Research Questions to be Addressed:

1. Provide an overview of the extent of the globalization of the company (provide data)

Godrej Group
Headquarters: Mumbai, India
Regional involvement: Asia Pacific, Middle East and Africa, Latin America, Europe
Home care revenue (2015): US$464 million
Category involvement: Home insecticides, air care, laundry care

GCPL has become more international

GCPL has a diverse and balanced portfolio
International sales
as a percentage of
consolidated sales
FY 2010-11
34%
FY 2016-17
48%

GCPL’s 3x3 strategy has a distinct focus on penetrating new markets, in particular emerging
economies in Asia, Africa and Latin America, in tandem with category entry and expansion
within home care, hair care and personal care.
Over the last few years GCPL has followed a growth strategy, which it calls three-by-three. This
entails accelerate growth of three of its businesses – hair care, home care and personal care, in
three regions of the world – Asia, Africa and Latin America.
The strategy is clear: a new geography is entered through the acquisition of an established
player in at least one of the key categories. Thereafter, new categories are entered through
product innovation, while the company expands in the market through deepening its distribution.

Since the implementation of the strategy in 2010, GCPL has seen absolute growth of 150% in
global home care sales.
The key acquisition of PT Megasuri Mamsur in Indonesia has driven growth in home
insecticides, as well as giving Godrej a significant and timely entry into air care.
Godrej Indonesia
Godrej Consumer Products from India acquired the Indonesian household product major, the
PT Megasari Makmur Group, in 2010. Today, Godrej Indonesia is a leading household and
personal care company in Indonesia. It is estimated that close to 15 million households in
Indonesia use at least one of our brands, every day.

With an expected turnover of approximately IDR 3 trillion for fiscal year 2014-15, Godrej
Indonesia is the largest international business of Godrej Consumer Products. We have a strong
proven track record of performance; growing by 23 per cent CAGR over the last 4 years. We
also have exciting and ambitious plans – to be among the top 3 home and personal care players
in Indonesia and double our revenue by 2018.

We are constantly innovating and looking for new ways to delight our consumers with
world-class products at affordable prices. Our flagship brands - Hit in household insecticides,
Stella in air fresheners and Mitu in baby tissues and baby care - are market leaders in their
respective categories. Our brand portfolio also includes other household favourites like Proclin,
Klinpak, Polytex, Carrera, Cap Gajah, Biosol and Shock.

Building on this success, Godrej has pledged Rs30 billion to fund future acquisitions to continue
its 3x3 strategy

In 2012, the company expanded its international operations by entering into new countries in
Africa and Latin America. In 2011, the company also acquired a 51% majority stake in leading
pan-African hair care company Darling Group, which operates businesses in South Africa,
Mozambique, Nigeria and Ghana.
As of 2014, Godrej Group exported its consumer products to 60 countries, most of which are
located in South Asia, Southeast Asia, Latin America, Europe and Africa.
Adi Godrej, chairman of the Godrej Group
Continuing with its strategy of driving growth through overseas acquisitions, Godrej Consumer
Products Ltd (GCPL), the fast moving consumer goods arm of the $4 billion-Godrej Group, has
acquired yet another global company; this time in the US.

2. Which are the foreign countries where it entered till date?

Africa
Range of products across hair extensions, hair care, hair colour, personal wash, home care and
household insecticides
Argentina
Range of products across hair colour, hair care and styling in mass and professional markets
Chile
United Kingdom
Bangladesh, Sri Lanka & Nepal
Middle East
Leading player in the henna and powder hair colour segments Range of household care, hair
care and Strong market position in soaps

B. Names of companies which have become or ceased to be subsidiaries, joint ventures, or

associates during the year: During the year, the following companies became subsidiaries of
your Company: zStrength of Nature LLC (USA) zCanon Chemicals Ltd. zWeave Senegal Ltd.
zStrength of Nature South Africa Proprietary Limited zOld Pro International Inc (USA) zDGH
Uganda zStyle Industries Uganda Limited zGodrej Consumer Products International FZCO,
(Dubai, UAE) zGodrej International Trading Company (Sharjah, UAE) DGH Angola ceased to
be a subsidiary of your Company during the year. C. Report on

Indonesia Our Indonesia business delivered a mixed sales growth. While the Household
Insecticides portfolio declined due to a poor season, the rest of the portfolio grew strongly. The
overall portfolio sales were the same as the previous year in constant currency terms. During
the last quarter of the year, we cross-pollinated the aer pocket bathroom air freshener to
Indonesia, and launched Stella pocket. In July 2016, we cross-pollinated hair colours in
Indonesia with the launch of NYU crème hair colour in a sachet format.
Africa Last year, we saw muted economic growth in certain key countries, such as South Africa
and Nigeria. We bucked the trend and grew the business strongly with a constant currency
sales growth of 22 per cent. We also acquired the Strength of Nature business this year and are
focusing on leveraging this acquisition to turbocharge our wet hair care portfolio growth in
Africa.
Latin America and UK Despite a challenging macroeconomic environment, our Latin America
business grew by 19 per cent in constant currency terms. We continued to focus on innovation
and effective communication campaigns to drive growth. Our UK business remained flat on a
constant currency basis in a challenging operating environment. A report on the performance
and financial position of each of the subsidiary, associate, and joint venture companies has
been provided after the Consolidated Financial Statement section of the Annual Report in Form
AOC-1. Pursuant to the provisions of Section 136 of the Companies Act, 2013, your Company
has placed the financial statements of its subsidiaries

3. What are the key reasons/motivations/objectives underlying the international venture of

the company? (e.g. market-seeking, resource-seeking, technology-seeking, etc.)
Strategic acquisitions will continue to form a part of the core business. Adi Godrej says that the
group is still looking for acquisitions in various areas, but these acquisitions will not be done just
to spice up growth rates, but to enhance the quality of the business overall. Adi Godrej for his
part, is happy with his decision, and GCP has created wealth ever since it was carved out of
what was once Godrej Soaps in 2001. “This business has compounded shareholder wealth at
35 per cent since then,” Godrej says.
"Unlike multinational companies, which believe in having one brand across markets, our
approach is to invest in local brands and let them be the face of the company. The back-end
can be supported by our technology and category learnings," Vivek Gambhir, managing director
of Godrej Consumer, said in a conversation with the Business Standard.
There is a greater chance of us succeeding because consumers in Africa will be familiar with
local brands rather than products transported from India," he added.
This has been the mantra of the group over the last many years — to hedge its business model
from market risks and add more growing areas. So, if one country is traversing a bad patch with
a falling revenue, the other parts of the world come in handy to support revenue and profitability
overall. With the group’s business in Latin America, West Asia, Sri Lanka, Bangladesh and the
UK, GCP is one of the most diversified Indian consumer companies in the global consumption
markets. Global sales, including those of India, are about Rs 6,538 crore, of which international
businesses contribute nearly 45 per cent.
The question is why is GCPL, which is among the largest players in India in hair colour,
household insecticides and liquid detergents, the second largest in soaps after Hindustan
Unilever, and owns brands such as No 1, Cinthol, Hit, Good Knight, Ezee and Renew, investing
so much in Africa?

The answer lies in Africa's similarities with India, specifically, its emerging middle class, a
market that GCPL has traditionally addressed on its home turf.
GCPL's road map in Africa mirrors its operations in India: target the emerging middle class with
good but reasonably-priced products that offer clear consumer benefits. Categories where its
attention will be focussed in Africa include hair colour, hair extensions and household
insecticides. Hair colour and household insecticides are two areas where GCPL is a key player
in India. Clearly, the company can take its knowledge and technical expertise in these segments
into Africa and apply them there, say analysts.

GCPL Executive Vice-president (mergers & acquisitions and business development in Africa)
Omar Momin says, "If you take a high cut-off in terms of comparable income levels in India and
Africa, then the emerging middle class in Africa at 330 million is more than India (250 million). If
you take a lower cut-off, then Africa's emerging middle class is even bigger at 500 million. Like
India, this emerging middle class has a high proportion of young people who aspire for a better
standard of living and good-quality products.
4. What modes of entry were used in each of the countries entered?

Godrej is going in for international acquisitions with twin strategies - diversifying risk and
tapping new markets. It expects good synergies from the Keyline acquisition and a double-digit
growth in these brands
Nine years ago when Godrej Consumer Products Ltd, or GCPL, entered South Africa with the
acquisition of a hair colour brand called Rapidol, few anticipated the avalanche of deals that the
company would strike in the world's second-largest continent.

Since 2006, GCPL, the Rs 7,583-crore flagship of the Rs 13,500-crore Adi Godrej group, has
wrapped up five acquisitions in Africa, higher than what it has done in South America and Asia,
its other chosen markets. In all, GCPL has invested close to Rs 2,000 crore in its African
purchases
Godrej’s entry into Indonesia marks the first time an Indian FMCG company has a full-scale
local operation in the country
Despite being a foreign player in Indonesia, the transition towards building up a strong team in
Indonesia was not a tough task. Bureaucratic and cultural hurdles were brushed aside easily,”
smiles Naveen, who now works out of Jakarta with the title of Business Head for Indonesia and
the Middle East. Naveen, who likes to wear batik shirts, sees many parallels between India and
Indonesia, nicknaming the archipelago nation as “India in ASEAN” (a play on the pronunciation
of “Indonesia.”)

The strategy of Godrej in Indonesia is simple, explains Vivek. The company tries to develop its
own local brands and not mimic global ones already present in the market. The company
estimates that at least 15 million households in Indonesia use one of its brands every day.
Among its best-known brands are Hit insecticides, Stella air fresheners and Mitu wet
tissues—all of which are market leaders in their respective categories. In the last five years, the
company has also seen sales growth of about 21% and EBIDTA growth of around 22%.

the GCPL (Godrej Consumer Products Ltd) management informed the stock exchange in
Mumbai, from London, of its decision to buy Keyline Brands Ltd, a UK-based FMCG company.
While Keyline may be a relatively unknown company in India, its brands such as Erasmic and
Cuticura are well recognised in India. (15,3m)

The move to acquire Keyline Brands marks GCPL's foray into the global market with a ready
clutch of brands and, at the same time, gives it access to the modern trade distribution in the
UK. Taking the inorganic route to growth, GCPL has catapulted itself into the big league through
its first global acquisition. Its kitty will include haircare and skincare brands such as Erasmic,
Inecto, Aapri, Cuticura, Endocil, Skyhydra and Adorn.

.
5. Critically analyze the entry strategies adopted by the company in various countries, what
worked, what didn’t and why?
Godrej Consumer Products’ business in Africa is among its fastest growing international
acquisitions and has clocked a growth of 48 per cent, year-on-year. Godrej Consumer Products’
African safari began with the acquisition of hair-colour company Rapidol and its brand Inecto in
2006. When this acquisition proved successful, GCP made a further foray and acquired a
hair-extension business through two more acquisitions. It has since made a string of
acquisitions in the African continent, taking its overall revenue base from the sub-continent to
Rs 1,013 crore. With a rapidly growing young population, demand for consumption items
continue to increase and GCP’s African excursion is expected to contribute significantly to
growth over the coming years.
Godrej Consumer derives half of its consolidated top line of Rs 7,583 crore from international
operations.
Good Knight from Godrej Consumer's India portfolio is the only product to have been taken to
Africa in the last few years. "Good Knight enjoys a strong equity in India and something the
African (management) team felt would be accepted by people there. Which is why we took it
there, beginning with pilot projects and then launching it. It is 12 months that Good Knight has
been present in Africa in the aerosol format. It is the dominant product category in household
insecticides there," Gambhir added.

Analysts said the company had spent close to Rs 2,000 crore in making these acquisitions and
was expected to spend a similar amount in the next few years. Godrej Consumer has made
most of its purchases in the last decade in Africa, followed by Latin America (Issue, Argencos
and Cosmetica Nacional) and Asia (Megasari Makmur in Indonesia).

To ensure the momentum is sustained, the African market has been divided into three clusters,
South-Africa-Mozambique in the south, Nigeria-Ghana in the west, and
Kenya-Uganda-Tanzania in the east. "These clusters will operate as hubs, allowing us to
expand into nearby territories. Manufacturing will be located in these clusters. We could focus
on expanding distribution in neighboring territories," Gambhir said.

A key region for international expansion for Godrej is the Middle East and Africa. Forecast value
growth in home care for the region over 2015-2020 is moderate, at 3%. Godrej’s key category of
home insecticides is set to grow by a CAGR of 4%.
Godrej Group has emerged as a significant market player through well-targeted acquisitions
over the review period.
The Sara Lee acquisition in 2010 gave the company full ownership of the Good Knight, Hit and
Jet home insecticide brands, while the Genteel brand of liquid detergent acquired from
Naturesse Consumer Care Products has broadened the company’s portfolio in laundry care,
which remains a minor interest for Godrej Group to date. Also in 2010, Godrej Group acquired
the Stella air care portfolio from Megasari Group in Indonesia, paving the way for its further
geographic expansion in the dynamic Asia Pacific region.
Godrej is still keen to grow in Indonesia, and has shared a “wish list of assets” with various
investment bankers for further acquisitions. The question is whether or not suitable “assets” are
up for sale, and this will impact the speed of their growth trajectory against stronger
multinational companies also present in Indonesia.
The strategy continues in Africa, where Godrej has attained a majority equity stake in Canon
Chemicals Ltd, a Kenyan company with a broad personal and home care portfolio. It is notable
that Canon is also present in home care categories that Godrej is absent from, in particular
dishwashing and toilet care, thus Godrej has a good opportunity to develop these categories
further.
Megasari

The company says that its foray into Indonesia via Megasari acquisition has been amongst the
most successful M&A transactions as revenue and PAT have grown 3 and 4 times (constanThe
company says that its foray into Indonesia via Megasari acquisition has been amongst the most
successful M&A transactions as revenue and PAT have grown 3 and 4 times (constant
currency) respectively, over the past six years. In 2010, GCPL had acquired Indonesian
household product major Megasari Group for Rs 1200 crore.t currency) respectively, over the
past six years. In 2010, GCPL had acquired Indonesian household product major Megasari
Group for Rs 1200 crore.

Strength of Nature JV
Canon Chemicals
Strength of Nature South Africa Proprietary Limited

GCPL is ensuring that there is no overlap between the brands, and a segmentation strategy is
being ensured to avoid cannibalisation. So, while Erasmic is expected to enter the Indian
market, GCPL will make sure that it does not overlap with Godrej's shaving range. For instance,
Godrej's shaving portfolio does not include foams or shaving blades; so Erasmic could be
expected to fill this gap.

6. How far is the company successful in its global foray in your view?
Godrej Group has emerged as a key home care player within the rapidly expanding Indian
market seeing its global position improving from 39th in 2010 to 24th by 2015. This profile
analyses the company’s strategy to expand internationally into other emerging economies in
Asia and Africa, as well as generate further value through category diversification and product
innovation tailored towards local preferences, to target a growing middle class both in urban and
rural areas.
Household insecticides and hair care are categories Godrej Consumer is expected to devote
attention for acquisitions. So far, Godrej Consumer has wrapped up five purchases in Africa,
including Rapidol, Kinky and Frika hair care brands in South Africa; Tura, a personal care brand
in Nigeria; and the Darling Group, a hair care company that has a presence in 14 countries on
the continent.

From 2010 till date, GCPL has acquired at least eleven companies across countries including
India, Indonesia, Argentina, Chile, Kenya, Nigeria and South Africa. As on December 31, 2015,
GCPL earned 47 percent of its revenues and 41 percent of its Ebitda from markets outside
India.
7. What would be your recommendations for the company, going forward?

While domestic demand for home care remains healthy, Godrej Group will continue its
international expansion over the forecast period, by means of carefully targeted acquisitions.
Asia Pacific and Sub-Saharan Africa should remain Godrej Group’s core focus of international
expansion, given its long-term 3x3 strategy. Further international acquisitions are expected over
the forecast period, which could help overcome the barriers of local production and distribution.
However, green field operations should also be established to counteract a lack of acquisition
opportunities and to build a solid presence within a market.

With its many businesses and brands spread across areas and continents, while the pace of
growth of shareholder wealth addition may not be the same, there’s little doubt that
shareholders’ wealth will continue to expand. The vast driver in GCP’s growth levers, ie., strong
brands in key product categories, is its biggest differentiation
Strategic acquisitions to aid international expansion in high growth developing markets is
expected to continue to boost Godrej’s turnover growth. By continuing to concentrate on
category expansion through product innovation and building brand equity, the company aims to
increase its market share domestically in India and become a market leader in other emerging
economies

http://www.moneycontrol.com/news/business/companies/godrej-consumer-bets-bigindonesia-to-
foray-into-hair-care-992180.html

http://www.business-standard.com/article/companies/godrej-on-buyout-mode-in-africa-1150427
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micals-in-kenya.aspx
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non-chemicals-1044166.html
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