Star MNC: Strong comeback for PGHH despite challenges posed by Covid-19

The company delivered profitable double-digit growth

At a time when the entire world was dealing with the outbreak of the Covid-19 pandemic, Indian companies, too, struggled to continue operations and deal with broken supply chains and rapidly changing consumer demand. However, one company —Procter & Gamble Hygiene and Health Care (PGHH) — managed to deliver strong double-digit growth in both sales and profit after tax for the 12 months ended June 2021 (FY21).

Remarkably, the toughest year for the company in several decades also turned out to be a comeback year for it.  

The Vicks-to-Whisper manufacturer delivered strong sales during the first half of the past decade, with a 20.04 per cent compounded annual growth rate (CAGR) over FY10-15. While sales stagnated over the next three years, it made a strong comeback during the pandemic period, especially in FY21, led by increasing sales in the feminine hygiene care segment.

PGHH delivered sales growth of 19 per cent during FY21 and has managed to return to the growth levels it witnessed during the earlier half of the previous decade. Moreover, net profit surged 50.1 per cent to Rs 652 crore in FY21. Efforts to expand the distribution network, significantly higher ad spends, new launches, and price cuts have boosted growth in recent years.

Madhusudan Gopalan, managing director and chief executive officer of PGHH, explains the three main priorities in navigating the pandemic: “First, protect the health and well-being of P&G employees. Second, maximise the availability of P&G products that help our consumers with their health and hygiene needs, which have never been greater. Third, support communities, relief agencies, and people on the front lines of the pandemic.”

Gopalan adds, “Despite the challenges posed by the pandemic, PGHH remained agile and committed to serving Indian consumers, and delivered strong and profitable double-digit growth.”

The company has built a robust pipeline in this domain over the past several years, and expects to sustain it and convert it into revenue in the coming years as well. The feminine hygiene portfolio contributed 66 per cent of PGHH’s annual sales during FY21 and Whisper continues to dominate the market. In the feminine hygiene segment, the company diversified its product offerings and strengthened its position in the emerging premium Nights segment, while playing actively in the base Ultra and Choice portfolios. Its feminine segmental sales grew by 16.7 per cent on a year-on-year basis, making it the second year for the company in the past three years when sales growth in excess of 15 per cent was achieved in this segment.

In FY21, its health care segment grew 24.1 per cent, the highest-ever growth rate for the business vertical. Overall, it contributed a third of the company’s sales.

In the health care business, Vicks continued its product innovations backed by superior go-to-market muscle that boosted its penetration and market share. PGHH continued to gain market share in the cough and cold category, with strong offtake across sub-brands in the portfolio — VapoRub and BabyRub (61 per cent of health care sales), cough drops (32 per cent), and tablets (7 per cent), Motilal Oswal Securities said in a report on the company.

Growth was driven by superior go-to-market strategy, with an enhanced presence in stores with more visibility, increased market share in the cough and cold category, and innovation backed by strong communication campaigns, the report added.

During the pandemic many companies shied away from increasing their advertising spends, but PGHH increased its ad spends in FY21 by 59.1 per cent, the highest among peers, in line with the foreign parent’s (P&G’s) global strategy.

The hygiene and health care products maker is investing heavily in meeting its climate goals, in line with its parent’s initiatives. It made capital investments worth about Rs 70 crore towards acquiring energy conservation equipment in FY21.

The company employed 463 permanent employees on its direct payroll in FY21, including 115 permanent women employees.

On a standalone basis, PGHH reported Rs 3,574 crore for FY21 as total income from operations, as compared to Rs 3,002 crore in the previous year, registering a growth of 19.1 per cent. It reported profit after tax of Rs 651.8 crore for FY21, as compared to Rs 437.1 crore for FY20, a jump of 50 per cent.

FY21 threw up numerous challenges. The pandemic not only challenged companies but also tested their resilience. But this did not restrict P&G to focusing on just its performance; it also took the time to serve society.

In response to the pandemic, the company launched the “P&G Suraksha India” programme, through which the P&G group contributed towards vaccine doses to support the country’s vaccination efforts.

It also donated crucial aid, including oxygen concentrators, masks, and sanitisers for the protection of its frontline workers and underprivileged communities. The company continued to leverage the voice of its brands on mass media to create awareness about preventive measures to combat the spread of Covid-19. 

While PGHH displayed resilience to the shock pandemic-induced economic slowdown in FY21, it is intent on driving performance in FY22 and beyond: “We are raising the bar on all aspects of our superiority strategy — product, package, brand communication, retail execution, and value. We are driving productivity improvements to fund investments in innovation and help drive balanced top- and bottom-line growth.”

He adds, “As a focused, agile and accountable organisation operating at the speed of the market, we are also leading constructive disruption across the value chain in the industry.”

Despite challenges and uncertainty in the short term, the FMCG sector continues to be an essential contributor to the economy, the company says.

In FY22, in the first two quarters, PGHH delivered strong sales growth led by strong brand fundamentals and improved market execution.

With the industry facing commodity inflation challenges, “the company is focusing on improving productivity by leveraging advertising and promotion analytics, strengthening its product mix and driving supply chain efficiency to drive balanced top- and bottom-line growth,” PGHH said in a statement.