Of course it is possible. Apart from the Patanjali example quoted, there was a recent boycott of cola drinks (Pepsi and Coca-Cola) in Tamilnadu during the Jallikattu protests. Shopkeepers, traders and consumers boycotted them for a while in favour of local manufacturers.
But after a while they were back. Consumers over a period of time prefer quality products and generally not think about any Swadeshi movement. Coca-Cola has now launched a drink exclusive for Tamil Nadu which directly imitates the taste of the local manufacturer-Kalimarkās Bovonto.
To think of it, even Mahatma Gandhiās Swadeshi movement in a way didnāt last long! At the heat of the moment, people will boycott but maybe not for long.
WARREN BUFFETT: Yeah, I consider Jorge Paulo and-- and his associates. But my primary contactās been with Jorge Paulo Lemann-- over the years, first meeting him on the Gillette board. And I think heās an absolutely outstanding human being. And-- but a year ago, he pointed out that the game had changed, in terms of brands. And he gave a talk at some Forbes event or someplace. And that was a full year ago. And six months ago, I told you, on, you know, the Glide thing, that brands-- itās not as-- packaged goods are not as good a business as they were. The really strong brands are. But, you know, weāve learned that over the last few years, as the struggle between the retailers and the brands has shifted toward the retailers. And thatās why Kirkland is a big-- a very, very big brand. Walmartās going more to private label. There are some big forces on the other side. If youāve got a good-enough brand, you know, you can-- you can-- you can also call your terms. Costco dropped Coca-Cola some years ago. They brought them back.
BECKY QUICK: Do you see that ever shifting? Or do you think that the-- the game is going to be this way, weighted towards the retailers, except for the biggest brands?
WARREN BUFFETT: It certainly looks like, particularly with the addition of Amazon to the picture, I mean, when you-- when you have Amazon and Walmart fighting, itās a little bit like the elephants fighting, you know, I mean, the mice get trampled. And, I donāt see-- I certainly donāt see the retailersā position getting weaker. I mean, you have Aldi coming in and stronger. It just-- and you got-- Walmartās done a very, very, very good job. You had McMillon and-- but he carries around that list of the ten top retailers of the past andā
That might be applicable overseas but not India where the edge currently comes from having distribution in rural areas with a number of kiranaās and I dont think kiranas have the bargaining power of a walmart. Indian investors read american investor books and study buffets speeches when perhaps everyone on this forum knows more than buffet about Indian market. What he said is irrelevant in India. Nestle can put a kirana shop out of business by cutting supply of maggi. Maggi wont care if big bazaar or dmart stop carrying it. In fact consumers will stop shopping at dmart if they dont carry maggi! Whatever buffet said is the opposite in the case of India. And it was always a well known fact that new brands struggle with distribution and shelf space so nothing new hereā¦
What Mr buffet is saying is true and has been happening slowly for last couple of decades ā¦ Now why this is happening for this we need to understand ROLE OF BRAND
Brands performs following functions
Consistent quality assurance
Reduce Search and trial cost
Easy availability
Stable Market Price for all consumers - ie one consumer cannot get lower price based on his bargaining power
Aspiration Value ā¦
Familarility Value ā¦ Taste , feel , smell etc ā¦
Now most large store brands say like Amazon , Walmart can address 1, 2 , 3 functions adequately and fourth occassionally
But No 5 & 6 are unique and cannot be displaced and transferred easily from brand A to Brand B ā¦ It will take more than generation of consumers to shift ā¦
So if a brand has great aspiration value and familiarity value and if the parent donāt mess on product quality and pricing these brand can survive longer ā¦
There appears to be a cultural shift towards facial hair (could be cyclical). It looks like new age brands have carved a niche for themselves here - check out how well boutique brands are doing in the beard/mooch wax segment. These brands (take Ustraa for eg.) are growing into hair cream/wax, colognes, soaps, face/body wash segments as well. Its possible that Gillette or P&G Hygeine might buy these guys out but brand moats are not impenetrably strong these days.
Any thoughts on current valuations for Godrej Consumers?? Itās trading at significant discount compared to HUL/PnGs of the world. Even Jyothy Laboratories with lesser brands is trading at a premium compared to GCPL. Doesnāt this makes GCPL a strong candidate for PE re-rating??
Disc: Holding tracking qty in GCPL, looking to increase
My 2 centsā¦Gillette is a great brandā¦its product category is facing a change in habit issueā¦if it wants it can leverage the power of its brand but all depends on the strategy of parent and its visionā¦thatās precisely the reason I am doubtful of MNCs and subsidiaries of otherwise big companies like P&gā¦which has evolved its products and brands but we see Gillette lagging somewhat behind till now in brand extension and leveraging itās mightā¦
GCPL is present in very mature categories like soap, insecticide (I personally donāt consider this a FMCG). In hair colour they are not aspirational brand. Also, 50% revenue comes from outside India.
Also, PE is around 50. They had a share split so maybe moneycontrol is not calculating it correctly.
gcpl recently moved a resolution seeking shareholder approval for reappointment of Mr Adi Godrej as chairman emeritus but with executive powers. This is without precedent as he is officially retired and the chairman emeritus is not involved in the day to day activities of the company.
In return for his executive contributions Mr Godrej will receive a salary of 2.5cr per year.
There is a strong case that this goes against the spirit of best corporate practices, though its is not officially prohibited. Mr Adi Godrej is 77 years old.
Pest control chemicals are not aspirational products which one can command a premium for. Also, in cities this is handled by apartment and societies and they may not use branded products.
āHousehold insecticideā is a play on brand unlike normal āInsecticideā. So Iām not sure why it wouldnāt qualify as a fmcg. Soaps, hair colour and other branded products contribute more than 60% of the revenue. Also, theyāve recently entered the male grooming space with products ranging from beard wax to body wash. I feel this segment can grow at better rates than soaps/dyes.
Also, the PE is around 36 and not 50
Hi Bheeshma,
I donāt understand why this is such a big issue. Adi Godrej is the man who built this company brick by brick over the last 30 years taking it from the point when it had a small footprint in the fmcg space to its current state, so obviously he would love to remain in the thick of the things at the company, although not in an exec role. Ratan Tata has been retired for years, still youād see him along side the CEO, everytime Tata motors launches a new car.
In terms of corp governance, I think Godrej is one of the best along with Tatas, unlike Birlas/Ambanis.
We shall know soon what shareholders feel about giving Mr Godrej executive powers it and it would be an interesting vote. Corporate Governance is of course perceived to be very good at godrej - Adi Godrej after all was the chairman of the MCA committee that formed the policy document on corporate governance in 2012.
However the common governance policy is to not have a chairman emeritus don an executive role.
Household insecticides include good knight and Hit brands. They command a premium for sure. They have a market share of more than 90% in household insecticides, still they come up with innovative products like the mosquito repellent in fabric roll-on format.
However I feel the real opportunity for growth lies in the air freshener and handwash segments which are still in nascent stages and can grow big in future.
Although one can classify insecticide as fmcg, I donāt have it at the top of my favourites. To me, a good fmcg product needs to be quickly consumed. The quicker the better. A biscuit packet will be consumed quickly while a mosquito repellent might take 30 to 90 days to be consumed. Both products are great but if I get 2 companies selling each of those at the same valuation, I prefer the biscuit company.
By that definition, most of HULās products wonāt qualify as fmcg. A shampoo/soap/detergent/deo normally last for atleast a month. A biscuit/cookie is a discretionary product while a mosquito repellent is more of a non-discretionary.
Broadly i agree with you however i feel no point in being touchy about same. Somewhere around 2001,Godrej Industries Ltd tries to delist the same ,exactly same as Sterlite had done, where in the share holders have to inform company in writing that they want to remain with company. Those who didnāt respond got cheque of Rs: 18 per share( At that time FV was Rs:6 now Rs: 1 is quoting around 530) Luckily because of some smart investors ,management couldnāt delist the shares as they were short by 1/2%. Such move by Sterlite was highly criticized, where as Godrej Matter was ignored. Further recently shareholders were duped by RICOH India ,the parent company of it has received Worlds most Ethical Company Awards for last 8 years.
Hence i feel we should look for Companies with shade of Gray ,not white not Black
The size we guys buy may last longer but common man prefers to buy the smaller size options. Although these products have slightly longer use cycles, they have aspiration value which is lacking in insecticides. In fact FMCG definition clearly includes use cycles and shelf life. The shorter the better and that is one reason we see smaller and smaller size Packets.
