MUMBAI: Procter & Gamble India is dropping Oral-B toothpaste as it moves away from low-margin segments and focusses on profitability. P&G launched Oral-B toothpaste in India in July 2013, after years of speculation that it would bring Crest, one of the world’s largest oral care brands, to the country.
However, the Indian unit of the world’s largest consumer products company has so far managed to corner only about 1% of the toothpaste market — less than newcomer Patanjali Ayurved — and far behind Colgate-PalmoliveBSE -1.36 %, which controls more than half the market, and arch-rival Unilever, which has a quarter.
“The company will not supply Oral-B toothpaste after the next few weeks. At present, they are just clearing old inventory,” said two people aware of the development.
A P&G spokesperson, however, denied that the product would be withdrawn completely and said the company had launched Oral-B in limited geographies forming a small percentage of the total market to help it learn how to best serve consumers. “We will continue to learn in these markets and make Oral-B toothpaste available in order to make the right choices to optimise our portfolio. We consider India a highly strategic country in oral care and it is very important to our business,” the spokesperson said.
The Rs 7,000-crore oral care market is a rare consumer segment that has one company, Colgate, dominating with 55% share and almost a dozen rivals. The competitive intensity has increased in the herbal and value-added sub-segments.
Patanjali already commands an almost 3% share in toothpastes, while GlaxoSmithKline Consumer’s Sensodyne is the market leader in the sensitivity category. Colgate andHindustan UnileverBSE -2.54 % have ceded about 230 basis points share in both volume and value terms over the past two years, according to a Goldman Sachs report citing Nielsen.
“The lack of re-investment in to the business is likely to add to investor concerns about its ability to retain market share and grow volume, in our view. Colgate reported its lowest ever overall volume growth at 1% last quarter,” according to the report.
Experts said Colgate would have lost a bigger market share if P&G had a toothpaste making facility in India, which in turn, could have given it higher margins. “Colgate was very aggressive when P&G entered the category. There were so many offerings that Procter was not able to differentiate in the mind of the consumers,” said Abneesh Roy, an analyst at Edelweiss Securities.
In January, P&G said it has indecided to de-prioritise several unprofitable lines of business in India which negatively affect short-term top-line growth rates so that a much more profitable business will grow strongly in the longer term. Net sales at the company’s Indian units grew a combined 2% in the October-December quarter.
“Last fiscal year, organic sales growth slowed by several points but we made significant progress in improving local profit margin, up 700 basis points. We went from losing money in India to triple-digit profits,” P&G’s Chief Financial Officer, Jon Moeller, said on a call with investors.
Sales in the portion of business that the US-headquartered company is fixing or exiting in India account for about 15% of the total and were down 35%.
P&G’s three entities in India — Procter & Gamble Hygiene and Health Care, Gillette India and Procter & Gamble Home Products — sell products ranging from detergents and shampoos to razors and sanitary napkins. They posted combined revenue of Rs 10,347.7 crore in 2014-15, growing at 12.7% compared with 15% a year ago.
Last year, long-serving managing director Shantanu Khosla and sales director Uday Bhaskar quit when Procter & Gamble lost market share in over two-thirds of its business, a struggle reminiscent of the parent company, which has now put over 100 brands on the block to focus on its core business.