Godrej Consumer CEO Outlines Execution Overhaul

New Godrej Consumer Products CEO Aasif Malbari gave a frank review of the company's performance in his first investor call. He pointed to execution failures, weak core-category growth, and falling profitability across key markets.

The call followed the abrupt August 10 resignation of former managing director and CEO Sudhir Sitapati. Sitapati left just days after shareholders approved his reappointment for another five-year term. The board immediately appointed Malbari, the former CFO and head of Africa.

Core Challenges and Financial Performance

The company's leader identified the core domestic business as the biggest problem. Core category revenue growth has been flattish with profits under pressure. Profitability is declining in India and Indonesia. Latin America and other international operations remain low-profit.

He provided specific figures on recent performance. Malbari said the company delivered an organic UVG of 4% in India on a standalone and consolidated basis. The ULG has been 7% and 6%, and EBITDA has been 6%. He concluded the company had shifted significantly below its target.

Planned Investments and Cost Impact

The company's response centers on increased spending. GCPL plans to invest roughly Rs 150 crore in a new research and development center. It will also boost spending on international go-to-market efforts and digital marketing.

These combined investments are expected to add approximately Rs 200 crore annually to operating costs once fully implemented. Malbari warned investors these costs would take time to recoup. He said these investments actually take 2-3 years to pay back in full.

Inventory Correction and Growth Struggles

A major operational issue is high distributor inventory in India. The company expects to collect between Rs 125 crore and Rs 150 crore of excess stock over the next three quarters. Distributors carry about 20 days of inventory for general products. GCPL believes it can operate with just 10 days.

He acknowledged the correction would pressure short-term profit growth in India. Malbari said the move needs to be done. It's a short-term thing. Rs 150 crores is not small.

The CEO conceded failures in executing several growth initiatives. The company struggled with the fragrance and deodorant category entered via the Rs 2,825-crore Raymond Consumer Care acquisition. He stated the company didn't get the execution right when acquiring and integrating PAKS.

Market share in soaps has plateaued after years of gains. Household insecticides require better innovation and distribution despite previous launches. Malbari said the company failed to convert strategy into action.

Strategic Direction and Future Goals

Despite the execution issues, GCPL is not altering its long-term Vision 2040 portfolio expansion strategy. The company is doubling down on it. The goal is for core categories to return to industry-level growth. Newer businesses should eventually drive overall growth into double digits.

Malbari defined the ultimate benchmark for success. He said the one thing which will define the company as an out-performer is a double-digit immediate profit. The question will be when, not yet.