Godrej Consumer Products’ acquisition of US-based Strength of Nature, the third in the last 12 months, will give the homegrown FMCG major its first on-ground presence in America. The company is eyeing more acquisitions, particularly in India, Africa and Indonesia, Godrej Group chairman Adi Godrej tells HT in an interview. Excerpts.
The acquisition of Strength of Nature is one of your biggest bets yet. How do you think it will pan out?
This is our second largest acquisition after Megasari of Indonesia a few years ago, and will contribute to over $100 million to our topline. We expect it to be very synergistic in our business where we supply to African women for their hair care. With this acquisition, we will be the largest player in the $4.5 billion market for hair care for women of African origin, with revenue of $300-325 million. This will give us a foothold in this market in the United States.
It will also add very considerably to benefits we can obtain in Africa, which now accounts for one-sixth of our total business. Our international business revenues will surpass those of the India business now.
Will this deal help you scale up in the US, probably the biggest market for
Yes, we will certainly look at it. For example, we have a very strong position in dry hair care products in Africa. We are looking at opportunities to take that to the US. We will also see how we can grow in the wet hair care space in the US. This company also has some business in the Caribbean, where there is a large population of African origin. So, we will look at all these geographies that this company caters to, to scale up.
You have made several acquisitions in the last 10 years. Do you see more opportunities?
We will look at all acquisitions that can help grow our three-by-three strategy (focus on three regions of Asia, Africa and Latin America and in three areas of haircare, personal wash and home care). Godrej Consumer’s debt to equity ratio is low, so the potential to borrow more for further acquisitions is good. We have done acquisitions in the domestic market in the past, and we will continue to look at the market for strategic fits. However, the likelihood of us acquiring companies abroad is more.
Does the emergence of Baba Ramdev’s Patanjali and others like Sri Sri Ravi Shankar, who are scaling up rapidly in the FMCG space, worry you?
Not yet. They don’t compete with us so much as they do with a few other FMCG players. There will always be competition from all sources, as well as ups and downs. We will have to continue to focus on driving innovations and launching new products. I feel we do have a strong innovation pipeline.
The domestic FMCG market has seen growth slow down over the last couple of years. Are there any signs of a pickup over the next one year?
FMCG growth has decelerated. I expect as the economy steadies, and especially if we have a good monsoon and the rural stress is relieved, FMCG growth will accelerate. The biggest growth opportunity lies ahead if the GST (Goods and Services Tax) gets passed, then the FMCG growth rates could accelerate considerably. I hope the GST does come.