P&G India Supply Chain Analysis

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Supply Chain Strategy, Performance and Risks: Tools and Techniques

Introduction

“Our Purpose works to unify us in a common cause and growth strategy. It is powerful because it promotes a simple idea to improve the lives of the world’s consumers every day. P&G grows by touching and improving more consumers’ lives in more parts of the world...more completely.” - P&G

“At P&G, we touch lives in small but meaningful ways. Billions of them. Every day.”

Procter & Gamble Co. is a multinational corporation that manufactures a wide range of consumer goods. Globally it is one of the largest FMCG companies. P&G entered Indian market four decades ago but still lags HUL and other major players whereas its entry in china has been successful and has grown to three times larger than Indian operations.

P&G is now focused on becoming more cost efficient globally. In the emerging markets like India can those strategy be implemented considering its positions as smaller player? What it needs to do differently to build an effective supply chain to meet the local specific demand?

In December 2008, while the world was cutting down production and halted all expansion plans the P&G announced to build 19 production plants in developing countries like Malaysia, Romania, India and Pakistan. P&G has now adopted a purpose-inspired growth strategy which is to be cost effective to produce more affordable goods for low-income group consumes.

FMCG Industry

Goods consumed daily or at a regular interval are considered fast moving consumer goods (FMCG) like soaps, detergent, tooth paste, packaged food etc. FMCG companies are mostly involved with the production, distribution and marketing of these goods.

In Indian FMCG is the fourth largest sector with market size greater than US $ 13.1 Billion and is expected to treble from US$ 11.6 Billion in 2003 to US$ 33.4 Billion in 2015. It is a very competitive sector and is characterized by an extensive distribution network, low operational cost. The FMCG market is set to treble from US$ 11.6 billion in 2003 to US$ 33.4 billion in 2015. But in India, Procter and Gamble is way behind of Hindustan Unilever, ITC, Dabur India and Britannia though it is one of the top FMCG Companies in the world. So an effective supply chain model can help P & G to climb to among the tops in India. In India, P & G has mostly targeted the premium market. The shampoo market in India is valued at Rs 4.5 bn with the penetration level at 13% only. The market is expected to increase due to lower duties and aggressive marketing by players Shampoo is also available in a sachet, which is affordable and makes upto 40% of the total shampoo sale. The Indian shampoo market is characterised by a twin-benefit platform: cosmetic and anti-dandruff. It is basically an upper middle class product, as more than 50% of the consumers use ordinary toilet soap for washing hair. HUL is the leader with approximately 44% share of this market through its Sunsilk, Clinic Plus, Clinic All Clear and Dove brands. P&G is the second-largest player, with a market share of around 25%. However, while HUL gets 7-8% of its revenues from shampoos, P&G gets 15-17% from the category. Although the per capita consumption of detergents in India (2.7 kg pa) is comparable to some countries like Indonesia and China (around 2 kg pa), it is lower than in others such as Malaysia, Philippines (3.7 kg) and the USA (10 kg). The Indian detergent market is expected to grow at 7-9% pa in volume terms. In detergent segment, P & G has 16% market share in India, where as HUL leads with 37% market share and closely followed by Ghari (18% market share). Whisper cumulatively has a market share of 52 per cent and is the leading brand in its segment and Vicks Vaporub has market share of 33.5% in India. Market share of Gillete is 40% while that of its nearest competitor, the House of Malhotras, is 14%.

Large FMCG companies...
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