This could be a yr of double digit volume growth: Vivek Gambhir

We would not like to give any particular guidance but the 14% growth in Q1 is in part driven by the effects of a lower base, Vivek Gambhir, MD & CEO, Godrej Consumer, tells ET Now.Edited excerpts:Volume growth of 14% is very impressive. How much of that is because of the GST base effect and how much is real demand? We are very happy that the recovery is underway and the platform is set for a much stronger growth for the remaining quarters. On a two-year CAGR basis, our volume growth was in the highest single digits and on a one year basis, it is 14% growth. Even if you strip away the effects of a low base quarter, growth is trending towards the right direction and our hope is that if this momentum continues, this will be a year of double digit volume growth. Do you think you can do better than 14% on domestic volume growth? We would not like to give any particular guidance but the 14% growth is in part driven by the effects of a lower base. That impact would no longer be then the quarter’s head. Certainly, our hope would be that the industry should get to a low double digit volume growth and our efforts would be to try and get towards 13% to 14% volume growth for the year as a whole. Though it has not been as robust when it comes to Africa, Middle East or US regions, what would you attribute that to? Is it just a fraction of the currency movement or is it something more to that? We have been very pleased with the recovery in Indonesia, The recovery is underway. We regained some of the share that we had lost over the course of last year. A lot of good building blocks have been put into place. While the economy remains challenging, we are hopeful of a much stronger year from Indonesia this year. In Africa, the first quarter was relatively on the softer side, primarily driven by very weak macroeconomic conditions in South Africa. Our West Africa business and our East Africa business did quite well. Having said that, though the team is putting in a lot of corrective actions in place to deal with the macroeconomic flux and the second half of the year should be much better for Africa both on a top line and a bottom line basis. We always tend to focus on growth and volume dispatch numbers and where the volume growth is coming from but look at the other side of the equation. What has been the cost savings and what has been the margin expansion which you have enjoyed because of GST? Do you think that one-time GST margin expansion is in the price or is that an ongoing process and incrementally will keep on increasing every quarter? We have seen some very good benefits from GST as we have passed on some of the pricing benefits to our consumers. That has led to a better demand and better operating leverage. At the same time, we are also seeing benefits in terms of logistics and transportation. But it is still early days. There is still more work to be done in terms of reconfiguring a supplier and a manufacturing network. Over the next one or two years, we do expect to see continued benefits from the GST implementation. Also as ease of business improves and the playing field gets more levelled, some of the smaller, less organised players will find it difficult to do business. We do expect share gains to be derived by the larger players and over the next one or two years, GST will continue to provide us with more incremental benefits. Which are some categories where you have gained market share because of unorganised sector moving towards organised sector? Which are categories where you would say that you have gained a market share purely because of your product profile? Across the board, our share gains have come from a combination of various factors new innovations, product launches, effective micro marketing and genuinely stronger execution. Having said that, it is anecdotal largely because the data is difficult to fully capture our belief whether some of the share gains in the soap segment in particular have come from share shifts from smaller unorganised players to more organised players. Are you optimistic because we will get into the festive season come October. Diwali being in November this year, from a demand perceptive, things will only look up then, especially consumption driven by the rural economy? We are very optimistic that demand will look better in the quarters ahead. A lot of the indicators in building blocks are in place. As you mentioned, in Q1, our urban growth was about 13%, rural growth was around 17%. We expect rural growth at about 1.4 to 1.5 times urban growth on the back of remonetisation. With the settling of the GST implementation and the impact of some of the government’s efforts to stimulate the economy, we are quite hopeful that demand will further improve in the quarters ahead.

from The Economic Times https://ift.tt/2LRua8D