Recently, Godfrey Phillips India one of the leading cigarette & tobacco manufacturers in India announces its exit from the chewing business. Why did the company exit the chewing business, what are its impacts, and what should Investors do?
About Godfrey Phillips:
Godfrey Phillips India Limited is engaged in manufacturing cigarettes and chewing products, and trading tobacco products, tea, and other retail products. The Company's segments are Cigarette and tobacco products; Tea and other retail and Others. The Others segment includes investment and real estate business activities of the subsidiary’s products.
Godfrey Phillips exits Chewing Business:
- On Wednesday 12th October 2022, Godfrey Phillips announced the execution of the agreement to sell trademarks along with rights, titles, and interest including rights to the leasehold assets of its Chewing Business.
- The company had a famous brand ‘Pan Vilas’ under its Chewing business.
- Godfrey Phillips will be selling its Chewing business to Vishnu and Company Trademarks Private Limited and its wholly-owned subsidiary VLC Innovations Private Limited. The deal was executed for total consideration of Rs. 80 Cr.
- Vishnu and Company Trademarks Private Limited and its wholly-owned subsidiary VLC Innovations Private Limited are engaged in the business of chewing products.
- The company is planning to exit from the chewing business due to continuous incurring losses in the business. The chewing business contributed less than 2% to the business’s total revenue.
About Chewing Business:
- Godfrey Phillips currently had 4 key business verticals: Cigarette, Retail, Confectionary, and Chewing Business.
- The Chewing Business contributed very minimally i.e., around 2% to the overall revenue of the company as of FY22.
- Godfrey Phillips India entered the pan masala category by launching the premium pan masala brand Pan Vilas in Jaipur in the year 2010.
- The company has 800 Exclusive Distributors for Chewing & Confectionary Business.
- The premium pan masala market size is estimated to be Rs. 2,800 Crore and Pan Vilas have a 20% share in its key market of Gujarat.
Why Did Godfrey Phillips exit the Chewing Business?
- The company is planning to exit from the chewing business due to continuous incurring losses in the business. The chewing business contributed less than 2% to the business’s total revenue.
- GPIL entered the pan masala category by launching the premium pan masala brand ‘Pan Vilas’ in Jaipur in the year 2010. Then, the company planned to rise the revenue share of the Chewing Business to 30% of the overall business, which the company failed to do so.
- To focus on other growing verticals like its retail business and its core business
- To focus on export growth, currently International business contributes 18% to the revenue of the company.
What Should Investors Do?
The company’s decision of exiting the Chewing business looks good from the company’s perspective as it was a loss-making venture and was facing continuously facing hindrances to upscaling. Since there is no meaningful revenue coming from this business, there should not be any meaningful impact on the overall business of the company.
Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent are commendation to buy or sell stocks or MF.
Originally Published On:
https://blog.investyadnya.in/godfrey-phillips-india-to-exit-from-chewing-business-what-will-be-its-impact/
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