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P&G plans to add fizz to detergent business

16-July-2005
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P&G plans to add fizz to detergent business

The recent transfer of the contract manufacturing detergent business (Ariel and Tide brands) from P&G Health & Hygiene (PGHH) to P&G Home Products (PGHP), signals the global major's interest in increasing its detergent business significantly in the near future, analysts said. The detergent business has begun growing at double digits, raising the company's confidence in the Indian market. The company is expected to invest in resource employment in the division and create assets rather than invest merely in brands.

“The move indicates the willingness of P&G to significantly up stakes in creating incremental capacities for its future growth. It's a step toward increasing P&G's bandwidth within the laundry wash business,” said Nikhil Vora, vice-president (research) at SSKI Securities.

As far as PGHH is concerned, analysts call the business transfer a losing proposition for the company. Detergents contract manufacturing contributed about 35% to the company's revenues and assured revenues and profitability. For Q3 ended March '05, while PGHH's health business grew by 10%, the contract manufacturing business for detergents grew by 48%.

The '04 detergent price wars between consumer goods rivals, HLL and P&G have helped both companies capture sizeable volumes in a market, which is growing at a 4% as per AC Nielsen estimates. HLL has held on to its 37% share with P&G too going strong at 10.2%. Leading dealers said both HLL and P&G have been aggressive in their marketing and advertising.

But Kanpur Detergent's Ghadi remains another regional top contender at 10%. Nirma, the second largest detergent brand lost value market share from 16% to 14%. Analysts say upgrades from discount brands to a bigger brand following the price cuts have hurt Nirma. Kanpur Trading Co's Ghadi detergent has a dominant 40% share in UP and 10% nationally.

Rising input costs continue to hit detergent makers, forcing the two rivals to hike prices of their large packs. While HLL raised prices of all the Surf variants, P&G raised that of Tide and Ariel.

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