Thomas White Global Investing
Emerging Leaders

Emerging Leaders

July 2012

Adi Godrej, Chairman, Godrej Group


“The challenge of the future is to use our brand image and success, while simultaneously creating a modern, efficient, young and consumer-centric organization which can create a momentum of growth in the future.”

— Adi Godrej in an interview with The Indian Express


The next time you visit a household or a shop in India, just take a close look at the padlock dangling on the gates or the doors. The lock most likely will have a stainless latch and a brass body, etched with the name Godrej” on it. For Indians of the past three generations, “Godrej” is an everyday name. And incredibly, nearly 400 million Indians come in contact with the name as they unwrap their bathing soaps in the morning, switch on their air conditioners during the day, bite a piece of chicken for lunch, or light a mosquito coil during the night. The man behind this behemoth today is a 70-year old balding, bespectacled man named Adi Godrej.

Adi Godrej, the third-generation scion of the Godrej family, who came into the family business nearly five decades ago, is one of India’s most outspoken businessmen, and a name synonymous with philanthropy, innovation, and environmental-friendly initiatives and technologies. Amidst a flurry of corporate scandals engulfing some of India’s prominent businessmen, Godrej’s businesses today stand on a pedestal, courtesy of the old-fashioned way of doing business through hard work and savvy brand-building.

Adi inherits his business skills from his forefathers. More than a hundred years ago, in the gritty coastal city of Bombay, Ardeshir Godrej, Adi Godrej’s granduncle, read about rising burglary incidents in the city through a crumpled, ink-smeared newspaper. Young Ardeshir, smelling a business opportunity in preventing such crimes, set out on an innovative mission to make superior locks and safes in what was still British-ruled India. The locks that Ardeshir eventually made were so safe yet so accessible that they were used by both royalty and the cotton merchants of Bombay alike. Ardeshir’s success in his business venture took him to England, France, and Germany in the 1900’s.

Although Ardeshir died childless, his innovative potential and penchant for travel ran deep in the family. Today his grandnephew Adi Godrej exhibits the same qualities that defined the Godrej group in its earlier days. Like Ardeshir, Adi is well-travelled, with a passport that bears testimony to the nearly 90 countries he has travelled so far for business. Again like Ardeshir, Adi is trying to leverage profits from small innovative things such as low-cost refrigerators and economical water purifiers aimed at India’s vast rural inhabitants.

Adi’s travels started quite early. Amusingly, he credits his first “journey” as crossing the streets in Mumbai, a lesson taught by his mother, Jai Godrej. Although his family was well-off and part of India’s elite, Adi’s mother put him on a tight budget early in his life to manage his everyday affairs. As a teenager, Adi convinced his mother to let him travel throughout India by train in the early 1950’s. Then, India’s trains were one of the great equalizers of society. Men and women of all class and creed – rich and poor and Hindus and Muslims – thronged the train. Although the trains themselves were segregated into different classes, the upper class tickets were so expensive at the time that only the elite in India could afford them. Although Adi clearly belonged to this privileged group, his mother’s tight purse strings afforded him only a second-class ticket.

Till a few years ago, I didn’t really listen to what others had to say. I have tried to change that. Now, I make an effort to listen carefully when a suggestion is made, or when someone is making a point.

— Adi Godrej in an interview.

Adi calls that journey an eye-opener. He formed his opinion about the consumption patterns of Indians from all walks of life on that train journey. In a country where millions of people lived in poverty, it made sense to Adi to target the “bottom-of-the-pyramid,” the market mostly made up of the poorest people in Indian society.

Soon after graduating at the top of his class, Adi went to the U.S. to complete undergraduate and business degrees from the prestigious Massachusetts Institute of Technology (MIT). When he returned to the family’s soap business in the early 60’s, he was the first business graduate to join the management. His efficient inputs and corporate management acumen helped the group when India’s intrusive government levied as much as 90% taxes on businesses. But all along, Godrej Industries expanded by painstakingly building distribution networks to every nook and cranny of India’s villages to cater to the needs of the less affluent parts of the society.

When India opened its markets during the early 1990’s, multinational giants like Procter & Gamble and General Electric sought Godrej’s expertise to reach India’s rural markets. Born out of these joint ventures were innovations like sachets of shampoos and hair-dyes that roughly cost one U.S. cent for rural India. Godrej’s ‘Good Knight’ mosquito coils helped millions of Indians, both rural and urban, get a good night’s sleep by driving away mosquitos.

Despite such achievements, criticism abounds that Godrej, in comparison to other old Indian business houses like Tata and Ambani, has not grown fast enough. Adi acknowledges that his business has not grown as big as its old rivals, pointing out that Godrej grew comparatively slower due to his desire to keep out of tightly regulated businesses. Still, many Indian business journalists take a dig at the establishment for missing the bus in industries such as information technology outsourcing.

Adi now seems to be waking up to his critics and is setting more ambitious targets for the firm. He is taking his “bottom-of-the-pyramid” strategy to other low and middle-income-countries in Africa, Latin America, and Asia. These days, the time-tested businessman is also slowly giving up his ‘arrogance’ and is willing to listen more to the company’s young managers, which includes Godrej’s fourth generation upstarts. As well, Adi is relaxing his generally conservative business stance and is dipping his toes into more risky ventures such as properties and real estate. And the results are showing. Godrej Group’s revenues have nearly doubled from $1.7 billion in 2006 to nearly $3.3 billion in 2010.

But Godrej is not making any compromises to grow rapidly. In 1930s Bombay (present day Mumbai), a city where news agency Bloomberg estimates that it will probably take hundreds of years for a commoner to repay a mortgage on an average Indian salary, Godrej’s forefathers bought nearly 14 square kilometres of land from the British. Half of this valuable land is comprised of precious mangroves essential for the city’s ecosystem, and home to jackals, wild boars and a lot of beautiful and exotic birds. Adi Godrej has vowed to reserve the 1,750 acre mangrove for environmental preservation.

Sometimes growing large isn’t the top priority. That’s a lesson that perhaps a lot of other businessmen in their quest for valuable resources can learn from Adi Godrej.

 

 

 

 

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