P&G near toothpaste entry, starts production trials of Oral-B

Consumer goods major Procter & Gamble (P&G) is finally foraying into India’s billion-dollar toothpaste market with Oral-B, after selling toothbrushes under the same brand name for years.

The company is looking at launching toothpaste in early 2011 at aggressive price points, two sources familiar with the development said.

P&G began conducting production trials for Oral-B toothpaste in June this year and this will continue to December, one source said. The company has appointed JHS Svendgaard Laboratories, the largest manufacturer of oral care products in India, to contract-manufacture the toothpaste, this person said.

Nikhil Nanda, managing director of JHS Svendgaard, denied any knowledge of P&G’s toothpaste foray. “However, there is no reason why P&G should not look at India,” he said.
P&G could not be reached for comment.

P&G acquired Oral-B when it bought out Gillette globally in 2005. However, in India, Gillette remains a separate entity and continues to own the brand.

“P&G India is likely to launch Oral-B toothpaste in January-March next year, in line with our long-standing expectation,” said Manoj
Menon and Amrita Basu, analysts with Kotak Institutional Equities Research.

“We continue to believe that the threat of P&G’s entry into toothpaste category in India, which can likely result in disruptive competition for Colgate, is real. Oral care contributes about 6% (worth $5 billion) of P&G’s global sales with toothpaste contributing about 30% and toothbrushes about 45%,” Menon and Basu said.

JHS Svendgaard first received P&G’s contract to manufacture detergents. Then the firm recently outsourced production of Oral-B toothbrushes to it.

JHS Svendgaard has a factory in the tax-free zone of Baddi in Himachal Pradesh and already manufactures toothpastes, toothbrushes and mouthwashes for Elder HealthCare, Dabur and
Himalaya. P&G has been successful in pushing the Oral-B brand in India through toothbrushes, which has become the second-largest in terms of sales. This, analysts said, would make a “brand extension into toothpastes a natural corollary”.

Globally, Crest and Oral-B are P&G two largest oral-care brands. In the US, P&G has mostly integrated Crest and Oral-B through the co-branding route. But Anand Shah, senior research analyst,
Angel Broking, believes the probability of P&G launching Crest was greater. Another analyst with a domestic brokerage, on the condition of anonymity concurred. “I think a Crest launch is highly probable,” he said.

DNA had first reported on March 30 that P&G is looking to launch one of the two toothpaste brands it owns - Crest and Oral-B, in India by end of 2010 or early 2011.