Procter and Gamble Co (PG) along with Unilever Plc. (UL) has announced that they will raise prices of soap and detergent that are sold to China. This action by the two big Consumer goods giants brings to mind the challenges that the Beijing government would further face to curb inflation in the country.
China has been facing the chronic problem of inflation for over the past year. The government has been taking several steps to control the hyperinflation through several monetary and fiscal policies like raising the lending rates of banks.
Additionally, the government is also increasing the statutory reserve to be held by the banks before lending. This is to decrease liquidity in the hands of financial institutions. Many shops have reportedly sold their stock to increase supply in order to put a cap on soaring prices of essential commodities.
The shelves of shops were almost ransacked after the news of the anticipated price increase spread across the country. People went in for hoarding the detergents and soaps before the price increase could become effective.
Procter & Gamble entered Mainland China in 1988 by establishing its first joint venture – P&G (Guangzhou) Ltd., headquartered in Guangzhou. P&G China currently has operations in Guangzhou, Beijing, Shanghai, Chengdu, Tianjin, Dongguan and Nanping, and a technical center in Beijing. P&G is the largest consumer products company in China, with annual sales of over $2.5 billion.
Unilever’s history in China can be traced back 80 years, to when Lever Brothers established its first operation in Shanghai in 1923 and became the largest soap maker in the Far East. Unilever’s business in China covers two main areas; one includes major home and personal care brands like Omo, Comfort, Zhonghua, Lux, Pond’s, Clear, Dove, Hazeline and Rexona; and second covers the major food brands like Lipton, Knorrt, and Wall’s.
Procter & Gamble Co. and Unilever Plc. currently hold a Zacks #3 Rank, indicating a short-term Hold rating.
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