Why Procter & Gamble is a slow mover in India

The world’s largest consumer goods company, Procter & Gamble (P&G), is slowing down in India. For the second straight year, the top line of P&G Home Products, the unlisted Indian arm of the global major, declined, touching Rs 4,891 crore in 2016-17. For the financial year ended March 31, 2016, P&G Home Products registered its first decline, with net sales of Rs 5,671 crore, according to data sourced from the Registrar of Companies (RoC).

The performance of the unlisted arm of P&G matters because it houses some of the latter’s key businesses in the country. These include detergents and shampoos, which together make up 54 per cent of its overall domestic turnover. The balance 46 per cent comes from categories such as feminine hygiene (Whisper), over-the-counter products (Vicks), and male grooming (Gillette), which are part of its listed entities P&G Hygiene and Health Care and Gillette India, respectively.

The three businesses combined delivered a top line of nearly Rs 9,000 crore for P&G in FY17 (the top line data for the listed companies was sourced from Capitaline). This is lower than the Rs 9,701 crore total turnover reported in the previous year. P&G’s listed companies follow the July-June accounting period, while the unlisted firm follows the April-March cycle.

Compare P&G’s performance with arch-rival Hindustan Unilever (HUL) and the picture becomes clearer on where the former stands in India. For FY17, HUL’s turnover stood at Rs 33,162 crore, over three-and-a-half times that of P&G’s top line in the same period. Globally, the two wage a stiff battle with each other and have retained their respective positions as the world’s largest and second-largest consumer goods companies. P&G declined to comment when contacted with a detailed questionnaire on its domestic performance and strategy.

Analysts say P&G has clearly ceded ground in India, led in part by its strategy of focusing on key markets like the US and China. “About three years ago, P&G globally articulated that it was keen to keep its attention on its top two markets — the US and China,” said Abneesh Roy, senior vice-president, research, institutional equities, Edelweiss. “The result of the strategy was that it de-focused its attention on markets such as India, whose contribution to global turnover is in low single digits.”

P&G India’s contribution to the parent’s $65 billion (or Rs 4.22 lakh crore) top line is only 2 per cent. HUL’s contribution to the parent’s top line of $58 billion (or Rs 3.77 lakh crore), on the other hand, is nearly 9 per cent, making India the second-largest market after the US for the Rotterdam-and-London-headquartered major. HUL also continues to be aggressive in the Indian market, said Roy, focusing its attention on market share gains and volume growth as opposed to P&G’s focus on the margins and bottom line.

The result, say experts, has been that P&G has been slower to cut product prices and advertise aggressively, a strategy used commonly by other consumer goods majors, including HUL, to grow their share. P&G’s direct distribution reach (1.5 million outlets) is also far lower than HUL’s (3 million outlets), giving it less control over shelf space and the kind of products it can push within stores.

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