Selective focus

2
27 October 1999

Godrej Soaps plans to focus exclusively on fast moving consumer goods in the future. Thus, in future the focus will be on a separate consumer products division which will include personal care products, special purpose detergents, third party distribution and contract manufacturing of soaps. This altered focus is probably due to reasons of profitability as sales of this division were pegged at Rs 181 crore for the first half of the financial year 1999-2000. The company has decided to reduce exposure to its edible oils business which has seen falling sales at Rs 14.9 crore in the first half of the current financial year as against Rs 106.6 in the corresponding period last year. However, the company might continue trading in oil.

Future plans for the branded soaps business includes introducing new products in the premium as well as the sub-popular segment. Recently the company launched Godrej No 1 sandal in the sub-popular segment. The company also plans reposition Cinthol soap. Earlier this year the company repositioned its soaps like Evita, Shikakai, Godrej Crowning Glory and Ganga.

Recently, Godrej reacquired the brand Ezee from Cussons India as well as Trilo and Key detergent bars from the same company. At the time Adi Godrej, chairman of the company indicated that the company was committed to becoming a serious player in the soaps and detergents business in India and abroad.

In the hair colour segment, Godrej is a market leader with a 40 per cent share of the market. The company plans to launch new products like Colour Soft and Kali Mehendi in satchets in a bid to cater to the mass market.

The reason for the company exiting the edible oils business is probably due to declining profitability in this business. Being an agro-based business, the edible oil business is susceptible to the vagaries of the weather conditions. A low oilseed output and lower supply can lead to a flare up in prices and vice-versa. Besides domestic supply, edible oil prices are also influenced by international price trends. All these factors make it a risk-prone business.

The major production lines of Godrej Soaps are toilet soaps, detergents, industrial chemicals, cosmetics and men's toiletries. Toilet soaps and men's toiletries are characterized by entry barriers of brand equity and distribution network. Marketers build up brand equity by incurring huge investments in advertisements and promotions. Building up a distribution network is a time consuming and lengthy process. The market for toiletries is growing at 7-8 per cent per annum and HLL and Nirma are the main players here. The personal care products market has grown at 15 per cent and the leading players in men's toiletries are Indian Shaving products, P&G and Colgate.