Informist, Thursday, Apr 27, 2023
By Avishek Rakshit
KOLKATA – Acquisition of Raymond Consumer Care Ltd's fast moving consumer goods business by Godrej Consumer Products Ltd will introduce the latter to two distinct markets — the sexual wellness category, which holds immense potential, as well as the fast-growing men's grooming segment.
The acquisition, announced today, will include brands such as Park Avenue, KS, KamaSutra, and Premium and will be carried out for a consideration of 28.25 bln rupees. It is expected to be completed by May 10.
OPEN SESAME
For Godrej Consumer, the deal will open the doors to the $1.15-bln sexual wellness category in India, which has the potential to expand to $2.09 bln by 2030. KamaSutra, one of the key brands under the deal, was introduced for condoms and later extended by Raymond Consumer Care into women-centric aerosols like flavoured lubes. Deodorants were also rolled out under the KS brand – a stylised shortened name for the KamaSutra brand.
Raymond Consumer Care has a substantial market share in the condoms business; it is the third-largest player in the country. The segment is dominated by Mankind Pharma Ltd, which holds 29.6% market share in the category with 4.62 bln rupees of sales and is preparing to get listed on bourses and expand its footprint.
With the acquisition, Godrej Consumer will get access to Raymond Consumer's world-class condom manufacturing facility in Aurangabad, Maharashtra, which can make 4 mln condoms annually. Industry officials say the potential to expand this business is high.
"Effectively, with some cash flows and sales outreach, the market for KamaSutra can be increased," an industry official told Informist.
MEN'S AFFAIRS
The second major way in which the deal will give a leg-up to Godrej Consumer is the $888.51-mln men's grooming segment, in which the company currently has only one brand – Cinthol. Rough estimates from industry officials suggest this category is expected to grow at a compounded annual rate of 11.06% through 2023-24 to 2028-29 to reach a market size of $1.84 bln.
A key sub-segment within this is the fast-growing deodorant market. Thanks to the acquisition of the Park Avenue brand as part of the deal, Godrej Consumer is expected to focus more on this deodorant market — currently estimated at $440 mln and expected to grow 11-13% on account of a low base.
Per-capita consumption of deodorants in India is 0.4 times compared to Indonesia, 0.05 times compared to Brazil, and 0.04 times that in the US.
Although a sector analyst termed the acquisition "pricey", Godrej Consumer is bullish on the way ahead with the categories it is set to acquire. Products like Park Avenue and Premium and deodorant variants of the KS brand, it feels, could complement its product portfolio. And, a well-known sexual wellness brand like KamaSutra could offer it a long runway of growth.
"These categories have the potential to deliver double-digit multi-decade growth given the low per capita consumption in India compared to similar emerging markets," said Sudhir Sitapati, managing director and chief executive officer of Godrej Consumer.
LEVERAGING SYNERGIES
At the same time, industry officials say Godrej Consumer could look at combining distribution synergies to register higher sales growth from retail counters. While the company is present across 6 mln outlets that it hopes to take to 7 mln next year, Raymond Consumer products are available across 650,000 outlets. Although Raymond Consumer's reach is just a fraction of Godrej Consumer's, it is highly skewed towards the urban chemist and modern retail as well as online portals.
"Godrej's outlet count is higher because of its mosquito repellent brands like Good Knight and personal care brands like Cinthol, which is bound to have a larger rural presence; in comparison, KamaSutra and Park Avenue, which is targeted towards the urban consumer will have lower but highly productive sales points," said a second industry official when asked if Godrej could benefit from this acquisition.
Godrej Consumer has been stressing on increasing its reach to chemist outlets across the country. It increased its chemist touchpoint base by 30% in 2021-22 (Apr-Mar).
"There will be some overlap in the chemist channels but chemists who were hitherto selling KamaSutra can also now be approached to sell Good Knight and Cinthol as well," said the industry official quoted earlier.
The KamaSutra, Park Avenue, and Premium brands that Godrej Consumer is set to acquire also offer adjacencies. Apart from the adjacencies of the KamaSutra brand and product extensions under the KS brand, the Park Avenue brand expanded its portfolio to come up with an innovative 'beer shampoo' and expanded the line-up of fragrances.
On its part, Godrej Consumer also extended its Cinthol brand to a range of male grooming products. End
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