The irony that confronts most century-old businesses is: how do you stay relevant? These giants have been around long enough to know that every era comes with its own unique set of challenges. There are opportunities to be capitalised upon as well.
These questions have dogged the 112-year-old Godrej group for long. The over Rs 8,000-crore group, which was founded in Lalbaug, central Mumbai, in 1897, has seen it all. British Raj, India?s fight for independence, Nehruvian socialism, license raj, and yes, liberalisation.
But the group has chugged along under the astute leadership of the promoter family. In the last few decades, it has been group chairman Adi Godrej with support from brother Nadir, chairman, Godrej Agrovet, and cousin Jamshyd, chairman and managing director, Godrej & Boyce, who has steered the conglomerate through many a storm.
In the process, the group has reorganised, ventured and even exited businesses. For instance, Adi Godrej modernised systems and processes when he took over the family business in the 1960s. The generation before him, in contrast, did not hesitate to venture into producing soaps when the traditional family business was producing locks. All this has meant that the group has marked its presence in a number of areas, including engineering, domestic appliances, furniture, personal products, food, pesticides, allied fast moving consumer goods, agri-business, properties, specialist chemicals etc.
But as the business has grown so has the need to bring in greater focus?at the product, brand and consumer levels. ?That is a challenge for most business groups that have been around for some time,? says Arvind Singhal, chairman, KSA Technopak, a management consultancy firm. Says an independent observer, ?You need to play to your strengths. That will help you grow eventually.?
Adi Godrej doesn?t deny the need to do this. ?India is different now than what it was 40 years ago. There is greater free enterprise, more latitude. Strategy is far more important today than it was in the past. This includes what to do and what not to do, where you need to be and where you needn?t be.?
This requirement to be focused drove the group last year to put in place a programme signaling a directional shift in strategy, communication and approach towards its businesses. The group?s FMCG business, whose turnover is about Rs 2,500 crore ? roughly one-third of the conglomerate?s overall topline ? will be the key driver for it going forward.
A Mahendran, managing director of Godrej Sara Lee Ltd (GSLL) and Godrej HiCare Ltd, who has been put in charge of a dedicated FMCG Portfolio Cell (FPC) within the group, has been given the target of taking turnover of the FMCG business to Rs 5,000 crore by 2012. ?I have four specialists reporting in to me,? says Mahendran. ?An M&A specialist, a strategic affairs specialist, a human resources specialist and a channel specialist.? The group, incidentally, intends scouting for acquisitions actively in the FMCG space, so the services of an M&A specialist, concurs Mahendran, should come in handy. ?I intend adding another Rs 3,000 crore in acquisitions,? he says. ?If Rs 5,000 crore will come via organic growth; Rs 3,000 crore will come via inorganic growth. The idea is to take the overall share of the FMCG business to about 50% of group turnover.?
This is important for the group as the slowdown is biting most of its other key businesses. ?The strength of the group lies in the trust associated with its name. There?s no denying that. But it?s time they got aggressive,? says an independent observer.
The FMCG business, say analysts, is ideal in that sense to help the group make that leap forward. It?s a defensive sector, not prone to the vagaries of the economy and can help in the group endeavour to add to shareholder value, say Godrej watchers. ?It?s also not a very capital-intensive business,? says Mahendran.
The FMCG business comprises Godrej Consumer Products Ltd, Godrej Sara Lee Ltd and Godrej Hershey?s Ltd . ?For legal reasons, we?ve had three separate entities,? says Godrej. ?They continue to be independent. But we?ll try and harness synergies wherever required.?
If that means developing a common distribution policy, a common modern-trade or human-resource policy, then so be it.
The pull factor here will be the Godrej brand, which was repositioned last year to attract a younger audience. The red logo has given way to a vibrant green-blue-pink logo?all aimed at making the group look contemporary and youthful. Says Godrej; ?We?ve always been very brand-oriented. But there was a need to address the changing Indian consumer. He or she is getting younger now. We had to reposition ourselves to address that segment. The brand makeover was a step in that direction.?
With a sizeable portion of the Indian population below the age of 25, addressing that segment is crucial. Most FMCG companies have realised this over time. Products today are targeted at younger audiences. Communication is cutting-edge and zippy?all aimed at addressing this segment.
The Godrej group, say analysts, cannot afford to ignore this segment. It?s not surprising then that the group is working in that direction now. What is worth noting is that this shift has coincided with the generational change in management at the group. Adi?s children?Tanya, Nisa and Pirojsha and their cousin Navroze, son of Jamshyd ? are now involved completely in the family business. Godrej makes no bones about the fact that this generation is more in touch with younger audiences. ?They understand the pulse of the audience. They are better placed to address them with their work.?
Members of the next generation are doing just that. Tanya manages the strategic marketing group, Nisa heads overall strategy and Pirojsha is involved in the property business of the group. Navroze, in contrast, has followed in his father?s footsteps to take charge of initiatives at Godrej & Boyce, the manufacturing arm of the group which produces consumer & industrial goods.
Each member, says Godrej, is working in their individual capacity to push the group vision forward. ?I am confident they will take the business to new heights,? he says.