January 16,2006
NEW DELHI: Gillette India today announced its merger plans with Procter and Gamble India in which operational synergies will be leveraged, even as they remain separate legal entities. The company will move over to P&G’s distribution structure and gradually discontinue services of the 700-plus distributors engaged in mass trade of Gillette products.
The Boston-based blades and razor company will also adopt P&G’s organisational structure and effective July 1, ‘06 relocate its headquarters from Gurgaon to P&G Plaza in Mumbai, which will house all P&G subsidiaries in India. The company will also follow P&G’s fiscal year (July-June) subject to necessary approvals. Zubair Ahmed is likely to remain the head of the legal entity Gillette India. ET had reported on January 4 that Gillette and P&G will remain separate legal entities in India after their global merger.
“We believe the new distribution structure will significantly increase Gillette’s direct coverage, enhance wholesale coverage and help service more retailers and reach more consumers efficiently,” Mr Ahmed said in a media release.
P&G’s organisational structure is broadly divided into three heads: GBU (Global Business Unit), MDO( Market Development Organization) and GBS( Global Business Services). Gillette will move from business units based on geographic regions to GBUs based on product lines. MDOs will develop market strategies to build business based on local knowledge and GBS will bring together business activities such as accounting, human resource systems, order management and information technology, thus making it cost-effective.
As a result of the new structure, Gillette will relocate some employees across functions to Singapore, which is P&G’s regional headquarters. For instance, Nikhilesh Brahma, business head of blades and razor in India, has moved to Singapore as marketing director. Mr Ahmed says the new structure will help focus on big brands and customers, innovate and move to the market faster.
The new cost-efficient structures and processes will result in the redundancy of some employees. “While some Gillette employees will be transferred to P&G Singapore, there will be separation of some employees. We are committed to helping affected employees through competitive VRS packages, counselling and services of placement agencies.”
A significant portion of the restructuring costs will be incurred in the first two quarters of ‘06, which would impact Gillette’s financial results of those quarters. However, the savings and benefits resulting from it are expected to outweigh the costs and result in significantly higher earnings in the medium and long-term, the release said.
“Even as Gillette India stays as a separate legal entity in India, P&G’s organisational structure, distribution, systems and facilities will help increase our reach, cost efficiencies, speed to market and our current growth momentum,” Mr Ahmed added.
