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Concentrating on high value - Views on News from Equitymaster
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  • Jan 5, 1999

    Concentrating on high value


    • Procter and Gamble India Limited P&G is a 65% subsidiary of the US$ 35 bn global giant Procter & Gamble, USA. P&G is a market leader in the anti-cold healthcare (Vicks), feminine care (Whisper sanitary napkins) and men's toiletries (Old Spice) businesses. It also manufactures Clearasil cream.
    • The parent has 3 companies in India - P&G India, P&G Home Products (a 100% subsidiary) and P&G Distribution.
    • P&G's distribution is largely urban with a combined reach of 0.5 m outlets.
    • P&G acts as a contract manufacturer of detergents (Ariel) and shampoos (Head & Shoulders, Pantene) for P&G Home Products, which markets the aforesaid products

    Healthcare (Anti-cold) segment (40% of FY98 revenues)

    • This segment consists of menthol-based products in numerous forms like rub and cream, tablets and cough drops, lozenges and inhalers. 
    • P&G's brand Vicks operates in all the aforesaid forms and is the No. 1 brand with 35% market share in the Rs 4 bn anti-cold healthcare segment. Overall, this segment is growing at 17-18%  per annum. Vicks main competitors in this segment are Amrutanjan, Zandu and Warner-Lambert (Halls).
    Feminine Care (13% of FY98 revenues)
    • P&G's Whisper dominates the Rs 1.8 bn sanitary napkins market with a 50% market share (in value terms). Whisper operates in the premium range, meaning high margins and low volumes. 
    • This segment is growing annually at 25-30%. The segment has low awareness and penetration levels (10-12% in urban areas). P&G competes with Johnson & Johnson (Stayfree, Carefree) and Kimberley Clarke-HLL (Kotex, Secure).

    Men's Toiletries (12% of FY98 revenues)

    • P&G's products consist mainly of Old Spice range of shaving cream, after-shave lotions, hair cream, deodorants and talcum powder in this segment. In shaving cream,Colgate Palmolive is  the market leader with 28% market share, followed by Old Spice at 16%.
    • Old Spice after-shave is the market leader with more than 50% share. P&G competes with HLL's Denim and Park Avenue of JK Helene Curtis in this segment. The Rs 1.5 bn men's  toiletries market is growing 15-20% per annum.
    Contract manufacturing (35% of FY98 revenues)
    • P&Gmanufactures the Ariel range of detergents and Head & Shoulders and Pantene range of shampoos for P&G Home Products. It enjoys assured net margins (cost plus 5%) on these products.

    Skin Care

    • P&G manufactures Clearasil an anti-acne cream, which has been growing at 5-6%, compared to the industry average of 15%. Lakme, Ponds, Charmis and Fair & Lovely are the other major brands in this segment.
    • Parent focus on P&G Home Products. All future product launches in fabric-wash, hair-care, cosmetics and oral-care segment will take place through this 100% subsidiary. 
    • Though it will shield P&G from high costs of product launches and brand building, at the same time it will deprive it of leveraging P&G,USA's global brands and high growth areas.
    • P&G to focus on its three businesses - healthcare, feminine care and skin care through brand extensions. It will also provide manufacturing base for group companies.
    • The company has proposed changing its name to Procter and Gamble Hygiene and Healthcare to better reflect the nature of its business.



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