Godrej Consumer chief sees revival of FMCG sector in 2017

On demonetisation Vivek Gambhir, MD, Godrej Consumer Products Limited, had said that the India business is impacted by liquidity crunch more than demand crunch. Now, he is of the opinion that there will be pickup in demand in December and if the pickup continues then the situation will be back to normal.Speaking to CNBC-TV18, he said in the long run cash ban will help the larger and more organised players. The company has delivered 9 percent and more in last five to six quarters and looks forward to double digit growth in FY18.Gambhir also said that the fast-moving consumer goods (FMCG) sector will see revival in 2017. Company intends to maintain margins going forward and has curtailed some ad spends in the month of December. The ad spend will increase in the fourth quarter, said Gambhir.Below is the verbatim transcript of Vivek Gambhir's interview to Sumaira Abidi and Mangalam Maloo on CNBC-TV18.Mangalam: On demonetisation you had said that the India business is impacted by liquidity crunch more than demand crunch, this is what you had said the last time you spoke to us, so you said you also expect normalcy, has demand recovered to normal yet?A: Clearly, as we had indicated before November was not a good month for the overall sector as a whole, what is encouraging is that we have begun seeing a pickup in December and so things are definitely moving in the right direction, our hope is that if this pickup continues that things should start returning back to normal quite soon and we are expecting full normalcy to be in place in the next 6-8 weeks and a full recovery to be in place by the end of the fiscal year, so definitely what we saw in November has been reversed and we are now seeing encouraging signs of a pickup.Mangalam: But you had also said that you expect some market share gains coming in your hair colours and the coil segments from regional unorganised players owing to this demonetisation, has that happened?A: A little bit too early to say -- I think over time demonetisation will definitely positively benefit the larger, more organised players because a lot of the regional players are tend to rely a lot more on the wholesaler channel and that is a very cash driven channel and so as you start seeing normalcy return back -- we do expect this move to actually helped the larger more organised players, but share changes don’t happen overnight. It will take a few quarters before you start seeing this reflected in the market share positions.Sumaira: Now input prices are increasing and you have stated earlier that you have withdrawn the consumer offers in soaps and taken about 2 percent hike in your household insecticides segment, would that impact your volume growth?A: I don’t think so -- I think a lot of the decisions are on price increase depends a little bit also on the competitive position of each brand and the kind of equity that we have. On the house and insecticides space as you mentioned it is a very small price increase, but we feel very comfortable that we will be able to sustain and increase our volume share.On the soaps side as you mentioned, we have withdrawn offers and that pretty much implies almost an 8-10 percent price increase. Beyond that we don’t foresee taking any other additional price increases. We have palm oil covers that are quite comfortable over the next 3-4 months and so while palm oil prices are going up, we are waiting and watching but at this stage it is good to get some more price led growth in the market and hopefully it will not led to any erosion of volumes. Sumaira: Also, you’re rationalizing your ad spends, you are managing fixed costs, so do we see margins improve or sustain at these levels, or could there be even a decline in the worst case?A: Our intent is to grow profits ahead of sales and so we would like to continue to strive towards margin improvement. Clearly, over the next few months we will have to see if we can maintain this intent. As far as ad spends is concerned, we have just postponed the ad spends. I think November ad spends were at the planned levels. We have curtailed or postponed some ad spends in December, but as the economy picks up as demand returns, we will look at again increasing the ad spends in quarter 4, because we have some fairly exciting innovations and we want to make sure that we are backing this innovations.