Sagar Malviya, The Economic Times
Mumbai, 24 October 2016
& Gamble (P&G), the world’s biggest consumer goods
company, is exploring a long-term partnership with Kishore Biyani’s
Future Group akin to the one it has with Walmart in the US, that could
involve joint sales forecasting and planning, exclusive product
releases, embedding officials at each others’ headquarters and even
Top executives of P&G and Future Group have held a series of meetings to take their association beyond retailer-client relationship, two officials aware of the development said. While discussions are at an early stage, a few senior executives from P&G’s global office are expected to meet Future Group officials next month to deliberate on the contours of a long-term joint business plan.
“It could be a similar partnership that P&G has with Walmart in the US where they share data on consumer behaviour, plan product launches and even lean on each other for supply-chain initiatives,” said one of the officials.
A month ago, P&G global chief executive David Taylor visited India and toured a few retail outlets, including Big Bazaar. Last week, Biyani and Future Group’s FMCG president Devendra Chawla visited P&G’s Cincinnati headquarters.
P&G’s three entities in India, which sell products ranging from detergents and shampoo to razors and sanitary napkins, have a combined revenue of under $2 billion, less than 3% of its overall global sales.
The business pales in comparison with Unilever’s that is nearly thrice as big in the country with products across price points. However, unlike its Anglo-Dutch rival, P&G has been more focused on premium products that generate high sales at modern trade outlets in contrast to its rivals who stock several mass brands on retail shelves.
Future Group has the widest network in the country with around 13 million square feet of retail space in 221 cities through a 700-odd store network of supermarket brands such as Big Bazaar, EasyDay and Nilgiris.
“It is standard practice for us to engage with our partners across the retail landscape, including all our partners in modern retail, e-commerce and traditional retail, to develop unique plans that create superior value for the shopper,” a P&G spokeswoman said. Future Group declined to comment.
P&G has invested more than Rs2,000 crore in India in the past three years, mainly to set up manufacturing units to reduce dependence on pricier imports. At present, it has seven manufacturing facilities in six states, accounting for more than 90% of its products sold in the subcontinent. P&G’s strategy in India has been paying off — profit margin is up 750 basis points and the company has gone from losing significant money in the country to triple-digit profits in the last two years.
“As modern trade grows, P&G would want a significant share similar to what it has in developed markets. So, rather than just a distributorled model, it is a smart step to align its needs with that of a retailer. Critical issues such as lower product availability on shelves could also be addressed,” said Devangshu Dutta, CEO at Third Eyesight, a retail and consumer goods consulting company.
(Published in The Economic Times)