Thursday, October 29, 2009

P&G plans to add half a billion users

In five years, the firm intends to reach out to 75% of the population and increase per capita consumption to $20

Mumbai: The three Indian arms of Procter and Gamble Co. (P&G) are looking to add 500 million new customers in India in the next five years, a top company official said.

That’s a little more than the number of Indian consumers the three companies currently reach out to and will be equal to 75% of the country’s estimated 1.26 billion population in 2014.

“We will add half a billion new consumers by 2014,” said Sumeet Vohra, marketing director, P&G India.

If it succeeds, P&G could close the lead that arch rival Unilever Plc has over it in India, a rare market where the American company lags the Anglo-Dutch consumer multinational.

To be sure, P&G’s ambitions will require it to expand its reach to rural areas—its current consumer base is largely urban—and not everyone is convinced the company can do that.

“It is a tall order for P&G to make inroads into rural (areas),” said Dwarika Prasad Uniyal, adviser with Jindal Global Business School, OP Jindal Global University, Sonepat. To do so, the company needs to augment its presence in smaller towns and also work on charging the perception that it is a “premium products” firm.

Still, P&G seems determined to try.

Earlier this month, the Cincinnati-headquartered company’s new president and chief executive, Robert McDonald, said at the annual general meeting of shareholders that P&G would add a billion new consumers over the next five years in emerging markets, and that the company’s Chinese and Indian operations would lead this effort.

P&G wants to increase the per capita consumption of its products from $3 (Rs141) in China and less than $1 in India to Mexico’s level of $20, a move that will add around $40 billion to its sales. At $20, the consumption in these markets would still be a fifth of the $100 it is currently in the US, said a recent AP report.

The result of this focus is a buzz of activity in the three Indian subsidiaries of P&G that continue to remain low-profile and media shy.

The three companies share a common management and distribution structure. Procter and Gamble Hygiene and Health Care Ltd (PGHH) ended the year to June with revenue of Rs774 crore and net profit of Rs179 crore. Gillette India Ltd ended the same year with revenue of Rs661.5 crore and net profit of Rs113 crore. Both companies are listed on the Bombay Stock Exchange and P&G Inc. holds a majority stake (in excess of 50%) in both companies. The third P&G company in India, Procter and Gamble Home Products Ltd (PGHP), is a 100% subsidiary of P&G Inc. It sells detergents (Tide and Ariel), shampoos (Head and Shoulders and Pantene), skincare products under the Olay brand and baby care (Pampers). While it doesn’t report its numbers, the three companies together are estimated to have a revenue of around Rs3,000 crore, according to Vohra.

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