GCPL buys out its 50% stake in joint venture with SCA Hygiene

GCPL buys out its 50% stake in joint venture with SCA Hygiene

New Delhi: After failing to make a dent in the local market with Swedish branded personal hygiene products, Mumbai-based Godrej Consumer Products Ltd (GCPL) is falling back on selling its own brands. The company, which also manufactures soaps, shampoos and detergents, has effectively dissolved a joint venture (JV) with Sweden’s SCA Hygiene Products AB by buying out its 50% stake in Godrej SCA Hygiene Ltd.

“We will have to rework all our strategies related with the joint venture," said GCPL executive director H.K. Press. “The company will take a re-look at its manufacturing and sourcing of products after this decision." Godrej had invested Rs20 crore in the JV at the time of its launch and sold its baby diaper brand Snuggy to the JV. It also planned to make the Swedish firm’s baby diaper brand Libero and women’s sanitary napkin brand Libresse at a plant in Nashik, Maharashtra, instead of importing them into the country. “The plan to set up the manufacturing unit in Nashik has been put on hold for now," Press said.

The company declined to name the price at which it has bought out SCA Hygiene. The JV will now be GCPL’s wholly owned subsidiary and will for now focus on its own personal hygiene brands. “While it’s not clear yet why GCPL bought out SCA Hygiene’s share, there is a possibility that SCA may have wanted to withdraw from the market because its brands failed to make any impact here," said Anand Shah, ananalyst with Mumbai-based brokerage Angel Broking Ltd. “It is not easy to establish an international brand in any category."

While Press declined comment on whether SCA Hygiene’s brands will be withdrawn from the domestic market, Shah said GCPL is more likely to focus on its own brands instead of importing and selling its former partner’s brands to India.

“There is a possibility that the Swedish company will exit the Indian market and take its brands along and GCPL will go back to building on its own brands," Shah said. GCPL sold products worth Rs1,102 crore in the fiscal to March. SCA is a global consumer goods and paper firm that makes personal care products, tissues, packaging solutions and solid-wood products in more than 90 countries. According to the company’s global website, it recorded sales of €11.4 billion (Rs72,390 crore) in 2007.