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Q1-2016: Godrej Consumer Products y-o-y marketing spend flat at Rs 251 crore

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BENGALURU: Godrej Consumer Products Limited (GCPL) reported almost flat (0.4 per cent increment) advertisement and publicity expenses in Q1-2016 (quarter ended June 31, 2015) at Rs 251.12 crore (12 per cent of net Total Income from Operations or TIO) as compared to the Rs 250.20 crore (13.2 per cent of TIO) in Q1-2015. GCPL’s ad spends in Q1-2016 was 9.1 per cent more than the Rs 230.18 crore (11 per cent of TIO) in the immediate trailing quarter. Last quarter (Q4-2015), the company in its earnings release said that its household insecticides brand Good Knight crossed the Rs 1500 crore mark and amongst GPCL’s soap brands, Godrej No. 1 crossed the Rs 1,000 crore and Cinthol, the Rs 500 crore milestone.

Note: 100,00,000 = 100 lakhs = 10 million = 1 crore

Godrej group chairman Adi Godrej said, "We have had an encouraging start to FY-2016 and have delivered strong volume led growth coupled with robust profit growth. We continue to grow ahead of the market gaining share across our key categories and geographies. We continued to strengthen our leadership position across our core categories. In the first quarter, our India business branded net sales grew by 13 per cent. This was driven by a healthy volume growth of 13 per cent. Our international business (in organic constant currency terms) too grew by 13 per cent, despite the macro challenges and slowdown in a few of our larger markets. Our consolidated EBITDA (in organic constant currency terms) grew by 32 per cent. This was aided by lower commodity costs, the impact of our cost transformation programs and effective leveraging of our brand platforms."

"We are seeing early signs of consumer demand picking up in India. We remain optimistic that as the economy continues to gain pace, the growth in the FMCG sector this year will be better than last year. Though the macro-economic environment in some of our international markets remains challenging, we are confident of delivering ahead ofmarket, profitable growth in these geographies. We will accelerate the pace of new launches and enhance our go to market infrastructure. We will also continue to manage our costs prudently in the near term, while investing for the future. Overall, we will strive to deliver a stronger operating performance in fiscal year 2016," he added.

The medium and long-term growth prospects in India and our other emerging markets remain robust. We believe that there is still a lot of headroom for growth across these markets, given the low penetration and consumption rates in our core categories. I am confident that with our clear strategic focus, differentiated product portfolio, superiorexecution and top-notch team, we will continue to deliver industry-leading results in the future," he said.

Trends

Please refer to Fig A below. GCPL’s Q1-2016 Ad spends mentioned above was the highest in absolute rupees during the 13 quarter period starting Q1-2013 until Q1-2016. Its highest Ad spend in terms of percentage of TIO was in Q1-2014 at 13.8 per cent (Rs 239.06 crore). During the period under consideration in this report, its lowest Ad spends both in absolute rupees and in terms of percentage of TIO was in Q2-2014 at Rs 145.78 crore and 7.5 per cent. 

During the period under consideration in this report, Ad spends in terms of absolute rupees and percentage of TIO shows a linear increasing trend as indicated by the broken blue and maroon trend lines in Fig A below.

GCPL reported 11.1 per cent growth in TIO in Q1-2016 at Rs 2097.66 crore as compared to the Rs 1888.51 crore in Q1-2015 and almost flat (0.3 per cent more) than the Rs 2092.02 crore in Q4-2015. During the thirteen quarter period under consideration in this report, TIO shows a linear increasing trend as indicated by the broken green trend line. 

Profit after tax (PAT) in Q1-2016 at Rs 199.23 crore (9.5 per cent of TIO) was 38.9 per cent more than the Rs 143.45 crore (7.6 per cent of TIO) in Q1-2015 but was 25 per cent less than the Rs 265.57 crore (12.7 per cent of TIO) in the immediate preceding quarter. During the thirteen quarter period in this report, PAT shows a linear increasing trend both in terms of absolute rupees and percentage of TIO as in obvious from the broken red and black trend lines in Fig B below.

Category review by GPCL

Household Insecticides

The company says that its Household Insecticides continued to deliver a strong performance, with a double-digit, volume-led sales growth of 15 per cent. This was aided by the success of new launches and deeper penetration. GPCL’s focus on innovation, backed by superior execution, resulted in market share gains across formats. The company says that it recorded its highest ever overall market share this quarter. Gross margins benefited from lower crude oil prices and have improved significantly.

Soaps

GPCL’s says that its Soaps business sustained its healthy momentum, with a double-digit volume and mix driven sales growth of 13 per cent. Cinthol’s strategy of focusing on functional benefits in the premium segment, supported by 360-degree activations, delivered encouraging results. Godrej No. 1 continued its positive momentum, led by its re-launch and new positioning as ‘India’s No.1 purest soap’. Gross margins during the quarter benefited from lower palm oil prices and have improved significantly.

Hair Colours

The company says that its Hair Colours delivered a consistent, double-digit, volume driven sales growth of 12 per cent. Godrej Expert Rich Cr?me continued to gain market share due to increased penetration.Nupur Coconut Henna Cr?me, launched this quarter, has been introduced to address the demand from herbal-based powder users and up-trade existing hair colour users.

Air Fresheners

GPCL says that Godrej aer, its air freshener brand continues its strong sales and distribution ramp up. This has been aided by innovative gel format technology and various consumer engagement initiatives. aer is now the number three player in the air care market. The company says that it continues to focus on increasing distribution and driving consumption.

Health and Wellness

The company claims that its Health and Wellness portfolio of hand washes, a hand sanitiser and anti-mosquito spray, under Godrej Protekt, continues to be well received in modern trade.

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