MUMBAI: India remains a high priority market for Procter & Gamble (P&G) and the consumer products major has set itself the objective of maintaining a number one or number two position in every functional category, the company’s management told Espirito Santo Securities Research in a recent interaction.
According to a report by Espirito Santo Securities, P&G wants to localise production as also have vertical portfolio across tiers. “P&G is still catching up in terms of increasing the distribution network and new capacity addition demonstrates long-term commitment of the firm,” the report said.
P&G became synonymous with disruptive competitive intensity after the price war between the company and rival Hindustan Unilever in detergents. “P&G, however, articulates its current India strategy as focused on increasing market share, and pricing and mix improvement. It believes that the No. 1 and No. 2 players in any category generally earn a disproportionate share of the category profit,” the report said.
In the last two years P&G has increased its India distribution network by approximately 10% year-on-year, according to the report. However, its network is still miniscule compared to competitors.
As to whether P&G is positioning correctly to crack the Indian consumer, the report said though lower stock keeping units (SKUs) have helped P&G to move away from being just an urban centric story (Olay shampoo is now sold in sachets and the company recently launched Guard, an inexpensive razor system innovated in India), the firm remains clear that it won’t compete at the lowest possible price points.
“Our channel checks indicate that P&G’s de-emphasis on double-edged razors is resulting in a bourgeoning grey market and competitors grabbing market share. What needs to be seen is if the strategy of waiting for the globalization works in the male grooming category. We note that even Kellogg’s had to reengineer its products in 1994 after failing to change the local preference of breakfast cereals with hot milk,” the report said.
The transition from unbranded to branded consumer goods is the biggest growth driver for the profitability of consumer companies. This, in turn, implies that the onus is on companies to keep innovating and attracting new consumers to the category. “We believe that mass volumes focus is the right strategy,” the report said.
