Condoms and deodorants are quite complementary: Sudhir Sitapati, Godrej Consumer Products
Sudhir Sitapati, Managing Director and CEO, Godrej Consumer Products, wrote in a LinkedIn post after the company conducted the townhall with employees at Raymond Consumer Care (RCCL).
ADVERTISEMENT
On Thursday, Godrej Consumer Products Limited (GCPL) acquired the assets of Raymond Consumer Care (RCCL), Park Avenue and Kamasutra, in the Deodorants and Condoms categories, in a full cash buy out. The company conducted the first townhall with employees at the RCCL office in Powai, Mumbai.
At the townhall, Sudhir Sitapati, managing director and chief executive officer, Godrej Consumer Products shared the top four reasons for this acquisition. Here are the reasons.
Sitapati shared:
1. Deodorants solve a big unsolved problem in India: Any of us who travel in public transport to work will testify to this. Many Indians use deodorants like perfumes on clothes while going out in the evening. But if we used it like most of the world does – on the underarms, in the morning (much like brushing your teeth), India could be a USD 10 bn+ market for deodorants.
2. Strong brands and market positions: RCCL is the number #2 player in Deodorants and #3 in Condoms. Its leading brand, Park Avenue, is a great product with probably the highest loyalty in the category. It’s perhaps the closest India has to a deodorant used as it should be – as a need and not a want. In the midst of a lot of churn in the category, RCCL market shares have been rock steady.
3. Complementary capabilities with GCPL: GCPL’s direct distribution is 4x that of RCCL for both categories. RCCL has a great chemist distribution. For chemists, while Household Insecticides are important, Condoms are a must-have. We reckon that together we will be a better company in chemists.
4. A strong business case: RCCL has gross margins similar to that of GCPL, i.e., in the early 50s. However, EBITDA is in high single digits versus around 25 percent for GCPL India. The difference is in the higher overheads that smaller companies typically have compared to larger companies. We think we can take this EBITDA margin to the GCPL level quite soon and if we do that, we will be EPS accretive in about 18 months. At a net cost of INR 2,300 crore, we paid 3.7x revenue which is about 1 year of cash flow for about 10% revenue increase for our India business. It usually doesn’t get much better than this in FMCG.
He added in a LinkedIn post:
"…and then of course, condoms and deodorants are quite complementary. If you want one, you need the other :-)"
