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P&G: Making a comeback - Views on News from Equitymaster
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  • Aug 23, 2000

    P&G: Making a comeback

    Procter & Gamble Hygiene and Healthcare Ltd. (PGHH) has identified healthcare as its long-term business focus. The company’s leading brand Vicks (in existence for more than 100 years) however faces stiff competition in the market from D’Cold of Paras Pharmaceuticals and Coldarin.

    PGHH’s new country manger Gary Cofer has identified healthcare business for expansion in India. India is expected to become a major global sourcing base for healthcare products. This will help PGHH to get more research and product line in the healthcare segment from its parent P&G. P&G International markets its products in more than 140 countries of the world.

    PGHH’s topline growth is always boosted by value growth rather than volume. Vicks is also priced at a premium compared to its competitor’s products. However, the consumer confidence in the brand has remained intact which had helped Vicks to dominate the healthcare market with its incomparable product quality.

    PGHH has offlate shown a disappointing performance in terms of its brand image and sales growth. Currently Vicks contributes around 17% to total revenues of PGHH. As per the survey conducted by A&M/ORG MARG in 1999 Vicks Brand dropped to 14th position (from 8th position in 1998), which was its worst ever performance. The company had also suffered a volume drop after it affected an upward price revision last year. However, during the current year after several relaunches with an upgraded packaging the company has increased its sales growth of Vicks by 30%.

    It has changed the product packaging of Vicks (to prevent competition from spurious products) and introduced a new campaign to remain the leader in the segment. It has also launched Vicks Plus a new variant of Vicks Cough Drops, which is available in three flavours of orange, menthol and lemon. The product is priced at a slight premium to the existing range of Vicks Cough Drops. This new launch comes after a string of relaunches during the year such as new packaging for Vicks Vaporub, Vicks Action 500 and Vicks Cough Drops. India is the second market after Japan where this product is being launched.

    New packaging backed by a new advertising promotion and the efforts the company has put in, to create a brand will help it to maintain its leadership position. It will also lead to a positive growth in its revenue since PGHH's US based parent P&G has identified India among the top three markets in the world in the healthcare segment.

    At the current market price of Rs 667, PGHH is available at a P/E ratio of 22 times its FY01 projected earnings. Historically the company’s P/E has been in the range of 30-35 times.



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    More Views on News

    P&G: Strong Core Growth (Quarterly Results Update - Detailed)

    Dec 9, 2016

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    Aug 18, 2017 (Close)


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