Godrej Foods (GFL)’s business collapsed for the second quarter running due to recession in the Indian edible oils market. For the half year ending 30 September, sales and other income fell to US$16m from US$47m during H1 of last year. Profit of US$0.2m turned into loss of US$3.2m.
Just a few days back, Unilever subsidiary Hindustan Lever had shown higher profits on sluggish sales, and the higher margins were attributed to lower costs of edible oils. just-food.com was unable to clarify how the same factors affect two companies in same market-product category differently, with as many as 30 telephone calls and emails drawing a deafening silence from GFL’s managers and MD Sudhir Awasthi.
Effective 1st November, Godrej Foods will part ways with Pillsbury, a la Procter & Gamble. The reference is to Godrej Soaps’s unfortunate, but cordial parting with P&G in 1996.
Like all Godrej companies, Godrej Foods is a manufacturing company. It has facilities for tetrapacking pastes and liquids, three edible oil brands, the Jumpin’ brand of fruit juices, tomato puree, flavoured almonds, Pillsbury Chakki Fresh Atta (wheat flour), and Green Giant canned corn. Sales & Distribution is handled by a JV with Pillsbury. Godrej has a 49% stake in Godrej Pilsbury, a JV with Selviac Netherlands. This 49% is the consideration for Godrej Foods’ entire distribution network and the distribution rights for four brands – Jumpin’, Cooklite, Godrej Sunflower Oil and Shakti. Pillsbury has management control. Godrej can not be too happy with the joint venture’s results on their brands : Jumpin’ market-share fell from 35% two years ago to about 24% now. Refined sunflower oil market share stagnates at 12%.
In contrast, Pillsbury now has a significant 11% share in the atta (wheat flour) market nationwide, thanks partly to Godrej’s national distribution network. Godrej Pillsbury Ltd. President Mr. Ravi Sivaraman told me Pillsbury (wheat flour) is the #2 brand (after Lever’s Kissan Annapurna) in Southern and Western India, and #1 in Bombay Metro. In all large cities, it has a 40 to 50% market share. Given Indian lifestyle habits, branded wheat flour is essentially a product category that moves only in cities. Ravi declined to comment on the separation from GFL.
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By GlobalData Godrej is a respected Indian group with many and wideranging collaborations over decades with the likes of GE, Geometric, Pacific, Proctor & Gamble and Pilsbury. The collaborations have all been synergistic, even separations having benefited both sides. Godrej still manufactures Camay soap for P&G. The strategic alliance with P&G worked very well till P&G’s Cincinnati bosses decided, sometime in 1994 or 5, to focus on four core areas not including Personal Wash. When Proctor & Gamble Godrej Ltd. was discontinued in August 96, P&G inherited the Distribution setup and Sales force, and Godrej got Rs. 44 crores (US$9.5m). Some analysts say last time Godrej got a bad deal: P&G products grew, while Godrej Soaps’ brands lost market share.
Will they get a better deal this time?
By Navroz Havewala
