The Godrej brand is used by 400 million people in India today. One in three households is using a Godrej brand every day. Our new brand/ product is very important to us, well-recognised, attracting more consumers and providing wider range of products. The other important resource is our people. Our people are the ones who have built our businesses over the years. We have moved our people across businesses, just the way our brand has been applied across businesses. We are India’s most consumer-centric business. We understand the Indian consumer well and this is a big asset for us. We, at present, are catering India either in soap or detergent, electric or electronic gadgets, foods etc.

Q: Is Godrej Group looking forward to take a position in retail?

A: Godrej is not focusing on initiating retailing ventures. We feel that consumer is our central and essential focus and organised retail does not fit in our growth plans.

Q: Some suggestions for emerging entrepreneurs?

A: With the growing Indian economy, many new opportunities are emerging for young entrepreneurs. It is the need of the hour to look beyond and capture this new wave. Dependence on the traditional shops would only suffice with the new business formats in retail.

Instead of replicating examples of global business in India for our brands/ products or retail set-ups, we should create new trends before the world by creating superior organisations.