Why Godrej CPL acquired Raymond Consumer

 In today's competitive business environment, FMCG companies aiming to expand likely have three possibilities.

The first option is to create a brand-new sub-brand from scratch. But it's challenging. To build and market it successfully, a lot of money is required. Not to mention how much time it takes. Given that the majority of FMCG products already have razor-thin margins, it might not be worth it.
The second choice is to acquire an up-and-coming D2C brand. These days, this is what all the cool kids are doing. However, the majority of these brands don't generate large earnings. Additionally, their audience is relatively small. It is so challenging to the business, commercial scale. The 125-year-old Godrej Group is currently pursuing this third alternative. It desires a stake in the Raymond Group, another nearly 100-year-old provider of consumer care.

GCPL now values brands. Cinthol soaps, Good Knight insect repellents, Godrej Expert hair dye, and even the Hit bug sprays are among the most recognized brands in India. Purchasing Park Avenue and KS only expand its clientele. According to Nielsen data, Park Avenue is ranked second among deodorants. Only Vini's Fogg is in front of it. The most intriguing aspect is that Raymond is on the podium without significantly investing in advertising and promotion. Vini's has been spending anywhere from 13 to 20% more on advertising than Raymond, which spends about 5% of its income on them.

In spite of this, Godrej's research tends to indicate that consumers' perceptions of and satisfaction with the Park Avenue brand are far greater than those of its five main rivals.

Raymond’s EBITDA margin is hovering around 5% thanks to its high fixed costs. And it’s quite shockingly low when you compare it to its rival Vini’s which is 5 times higher at 25%. Getting this to head north will be an uphill task for GCPL.

The other thing analysts are questioning is why it wouldn’t Godrej just capitalize on its existing brands. It does have Cinthol which is a pretty popular soap in the country. And while Godrej has tried to extend the brand into deo's, it hasn’t worked out yet. So maybe Godrej needs to refocus a bit on Cinthol instead of looking elsewhere.

But Godrej has a response to that. They had a slide in their presentation which said — “If you are not among the first few entrants, you can only enter if you have a seriously disruptive product.” And since their surveys indicate that people are fairly loyal to their deos and don’t switch often, they wanted something which already had a strong presence in the market.