Whats the outlook for the fast moving consumer goods (FMCG) sector in India this year in view of the global market meltdown
When the going gets tough, the tough get going. It may sound clichd but its true. To say that the last year (2008) was tough would be an understatement. Input costs have gone up significantly, the competitive landscape has become ever more challenging and growth in markets across the world has been slow. Our global targets reflect the reality of the conditions, and also our determination to win in the market.
Following the global trend, the booming Indian economy has also shown signs of slowing down. It has experienced a trend reversal in GDP (gross domestic product) growth. Although the recovery process is expected to be slow, the situation will stabilise sooner than later. Having said that FMCG is one sector where the impact has been minimal.
Reckitt Benckiser India has been growing in line with our internal benchmarks. Our aim is to perform quite well against the market and our competitors, but we do not give our forecasts. We clocked a growth of 17% in 2008 in a market reeling under recession, and that was ahead of our competitive set. Reckitt Benckiser has also shown healthy market share during this period. For example, the share of Dettol in the bar soaps market stood at an all-time high, while Mortein continued to be the single largest brand in the pest control market. Veet attained market leadership and is currently at 29.9% share (April 2009 market share in value).
Rising commodity prices over the past few years have forced many companies to revise prices upwards. What steps have you taken to avoid a squeeze on your margins and rationalise the cost structure
Inflation in the commodity prices is one of the major concerns for the FMCG sector as a whole. Hence, it is imperative for FMCG companies to analyse the situation and implement any change in prices judiciously. We take into account a lot of factors before resorting to revision in prices.
This year, till now, we have not made any revisions in prices. Last year, we passed on only 25% of the total cost increase to consumers, that also only in certain categories. While as an organisation, we are cautious about price increases, these decisions will be dependent on market conditions based on commodity prices and the economic scenario. To protect our margins, we have looked at our own processes and materials to see if we can improve those processes and cut costs and also if using new materials or new designs to reduce materials needed, while giving more benefit to the consumer. With this creative and business-focused thinking, we managed to grow our margins.
Reckitt Benckiser has 17 power brands globally, of which only 10 are in the Indian market as of now. Are you planning to bring in more products from your global basket into the country
We have 17 power brands globally, with many local jewels as well. In India, we have regularly introduced new products while innovating and reinventing the existing portfolio. In January 2008, we brought one of the biggest Reckitt Benckiser global brands to India, Air Wick. This was followed by the relaunch of Clearasil and the launch of new Veet with skincare ingredients. With Lizol, we launched a remarkably new kitchen cleaner product in the market. Strepsils, a leading brand in sore throat remedy, announced the launch of new Strepsils Ayurvedic. We also celebrated the platinum jubilee of Dettol, the iconic brand from Reckitt Benckiser in 2008-09.
In 2009, we have launched two new variants of Harpic, Harpic Power Rose and Harpic Power Orange. Dettol, in line with its 75-year celebrations, introduced its global variant, Dettol Fresh (in soaps and Liquid Handwash). All new products introduced since the beginning of the year, or products in test market are performing in line with our expectations.
Besides the new variants and a new product in the Indian market, Reckitt Benckiser, recently announced complete revitalisation of its corporate brand, with an aim to strengthen its identity. The new branding for the very first time introduced RB alongside Reckitt Benckiser, a move aimed at simplifying pronunciation of the company on an international basis. Creatively, the new brand is inspired by the high-speed, agility and colourful characteristics of a high-performance sport, kite.
In 2006, you bought Boots Healthcare and also added brands such as Clearasil and Strepsils to your portfolio. What did you gain out of it in terms of brand, marketing and production capability
Strepsils is the global number one medicated sore throat brand and Clearasil, the global leader in anti-acne. Last year our major focus was on successful integration of these businesses and extracting the promised synergies while gradually preparing the business for growthwhich we have been able to do. We are distributing and aggressively marketing both these brands in India.
You expect Dettol to cross the Rs 1,000-crore mark by the end of 2009 in the country. Do you foresee similar growth for other brands in India as well
Dettol is one of Reckitt Benckiser Indias biggest brands. To reach the Rs 1,000-crore mark for any brand is a milestone and very few brands in India have that stature. As seen across segments, Reckitt Benckiser brands are either No 1 or No 2 in market share in all the segments it is present in.
With time and with market penetration/ growth, these brands will continue to build on their growth.
In 2008, you had announced that the company would double its turnover to Rs 2,500 crore by 2010. How close are you to that goal
Globally, we are seeking 4% topline growthwhich, as you would have seen from others targetsis very aggressive. Clearly, India will be much ahead of this as it is part of the fastest-growing businesses in the company.
How important is the Indian market for you
India is part of the developing markets (DM). The DM business has delivered phenomenal growth of more than 12% over the past few years at the global level, with India one of the Top 3 DM countries. India is central to RBs growth strategy, with hundreds of employees, six manufacturing facilities across the country, and a leading research and development centre. We work towards continuing his trend of double-digit growth.
What is the size of the household, health and personal care product market in India
The total size of the household, health and personal care product market in the country is evaluated at approximately Rs 91,000 crore. The growth rate reported by the sector is of around 15.9%. Health and personal care is an important segment but segments such as home care and surface care are equally good revenue-earning areas for the company with Mortein, Cherry Blossom, Harpic and Lizol range of products. Even fabric care is turning out healthy numbers. So we are heading towards a more balanced portfolio of products in the years to come.
In your home care business, your brands have large market shares. Today, there are a lot more private labels that are also cheaper. Have you seen any erosion in market shares over the past two years
Consumers look for brands they can trust to do the job when times are harder. Our brands are focused on delivering the solutions consumers want and they have a great reputation with them for doing that. We have grown our market share and we have not lost any to private label.
Can you share some of your social initiatives
We undertake such initiatives on a sustained basis. One such initiative is Dettol Surakshit Parivar Programme. Over the years we have contacted over 9 lakh new mothers across six metros; this year we are contacting 11 lakh new mothers in eight metros. Through this programme, new mothers are provided with a baby care booklet (in local languages) giving them essential tips to protect the new born from illness-causing germs and infections.
We also undertake a School Handwash Programme under which children are educated on the importance and procedure of complete handwash as washing hands regularly is the single most important thing that one can do to protect oneself from illness-causing germs. Through this programme over 3 lakh students have been contacted so far. This year over 5 lakh students will be contacted. During this programme, students with cent percent attendance are also awarded the Dettol 100% Attendance Award.
Through the Hospital programme Dettol reaches out to hospitals and conducts awareness programmes with nurses regarding different illness-causing bacteria/virus, and methods of ensuring a germ-free environment.