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Godrej consolidates portfolio - Views on News from Equitymaster
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  • Sep 1, 1999

    Godrej consolidates portfolio

    Godrej Soaps Limited has re-acquired 'Ezee', India's largest selling liquid detergent (annual sales more than Rs 180 m) from Cussons India, in a bid to consolidate its product portfolio and increase its market share. Godrej had introduced Ezee in 1983, but transferred it to Procter & Gamble (India) in 1993, when the two formed a joint venture.

    Ezee, used largely for washing winter clothing has a strong presence in the north and east, and competes with brands like genteel and woolite. This acquisition, along with Godrej's own 'Dip' liquid detergent will propel it to market leadership status of the country's Rs 350 m liquid detergent market. The company (market capitalisation Rs 3.6 bn) has also acquired the 'Trilo' and 'Key' brands of detergent from Cussons. It will also manufacture, sell and distribute the 'Imperial Leather' brand of soap and talc owned by Cussons. Cussons will however, retain the marketing rights of the brand. In turn, Godrej proposes to offer Cussons its production and distribution facilities, which will also help in efficient utilisation of its existing facilities.

    In FY99, Godrej had reported a loss of Rs 300 m, on the back of a 31% rise in turnover to Rs 9.2 bn. The company however, turned around in the first quarter ended June 30, 1999, reporting a net profit of Rs 52 m (up 400% over 1QFY99). Ironically, soaps and detergents account for only 29% of the company's total income, while edible oils contributes 32% and Chemicals 26%. This spate of acquisitions will not only consolidate the company's detergent and soaps portfolio, but also correspondingly increase its contributions to the bottomline. Speaking on the occasion, managing director, Mr. Adi B. Godrej indicated that the acquisitions were with a view to become a serious player in the detergents market in India and also explore opportunities abroad.

    Godrej, while aiming to become a major player in detergents, may be aspiring to break Hindustan Lever's stranglehold on the Indian consumer. Similarly, Henkel Spic (part of German consumer products major, Henkel AG), has also reported improved its first quarter performance and is looking at brand acquisitions to increase its market presence. The sector is likely to see a spate of new acquisitions and distribution alliances in the coming months to grab market share (read rural market share).



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