Gillette India Limited — Q1 FY24 earnings call

Call held 22 Sep 2023

Management summary

Gillette India delivered a strong performance for the fiscal year ending June 2023, characterized by double-digit topline growth and even faster bottom-line expansion. The company is successfully navigating the 'bearding trend' by pivoting toward premium grooming systems and trimmers, while maintaining a dominant 60%+ market share. Management remains 'cautiously optimistic' due to persistent commodity headwinds and recent inflationary pressures, despite a recovery in rural volumes.

Highlights

  • Annual sales for FY22-23 grew by 10% YoY, with profit growing by 18% YoY.

  • The April-June quarter delivered 12% topline growth and 36% profit growth.

  • Volume growth for the June quarter stood at 7.5%, significantly outperforming the industry.

  • Gillette maintained a record market share in the grooming category, exceeding 60%.

  • Productivity interventions delivered savings of ₹55 crores during the fiscal year.

  • Direct distribution reach has expanded by over 65% compared to five years ago.

  • Rural growth showed signs of inflection with 1.4% volume growth in the non-food sector in the June quarter.

Concerns

  • Persistent high commodity prices

Key financials

  1. Sales Growth (Full Year) 10% +10%YoY
  2. Profit Growth (Full Year) 18% +18%YoY
  3. Topline Growth (Apr-Jun) 12% +12%YoY
  4. Profit Growth (Apr-Jun) 36% +36%YoY
  5. Volume Growth (Apr-Jun) 7.5%
  6. Productivity Savings ₹55 Cr

What they filed

Q1 FY27: revenue up 10.7%, net profit up 8.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue782 686 767 707 811 +4%790 +15%792 +3%783 +11%
EBITDA190 183 226 210 208 +9%248 +36%277 +23%228 +9%
Net profit133 126 159 146 144 +8%172 +37%193 +21%159 +9%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Grooming
    60% Market Share
  • Appliances (Braun)
    2% Category Value Contribution
  • Oral Care
    5% Market Growth Expectation

Guidance & targets

Profitability

  • Bottom-line growth vs Topline Profitability · foreseeable future · High confidence ahead of topline
    The exact band is difficult to predict but we aim to grow bottom-line ahead of topline in the foreseeable future.

    — Gautam Kamath, CFO

Volume

  • FMCG Category Volume Growth Volume · next 5-7 years · Medium confidence mid-single digits
    We expect volume consumption growth within the FMCG category to be in the mid-single digits over the next 5-7 years.

    — Gautam Kamath, CFO

Other

  • Sustainability - Net Zero Other · by 2040 · High confidence Net-Zero
    We have committed to be Net-Zero by 2040.

    — L. V. Vaidyanathan, Managing Director

Margin

  • Gross and EBITDA Margin Recovery Margin · next 12 months · Medium confidence longer than 9 to 12 months
    Given the volatility in the prices we expect the recovery (in any) to take longer than the immediate 9 to 12 months.

    — Gautam Kamath, CFO

Risks & concerns

  • Persistent high commodity prices

    high

    Cost pressures are not receding as expected, which will keep bottom-line pressures in place.

    Management acknowledged

  • Inflation and erratic rainfall

    medium

    Retail inflation averaged 7% in July/August, and August rainfall showed an 11% negative deviation, potentially impacting future demand.

    Management acknowledged

  • Underdeveloped consumption in key categories

    low

    While a risk, management views this as an opportunity for double-digit growth through education and awareness.

    Management acknowledged

Areas of evasion (1)

  • Specific future margin bands or exact pricing action timelines.

Q&A highlights

3 direct
Growth prospects in the face of bearding trends Direct
The category is undergoing a transformation, and this presents an opportunity for us to play in premium systems and trimmers... we are continuing to grow and drive category growth, recording our highest ever shares.

Investors were concerned about the structural decline in shaving; management clarified that they are capturing the 'beard grooming' segment through premiumization and trimmers.

Asked by Multiple (Gokul Maheshwari, Priyanka Khandelwal, etc.)

Margin recovery and commodity price outlook Direct
Most of the commodities that impact us have not demonstrated a lasting downward trend. Given the volatility in the prices we expect the recovery (in any) to take longer than the immediate 9 to 12 months.

Tempers expectations for immediate margin expansion despite some softening in global inflation.

Asked by CNBC TV 18

Competition from D2C and niche brands Direct
We believe the best way to win is to keep consumer at the centre – not competition... we are raising the bar on our e-commerce and digital presence, working closely with our eCommerce retailers.

Confirms Gillette is using its scale and digital strategy (subscriptions) to counter agile D2C competitors.

Asked by Manasvi Shah (ICICI Prudential), Mudit Minocha (M3 Investment)

2 min read 5 chapters

Detailed narrative

Robust Financial Performance and Premiumization

Gillette India reported a strong fiscal year with 10% sales growth and 18% profit growth. The momentum accelerated in the final quarter (April-June), where topline grew 12% and profits surged 36%. This outperformance was driven by 'premiumization'—consumers opting for higher-end systems like the Fusion and Mach 3 Charcoal ranges—and prudent pricing strategies that offset significant commodity headwinds.

Strategic Response to Bearding Trends

Management addressed investor concerns regarding the 'bearding trend' by highlighting their pivot toward beard grooming. The company has successfully launched the King C Gillette range and premium trimmers under the Braun brand. This strategy has allowed Gillette to maintain a record market share of over 60% in the grooming category, proving that the brand can thrive even as shaving habits evolve.

Smart Distribution and AI Integration

A key driver of growth has been 'Smart Distribution,' an in-house AI and machine learning engine that analyzes consumer behavior at the store level. This technology has enabled Gillette to expand its direct reach by 65% over the last five years. By customizing product ranges for individual kirana stores, the company has optimized inventory and reduced non-moving stock, enhancing both retail efficiency and consumer availability.

Rural Recovery and Macro Outlook

The company noted a positive inflection in rural demand, with the non-food sector showing 1.4% volume growth after four quarters of decline. However, management remains 'cautiously optimistic' due to retail inflation averaging 7% in recent months and erratic rainfall patterns. They expect the FMCG category to grow in the mid-single digits over the next 5-7 years, while aiming for double-digit growth in their specific underdeveloped categories.

Sustainability and Citizenship Commitments

Gillette emphasized its commitment to being a 'force for good' through its flagship P&G Shiksha program, which has impacted over 35 lakh children. On the environmental front, the company has committed to Net-Zero emissions by 2040 and is currently collecting more plastic waste than it produces in India. These initiatives are integrated into the business model to ensure sustainable long-term value creation.

This is an AI-generated summary of a publicly available earnings call transcript.
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