P&G to build largest Indian plant in Hyderabad

Source: The Economic Times, Apr 20, 2012

Hyderabad | Mumbai: Procter & Gamble, the world’s largest consumer goods company, will build its largest manufacturing plant in the Indian sub-continent in Hyderabad by investing 345 crore.

The plant, to be spread across 170 acres at Mahdubnagar district, will make products across categories such as laundry, personal and baby care, a person, who is the know said on condition of anonymity.

P&G India’s associate director, product supply, Madhav Rao confirmed that the maker of Tide detergent and Head & Shoulder shampoo will build a manufacturing facility in Hyderabad. The plant will start commercial production in two years.

Andhra Pradesh industries secretary TS Appa Rao said P&G has awarded the construction contract to L&T. “They have asked for a tailor made package of tax breaks and the state investment promotion board is considering it,” Rao said.

The $82.6-billion (sales in FY11) US giant had considered Chennai too as a possible site for its plant. Building the plant in Hyderabad will make it eligible for a 100% stamp duty reimbursement and fixed power allocation as per Andhra Pradesh’s newly-revised industrial policy. The company has also asked for a 75% reimbursement on VAT for five years.

The move is in line with the Cincinatti-based firm’s global mandate to set up over 20 production centres and acquire one billion new consumers in emerging markets by 2015. P&G is looking to catch up with archrival Unilever in India and most emerging markets. Making more products locally and reducing imports will help it speed up product launches and cut costs.

It currently has five plants and over nine contract manufacturing sites in India.

Last year, P&G approved an investment plan of over 900 crore in its unlisted arm Procter & Gamble Home Products. Most of this money will go into powering P&G’s ‘Project 2-3-4,’ which is aimed at doubling the number of Indians who use its products, trebling per capita spending by Indians on its products and quadrupling net sales of its India operations by 2015.

Anand Mour, senior analyst at brokerage firm Ambit Capital, said P&G will need to spruce up production to quadruple its sales. “Making products locally will help P&G in economies of scale to localise and price their products aggressively,” he said.

P&G is also expanding its existing multi-product manufacturing facility in Bhopal. It has doubled its distribution reach over the past couple of years and now has a direct reach of 1.3 million outlets, against HUL’s direct reach of 2 million outlets.

At present, India is one of the smallest markets for P&G with just $1-billion sales across three subsidiaries -Procter & Gamble Health & Hygiene, Gillette India and Procter & Gamble Home Products.

 

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