Ladies and gentlemen, good day and welcome to the Godrej Consumer Products Limited Q1 FY 2023 earnings conference call hosted by Kotak Securities Limited. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Jay Doshi from Kotak Securities Limited. Thank you and over to you, sir.
Thank you, Renju. Good morning, everyone. On behalf of Kotak Institutional Equities, I welcome you all to Godrej Consumer Products 1Q FY 2023 earnings call. I'll now hand over the call to Pratik Dantara, AVP, M&A, and Investor Relations for initial introductions. Over to you, Pratik.
Thank you, Jay. Good morning and welcome to the call. We'll be covering the results for the quarter ending 30 June 2022. On the call with me from GCPL Adit i Godrej, Executive Chairperson, Sudhir Sitapati, MD and CEO, and Sameer, CFO. We can start. Sudhir, over to you.
Thanks. Thanks, Pratik. Good morning, everyone. I hope you and your families are doing well. Thank you so much for joining us on the call today. I will first start with an update on our quarterly performance. On the face of it, Q1 FY 2023 appears optically poor, but we are actually quite encouraged. We declined volumes 5%, grew by 8%, declined EBITDA by 13%, and PAT by 16%. However, given the various COVID disruptions, headwinds and tailwinds of the last two years, we think that the right way to evaluate underlying performance is to look at three-year CAGR and how that trajectory is changing over quarters. Our three-year CAGR of volume is 3%, sales 10% and EBITDA 5%.
If one takes the core geography of India, we grew 4% underlying volume growth, 12% sales and 11% EBITDA on a three-year basis. This compares favorably with the three-year CAGR of the prior two quarters of 7% sales and 0% EBITDA. We are also quite happy with the quality of results globally. Our GMs contracted by 560 basis points and our media increased by 140 basis points. Driven by cost savings, we were able to limit our EBITDA drop to 420 basis points. Our performance has been largely driven by areas where we made structural interventions. Media across the board, India hair color, India hair care, and Kenya. Our household insecticide businesses in India, while again having an optically poor one-year performance, has significantly increased, improved its three-year CAGR trajectory versus the previous few quarters.
Indonesia delivered a particularly weak performance, with sales declining at 12% and EBITDA at 40%. While again, here the performance looks optically very poor, there are some green shoots. If one excludes the base of Saniter, which will reduce by Q3 FY 2023 and look at sellouts, we will continue to reduce stocks, including this quarter. We actually grew offtakes by 4%. The macros in Indonesia are also looking better. Weak sales compounded by cost inflation and a 120 basis points investment in advertising and promotion, which we continued despite the gross margin fall, has meant that EBITDA drop has been very large. With our strong market positions, media investments resulting in recent share gains in Indonesia and our determination to reduce our trade pipelines, we expect the Indonesian situation to start improving by Q3 FY 2023 onwards.
GAUM continued its double-digit momentum on a three-year basis. The dry hair category grew in mid-single digits, driven by a disappointing performance in Nigeria. While the FMCG category grew in high double digits. The growth flywheel in GAUM has started to move, but we need to simplify business and significantly strengthen governance, which we are working on. The EBITDA margin decline in GAUM was largely due to higher marketing investments. Our prognosis for FY 2023 remains broadly unchanged. We anticipate double-digit top line growth with low to, if we're lucky, mid-single digit volume growth. With inflationary pressures abating, we expect sharp margin recoveries from H2. Our game plan is to enhance category development driven by relevance, access and marketing investments, and funded by a digitally enabled simplification of our organization. We have scheduled a slew of category development initiatives in Q2, which we believe will build relevance for our categories.
For instance, within household insecticide where we are the market leaders in India, we have recently repositioned GoodKnight Liquid Vaporizer as a protector of sleep under the campaign, "Neendon ko nazar na lage," and relaunched HIT as well. Within air fresheners to drive premiumization in the category and get non-users to start using aer Matic. Based on the insights of when guests come home, your bathroom or room needs to smell good, we've launched a campaign which says, "If rooms could speak, they would use aer." We have recently launched Magic Ready-to-Mix Body Wash in India with Shah Rukh Khan as brand ambassador, which we hope will not just develop the body wash category in India, but make a significant difference to perceptions on plastic usage in the country. Our journey on simplification is making good progress.
Our cost to serve is down 370 basis points in Q1. With inflationary pressures abating, we expect that these controllable cost savings, along with the marketing investment, will give us significant fuel for growth and digital transformation. Thank you very much. Happy to answer any questions you may have.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Abneesh Roy from Edel. Please go ahead.
Yeah, thanks, Sudhir. My first question is essentially on the steps which you have taken post joining. Essentially past few quarters numbers have been optically weak in some of the quarters and your three-year growth is still looking decent. My question is, based on the steps which you have taken, say, better emotional messaging in your advertisement, better go-to market, focusing on core and higher A&P also. The numbers, et cetera, obviously we can't decipher the impact of these steps because they are optically weak. My question is, any anecdotal evidence or any initial case studies you can share in terms of all these four, five steps which can give us more comfort?
Yeah, I mean, Abnesh, you know, more than anecdotal, you know, a simple way of looking at the numbers is to look at what was our trajectory pre-COVID, and now we're in a post-COVID period. Has our trajectory changed this quarter over the last few quarters? A simple question to ask. In our view, our. You know, especially if you look at India where things are stable, Indonesia, we've been doing a lot of pipeline correction. If you take our last two quarters, our three-year CAGR was about 7%, and it's now moved to 12% in this quarter. That in itself is quite encouraging for us because when we look at three-year CAGR polarity, we see we feel it's changed in Q1.
Anecdotally, a lot of the initiatives where we have put a lot of the change, I mean, we have fundamentally increased our media spends. We have fundamentally simplified the organization. The media spend increase is evident to you in the numbers. Simplification of the organization results in cost savings. Those cost savings are again pretty evident in the numbers because if you knock off gross margin and working media you will see that significant reduction in everything else which is a cost to serve. In terms of is the media working, apart from the polarity, the good thing is that where we have made interventions with hair color, with hair care, but even in HI where we have significantly stepped up our media investment, we are seeing changes in three-year CAGR trajectories.
Sure. That's helpful, Sudhir. Two quick follow-ups on that. One is, in terms of HIs, seasonality is a very big factor for the industry, and we can't do too much about it. This better emotional connect in terms of the advertising message and, say in terms of more advertisement against illegal, and maybe even more disruptive innovation, because this is a tough category, very highly commoditized. Could you tell us, when do we start seeing more action here, for example, disrupting innovation? Is it more of the FY 2024?
Abneesh, the diagnosis of the HI. In our view, there are two things in the HI category that we probably need to do, which is our two core formats in HI, which is aerosol and electrics, have relatively low penetration in India and Indonesia actually. One of the ways of increasing penetration is just increasing media and distribution. We've done that. We are anyway seeing results on a more long term basis. The second, in the case of liquid vaporizer in India, which has been, you know, a bit of an issue for several years, we have repositioned the brand in the previous quarter, where we've moved it to this. Our insight has been that, perhaps consumers, you know, this brand was created as you know, name is Good Knight and a good sleep.
Perhaps we had moved a little bit away from that, and there was a little bit of hesitation among consumers to use liquid vaporizers to sleep at night when kids are there, et cetera, which is. Therefore, we've taken a pretty strong shift from talking about efficacy and performance to talking about sleep of infants. I think a combination of these two, in our view, is starting to yield results. I know it's not evident to you in the, in the results compared. You know, basically during COVID, there was an unnatural increase in the use of household insecticides which were now clear to us that consumers were at home, they were very scared to go to the hospitals, et cetera. Over our longer-term trajectory, we are actually quite enthused by our HI performance in the quarter.
Sure. Last question is on Africa business. In FY 2022 annual report also and today also you have called out two things, simplification and governance. Could you give us some steps on both these facts? When do you see both these issues getting fully resolved?
See, in the simplification part of the business, you know, we have started the process there, which is to focus on the core of our business to reduce our SKUs to put most of our investments in core market to start advertising, et cetera. Again, on the simplification journey, see, in Africa over the last few years, Abneesh, we've seen good top-line performance, but relatively muted bottom-line performance. I'm hoping that the top line performance I think will continue to be good, and I'm hoping that the steps that we've taken to simplify the business and governance. Governance is a slightly longer haul thing because, you know, it is strengthening, it's a cultural thing, and you've got to do it across, and there are lots of investments to be made. Simplifications are relatively lower hanging fruit.
I'm hoping we should start seeing results pretty soon in terms of margin performance in Africa as well.
Sure. Thanks, sir. That's all from my side. Thanks.
Thank you. Next question is from the line of Vivek Maheshwari from Jefferies. Please go ahead.
Hi. Good morning, Sudhir and team. My first question is on Indonesia. You know, in your understanding in, how much of the issues that you are seeing on the ground are right now, let's say, external factors? How much of those will be something which are more internal and, you know, you would be able to address those in next, let's say couple of quarters?
I think, Vivek, in the case of Indonesia, there have been two sets of issues. One is that in the past few years, the macros were indeed quite poor in Indonesia, and I think over a longer period, we've probably not invested enough in Indonesia. In both cases, we've changed. Our investment patterns in Indonesia have changed over the last five, six months, and we are actually seeing macro improvements in Indonesia in the last few months. The very first measure that we have of, you know, whether there's light at the end of the tunnel is to see optics, and that has actually been quite encouraging in this quarter. Not spectacular, but encouraging.
I mean, there has unfortunately been a very large pipeline buildup in Indonesia over the last few years, and that pipeline buildup will take up to, I think, the end of Q3, for Indonesia to really start, you know, optically looking good. On Indonesia, I mean, there's some kind of light. I won't say we're out of the woods yet, but there's some kind of light there.
Got it. When you say pipeline, so how are you ensuring that? Is it like, you know, cutting down on SKUs? Is it that, you know, the levels of push was higher in the past? How exactly that is happening? Is there something similar happening in India as well? Because our checks are suggesting that even in India you have cut down quite a bit on SKUs.
No, I think. See, cutting down SKUs is a good thing to do in terms of simplification and structural costs. You know, a lot of that's the thing we're doing everywhere. In India, we don't have an issue of inventory in the pipeline. So in Indonesia we have that. For that, we're just, you know, reducing our sales and only, you know, basically if you have 190 days of inventory and you want to reduce it to 60 days, you're knocking off 30 days of sales.
Interesting. Once you know, just last follow-up on this. Once you think, and I think you have indicated by third quarter, it should be done. After that, do you think Indonesia should ultimately get back to double digits in foreseeable future?
I don't know about double digits, Vivek, but I certainly will get back to high single digit growth. I mean, our portfolio, I mean, Africa and India will probably grow structurally faster over a long period of time just in terms of the macroeconomics and so on. I don't know whether Indonesia will get to fully double-digit growth. I'm reasonably certain India and Africa will, but it'll certainly not be where it is right now.
Okay. Sorry, you know, one more follow-up, given that you mentioned that point. The delta between high single digit and double digit, that will be. That has to be bridged by macro factors or let's say, I mean, if you are saying that, you know, it can be high single digit and not double digit, you can actually look to get into newer categories if macro is conducive, right? So what will create that delta between or bridge the gap between high single digit to double digit? Is it just the macro external factor or there can be internal factor which can push up this to double digits?
I think, Vivek, the honest truth in Indonesia, Rajesh has just gone there and right now our mandate is to come out of where we are, you know, which we're having double-digit decline, to bring this back to stable growth, you know, recover a good part of our margins. We've got clear plans on India and Indonesia, Africa on how to kind of accelerate growth. I would say our step one for the next even six to 12 months is probably to get Indonesia back to a steady footing, and then we will think about, you know, what should we do in Indonesia? Should we kind of get into new categories, et cetera, right? That's not what we're thinking about right now in Indonesia.
Okay, got it. That's fair. The second and the last question on marketing spend. It is very good to, you know, see you talking about growth, you know, amongst various other things on the simplification side. Sudhir, if I still look at your advertising spend, and I know denominator is different given the inflation and the price hike that you have taken, but if I go back in the history, you were spending, let's say in India business almost 11% kind of A&P, or marketing spends that was and at a consolidated level at about 8%. Are you happy with the current spending levels? Because absolute numbers in the last five years have also not moved up as much.
Where do you think, you know, this number settles at, you know, from the current levels of about 6%-7%?
No, I mean, Vivek, this is an intense journey. I mean, you see, it's not prudent. This is a quarter in which we declined our gross margins by 560 basis points, but despite that increased our media spends by 140 basis points. This is quite unorthodox, right, to spend this kind of media increase in a time of high cost inflation. If you're asking, is this where we're going to end up? No, I mean, we're going to do this sensibly because there's no point just generally increasing media because there are lots of other things that have to go with it, quality of communication. We have to see what the return on media investment is, et cetera, et cetera.
I think we should show strong commitment of our business that regardless of gross margin, regardless of cost pressure, we feel that we will continue to invest. I mean, we're already seeing green shoots, and as we see the return on investment on this media playing up, it will become, you know, more and more as time goes on.
Okay. Just to follow up on this again, do you not think the time is conducive right now to actually spend so while gross margins are going down for you, so is the case with competition, and this is the time for you to, you know, basically maybe outspend some of the competition and basically gain share. Is that not the fair strategy given that, you know, you don't have any balance sheet concern, you don't have, you know, any other cash flow related constraints?
The core of our strategy is not competitive and share gain for GCPL, it is category development. Therefore, we have to put whatever is appropriate for category development, see the results, you know, modify it and then put more. I mean, there are obviously pockets where we are competing and etc., etc. The thrust of our strategy is to develop the categories, and it is prudent. I mean, we can put, as you correctly said, it's not because of the balance sheet nor but, you know, one has to be prudent about how much one is increasing and the results one is getting.
I can just say that in quarter one, I am personally, I know it's not easy to decipher it in the middle of all this data, but I am personally quite happy with the return on media investments that we have seen and its relationship with category development. This is therefore a journey that will continue going forward.
Maybe just to add to what Sudhir is saying, I think directionally we will invest, you know, the expansion in gross margins, which is expected to kick in in rest of the year, in terms of either gaining market share, but more importantly also driving category penetration.
Perfect. Thank you, Sudhir. Thank you, Samir. All the very best.
Thank you.
Thank you. Next question is from the line of Percy Panthaki from IIFL. Please go ahead.
Hi, everyone. Good morning. My first question is on HI. Just like you've given the three-year CAGR for the overall business in India at around 11%-12%, what would be the three-year CAGR in home care?
Percy, you know, we don't normally declare HI results separately, but I think it suffices to say that there's been a significant profitability improvement in HI in quarter one on a three-year CAGR versus the prior quarters.
But, uh-
So if you want us-
I know we don't report HI, but we report home care, so home care three-year CAGR possible to give?
Yeah. Percy, I mean, just in terms of data and direction, I think the three-year HI CAGR is close to double digits for us.
Secondly, I just wanted to ask Sudhir. I think you were not there, so maybe Samir can give a perspective across time periods. When this illegal incense stick problem had come up, immediately we had launched a natural incense stick, and we had also communicated that in due course of time we would be launching an active molecule incense stick. Since the regulatory approvals, etc., take time, it would be maybe 1.5 years for the launch. Now it's been like over four years. Just wanted to understand why is it that we have shelved that project?
I mean, Percy, my personal view is we are of course working on burning formats and things like that. I think our personal view here is that we have to continuously. Globally, the world is into aerosols and electrics, and our job is to develop electrics and aerosol. When those two formats are compelling to consumers, then a lot of the proxies and illegal products will disappear. Rather than, you know. Our strategy continues to be category development with what we are good at, which is aerosol and liquid vaporizer. Within that, of course, you know, we will figure out what to do tactically. I think, you know, Samir gave you a sense of the numbers which kind of enthuse us. We think that that is the right way to compete with the illegal incense sticks.
Got it. Shifting gears to Africa, your margins are still in single digits. Can you give some roadmap as to by when we can reach that 15% kind of mark, which is a respectable margin? How long will it take? Secondly, what will be the drivers to go from this 8%-9% to 15%?
Yeah. No, I'll answer the second question first. I think that there are two issues. See, firstly, Africa has been a tale of two parts. Top line has been good. It's been driven frankly by FMCG growth and distribution improvements, right? We are on a good journey there. Bottom line has been bad. Bottom line has been driven by two factors. The first is we constantly get governance hits like we got in the last quarter in Africa, which erode profitability. Two, structurally for the size and gross margin of the business, that business is too heavy and it's too complex.
What we're now doing is tightening the governance so that we don't have these one-time governance hits, but more importantly, simplifying the business, taking a look at our portfolio, saying which parts of our portfolio will we play in, which parts of our geographic portfolio will we play in, and if it means giving up some businesses in Africa, so be it. That's the kind of strategy going forward. Kind of choiceful top line growth, definite focus on bottom line. I hope we get to the numbers that you're talking to by 2025.
I think a pair of other drivers, Percy, to this also will be favorable mix because our strategy is to invest more in FMCG, which is going to be a favorable mix, from a gross margin perspective. Also we expect a bit of scale leverage costing programs to kick in to get to that 15-16% EBITDA by 2025.
When you say FMCG, you mean wet hair care here?
Wet hair care, household insecticides, soaps and hair colors. That's a basket of FMCG, which is close to 45% of our overall sales.
The core of the business, Percy, is wet hair and the next core will be household insecticides. This is the two businesses there.
Okay. What really went wrong in dry hair care? What is the reason? I mean, we were quite positive on this category when we did the acquisition in 2012. What went wrong here?
No, I mean, in the recent past, I mean, there's been long history of our business in dry hair care, but in the recent past it has been doing quite well in terms of top line, but not as well as we want in terms of bottom line for the reasons that, I mean, if you're asking me for historic reasons, maybe Sameer is a better guy to talk. In the recent past, the governance and the complexity reasons are the reasons why this business has a low EBITDA margin, on the longer term basis. Sameer, you may wanna talk.
Yeah, no, I think the shift in strategy is to sort of, you know, make hair extension cash cow, right, Percy Panthaki? To create a pool for investments for FMCG. I think the growth will come in, I mean, you know, from both the categories, and it's not about completely defocusing also hair extension, but making it much more simpler than what it has been, you know, historically, whether it be number of SKUs or number of, you know, styles, and then in turn simplifying the rest of the business operationally. So that's the shift in strategy. Otherwise, it's very much going to be integrated part of the portfolio, you know, going ahead in Africa. And also it's a category where, you know, route to market, salon influence works, I mean, you know, much better than pure, you know, kind of media investments.
Whereas FMCG is a classical FMCG space where, you know, the media investments along with route to market, do you know, get us a profitable, sustainable sales growth.
Sure, sure. I have more questions. I'll take them offline. Thank you very much.
Thank you. Next question is from the line of Gaurav Jogani from Axis Capital. Please go ahead.
Thank you for the opportunity, sir. My first question is with regards to the launch of the body wash, INR 45 one. I think if you could explain who all could be a key customer here or what kind of target-
Sorry, Gaurav. Sorry, we're not able to hear you. I mean, there's a lot of echo coming in. Can you come close?
Is it better now?
Yeah, it's much better. Okay.
Yeah. So my first question, you know, sir, is with regards to the body wash segment of the INR 45 that you have launched. So wanted to understand, you know, who would be our target consumer segment in this launch that we're targeting. I mean, you know, while the mass or the mid-premium guys would be using soaps, and it's only the top-end guys who are using the body washes. What kind of a TG we would be targeting here?
Yeah, Gaurav, I mean, look, the body wash offers some significant benefits to soap for everybody, whichever, high income or low income. I mean, the reason that only high income consumers in India use body washes are the price index to soap is one to three. Bringing the price index to one to one, we are hoping that body wash becomes a mass market offering. This is obviously, it's a game changing innovation, but it is a mass innovation aimed at mid-income and low-income consumers.
Sure, sir. Sir, my next question, you know, is with regards to, you know, effectively our view of the activities over the past four, five, six months. You know, we have been kind of, you know, taking the price per se down. For example, the INR 15 hair colors that we have introduced and again the
Gaurav, again, it's not very clear.
Sorry, sir. Now, is it better now?
Yeah, much better.
Apologies again. My question, you know, is with regards to again, you know, the price mix that we have even taken down over the past five-six months in terms of the hair colors growing, the INR 15 launch or for example, even this body wash launch for INR 45 or the HI piece that we have done, the relaunch of the older version. How is it expected to impact our margins, margin profile, you know, given that this will be a bit lower price point products?
I mean, look, the margins firstly in India are healthy, and I think a lot of analysts rightly say that we should invest in consumer value and therefore, you know, our number one priority, as I've said before, is to drive volume growth back. Having said that, while these may be lower than, some of, you know, they're generally accretive to the company, and if you get volume growth with the kind of leverage you will get, it's very unlikely that they will have an impact on margins. They're all structurally and fundamentally high margin. They may be slightly lower than what we are selling today in the market, but you're better off, you know, selling a lot more at 70% gross margin than a lot less at 80% gross margin, right?
Okay. Sir, got it. Thank you. That's all from me.
Thank you. Next question is from the line of Shirish Pardeshi from Centrum Broking. Please go ahead.
Yeah. Hi. Good morning. Thanks for the opportunity, Sudhir and Sameer. I have two questions. One is on India business, and when I see that you have reported on slide 13 personal care growth at 25%. If I just wanted to understand what is the price and volume in personal care?
I think, Shirish, you know, for competitive reasons, we don't share the cuts of, you know, categories on unit basis. But the mix, I mean, if we, you know, double click personal care in soaps, I think good part of growth is, you know, pricing led.
Equivalently in hair colors, which is the other, you know, kind of meaty component in personal care, a good part of growth is actually volume-led. I would say, you know, the UVG would be, you know, kind of reasonably, you know, kind of steady over there.
Thank you, Sameer. At least for India business, will you be able to share what is the volume growth?
Yeah, we have done that, Shirish. On the same slide, actually, you see India's UVG on a YOY basis has declined by mid-single digits and on a three-year basis is actually close to, you know, mid-single digits positive.
Okay. My second question is on the margin front. I mean, yes, we know Indonesia will turn around after quarter three onwards, but I'm not saying in terms of guidance, but the bigger thing which I'm seeing, and I think some other participant also raised this, the ad spend. Right now we are seeing on average, we are doing about INR 200 crore, but in the past we used to do about INR 250 crore-INR 300 crore. So I do get what Sudhir has offered, saying that we want to be very competitive and we got the benefit, but it's just not the advertising. But if you can spell out what is exactly the spends? I mean, are we spending more on category development in terms of the below the line?
You think ad spend is not materially going to help at this time, and maybe in future we will look at it?
No, no. Ad spend is going to materially help in this time, and it is helping in this time. Quarter-on-quarter, we've increased our ad spend by 150 basis points, which is a pretty significant jump for a quarter versus a quarter. I mean, we may not directly go back to our, the peak quarter that we've ever had before because we are also constantly iterating. Bulk of this is in mass media, which is largely on television and then on digital, which is basically on YouTube and OTT, and it is largely towards category development and focused on the core. The other big difference is that this kind of media increase is not spread out over a huge number of small projects. They're spread out over market development on the core of our business.
Even qualitatively, the way we are spending money is big monies on few big things.
Also the BPS spends what you are referring of below the line spends, Shirish Pardeshi, has actually come down in the quarter, which is reflected in the overall cost to serve, you know, coming down by 350, you know, plus BPS. The strategy is to, you know, kind of have more of, you know, media investment and reduce down trade promotion spends and other aspects of the controllable spend, to again create that pool for investment.
Sameer, how do we should model? Is that about 7% for full year a good enough thing? I'm purely asking from the modeling purpose.
Well, I think it's difficult to give out a guidance on that, Shirish Pardeshi. Sudhir Sitapati did mention in his opening remarks, right? I mean, even as of today, on a full year basis, we do expect, I mean, say conservatively, you know, our margins at overall level will be maintained. What will be more important over there is the quality of profits, right? They will significantly improve in terms of gross margins going up, in terms of ad spends going up, the cost to serve, you know, coming down. That is what we are pretty, you know, enthused about. Net-net, I think on a full year basis, at least sitting over here at this point in time, we do believe that we'll be able to maintain our margins, if not, you know, expand.
Sure. Thank you, Sameer, and Sudhir.
Thanks, Suresh.
Thank you. Next question is on the line of Sheela Rathi from Morgan Stanley. Please go ahead. Sheela Rathi, please go ahead with your question.
Okay, thank you very much for taking my question. Hello, Sudhir. Hello, Sameer. My first question was with respect to the category development, which you have talked about, Sudhir. I understand around HI what the plan is. You know, on the personal care side, do you think that we will be expanding this category, you know, beyond body wash? Are we thinking about going deeper into the personal care category in the course of next couple of years? A sub-question to that is, do we have a plan around our distribution target, which we plan to reach in the next two to three years? This is across the spectrum. This is my first question.
See, in personal care, we have two businesses which are large today. One is soaps and one is hair color. I think soaps is not a category development task, it's a market share task. The category development task is really in hair color, and that's going to be the focus of our development. One of the things that we have done is to launch an access pack, and that is yielding good results so far. I would say that while of course, we've done Magic body wash, and that's kind of you know, something that can really do well for us. I would still say that the focus of our personal care business in the next short term will be in developing the cream market in hair color. What was your second question?
It's distribution.
Distribution.
Yeah, sorry. On distribution, I think, you know, in India, our distribution of soaps is very good, and that's the lead category. All the category development categories are a subset of soaps. Given the fact that our focus is on category development, it is not as much of going to new outlets, as much as taking these categories like aerosol or liquid vaporizers to outlets that we already cover. It is to leverage our distribution for category development. However, in Africa and Indonesia, I think there is definitely a very strong drive in Indonesia to improve our GT distribution and in Africa to increase our general distribution, which is today very, very wholesale focused. I would say Africa followed by Indonesia are our distribution priority. India is much more about being more efficient about using what we have for category development.
Understood. My second question was on the media spend. I know there have been a lot of questions on that, but just wanted to confirm, have you called out that ad spend would be double-digit as a percentage of sales over the next 12-24 months?
No, we have not called this out. I think you see many companies in personal care globally do spend those kind of amounts in ATL. I don't think, you know, one should have a target spend on ATL. I mean, that's not the right way of doing it. I think one can keep a sort of saying that, you know, is one too low or one too high, and then one has to constantly increase it, iterate it, and see what the return on investment is, right? Because it's not just an ideological thing that we want to spend so much money. It's not proper for us to go directly from A to B because this is the right amount to be spent in personal care. You constantly do, like this quarter, you run 150 bps.
You know, you may be on that kind of rhythm for some time. If you don't see good results, sort of titrate a little bit and say, "Hey, what's going wrong?" If you see good results, increase it a bit more. I think that's probably how we will phase out our media increase. I think it's fair to say that we will continue to increase our media spends, but probably not right to give a number and when we'll get to it.
Right. This will not be at the cost of margins, I would believe.
I mean, you know, the other way we think about this is that our number one priority is volume growth, and we should do what it takes to get the volume growth, especially in our core markets of, in India and Indonesia. You know, at the same time, we're putting a lot of work on costs, so you can see it in our results. This time you knock off gross margins, you knock off media, and you'll see how much savings we've got. Some of those savings are one time, like bonus provisions, but even otherwise the savings are quite high. I think these are two separate tracks that we are on. Volume growth driven by investment and kind of ruthless cost savings. Wherever they add up to, they add up to because, you know.
I suspect they will not add up to massive gross EBITDA dilution.
Yeah. I think just to add, Sheela, in medium to long term, I don't think so that, you know, the increase in ad spend will come at the cost of margins, especially in rest of the year. We do believe, I mean, our gross margins have bottomed out. We will see gross margins maintenance through expansion. But in very short term, like I mean, demonstrated in Q1, if we are, you know, going to invest, we will not shy away either, right? Even if it comes at the cost of margins, because the benefit of higher, you know, kind of media spends, will, you know, result in sustainable UVG in medium to long term.
Understood. The third question was on just, you know, Sudhir, how do you see the future, say, in the next three years? Because, especially when we are talking about simplifying Africa business, rectifying Indonesia business, do we have a number in mind in terms of what the share of India business could look like in the next three years? Will it be higher than where we are now, or will it be in a similar group to the current level?
Well, I think there are two ways of looking at it, Sheela, right? One is the share of India business from a revenue perspective and then share of India business from a profitability perspective. As we have called out, I mean, you know, Africa is equally important. We do expect, I mean, sustainable sales growth has been demonstrated actually since last now seven-eight earnings quarters. Profitability is something which is, you know, kind of scale up over next, you know, three-four years or so. India, I mean, we do expect again a sustainable profitable, you know, sales growth. Indonesia, I mean, maybe after a couple of quarters should be on, you know, kind of gradual recovery, you know, path.
We don't have any, you know, such, I mean, you know, cuts or, you know, kind of ambition in terms of what should be India's sales in terms of, you know, revenues or profitability. But it's very market specific. In the past, we had also highlighted that, you know, within our portfolio, 80% of, you know, kind of, sales comes from, you know, the big four markets, which is India, Indonesia, Nigeria and Bangladesh. We will continue to over-invest, I mean, in those markets geographically.
Understood. Yeah. Thank you. My final question was, with respect to the dividend policy, how is the company thinking about paying out dividends, you know, starting this year, or what's the plan there?
See, it's a board decision at the end of the day, Sheela. I mean, you know, thinking, I mean, at least over last couple of years was to use the free cash flows towards retiring our debt. I mean, while at net debt, we are a net cash, I mean, in a way, but there's still a gross debt. We'll keep on evaluating multiple options of, you know, using the cash flow, either retiring the debt or, you know, rewarding the shareholders through all the possible options during the course of the year.
Understood. Thank you. Thank you, Sudhir. Thank you, Sameer.
Thank you.
Thank you. Next question is on the line of Avi Mehta from Macquarie. Please go ahead.
Hi, Sudhir. Hi, Sameer.
Hi.
Just two questions. Sudhir, on this HI focus, does the focus on communication entail more a market share gain kind of thought process rather than category development? Would that be a right way to look at this, at least in the near term?
No, Avi, I don't think so. I think that firstly, the HI solution is a combination, frankly, of three things. Of relevance, which is communication driven. Trial, which is sampling driven. Access, which is to get the right price points in the categories that we operate in. We have started off, and it's most visible because of media spends, et cetera, on relevance. But this communication that we are doing is not, you know, if you see, for example, Google the latest Good Knight communication, it is not a market share kind of communication. It is growing the pie kind of communication.
Okay. No, the reason is when you kind of mentioned it, you said that in order to counter the incense stick, this is how we. It's felt that you're trying to gain share from incense stick through this communication versus if I remember in the earlier conversations, you said you want to develop the base and the product development would allow us to expand the category to that extent. That is where
No, no. If that's what you mean. Yeah, no. I think if that's what you mean, this category is 75%-80% penetrated in India. A large amount of it is coils and incense sticks. When we say develop the category, I mean, develop the category for aerosols and liquid vaporizers. Not to win share within liquid vaporizers and aerosols, but to really, yeah, upgrade people from burning formats into these formats is the consumer task. If you're saying share of overall HI, then the answer is yes. Because there aren't that many people in India who don't use any HI, you know, through the year. In that sense, yes.
Okay. Got it. It's clear. The second bit is I wanted to just clarify this. In Indonesia, you said change in investment patterns. Was this more just that there was lesser marketing done on the core and that's what you're changing? Or is there, you know, a divergence or difference in the way marketing is being looked at now versus even pre-COVID?
No, I mean Indonesia, I mean, as I told you, there are two issues. Since you're asking the question on marketing, was a more acute, you know, symptom of what the overall company was, that the overall ATL spends were way too low in Indonesia for a very long period of time. As a consequence, EBITDA was very high and as a consequence, growth has been not very good in Indonesia for a few years. That is a structural change that we are doing. Like we're doing everywhere else in the world, in Indonesia it's the most acute. That's what we're changing in Indonesia.
If I were to extend this further, the normalized margin, would you have a thought in mind of where you would want Indonesia to be? Because obviously the 22% odd that we saw even pre-COVID was on the back of very low ATL. Is there a number you have in mind or range?
It was 22%, but pre-COVID, Indonesia was running at 26%-27% margins.
Okay. Yeah.
It was not 22%. It was very high margins, and there have been quarters in which it's crossed 30% and all. I think that again is not probably the right question, right? I think the right question to ask is what is the amount of media investments that we need to put that media investment, whatever the consequence on EBITDA is, and then at the same time ask the question on what are the cost savings possible. I mean, the nature of businesses, if you ask me, that we are operating in Indonesia, if we're efficient about it, can operate with higher ATL round about the EBITDA that we're operating at, without being exact about it. In other words, there's enough scope for efficiencies and even in Indonesia for us to fund significant ATL increases.
Perfect. That helps. Thanks a lot. That's all from my side.
Thank you. Next question is from the line of Alok Shah from Ambit Capital Private Limited. Please go ahead.
Yeah. Hi, good morning. Thank you for the opportunity. My first question is, Sudhir, in the previous quarters, in the 4Q conference call, you know, when there were questions on HI, you said that, you know, we'll discuss that in detail in 1Q. In this presentation and the conference call, you know, what we understand is about the new marketing message, et cetera. Am I missing something over here or is my understanding correct, that, you know, the change is largely on the marketing piece?
No. I mean, I didn't quite get the first part of your question. I think on HI. Let's ask the question, what is it that we have changed in our HI business? What is it that we will work towards and what are the early results, right? That, that's probably the good way of looking at it. Let's look at India, because Indonesia there's a lot of noise around the data. I think we have increased our marketing spends, that's a fact. We have changed the positioning of Goodknight. It's a significant change, moving it from efficacy and performance to good night's sleep. We are doing a reasonable amount of trial generation, and we are figuring out what to do to make the premium parts of this category more affordable.
This is what we are doing and what we are trying to do. The results that we can measure, given the various bases of HI in COVID. You know, we've been saying for some time that COVID had a massive tailwind on household insecticide. Or we can look at our market shares, which we're enthused by, and we can look at our three-year CAGR versus our trends in three-year CAGR. As Samir said that our structural growth rate pre-COVID in HI used to be in the low single digits. The three-year CAGR of this quarter has gone to the high single digits. There has been a polarity change, whether it is only a one quarter phenomenon.
Optically, while HI looks, you know, and Home Care looks like poor results, this has been a pretty significant polarity change. We'll wait for one more quarter because on HI I don't want to call victory too soon because, you know, we've done it. We'll wait for another quarter, which is this quarter, and see if that polarity continues, which is our three-year CAGR momentum has moved up. If it's moved up two quarters in a row, which are generally, you know, not COVID quarters or no external change, then we can say, yeah, what we're doing is working.
Got it. Sudhir, my follow-up to this is that, in terms of your marketing message moving away from efficacy to, you know, the new message. Now, you know, maybe this is my understanding and could be wrong, but, you know, when this illegal incense sticks came up, you know, it was more about problem-solving in terms of efficacy, right? People found a product with an immediate solution. You know, do you think that efficacy, you know, you can match up on the efficacy using the LV, judging the time that it takes to burn and spread across in the room and, you know, the efficacy is not a problem, but the communication was the problem statement, and that is what we are trying to address.
See, we have two brands in our portfolio, HIT and Good Knight. If you see our HIT communication, which I've not spoken about in detail, we've actually ratcheted up positioning on instant efficacy. Consumers have two big needs in this category. One is instant efficacy, and we've got a brand, HIT, which is going to do that single-mindedly. They have another need in the category, which is to sleep well at night, which Good Knight is going to do. What we're now doing is both brands have clear roles to play, one on efficacy and one on good night sleep. You know, and these are the two big needs in the category. If you ask yourself, sometimes you'll find mosquitoes in the room, you wanna kill them immediately, you need efficacy.
Sometimes you just wanna sleep well and not have that zzz noise or a mosquito coming in the middle of the night and, you know, sitting on your hand. You need a, you know, a good night's sleep, which is what LV is. I guess that's a change because the two brands are taking fundamentally different positions, which is what I guess good positioning is about.
Got it. My second question is on the powder to liquid body wash that, you know, you launched. Now, you know, you already had the powder to liquid hand wash. What are the learnings from that? You know, this is the consumer feedback, you know. Did you find that, you know, consumers need to mix it and, you know, use it in the right proportion, et cetera, to get the efficacy? Was that not an issue? You know, if that was, then how would you sort of address that in the body wash? Because this plays a larger part of your overall hygiene versus just a hand wash.
We launched hand wash three or four years ago, and we've been quite enthused by the response of Magic hand wash. We've taken a pretty strong position, especially in volume and usage terms in the category. I think we're, you know, number two in terms of volumes now in the hand wash category. We've done a steady gain, and we find that consumers are willing to go through that slight bit of effort of getting the, you know, of getting the recipe right, as it were, because of the big benefits that they get in value. You know, the hand, at the end of the day, is 1% of the body. The body is 99%, right?
If hand wash, we can have a pretty significant business in three-four years, if that same hypothesis works on body wash, that's a huge benefit. I mean, that's a huge market that we are playing in. I mean, you know, again, on innovations, I think Magic body wash is a good illustration of innovation, right? It's not that as a company, we're only doing category development but not doing innovation. We are doing innovation that can become massive for us. These are not incremental innovations. These are innovations that can game change the category. Of course, with all innovations, there's a risk associated, how much time it'll take. Should we build it into the business case? We don't build in these numbers into our annual plans and so on, because we know that innovations, you know, take time.
We'll be patient and persistent because fundamentally we think that if you can give a body wash at the price of soap in India, there is no reason why the market over a period of time shouldn't upgrade in a pretty large scale sense.
Okay. No, no, fair enough. Fair enough. My one last question for Sameer is that, you know, the investment in subsidiaries, this time around has gone up largely to Mauritius Africa Holdings. So any specific reason for this increase in investment is what I wanted to know. Thank you.
No. This was largely to, you know, kind of support some of these operating entities, because of the very tight, liquidity, you know, challenges which they are facing, you know, on ground. Also, the way this works out is that good part of this, dollars, you know, come back from the local entity to the operating entity because there are a lot of intercompany payables. In process of doing that, we also end up saving bit on the Forex cost in some of the entities on ground.
Sameer, is it right to say that structurally this is not putting new capital into Africa? It is African capital.
Yes.
Going back to Africa.
Absolutely.
One of the general principles that we are operating with is no new capital into Africa.
Perfect. Yeah.
Okay. This is the capital which you brought back in the day through repatriation and which is again getting infused. Is that?
Yes.
Okay, got it. Thank you.
Yeah. Yeah.
Got it. Thank you.
Thank you. Next question is from the line of Latika Chopra from JP Morgan. Please go ahead.
Yeah, hi, Sudhir. Hi, Sameer. Thanks for the opportunity. I heard your comments on, you know, some of the categories. I just had two follow-ups. The first one was on HI. You know, it seems that, you know, you are reducing your focus on burning formats and incrementally the focus is on the premium side, which is aerosols and vaporizers. So is it fair to assume that probably the next big intervention that could possibly come in this category from you are the lower price points in these premium formats? And the second part was if you could wanna share some thoughts on the non-mosquito part of the business. That seems to be doing well. What more can be done there? That's the first question. Thank you.
Yeah, no, I mean, Latika, I think on question one, definitely, you know, aerosol and Liquid Vaporizer is where our focus is, and we are appropriately playing within burning formats where required with, like, for example, a Goodknight Jumbo Fast Card, which we've dropped to INR 10. Et cetera. We will definitely work towards market development, you know, on these categories. It's not correct for me to say what exactly we will do in the future. Definitely price is a dimension in India on development of all categories, so that we will do. I think on non-mosquito, the big area of development is cockroaches for us. Cockroach penetration in India is very low. We will.
You know, while we are solving mosquito, the second big insect that we are working on is cockroach, and there also we're seeing very good results. There are a few others that exist, but I would say that we would first win in mosquitoes, then in cockroach, and then go on to the others.
Sure. The second one was on, you know, hair colors. This INR 15 price pack, is it now nationally launched? Any, you know, initial learnings here, is it leading to new consumers into the category for you? Is it leading to market share gains, or are you seeing some cannibalization versus the earlier SKUs that were present?
To answer your first question, yes, it is national. The response has been for a quarter, and as we can see in the personal care results, the response has been quite encouraging. In general, what happens when you launch a democratized pack is it actually takes time to build. It doesn't happen overnight. You know, initially you'll have a lot of excitement. Actually the cannibalization is not usually, at least from my past experience, massive, and it has not been in this case either as I thought it would be. These things are, again, you know, examples of category development. It's not just that you launch it and forget about it, you know. You have to go into rural outlets. You've got to go and knock a tin plate into the outlet and say, you know, INR 15 hair cream available here.
It's a hard journey. I think it's begun well. I think the numbers are pretty good. It's begun well, but it certainly none of these things are magic bullets, Latika. They take their time.
Sure. The last one is, you know, for Samir, you know, you called out, you know, very specifically 2025 margin expectations for Africa. Just, you know, looking at how you're trying to, you know, focus on volume growth for the India business, you know, and clearly there is a little bias also towards some of the premium formats in HI. We used to do like mid-20s margins, you know, 25% or, you know, for a couple of years before COVID. Do you think those kind of margins are something that you would like to achieve over the next three-four years for the India piece? Or we are as a company pretty okay to operate at low 20s for a while and just concentrate on building top line?
I think a couple of things, Latika. One is what will be very important is the quality of profits and not just, you know, the margins, you know, optics, right? We definitely do want to, you know, shore up our gross margins. We will see, I mean, meaningful reduction in cost to serve, and we will see increase in, you know, marketing spend. At this point in time, we remain relatively, you know, confident that in market like India, we should reach to, you know, kind of mid-20s% in terms of, you know, margin profile.
All right. Thank you so much, and all the best.
Thanks, Latika.
Thank you. Next question is from the line of Sumeet Agarwal from ICICI Bank. Please go ahead.
Yeah, hi, sir. Hi, thanks a lot for this, your opportunity. Just one thing that I wanted to understand for the company is the strategy in terms of what you guys are looking and what the strategy. Are you looking for, you being a mass category or looking for to premiumize the, brand also? Because what I see is every time, there is a to and fro in terms of the, your strategy. First it in HI it was incense sticks. Now we are aerosol, which is slightly on the premium side. So Godrej No. 1 on the soap side, you, it's a more of a mass, right? You tried on the Cinthol to premiumize. Similarly for hair color it was cream, then you moved to powd...
There was some focus on the powder side, then again on the cream, but with the lower price points. What's the strategy in terms of, where do you want the Godrej brand to be? Is it a mass product or is it a premium product?
No, I think there are several questions that you're asking, so let me answer them.
Yeah. Because there are lot of to and fro in the strategy that you guys have been adopting in the last five-seven years. I agree you are new, but probably Samir has been there. If you can talk about both Samir and you can talk about how you are now going to take it. Because you have not been very successful in taking the brand to a premium side. Godrej No. 1 was a good soap brand, say, seven years or 10 years back, but now it's considered to be a lower-end brand. Similarly for other categories that you have been there.
No. Listen, I've not been in the company, but I mean, there are many things that I've, you know, said about the company and I've criticized, but I don't think that, by the way, the company has been toing and froing even from outside on this particular one. I think it has been a company that has broadly been democratizing, you know, beauty and hygiene businesses, as simple as that. Now, you know, it is an assumption to say that, you know, aerosol is premium and this and that. I think our focus is in the belly of the Indian market. It is to take great products and to make them affordable, and that is true about everything that we're doing, done in the past.
Some exceptions may be like BBLUNT, et cetera, and, you know, we've kind of, you know, we're no longer in that business. Vast majority of our business has been looking at middle and lower income India and democratizing great products. I think that's broadly been pretty consistent, by the way, about the company. I mean, even in aerosols, the strategy is not to premiumize from aerosol into more premium aerosol. It is to make aerosols more. Because aerosols have natural benefits to consumers in terms of efficacy, in terms of usage, and to figure out ways in which we can make the aerosol format more accessible and more democratic to everybody. I would firstly say that there is clarity in our business that we are a democratization business and we are going to democratize products in India.
I would say it's been done reasonably consistently in the past. Now, to come to the questions on brands and where they are, we are a company with several brands. Godrej No. 1 is certainly playing in the kind of middle of the market. It's been consistently gaining share, and it's been doing quite well. I mean, and different brands have different roles. I certainly don't agree with this thing about Godrej No. 1 being a premium brand in the past and now a mass brand. I think it's a loved brand for a whole host of consumers in North India in particular, and it continues to do that and continues to do well.
I mean, I'm quite happy by the way to take criticism, but I don't see a major yo-yo in our strategy. You know, it's been consistent on democratization. I mean, democratization doesn't mean that, you know, if you go to aerosol and take liquid vaporizers and make it accessible and relevant for low income. Democratization doesn't have to do with the product. It has to do with the consumer you're talking to, right? That consumer has been a mid-income consumer or low-income consumer.
Okay. Sir, one more thing. Air purifier brand, you have done a fantastic job in creating this brand. How big is this air purifier brand now for you?
I don't think we can share the numbers of the category because we don't share specific category details. I think the air purifier again is an exciting category, right?
Yeah.
You see, it's a category that across the world has pretty high penetration and very high consumption. In India, our job is to democratize this category. It goes back to your question on are we premiumizing air purifier? No. We are taking the air category, which is, you know, a great benefit, and trying to see how we can make it accessible to all. We are very bullish about the future of the air category, both in India and Indonesia for that matter.
Okay. Any other, say apart from this powder hand wash and the powder body wash, are you looking for further category additions, in this FMCG side, or you would first look at the powder body wash and then add on?
See, I think, you know, it's not proper for us to say what we will do in the future, but I think it is enough to say that bulk of our energy and effort will be on category development. When we do innovations, there will be few heavily supported and hopefully game-changing.
Okay.
The vast majority of our effort will be going behind developing what we already have.
Okay. Yeah.
We won't be in a hurry to keep launching things without, you know, having the space within the P&L to support these and to do them properly.
Okay. Sir, thanks. Thanks a lot, sir. Thanks.
Thank you. Before we take the next question, a reminder to all the participants that you may press star and one to ask a question. Next question is from the line of Dhvani Shah from Investec Capital Services, India. Please go ahead.
This is Harit from Investec. I just had two questions. You know, in your release you had mentioned that you expect recovery in consumption with inflation coming off. Just wanted to get your sense about, you know, whether you're already seeing this on ground and, you know, any early signs, especially on the consumption side. Inflation probably hasn't come off so much for the end consumer. You know, any on ground trends that you're seeing even post Q1 that you can kind of just, you know, just talk about. This is specifically for India.
Yeah, no, I think I was just talking to Sameer. As I told you, we are quite enthused with our Q1 three-year CAGR, which is the right way to look at it. You know, a lot of people ask questions on what's happening to the rural slowdown, urban slowdown. My answer is look at the three-year CAGRs on rural, urban, and you'll find them pretty similar. I do feel like given the fact that polarity has changed a little bit in Q1, I'm sure some of it has to do with consumption coming back in India. It's hard within the quarter to judge when you see a green shoot, is it because of your action or is it because of a macro trend? Often it's a combination of the two. Therefore, I would say that Q1 certainly is more.
I'm more bullish on consumption of the country than let's say it was in Q3, Q4.
Got it. The second question was on Africa. I had two questions here. One was on the, you know, on change in mix side. When you invest in FMCG, in Africa, I think, you know, one of the elements is also a higher, you know, marketing spend because competitive intensity wet hair is probably very different from what dry hair is. Just wanted to know, you know, in terms of, interplay, you know, does a higher gross margin get offset by the higher marketing spend that you have to put on these categories?
See, again, the wet hair categories that we operate in Africa, that's consumer task and market development. It's not competitive intensity as much as to drive the categories themselves. Category will require high media and, you know, the FMCG, especially personal care categories, operate with high GMs and high ATL investments, and they generally tend to have, you know, EBITDA that starts coming with scale and leverage. We have to look at these two businesses separately in Africa. One, which is a relatively low gross margin business, which is dry hair, which has to get driven through efficiencies, and one which is a small but high gross margin FMCG business, and especially wet hair, which gets driven through media investments.
Just to follow up on Africa, you know, you said that, apart from, you know, getting the whole compliance element correct, et cetera, you know, there is also, there will be some pieces that, you know, you'll have to maybe look at reducing focus on certain smaller markets and seek, you know, the continued focus on the larger pieces. I just wanted to understand if there is any kind of correction that we can expect in Africa, not like Indonesia, although I think that size of correction is a little larger, but something like that, you know, in the quarters going forward as you kind of realign the, you know, your business there.
I don't think we will expect a correction like we have seen in Indonesia and Africa because Indonesia was a unique issue with a market slowdown plus a few mistakes on our part leading to very heavy inventory buildup, which had to be reduced. I don't think that's the problem in Africa. The African issue is slightly different, that which we'll have to rationalize our portfolio, rationalize some of our operations to simplify our business. That will not have the kind of impact on top line, the way the Indonesia corrections in the last one or two quarters and this quarter is having.
On margins, would you think any one-time kind of, you know, impact you might have to take write-offs, et cetera, over the next 12, 18 months, some small cuts here and there which could come through?
I mean, I don't think anything of, look, difficult to now judge the future and what will happen, but as I see it now, in the foreseeable future, there is nothing in Africa that will surprise us. One of the things about surprises is you never know, right?
Correct. Right. Sure. Well, that's it from me. Thank you. Wish you all the best. Thanks.
Thank you. Next question is from the line of Ashwani Agarwalla from Edelweiss Mutual Fund. Please go ahead.
Good morning, sir.
Hi. Hi, Ashwani.
Hi. So I've got a few questions. Are we planning to develop more of the products since we have our distribution network? Are we planning to go more into detergents, toothpaste and shampoos, which are the categories which we are not still catering to?
Thanks, Ashwani. No, listen, again, it's not proper one way or the other to say what we will get into and what we won't get into, but I guess the answer remains the same, that our business is going to focus on the core and on category development and a few blockbuster innovations where we genuinely believe we can solve a consumer problem in a differentiated manner. I certainly don't think we will get into categories for the sake of getting into categories. Magic Body Wash is a good example. You know, it's not an entry into body wash, but it's a very differentiated entry into that category. Those will be few and far between. Bulk of our resources will be on developing what we have.
Okay. In terms of soap, we've got only two products. As in Godrej No. 1 and Cinthol. Any plans of increasing body wash for these two soap or introducing any kind of a winter soap? Because people would use these soap for summers or non-winter season, but in winter they would switch to another soap. Why leave the customer for that period as well?
I think both Godrej No. 1 and Cinthol together, we have a little less than 15% share of the market, so we have a long way to go on these brands, and they have a lot of penetration and a lot of momentum. Again, I guess the answer is the same, which is we've got a lot of ground to cover on what we have before we start thinking of new things.
Okay, sir. Thanks.
Thank you.
Thank you. As there are no further questions, we have reached the end of the question and answer session. I would now like to hand the conference over to Pratik for closing comments.
Thanks everyone for joining the call. If you have any further questions, do reach out to the IR team. Thank you.
Thank you. On behalf of Kotak Securities Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.