Financial Daily from THE HINDU group of publications
Wednesday, Sep 15, 2004
Financial Daily from THE HINDU group of publications Wednesday, Sep 15, 2004 |
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Marketing
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Outlook P&G planning to set up 3rd facility in India
Sindhu J. Bhattacharya
New Delhi/Mumbai , Sept. 14 FOLLOWING the handsome volume gains in the shampoo segment over the last few months due to price cuts, Procter & Gamble has begun thinking in terms of setting up its third manufacturing facility in the country. At present, the company manufactures Ariel and Tide detergents at Mandideep in Madhya Pradesh and Whisper sanitary napkins and the Vicks range of products at Kundaim in Goa. However, it imports all of its shampoo brands - Head & Shoulders, Pantene and Rejoice - from overseas markets. On whether the company was scouting for sites to set up manufacturing facility for shampoos and other products, perhaps in Himachal Pradesh, a company spokesperson told Business Line, "P&G is examining this interesting opportunity. At this stage a decision has not been made, but the Himachal Pradesh plant is being evaluated at the moment.'' She confirmed that the company is importing its shampoo brands at present but did not specify whether the new facility being envisaged would manufacture shampoos. Analysts tracking the sector said the company, which imports shampoos from Thailand and other Asean countries, has decided to invest in a new manufacturing base because of the recent volume gains in shampoos and detergents despite sluggish value growth. However, the investment earmarked for this new facility could not be ascertained. Said Pranav Securities' CEO, Mr Rajesh Jain, "Most shampoo marketers operate through third party contract manufacturing since it keeps costs low and also provides logistical advantages. But these advantages of third-party manufacturing are now decreasing, since places such as Himachal Pradesh offer backward area benefits as well as income tax rebates". Another FMCG analyst felt that its own manufacturing facility will give the company further cost advantages in the segment vis-à-vis competition, particularly Hindustan Lever Ltd (HLL). "Besides with value added tax and MRP-based excise duties coming in next year, production outsourcing has become less attractive. P&G's move shows it has set its sights on a long innings in India," he added. Yet another analyst said the willingness of FMCG companies to invest in building capacities showed that they were banking on the current downturn in the market to end soon. "Besides, why would companies invest unless they were sure that growth will continue even if it comes at lower price points," he wondered. Procter & Gamble Hygiene and Health Care Ltd. (PGHH) - the listed arm of P&G - posted 30 per cent sales growth at Rs 577.24 crore for the 12 months ended June 2004, with 35 per cent higher net profit at Rs 92.17 crore. While PGHH deals with Vicks and Whisper product portfolios, its subsidiary P&G Home Products caters to shampoo and detergent brands in India.
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