Godrej's rediscovery of India

They say they touch more consumers than any other Indian company — and it's not just with soaps, locks and cupboards.

Last November, the senior management and members of the promoter family of the Rs 11,800-crore Godrej group left the air-conditioned climes of their offices to hit the potholed roads that lead to rural India. Group Chairman Adi Godrej and daughter Tanya Dubash, Group Executive Director and President of Marketing, headed to the villages in and around Alibaug, a popular holiday destination 120 km to the south of Mumbai. Nisa Godrej, Adi's second daughter, who heads human resources and innovation at the group, headed north of the Vindhyas to villages around Chandigarh.

And A. Mahendran, Managing Director of the fast-moving consumer goods (FMCG) company, Godrej Consumer Products Ltd (GCPL), headed to rural Tamil Nadu. A few more head honchos ventured into the Hindi heartlands of Uttar Pradesh. The exercise was rather plainly called the Godrej Rural Immersion Programme, but the idea behind the sojourn itself was fascinating. It was a sort of a minirediscovery of India — a tryst with its Indian customers. Not that the Godrej group needs to be reminded of who its customers are or where they lived — or how many of them use its soaps, hair dyes, locks, furniture, consumer durables and many more products.


  • A 113-year-old brand that is trusted and has great brand value.
  • A well-diversifi ed business, with a presence in businesses that are cyclical (properties), stable (FMCG), rural (Agrovet) and urban (retailing).
  • Owns close to 3,000 acres in Vikhroli, a developing suburb in Mumbai — though a little under half is mangrove-covered.
  • Increasing footprint in global emerging markets like Africa, Latin America and Southeast Asia.


  • Lacks a signifi cant presence or track record in new-age, sunrise industries like health care and information technology.
  • The federal family structure has helped the group make succession planning exercises smooth in the past. However, a new generation is being ushered in and transitions have known to be sticky.
  • Godrej has made a string of aggressive acquisitions; how these are assimilated will be crucial for the substantial FMCG business.
After all, as Group Chairman Adi Godrej says, the Godrej group has more customers than any other Indian company (excluding multinational Hindustan Unilever). "In our estimate, 470 million Indians use one of our products each day," says Adi Godrej, not without a hint of pride.

Now, 470 million people is a humongous number — it's almost the size of the population of the European Union, and 40 per cent of the world's second-most populous nation. "We also believe that we are among the top five companies in the developing world, in the number of customers served.The only company we know that has more consumers is China Mobile," says Godrej.

Godrej attributes the phenomenal reach to the fact that the group has its presence in both FMCG and consumer durables. LG is the other company with a similar business mix but its FMCG bit is largely restricted to Korea. In fact, the Godrej model is pretty much a unique model — other than FMCG and consumer durables, it also has other consumer-facing ventures that range from real estate to meat processing and confectionery. Group holding company Godrej & Boyce has within it real estate projects, domestic appliances and furniture. "Two-thirds of our business are consumer-facing," says Jamshyd Godrej, Chairman, Godrej & Boyce.

What also makes the Godrej conglomerate like no other is its almost esoteric range of businesses, many of them not consumer-facing (at least not directly). The group sells fatty acids to tyre manufacturers, animal feed to farmers, and premium wine to the upwardly mobile in Mumbai and Delhi. The group's customers range from five-year-olds buying confectionery (Nutrine) to vain, ageing men (many who get their hair dyed at home) to housewives buying a bar of soap.

IT and ITeS companies like WNS, TCS and Accenture are also the group's customers as the Godrejs rent out their sprawling campus in the Mumbai suburb of Vikhroli (and Godrej & Boyce earns Rs 100 crore a year for those efforts!). The Government of India, too, is a customer, procuring heavyduty equipment for its hi-tech programmes.

In fact, when India's mission to the moon, Chandrayaan, blasted off from Sriharikota, it did so powered by rocket engines made by Godrej, says Jamshyd. Finally, men stepping out for a haircut should know that some 50,000 barbers across the country are likely to recommend a Godrej dye as they snip away at your receding foliage.

The Godrejs' tour to the hinterlands is just one indicator of the renewed focus on the consumer. Joint ventures (with Hershey's in confectionery and beverages, and with Tyson in processed foods), acquisitions (mostly in FMCG) and divestments (of a pest control service and a rural retailing chain) are all a part of that growth recipe.

Hungry for Acquisitions
Back in June 2006, Adi Godrej signed a cheque for Rs 250 crore to acquire Nutrine, India's largest confectionery maker from the Andhra Pradesh-based B.V. Reddy family. Yes, Godrej did actually sign a cheque for the entire amount. "I remember Mr Godrej saying that this was the largest cheque he ever signed," recalls Jacob Mathew, Managing Director and Co-Founder, of Mape Advisory Group, which was the sole advisor to Godrej for the transaction.

"Ever since, the cheques have only gotten bigger," adds Mathew. Since 2005, GCPL has made seven international acquisitions. Four of them, including its biggest acquisition, of Indonesia's Megasari group for Rs 1,200 crore, happened this calendar year. It's the hunger for such buyouts in emerging markets that has got equity analysts on Dalal Street licking their chops.

"If there's one company that has got it all right in the consumer space, it's GCPL. Its international acquisitions have changed the scale it operates in drastically. It's catapulted itself to the top 3 consumer companies rather smartly," says Nikhil Vora, Managing Director, IDFC Securities. Back in 2008, the group set itself a target of tripling its growth in the FMCG business in three-four years.

"There was a realisation that if we had to make that kind of growth happen, it would have to be inorganic and we would have to look outside India," explains Mahendran, the MD of GCPL. And then began the slew of acquisitions — mostly in Africa, followed by Latin America and Asia — which saw the company's stock price more than double since July 2008.

Analysts expect GCPL's international business to account for close to 30 per cent of revenues in the current year, up from 18 per cent a year ago. At the same time, rural markets back home will also start contributing more — to half of sales in two years against 42 per cent last year. To get there, GCPL increased its penetration to 22,000 villages from 15,000, nine months ago. The company plans to cover 50,000 villages in the next three years.

But that's just part of the reason why the Godrej management council hit the road. As Adi Godrej explains: "Over the past decade, all our research began to show a diffused image of our brand. The younger generation did not identify with the brand like the older generation…. we got reactions like 'It's my parents' brand', 'It's my grandparents' brand'."

So, the group, led by Tanya Dubash, launched a rebranding exercise in 2008, the most visible part of which was a savvier logo that's uniform across all group companies. "Since the exercise began, the Godrej portfolio has gained share by growing ahead of the market across audited categories by 10 per cent," says Tanya Dubash.


...and how it runs its businesses.

  • The shareholding of the third generation of the Godrej family is divided equally into five parts between Adi Godrej, brother Nadir, his cousins Jamshyd and Rishad, and Jamshyd's sister Smita Crishna.
  • A family business board meets regularly, serves as a counsel for the professional management and handles issues like succession planning.
  • The board includes such 'outsiders' as former Unilever exec Keki Dadiseth, Naushad Forbes, Director of Forbes Marshall, and Pradip Shah, Founder of ratings agency Crisil.
  • GenNext members like Tanya Dubash, Executive Director of Marketing, for the entire group, Nisa, President of Human Capital and Innovation, Pirojsha, who is involved with Godrej Properties, and Navroze, who is at Godrej & Boyce, attend the board meetings as invitees.
Customer Hunting

But to understand how Godrej is reaching out to a new set of customers, especially in rural India, one needs to rewind back to May 2006. Jamshyd Godrej bumped into management guru and Harvard Business School Professor Clayton Christensen at Boston. The talk centred on the Disruptive Innovation framework that Christensen had outlined in his seminal book, The Innovator's Dilemma, in 1997. Within a few months, Godrej & Boyce had signed up Innosight, Christensen's consulting company. Trained facilitators sat with the company's senior team for a twoday workshop to come up with 24 ideas on how disruptive innovation could be used to come up with new products. By early 2007, the senior management had chosen four ideas.

One of those ideas was to manufacture a low cost refrigerator. "As a company that made refrigerators for more than 50 years, we asked ourselves why it was that refrigerator penetration in the country was just 18 per cent?" says G. Sunderraman, Vice President, Corporate Development, Godrej & Boyce. The company found some unusual answers.

"Most people in the poorer sections of society did not need a 180 litre fridge. Often, they lived in small houses where there is a space constraint," explains George Menezes, COO, Godrej Appliances, a division of Godrej & Boyce. That insight was the first step towards the creation of the ChotuKool — a squat 45 litre minifridge priced at just Rs 3,250.

ChotuKool is currently being piloted in rural Maharashtra and Karnataka. Menezes hopes to sell two-three lakh ChotuKools once it completes a year of going national (which should happen in a couple of months). "In three years, probably millions," says Menezes, who also lets on that Godrej Appliances is test-marketing television sets in Andhra Pradesh, Kerala, West Bengal and Maharashtra.

Furniture & Farmers
Yet another outcome of the disruptive innovation sessions has been the launch of 'U & US' — a 'by appointment' design studio by Godrej Interio, a Rs 1,200-crore division of Godrej & Boyce that sells home and office furniture. "We discovered that customers saw furniture as an extension of their personality. They wanted to co-design their furniture," says Anil S. Mathur, Chief Operating Officer, Godrej Interio. Another low-profile, low-margin, but high-volume business for the Godrej group is agri-inputs. "As long as you and I eat, we will be in business," jokes Balram Yadav, MD, Agrovet.

With revenues of over Rs 1,600 crore, Agrovet is the largest animal feeds company in the country. Agrovet's also the largest crude palm oil producer in the country. "We supply animal feed to over hundred thousand farmers across the country. We work with 10,000 oil palm growers across the country and closely collaborate with 2,500 contract poultry farmers," says Yadav. With its JV with American chicken processor and marketer Tyson Foods, Godrej Agrovet is also making a play for the fast growing poultry market.

Godrej is also taking a stab at the food budget of the premium, urban, upwardly mobile Indian with Nature's Basket, a gourmet retailing business that has grown at a compounded average rate of close to 60 per cent in the past two years. With 10 stores in unmarked locations in Delhi and Mumbai, Nature's Basket is set for expansion.

"Our outlet in Bandra (in suburban Mumbai) achieved cash profit in a single day. We have per sq. ft. sales of Rs 23,500 — that's three times above the industry average," says Mohit Khattar, Managing Director, Nature's Basket, adding that the store would probably never go the mass retail way. "Nature's Basket reaches out to a whole new audience and in that sense, raises the brand profile a bit," explains Tanya.

Land, Ahoy!
The real estate business too is likely to add several customers for the group. Adi Godrej calls it his "'star" business because of its rapid growth: last year, revenues grew by 53 per cent to Rs 456 crore, as approximately 1.89 million sq. ft. of area was booked. That's still a fraction of the 12.5 million sq. ft. pushed by DLF in a bad year but Godrej Properties Ltd (GPL) which made an initial public offer in January 2010, is already thinking of townships, like its bigger rival. "Our Ahmedabad project, Garden City, will have 20,000 units. Over 1 lakh people will live in it when the project is completed in 8-10 years. We are also planning to come up with townships in Kalyan and Pune this financial year," says Milind Korde, Managing Director, GPL.

Finally, there is the land that the Godrejs own that was brought by the late Pirojsha Godrej in 1943 in a public auction. Estimates of the acreage range from 3,000 to 3,500 — a little more than half of it covered by mangroves — and its value from Rs 50,000 crore to Rs 65,000 crore. "I wouldn't want to get into too many details on that but suffice it to say that it's more than half of Vikhroli," says Adi Godrej.

"Most of that land is with The Pirojsha Godrej Foundation, a charitable trust, and we plan to preserve the mangroves the way they are," adds Jamshyd Godrej. Estimates of the land that can be developed range from between 350 acres and 800 acres. "Our vision is to make Vikhroli an iconic, green, commercial, residential township. We are planning a high-street shopping development. We would like to see hotels come up here," says Adi Godrej.

The transition of the Godrej group from a manufacturingfocussed company to one that is consumer-oriented is well on its way. And the change is visible not just in the market place but also within. "Last April, we had the top 100 managers — VP & above — of all Godrej companies taking pledges that revolve around customercentricity," says Vivek Gambhir, who heads the strategy cell for the group. "It was something as simple as 'I will spend 'X' number hours with customers'."

In a few weeks, the top management of the group will pack their bags and head to Indonesia to understand the dynamics of that market. After all, there are another 100 million-odd consumers — according to the company's early estimates — out there in the developing markets where the buyouts have been made, who the Godrejs need to cotton on to.