Cinthol maker says premium products continue to do well as mass offerings lag

In a trend also seen in case of others FMCG players, Godrej Consumer Products reported strong demand for premium and urban-centric products, while mass offerings continued to suffer from poor demand
Cinthol maker says premium products continue to do well as mass offerings lag

Godrej Consumer Products, which owns brands such as Cinthol and Good Knight, said demand for mainstream products remained under pressure, even as premium products continued to do well.

“India volume growth was below our expectations and surprising. Household insecticide performed poorly on the back of poor monsoons, but what was surprising was the poor performance of hair colour,” company officials said during a post-results call with investors.

The company said that its segments witnessed a K-shaped recovery, with its premium products doing well along with modern trade and e-commerce chains while its household insecticide, and hair colour segments performed poorly.

“The balance is definitely under pressure. That's the bigger story and I'm not seeing any major change in that relative story there,” said the company.

The company, which posted its second-quarter results, saw a jump in its consolidated net profit to Rs 432.77 crore, as compared to Rs 358.86 crore in the same quarter last year.

The revenue from operations for Q2FY24 came in at Rs 3,667.88 crore, compared to Rs 3,431.79 crore last year.

Among the items that did poorly was haircolor, where it is the biggest player in India.

The company attributed the poor performance to the second additional month of Shravan in 2023. According to religious beliefs, hair should not be touched especially in this month, as it can have an inauspicious effect.

“What we missed this time was to forecast for the second additional Shravan month, since it happens once in 19 years. Organizational memory, you know, it is a long time for someone to pick it up saying, hey, there is a second month of Shravan this year,” pointed out the management.

“We are now realizing that there is a clear relationship between the lunar calendar and demand drivers as well. That is something we need to predict better. I think this has been a wake-up call for us for that,”

However, the company said that it believes the demand for its hair colour will pick up post-Sharvan season.

Speaking on the competition with local players, the company remained positive that there was no major impact on their profit margins.

While it agreed that it has seen low prices affecting its volumes, the company stated that the problem remained confined to its Eastern MP, Bihar, and Orissa and no other markets were impacted substantially.

The company continued to expect a turnaround in the rural market soon. “We are definitely seeing pure incremental sales in rural,” the management said.

Consumer companies have seen rural demand take a backseat over the last one year due to a variety of factors to do with the overall economy. In contrast, urban demand has been robust as some sectors of the economy — such as IT — have done well, as have values of assets such as shares.

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