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P&G-Marico: 'leveraging competencies' - Views on News from Equitymaster
 
 
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  • Oct 11, 1999

    P&G-Marico: 'leveraging competencies'

    Procter & Gamble Home Products, a 100% subsidiary of US-based Procter & Gamble, has assigned the distribution role for Camay range of soaps and Ariel detergent bar to Marico Industries. P&G will however continue to market these products.

    P&G, US operates three companies in India - P&G Health & Hygiene (formerly P&G India), P&G Home Products (a 100% subsidiary), and P&G Distribution. The distribution network of the company is largely urban with a combined reach of 0.5 m outlets. P&G Health & Hygiene is a listed company whose product portfolio includes Vicks range of products (lozenges, balm), and feminine hygiene products (Whisper sanitary napkins). P&G Home Products has hair care (Pantene, Head & Shoulders shampoos), detergents (Ariel), and baby care (Pampers).

    Marico Industries is market leader in branded coconut oil segment in India. Its brand Parachute commands over 50% market of this segment. Other prominent brands in its portfolio include edible oil (Saffola, Sweekar), SIL (jams and other edible foods), Mediker (anti-lice shampoo), Revive (instant starch), and Hair & Care (a non-greasy hair oil). The company's strength is its 600,000 strong retail reach.

    The move is in line with the decision of P&G group in India to focus on hair care, pharma, paper products and laundry products. The company is not keen to be actively involved in soaps, which it believes is not its core competency. Also, it does not have the retail reach like Marico, to compete with market leader Hindustan Lever Limited. By this tie-up P&G gains by getting access to 600,000 retail outlets for its products. It saves on having to invest in running a huge distribution network.

    Soap distribution will be a useful value addition to Marico, as soaps are a significant part of the FMCG segment. It will help it leverage distribution and take the fight to their biggest rival Hindustan Lever. In recent times, HLL has been aggressively trying to eat into Marico's branded coconut oil market. So in effect, Marico will gain experience with this latest addition on its distribution network, which in the long run might help it save its market leadership status in the coconut oil segment. It will also generate additional revenues for the company.

    With HLL gunning for the top position in the oil market, Marico's distribution channels will come under increasing pressure in the coming days, having to fight HLL on both fronts i.e., soaps and detergents, and coconut oil.

     

     

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