responses to your queries
1 GCPL is a dominant player in household insecticides segment with a major market share ( which was about 50 percent in 2016 ) in domestic market .
2 They have a strong brand recall value even today with the first name coming to mind of Good night when one thinks of household insecticides and so is HIT . They are making In roads into African market ( there is very high opportunity size there as insects menace is quite high in Africa )and other markets
3 Besides another area of moat is their strong history of innovation which they did by introducing new products like good night fabric roll on , good night fast card etc, hair dye shampoo and godrej protekt magic powder which just needs to be added in 200 ml of water to form soap liquid and is quite cheaper and cost effective
4 They also are market leaders in hair dye and hair colour and have purchased niche African brand on hair solutions in Africa . They are expanding geographically here too
5 Had read somewhere that Its the second largest soap player in India
Disc - I am an amateur investor and not a sebi registered analyst. Pls do your own due diligence before investing
Second query response
A moat is a sustainable competitive advantage which protects profit margins and market share from competition. So one need to ask what exactly stops its competitors from taking away its market share? It could be its brand which offers a quality assurance to the customers. A competitor will have to incur significant advertising expenses to establish the same sense of quality assurance from their brand.
I agree. But quality beyond a point is uniform whether its Godrej or Jyothy labs . What matters beyond a point (quality is standard in all renowned companies ) is brand recall and “perception of quality”
But if all a brand offers is quality assurance then it is a weak moat, it can be easily penetrated by names already associated with quality, like Amazon or D-Mart. I am not sure how it will protect its market share ones the likes Amazon and D-mart decide to leverage their distribution channels to supply their own brands of household insecticides, as an example.
This is debatable as many foreign in house retail brands havent been able to break the monopoly of locally renowned brands like Gillette , nescafeetc or some such other brands renowned since many years and having mind share in the minds of the consumer . Its very difficult to dislodge such brands .Dmart offers its own brand of coffee but still that wouldnt affect a Nescafe or a Bru . What at best it can do , is increase the market of coffee but its very difficult to dislodge Nescafe or a Bru as they are focussed players and as soon as they see some issue of sales declining ( a very rare probability although nothing is impossible ) , they would start focussed celebrity advertisements and also do advertisements in awareness programmes of some charity work etc
But if there is more to its brands, which gives customer stickiness like Maggie and Nescafe of Nestle, then it can be said to have a strong moat, which gives a greater assurance of future profits, and hence will justify a higher PE.
i believe Maggi is more sticky due to it being more personal however more important factor for pe is due to stickiness and importance and essential nature of product in daily life . In Nestle case , the more bigger moat is its baby food and powder very it has very high market share of 97 percent and 68 percent and its very sticky as no one would try to change their baby powder they are using as cost differential is minimal compared to the “perceived” risk in changing . This perception is created over the years due to brand awareness and trust and is extremely difficult to change psychologically . Evev if similar product is brought out by Dmart or Amazon, one would think twice before making the change as cost is a very small proportion of ones monthly income. Similarly , although good night isnt as significant as baby powder , they are extremely essential . And with their innovations, they have brought out baby roll on etc which is labelled safe for use. So a mother would think twice before using other brands due to perceived safety and years of building of market share . Besides the household insecticides mind share , they have various other categories where they are performing as i wrote earlier and moat could be a reason of several products doing well in a company as stated earlier , it could also stem from innovation and trust .