Focus to remain on top line, says P&G

P&G reported net loss of Rs 481.52 crore for fiscal ended March 2013

Despite making significant losses in FY13, the world’s largest consumer products company, Procter & Gamble, has no plans to take its eyes off the top line growth in India, where it has traditionally lagged archrival Unilever in key categories.

The Cincinnati, US-headquartered company’s unlisted Indian subsidiary, Procter & Gamble Home Products (PGHP), reported a net loss of Rs 481 crore for the year ended March 2013, higher than the Rs 353 crore in FY12 and Rs 333 crore in FY11. Figures for the first half of the current financial year have not yet been disclosed by the company.

PGHP houses almost 80 per cent of P&G’s India business including detergents, skincare, haircare and babycare. The listed subsidiary, P&G Hygiene and Healthcare, sells Vicks cough products and Whisper sanitary napkins. The second listed subsidiary, Gillette India, sells men’s shaving products and allied toiletries, Duracell batteries and Oral-B range of toothbrushes and toothpastes.

Interestingly, while PGHP’s losses mounted in the last three years, the company maintained its double-digit growth on the sales front during the period under review. Net sales for FY13 grew 24 per cent to Rs 4,827 crore over the previous year. In FY12, growth in net sales was steeper at nearly 38 per cent to Rs 3,906 crore over the year-ago period.

A P&G spokesperson, in response to a detailed questionnaire, said the parent company would continue to focus on India as a key developing market. “We believe India offers great opportunity for our brands to drive trial, penetration and consumption. PGHP’s over 23 per cent sales growth in the last financial year was driven by consumer-relevant communication and innovation.”

While PGHP did not disclose ad spending for the period under review, analysts say it remains high given its presence in competitive categories such as detergents, skincare and haircare. In detergents, for instance, HUL is the clear leader with a 45-50 per cent share of the market to P&G’s about 18-19 per cent market share, say analysts. In shampoos, HUL has nearly 50 per cent of the market to P&G’s 30 per cent share. In skincare again, HUL is the clear leader with over 45 per cent share of the market. P&G, on the other hand, is present largely with its Olay range of products. Its market share in skincare was not available. Despite trailing HUL by a significant margin in the above-mentioned categories, when P&G's performance is seen over the past few years, it becomes clear why ad spends remain high: PGHP has managed to up share in the last four years in detergents and shampoos by 500-600 basis points. In detergents, for instance, P&G’s share four years ago was 14 per cent. In shampoos, it was 24 per cent, according to persons in the know.

Earlier this year, P&G announced it would invest $1 billion (or over Rs 6,000 crore) in India over the next five years. This money will be deployed in areas such as manufacturing, distribution, sales and marketing.

"This focus can be seen with new innovations in Baby Care (Pampers), Skin Care (Olay Regenerist, Olay New Improved launch) and Air Care (Ambipur), new capital infusion to support manufacturing as well as investments in sales and marketing," said the company spokesperson.

Nitin Mathur, analyst (consumer and retail), Espiriti Santo Securities, says that P&G is unlikely to focus on bottom line as it tries to increase sales in India, which currently gives it about one per cent of its $83.32 billion (or Rs 5.19 lakh crore) turnover. "Profitability will improve in the coming years. Right now, its focus on share gain is the best way forward for it."