NEW DELHI: British consumer goods maker Reckitt Benckiser’s global chief executive Rakesh Kapoor says that Baba Ramdev’s Patanjali has made the entire fast moving consumer goods (FMCG) industry ‘better’, illustrating how India’s cultural roots may be harnessed to build a scalable business.
“The role of competition is not to eat your lunch; it is to make you better. Patanjali is making everyone better because it is making everyone deliver better value, not only in price but also in benefits,” Kapoor told ET in an exclusive interaction. “And it’s going to make everyone realise at the grassroot what India is all about.”
Calling Patanjali, which makes a gamut of household products from soaps and shampoo to biscuits and noodles and is now a Rs 10,000-croreplus company “a force for good”, the India-born Kapoor said: “There are companies like Patanjali which are trying to show that the way to reach Indian consumers is through their cultural roots and not operate at superficial levels. It will make companies better because they will be forced to understand Indians in a way that perhaps they would not have; and provide innovation and value.”
Patanjali’s rise to a Rs 10,500-crore company in less than a decade has shifted MNCs’ focus to the ayurveda sector. Over the past year, Colgate launched its first India-focused ayurvedic brand, Cibaca Vedshakti, aimed squarely at countering Dant Kanti, while L’Oreal launched hair care range under Garnier Ultra Blends made with natural ingredients. Hindustan Unilever too started a raft of ayurvedic personal care products, including toothpaste, under the Ayush brand, acquired the Indulekha hair care brand and also launched Citra, a natural skincare brand.
The maker of Dettol soap and Durex condoms, which missed 2017 profit estimates amid challenging market conditions and higher commodity costs globally, was also impacted by GST implementation in India. “The India train was moving along, but demonetisation and the GST did impact us. The cyber attack happened exactly at the time that the GST was being rolled out in India; we were switching our systems in the post-GST world and the cyber attack happened. So India was particularly impacted,” Kapoor said.
“We are in a world where change is profound; in consumer and shopping behaviour and fragmentation of markets. In the last six years, our company has grown among the best in the industry. We have outperformed industry in topline growth and operating margins. But clearly, 2017 has been a tough year,” he said. In its December quarter earnings, the company said currency fluctuations would have a worse-than-expected impact. Kapoor said there was a foreign exchange impact on RB global earnings, with strengthening of the pound and weakening of dollar and some other currencies, including the rupee versus the pound, which affected earnings about 7%.
“The second impact on earnings was that we are investing in two separate teams; there’s huge impact with greater focus and accountability but also more cost – and if there’s more cost, you will have operating margin pressure. When we were guiding on earnings, we made the market aware of two things – the foreign exchange impact which is a significant 7% impact, and extra cost associated with two teams – consumer health, and hygiene and home products.”
RB competes with Hindustan Unilever, Dabur and Godrej Consumer Products in categories such as antiseptic soap, household cleaners, hair removal creams and air-fresheners. “India is always very competitive; it’s one of our best-performing markets from the share point of view. But we cannot take for granted that the future will be as good as the past. Because every day, every one is learning how to compete,” Kapoor said.
He said the competitive landscape now includes global, local and smaller players. “The India story is not about taking a slice of the pie; it is how to grow that size; how to make that pie bigger – that’s where RB’s focus is. Yes, I care about market share, but I don’t care about market share ahead of market growth. To win India, you need to bring a mindset of abundance; not one of scarcity.” Going forward, he anticipates healthy consumption outlook for India, a top five market for RB globally.
“The outlook for FMCG in the next five years is better than outlook in the past five years. Demonetisation and GST, when they settle down, will be good for the market. Plus announcements in the Budget will provide impetus to rural consumption.” Kapoor added that RB’s acquisition of Mead Johnson infant nutrition was ‘transformational’ for the business, but remains small in India with sales of less than Rs 10 crore per year. “It’s too premature to say that we are going to make it massive in India. We need to learn the business here and then figure out,” he said.
On media fragmentation and how best companies can reach consumers through advertising, he said, “We know where you are – we can reach you. The question is, is it engaging; is it relevant; will you share it? This is the real defining challenge we have. Is it resonating with you?” RB is working on low-priced smaller packs of Harpic cleaners and Dettol soap, which Kapoor said was absolutely a key part of enhancing penetration. “But just going to rural markets with products is a bad idea. The way to go is (through) education and behavioural change. This is where Banega Swachh India comes in; it’s a massive behavioural change.”