Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ Opinion / Online-views/  P&G to focus on growing scale, maintain competitive pressure
BackBack

P&G to focus on growing scale, maintain competitive pressure

P&G to focus on growing scale, maintain competitive pressure

Premium

One of the main factors intensifying competition in the Indian home and personal care market has been the increasingly aggressive stance adopted by global consumer firm Procter and Gamble Co. (P&G).

Also See | Geographic Expansion (PDF)

Its focus on emerging markets is a part of the global strategy to accelerate growth. That has led to stiff competition between P&G and Unilever Plc in India, which had affected the performance of Hindustan Unilever Ltd (HUL).

Investors often wonder whether the competitive pressure will ease and pricing power will return. Going by a recent presentation made by P&G, where it re-emphasized its strategy for Asia, there appears no prospects of that happening soon.

From P&G’s perspective, in the late 1990s, India was a smaller market compared with even Thailand, and China was its largest Asian market, with about $1.5 billion (around Rs6,800 crore today) in revenue. Today, China is still the largest market with $5 billion in revenue, but India has moved up to the third spot in Asia.

The company mentioned that in 2009, India’s per head spend on P&G’s products was under 60 cents. It has now risen to just under $1 per head, but is lower than the average of $3 per head for its top 11 Asian markets.

The P&G management said its sales in India are under $1 billion. They are still much lower than HUL’s home and personal care products sales of about Rs14,000 crore, based on estimates for 2010-11.

The company’s plans for Asia include expanding the number of categories it operates in, adding new products to existing categories, growing the size of the market it operates in and increase its own share. P&G is also introducing products across price points and improving its distribution spread.

In India, it has launched Wella Kolestint hair colours in 2010 and claims shipments are on track. But it is early days yet. In skincare, its launch of Olay Natural White has doubled Olay’s market share in this segment.

In the detergents market, between Ariel, Tide Plus and Tide Naturals, the company is present in both the premium and mass segments. In 2010, its share in the detergents segment rose by 1.5 percentage points to 17%.

While inflation is a major concern in the home and personal care industry, competition is another. P&G’s efforts to grow its share in categories such as detergents, shampoos and skincare are expected to intensify competition.

Speculation on when P&G will shift focus to margin improvement appears pointless for now. In fact, it has set a target to be present in an average 20 categories in the top 11 Asian markets, from the current 14 categories.

In response to concerns about the effect of its Asian growth strategy on margins, the P&G management said that as scale grows, developing economies will add to its after-tax margins. The company’s focus on growing scale further, as a route to improve margins, indicates that competitive pressures in the local market are unlikely to ease in the near to medium term.

Graphic by Ahmed Raza Khan/Mint

We welcome your comments marktomarket@livemint.com

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 07 Mar 2011, 11:47 PM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App