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Global Consumer’s Mahendran on expansion plan, revenue target and more

Global Consumer Products Pvt. Ltd, floated by former Godrej Group top executive Arumugham Mahendran, operated as a regional player in southern India until last year. The company, backed by Goldman Sachs and Mitsui, is well set for a national rollout by next financial year with a diverse portfolio of products ranging from beverages, chocolate and confectionaries, and insecticides. Mahendran separately also runs pesticide services company ISS Hicare. In an interview with VCCircle, Mahendran talks about Global Consumer’s expansion plans and shrugged off the threat from multinational companies. Excerpts:

Global Consumer has a major presence in south India. It entered eastern India in February, western in March and then the northern region. What are your expansion plans? Will you target mainly metros or smaller cities as well?

We have been present in the north for three months. North will be the priority for us this quarter. We now have a presence across the country. We are fairly set in terms of infrastructure across India. The retail penetration won’t happen overnight; it will take at least two years. In the next one year, we will target three lakh outlets across the country. The target will be mainly metro and Tier I cities. We are also planning to cover half the Tier-II cities in India.

Was it a deliberate decision to start with the southern region? Which zone contributes the most revenue? 

Last year, when we launched our startup, I decided to go for a regional pilot. Typically, a pilot means a pilot town or a pilot state. But in our case, the south was a pilot region where we operated from last April to March this year. We are present in all five states in south India. We have plans for equal weightage for all regions in the years to come. 

The company operates in four categories–chocolate and confectionery, fruit juices, insecticides and ayurvedic personal products. Which segment is doing well? Is there a plan to diversify the product category? 

Beverages have picked up and contribute nearly 35% of sales. My plan is to eventually have a 30% split for chocolate, beverages and insecticides. Personal care, which is a relatively new category, will account for 15% of sales.

Within beverages, we are currently into juices and would like to add two-three items. We can go for specialised functional water and dairy-based beverages. That is part of our plans. Those items will be launched in next one year.

What was your revenue and EBITDA margin last fiscal year? What is the target for 2016-17?

Revenue for last fiscal year was not very significant as the company started off with a pilot project in the south. However, by the end of March 2017, we are hoping to clock over Rs 130 crore. 

As we are still in investment and brand building mode, the EBITDA (earnings before interest, tax, depreciation and amortisation) margin may not be relevant for our brands in next two years. However, five years down the line after the brand gets stabilised, the EBITDA margin will be between 15% and 20%.

You also run ISS Hicare. What is its growth plan? Are you looking to float any new venture?

I started Hicare in 2004. Though it was sold to Danish firm ISS Global in 2009, we got it back in late 2013 with the help of India Value Fund. The firm is growing well. To my mind, the best part of the services business is very embryonic in this category in India, as there are few organised players. There is a huge scope for ISS Hicare to grow.

What are Global Consumer’s plans for next two to three years?

The company will focus on building its brand and distribution. It will also emphasise on research and development. Our company’s philosophy is focussed on innovation and brand. We will keep our back end, which is the supply chain, on the satellite mode. Our innovation can be related to value for money for our customers and our technology and packaging-driven innovation is to make lifestyle better for the masses.

The chocolate and confectionary segment in India has international players such as Mondelēz, Nestle and Ferrero. Do you think local players lag these MNCs?

International brands can bring the know-how and technology. Are we ahead of those MNCs? Yes, we are. We are equally sound in technology with fine-quality products. Even in terms of packaging, we boast of international standards. To my mind, international brands have no extra advantage in the country.

What are your predictions for the beverages sector?

There are two segments in the beverage category—mass and premium. As the disposable income of the people is increasing, the savings rate is coming down. Rising disposable income and lower saving rate in the past three years has led to increased consumption. Be it mass-audience brands or the firms catering to the wealthy, all have benefitted due to this increased appetite in the past. This high consumption trend will stay for next two-three years.

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