Hopes belied

P&G: Defending the perch amidst competition

MOST FMCG companies will now have to live with the reality of slowdown in rural demand for their goods, consequent on poor incomes resulting from failure of two successive monsoons.

Procter & Gamble (P&G), a leading player in the detergent and sanitary product market, will soon be announcing its results for the year ended June, 2001.

Analysts are expecting the company to announce a fall in operating income for this year, since its performance in the past three-quarters has not been encouraging.

Operating income during nine months to March 2001, fell 7 per cent to Rs 357 crore. The performance is not in line with other FMCG companies such as Hindustan Lever that witnessed a stagnant operating income.

P&G derives around 25 per cent of its operating revenue from soaps and detergent segment. Ariel, one of the dominant brands in this segment, next only to HLL’s Surf Excel, is a major money spinner. Cosmetics and toilet preparations and ointments contribute around 24 per cent each.

The Whisper brand of P&G is the leader in the sanitary products segment, closely followed by Johnson & Johnson’s ( J&J) Stayfree.
The detergent market, once dominated by HLL, P&G and Nirma, has witnessed the entry of new players such as Henkel SPIC, that are growing at a higher rate than the old players. There is a potential threat to P&G in the long-run.

While P&G is a leader in the sanitary products market in value terms, its share in terms of volume is nearly half of its competitor J&J, which has around 57 per cent of the total volume. J&J’s focus on price sensitive products for the Indian market being the reason.
While operating income for the nine months to March 2001 has stagnated due to general sluggishness in the industry, operating profit (Rs 102 crore) and net profit (Rs 66 crore) have jumped by 20 per cent and 24 per cent respectively due to tight control over costs.

Therefore, while the topline is expected to post a negative growth, prudent cost control measures may boost net profit.

— Prashant Kothari