Consumer and personal care giant Procter & Gamble (
) won't be impacted longer-term from a drop in demand following
Japan's earthquakes given the company's size and how much Japan
contributes to its overall business. Smaller beauty and consumer
focused companies like Revlon (
) could be impacted more that larger conglomerates Colgate (
) and Unilever Group (
). We currently value Procter & Gamble with a
$75.25 Trefis price estimate of its stock
, which is around 20% ahead of the market price.
Plants are Operational, Locals Suppliers/ Distributors
P&G's fabric care plant in Takasaki, which was closed
briefly as a precautionary measure is now running again along with
P&G's other two plants in Japan which did not suffer any
damage. P&G's 4,000-plus employees have also been reported
sage. So, P&G's manufacturing base in Japan is well intact.
However, we still do not rule out impact on the supply network,
which shall depend on how P&G's local suppliers and customers
have been affected. Even if the supply of raw material were routed
from neighboring countries, where again P&G has a strong
manufacturing footprint, the erosion on gross margins due to
increased logistics and duties cannot be ignored.
Impact on Demand Side
Asia, including its growth engines, China and India, accounts
for 15% of P&G's global revenues of around $80 billion. While
China and India, have clearly been P&G's focus as it embarked
on its ambitious goal of acquiring one billion additional consumers
by 2014-15, Japan never lost its prominence in P&G's portfolio
and in fact doubled P&G's sales in the past decade!
The northern part of Japan has been severely impacted and while
we do not see consumers doing away with necessities such as
toiletries and personal care products, the damaged distribution
network could notably reduce sales in the near term.
Window of Opportunity
While the world offers aid to the people of Japan, P&G could
well use its mission of
Touching Lives and Improving Life
to not just extend a helping hand but increase its presence in
Japan. P&G is already donating $1.2 million, partly in the form
of its products such as diapers, hair and skin care and feminine
care. Heavily discounting its products through promotions in Japan
at this point could go a long way in gaining market share.
See our full analysis for P&G.