Cosmetica buy to aid hair colour biz globally: Godrej Cons

FMCG firm Godrej Consumer Products Ltd (GCPL) has acquired the remaining 40 percent in Cosmetica Nacional, a Chilean hair colour cosmetics company.In January 2012, Godrej had acquired 60 percent stake in Cosmetica.Speaking to CNBC-TV18, Vivek Gambir, MD Godrej Consumers says Cosmetica forms a major chunk in its Rs 650 crore worth cosmetics business in Latin America. This deal will provide an opportunity for the company to grow the hair colour business into other markets as well.Cosmetica deals 50 percent into hair colouring category, 25 percent into colour cosmetics and rest in hair removing category and is among the leader companies, he adds.On markets back home, Gambhir says rural demand is still quite under pressure.With inflation coming down and the government making efforts to help villages, he expects demand to pick up in the second half of the year, both in urban and rural markets.Below is the transcript of Vivek Gambhir’s interview with Latha Venkatesh and Reema Tendulkar on CNBC-TV18.Reema: Could you give us the consideration that you have paid for acquiring this balance 40 percent? A: The amount is something we are not disclosing at this stage but the acquisition price and the multiple was something that had been predetermined when we had first made the acquisition. So, this is something that has been predetermined. Latha: Can you tell us something about the company or the brand itself? Cosmetica Nacional what is its last reported sales? A: Our Latin America business in total is about Rs 650 crore and Cosmetica is a fair chunk of the Latin America business. The main brand for this company is in the hair colouring space. Where we are the market leaders in hair colours in Chile and it is very much inline with our strategy of leadership in hair colours and this is a co-category for us. However, beyond hair colours what is also interesting is that this company has leading brands in colour cosmetics and female hair removal products as well. So, 60 percent of the business is hair colours there, 25 percent is colour cosmetics and the remainder is hair removal products. These categories, colour cosmetics and hair removal are not there in other geographies for us and along with growing the hair colour business, we believe that this portfolio could give us interesting opportunities to take these products to other markets as well. Latha: Since we have you with us and we are towards the end of the monsoon which hasn’t been very flattering, has it had a very big impact on rural numbers? There is so much noise in the rural space, tell us what your own retailers and stockiests are telling you? How has rural demand panned out vis-à-vis previous quarter? A: Rural is still growing higher than urban and that has been a consistent trend that we have seen over the last few quarters. Overall we have seen a slight pickup in both rural and urban over the last two or three quarters but definitely worsens the potential or expectations that we had for rural. Rural is feeling more stressed as we speak. Now, there has been a bit of a monsoon revival over the last few days in Central India and Southern India and so that could provide some relief. However, overall I think this quarter could be a challenge as far as rural demand is concerned. The good news is that there has been a slight pickup in urban and that could counter balance things a little bit but rural demand is definitely feeling a little bit more like a challenge. Reema: Would this stress in rural demand extend for the full year because in the past you had maintained that the second half will be better than the first half. Do you also maintain that assessment? A: I think the second half will be better than the first half. Urban pickup will be much better because of the festive season and you are seeing job growth, numbers looking better, inflation has been coming down, so, disposable income is looking better in the hands of consumers. That will further drive demand for urban in the second half. Also, in the rural side the government is taking actions to bump up infrastructure spend; that should start transferring to rural growth as well. Kharif sowing so far has been largely on track, slightly better. So net-net there should be a rural pickup as well but the story for the year will be determined by how well urban does. We still are optimistic on the second half of the year to be better than the first half.