Posted in Marketing & Strategy Articles, Total Reads: 11151
, Published on 03 June 2011
Rumors are in the air that FMCG Giant Procter and Gamble is in talks to acquire its arch rival giant Unilever in a global takeover. They have even made an offer for 38 billion pounds. If this happens, this will be the mother of all acquisitions.
The FMCG market will go for a toss. Two behemoths who were the biggest quoted arch rivals would no longer be competitors. They will be working together or may be under a single brand name-P&G.
After this news became public, the share prices of Unilever started to rise. This means the market wants deal to go through.
Let’s assume P&G has acquired Unilever. What would be the various implications of it?
It’s said that competition in the market is very important for the good of the market and the consumer and when the industry under question is FMCG, the saying becomes even more relevant. FMCG is one sector which keeps buzzing in any phase. Recession or not, people eat, people wash, people wear.
Now if P&G acquires Unilever, will it affect the customer? Yes and no
No, if the brands are not affected. The people would still get to buy all their favorite brands and products governed by natural market forces of supply and demand. A person who prefers Surf Excel over Ariel can go ahead and buy it.
But the problem will start if P&G goes for a strategy in which acquirer kills the competitor brands simply by acquiring. Similar to what Coca Cola did to Gold Spot and Citra when they acquired Parle in India. They even nearly killed Thums Up but due to consumer’s demand, it rose from the ashes.
Will killing brands is something which would be on the list?
It’s said that Unilever is very good in distribution and logistics, that’s one of the reasons P&G is looking to acquire them. So this means that P&G would be using the existing network of Unilever for some of its products. Does this also mean that the existing distributors of P&G might go out of deals and eventually work?
How will the present competitors react to it ?
if this deal goes through, Colgate Palmolive, Reckitt Benckiser (RB), Johnson and Johnson, Kimberly Clark, ITC, Marico who had these two competitors will have one but huge FMCG competitor which will take up most of the market share. How will they make their next moves ? If you divide the market as per the brands, there should not be an issue. All the brands would still be competing with each other.
This deal has more financial implications than the marketing ones. The brands would still be available to the customers until P&G decides otherwise. One issue can be the consolidation of such huge entities. Both the companies have huge presence in all the major markets through operations and branches. So consolidating each and every entity, respecting all the rules of the host country, will a huge task for this deal to complete.
One more implications is on the jobs front. Would such an acquisition trigger Layoffs on either side. This is very common on the technology front (Oracle is often accused of this). If P&G keeps the all the Unilever brands, then it should not be an issue but if P&G decides to kill few of them , what about the people working on it ?
For fresh MBA and commerce grads, these giants provided two dream companies, now it comes down to one. Will P&G after acquisition hire double the people taking in to consideration Unilever? We hope so , rest time will tell.
Lets see whether the mother of all acquisitions goes thorugh or not.
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