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Prof. A.K Mitra

Rohan Tutlani
Godrej Consumer Products (GCPL) is a leader among India's Fast Moving Consumer
Goods companies, with Personal and Home Care Products. Our brands, which include
Cinthol, No. 1, Expert and Ezee, among others, are household names across the country.

Branch Offices in Mumbai, Delhi, Kolkata and Chennai ensure pan-India coverage, while
factories located at Malanpur (Madhya Pradesh), Thana (Himachal Pradesh), Katha
(Himachal Pradesh), Guwahati (Assam) and Sikkim cater to the diverse requirements of
our product portfolio.

With the acquisition of Keyline Brands in the United Kingdom, Rapidol and Kinky
Group, South Africa and Godrej Global Mideast FZE, a 100% subsidiary of Godrej
International, GCPL now owns international brands and trademarks in Europe, Australia,
Canada, Africa and the Middle East.

Wide array of products are manufactured by Godrej Consumers Products. The company
is popularly known for its Soaps, Toiletries, Hair Care, Household Care, and Fabric Care
solutions not only in India, but also in the countries across the globe. To offer the best to
the consumers, GodrejCP employs the Total Quality Management system. Major
GodrejCP products include the following:

• In the hair color category, Godrej Consumers Products is considered as the best. It
has variety of products such as, Godrej Liquid & Powder Hair Dyes, Godrej Kesh
Kala Oil, Godrej Renew Coloursoft Liquid Hair Colours, and Nupur based Hair Dyes.
• Fairglow, Cinthol, Godrej No. 1 are some of the popular Toilet soaps of Godrej
Consumers Products. FAIRGLOW is the first Fairness soap in India. GCPL is also the
contract manufacturer of toilet soaps of some of the renowned brands in India.
• EZEE is the Liquid Detergent brand of Godrej Consumers Products, and it is rated
as the best in this category.

• Godrej Mission is to operate in existing and new businesses which capitalize on
the Godrej brand and corporate image of reliability and integrity.
• Godrej objective is to delight its customer both in India and Abroad.
• Godrej shall strive for excellence by nurturing, developing and empowering its
employees and suppliers.
• Godrej encourage’san open atmosphere, conducive to learning and team work.
• Accelerate the growth of Indian household insecticides market.
• To globalize the business rapidly.
• Enriching Quality of Life Everyday Everywhere.

“We are dedicated to Deliver Superior Stakeholder Value by providing solutions to
existing and emerging consumer needs in the Household & Personal Care Business.
We will achieve this through Enduring Trust and Relentless Innovation
delivered with Passion and Entrepreneurial Spirit.”

The world is moving at an extremely fast pace. Borders are being transcended,
opportunities are arising in locations and businesses which many never cared to look at, a
few years ago. Flexibility, swiftness and the ability to identify and quickly capitalize on
these opportunities is becoming increasingly critical for companies to enhance their
competitive position and grow. At Godrej Consumer Products Limited (GCPL) we have
during the year under review, endeavoured to put in place all the building blocks so that
we are optimally prepared for the future and ensure that we are best placed to strengthen
our growth and create value for all our stakeholders.
After extensive and in-depth research to enable us to better understand our target
customers we have launched a range of exciting consumer centric offerings across all our
key business categories. These have been supported by focused media, advertising and
promotional campaigns. It is also becoming increasingly clear that in India, growth will
be driven by the relatively untapped rural and interior areas. We have as a result
considerably expanded our presence in these regions, enhancing our sales and distribution
infrastructure. Further as you are aware, your Company has been consistently exploring
viable and accretive opportunities globally. Here too, the opportunities lie in the
emerging and developing markets. We have identified three key geographies, namely
Africa, Asia and Latin America and have made considerable progress in the .rst two. Not
only are these geographies less tapped, they also have similar demographic pro.les and
behavior as the average Indian – which is the consumer we best understand and cater to.
Last but not the least, your Company has and continues to look to optimize its .xed and
variable costs to
Become more ef.cient and lean.

• Ador Multiproducts Ltd.

• Amar Remedies Ltd.
• Colgate-Palmolive (India) Ltd.
• Dabur India Ltd.
• Emami Ltd.
 Farmax India Ltd.
• Fem Care Pharma Ltd.
• Gillette India Ltd.
• GKB Ophthalmics Ltd.
• Godrej Industries Ltd.
• Hindustan Unilever Ltd.
• J L Morison (India) Ltd.
• JHS Svendgaard Laboratories Ltd.
 Jyothy Laboratories Ltd.
• Jyoti Cosmetics (Exim) Ltd.
• Marico Ltd.
• My Fair Lady Ltd.
• Paramount Cosmetics (I) Ltd.
• Procter & Gamble Hygiene & Healthcare Ltd.
• RayBan Sun Optics India Ltd.
• Velvette International Pharma Products Ltd.

Products which have a quick turnover, and relatively low cost are known as Fast Moving
Consumer Goods (FMCG). FMCG products are those that get replaced within a year.
Examples of FMCG generally include a wide range of frequently purchased consumer
products such as toiletries, soap, cosmetics, tooth cleaning products, shaving products
and detergents, as well as other non-durables such as glassware, bulbs, batteries, paper
products, and plastic goods. FMCG may also include pharmaceuticals, consumer
electronics, packaged food products, soft drinks, tissue paper, and chocolate bars.
Indiaʹs FMCG sector is the fourth largest sector in the economy and creates employment
for more than three million people in downstream activities. Its principal constituents are
Household Care, Personal Care and Food & Beverages. The total FMCG market is in
excess of Rs. 85,000 Crores. It is currently growing at double digit growth rate and is
expected to maintain a high growth rate. FMCG Industry is characterized by a well
established distribution network, low penetration levels, low operating cost, lower per
capita consumption and intense competition between the organized and unorganized
segments. The Rs 85,000-crore Indian FMCG industry is expected to register a
healthy growth in the third quarter of 2008-09 despite the economic downturn.
The industry is expected to register a 15% growth in Q3 2008-09 as compared
to the corresponding period last year. Unlike other sectors, the FMCG
industry did not slow down since Q2 2008. the industry is doing pretty well,
bucking the trend. As it is meeting the every-day demands of consumers, it
will continue to grow. In the last two months, input costs have come down
and this will reflect in Q3 and Q4 results. Market share movements indicate that
companies such as Marico Ltd and Nestle India Ltd, with domination in their key
categories, have improved their market shares and outperformed peers in the FMCG
sector. This has been also aided by the lack of competition in the respective categories.
Single product leaders such as Colgate Palmolive India Ltd and Britannia Industries
Ltd have also witnessed strength in their respective categories, aided by
innovations and strong distribution. Strong players in the economy segment
like Godrej Consumer Products Ltd in soaps and Dabur in toothpastes have
also posted market share improvement, with revived growth in semi-urban
and rural markets.

Swot Analysis

• Low operational costs
• Presence of established distribution networks in both urban and rural
• Presence of well-known brands in FMCG sector

• Lower scope of investing in technology and achieving economies of
scale, especially in small sectors
• Low exports levels
• "Me-tooʺ products, which illegally mimic the labels of the established
brands. These products narrow the scope of FMCG products in rural
and semi-urban market.
• Untapped rural market
• Rising income levels, i.e. increase in purchasing power of consumers
• Large domestic market- a population of over one billion.
• Export potential
• High consumer goods spending

• Removal of import restrictions resulting in replacing of domestic
• Slowdown in rural demand
• Tax and regulatory structure
Porters 5 Forces Model

Supplier concentration
Importance of volume to
Differentiation of inputs
Impact of inputs on cost or
Switching costs of firms in the
Presence of substitute inputs
Threat of forward integration
Cost relative to total purchases
in industry

Absolute cost advantages
Proprietary learning curve RIVALRY THREAT OF
Access to inputs SUBSTITUTES
Government policy -Switching costs
Economies of scale -Buyer inclination to
Capital requirements substitute
Brand identity -Relative price
Switching costs performance of
Access to distribution substitutes
Expected retaliation
Proprietary products


Bargaining leverage RIVALRY
Buyer volume -Exit barriers
Buyer information -Industry concentration
Brand identity ratio
Price sensitivity -Fixed costs/Value
Threat of backward integration added
-Industry growth
Product differentiation -Intermittent
Buyer concentration vs. overcapacity
industry -Product differences
Substitutes available -Switching costs
Buyers' incentives -Brand identity
-Diversity of rivals
-Corporate stakes

New Entrants

The major raw material required for toilet soap is palm oil which is required to be
imported from countries like Malaysia. Palm oil is an expensive ingredient and
this gives a low cost advantage to the soap industry of countries like Malaysia,
China etc. The exporters of these countries could supply good quality soaps at
rates less than the Indian competitors.

There are companies like Marico, Kopran, and Anchor to launch soaps in the
premium category. Oriflamme has entered the market recently with premium soap
for the niche segment Milk & Honey (40 Rs 100 Gms) and Kopran has titled its
new offering Shine & Smile.
The new entrants generally cater to small markets for e.g. there are a large number
of soap manufacturers catering the local markets of southern states. Most of these
players are a part of the large unorganized sector, which directly purchases fatty
acids of palm oil from the Indian manufacturers.

HLL takes complete advantage of the economies of scale by procuring huge

quantities of raw material and flushes the market with vast varieties of soaps with
minor variations.

Brands like Liril, Lux, Dettol created by existing players proves a hurdle for the
new entrants like Doy Care (VVF Ltd.) but there are a large number of players
operating at the local level.

The switching cost for the consumers is not very high in the soap category.
Premium Category, although compared to other does enjoy a better Brand Loyalty.
Even in case of specialty soaps like J&J, Santoor, where Brand Loyalty is
generally high.

The capital required for manufacturing process is very high in this sector
especially if one needs to manufacture standardized quality soap. Most
manufacturers in the organized sector like import the machinery from Italy.

Distribution is the key factor in this sector. Companies having a good distribution
network are able to cater to a wider market across the country. Sales are volume
driven and not value driven.

The specialty about this sector is that it has a high level of learning curve that
improves with experience and therefore soap manufacturing is quite often called
an art rather than a science.
The duties applicable to this sector are very high and thus prove to be major
barrier for the new entrant.


Generally one can point at two general broad substitute threats in the Premium
soap category. One threat is from the use of products like body wash and face
wash. Though the use of these products forms a very small part of consumption
this is basically due to the high costs associated with such products. One can see in
the some developed countries which have already registered a cent percent
penetration, the consumption of soap has now decreased due to the customers
upgrading to Body wash and Face wash.

The second threat is from downtrading i.e. the consumers from the premium
category opting for the popular category soap. Any small change in the price of
the Premium soap can cause in the shift of the price conscious consumer to opt for
shifting to a soap in the Popular category. Most companies like HLL, Nirma cater
to both the categories.


The major input for the soap manufacture is vegetable oil (around 80% of the raw
materials). Earlier Animal Fat was used which was even cheaper, but after the
Indian government banning animal fat, one had to shift to vegetable oils. They are
not available in India and thus have to be imported from countries like Malaysia,
Indonesia and China. There are only few players who export palm oil from these
countries and as such these exporters have a commanding position.
There are various grades of palm oil available and the manufacturer can switch
between these grades to save on the cost of inputs. Besides, soap can be
manufactured either from fatty acids or directly from the oil.

The soap manufacturers cater to the current and future needs of consumers through
the development of new formulations and relate these to their suppliers. A prime
example of this is the current trend towards producing higher quality soaps and the
customization of the products for e.g. Soap for different skin types. Such moves
result in new formulations that force suppliers to modify quality of inputs.

Companies like Godrej and VVF who previously used to supply soaps to other
bigger companies have gone for forward integration and started selling their own

Small players cannot afford to import Oils as the price of Oil keeps on fluctuating
and these fluctuations, if on the higher side cannot be incorporated in the price of
the product in this age of cut-throat competition. So they directly purchase fatty
acids of oils from large-scale Indian manufacturers who import Oil and convert
them to fatty acids.


To a large extent, Premium Soap is a price sensitive market. Off late there has
been an increasing trend towards downtrading. And this has forced the
manufacturers to lower the prices or offer temporary discounts to woo the
consumers who are either downtrading from the popular segment or graduating
upwards from carbolic soaps.
This sector faces low level of brand loyalty. Switching costs is very low and these
results in price war and people are concentrating on value-for-money. This forces
a lot of players to go for frequent promotional schemes like 3-on-1, 2-on-1.

Earlier the decision for purchasing the soaps was equally balanced between man
and woman (50:50).

Now the decision ratio is 60:40 in the favor of woman purchaser. This proves the
fact that today most soaps are targeted at the Indian woman.

The buyers, even in the rural area are subjected to the media invasion and are well
informed about the basket of products available in the market and thus take a
rational decision.

PEST Analysis:

Political Factors: --

Earlier the soap industry was under the Licence-raj restrictions. But, after
liberalization of economy by the Narshima Rao government there has been a spurt
in the number of players in the organized as well as the unorganized sector. A
player like Henkel SPIC is good example of this. The political system in India is
undergoing vast change. There has been competition between various states like
Maharashtra, Gujarat, Andhra Pradesh and Madhya Pradesh. The sops given to
new entrants like sales tax concessions and other incentives help encourage
players to open their shops in these states.
Government banned the import of tallow, a soap making raw material (which was
requiring a very little processing to make soap). It then followed an incidence of
adulteration of vanaspati by unscrupulous manufacture.

Economic Factors

Soaps in India cost very high in India as compared to other countries like
Indonesia. E.g. 100 gms of soap in Indonesia costs rs.4.25 whereas in India it costs
rs.10 approximately. This is primarily attributed to the high cost of imports due to
high import duties. Since India is now a WTO member India will have to bring
down the import duty rates to as much as 20% from 35%. Also the excise rate at
16% forms formidable portion of the cost. The Indian players are lobbying with
the government agencies to reduce this duty which can bring down the cost of the
final product. For toilet soap, the average expenditure per user household for low-
income households is Rs. 237, while it is Rs. 706 for high-income groups.

Social factors:

The social factor is very important when it comes to Premium soaps segment of
the soap market. With the rising education and disposable income levels, the need
for hygiene and personal / skin care becomes important. Premium soaps are thus
targeted at the audience to change their habits by raising their aspiration levels.

Lack of good hygiene factor like availability of clear water for bathing purpose
also discourages extensive use of premium soaps by vast population. Fragmented
approach of govt. and NGO’s towards inefficient PHC-primary health center also
aggravates the problem. Investment in basic sanitation will make biggest
improvement to health and also to the soap market.
The growing reach of advertising medias like satellite and cable TV too is
expected to give a boost to the market penetration initiatives of the industry

Technological Factors:

The industry though capital intensive is not very technology intensive. Premium
soap manufacturing though compared with other soaps manufacturing relies to an
extent on technology (especially in the finishing stage). The more important is
logistics management where marketing and distribution play a pivotal role. Here
technology like (SCM) Supply Chain Management and (E-CRM) Electronic
Customer Relationship Management will play a pivotal role. Companies like HLL
are working very hard towards such a system to rope up the entire small stores and
retailers (Kirana Stores).

The results of a survey done by National Council of Applied Research (NCAER)

suggest that Indian FMCG space is all set to enter a new growth phase, sample
this: the study says that the lower income group is expected to shrink from over 60
percent (1996) to 20 per cent by 2007 and the higher income group is expected to
rise by more than 100 per cent. It looks; the industry is all set for a fast-paced race