BEIJING: The Godrej group of industries will be establishing a "substantial business in the Chinese mainland within the next 12 months," says Group Chairman, Adi Godrej, who is currently leading a delegation of board members on an exploratory trip to China.

Mr. Godrej said the group was looking to either acquiring a Chinese company or entering into a joint venture with a Chinese partner in the FMCG (fast moving consumer goods) sector. The target is to have a turnover of between $50 million and $100 million from the China business.

Godrej-China will focus on household insecticides, hair colour, fairness soaps and other consumer products. The group now sources microwaves, locks and baby diapers from China. Mr. Godrej said the decision not to set up a greenfield project was based on the complications of establishing a brand and distribution networks in a new market. The plan was thus to join hands with an established Chinese brand.

The domestic market in China had proved difficult in the past for foreign companies to crack and few multinationals made profit from domestic sales. Profitability usually came from using China as a low-cost manufacturing base and then re-exporting the products. Thus, for example, the China businesses of Indian IT companies and manufacturers like Sundram Fasteners, focus on servicing multinational clients in the mainland or on export.

Global FMCG companies have taken a minimum of six years to break-even in China.

Mr. Godrej, however, is confident that the low-cost and high quality of Godrej products will find takers in second tier cities. Moreover, he says, Indian companies have advantages over Western multinationals in that they do not have false impressions regarding the Chinese market, having evolved in similar conditions in India.

The company is already in talks with potential partners and is most likely to set up base in the Yangtse river delta, a commercial hub in China's south that includes Shanghai, Zhejiang and Jiangsu provinces.

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