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HLL plans backward integration to slash raw material costs
Namrata Singh
Mumbai, July 31: In a move aimed at becoming more competitive in the coconut hair oils market, fast-moving consumer goods major Hindustan Lever (HLL) is planning backward integration to bring down its raw material cost. HLL officials told The Financial Express that since coconut oil is a very different category compared to others, the sourcing and pricing of raw materials is the key to competitiveness. HLL is thus exploring various options of backward integration, officials said. This is in order to cut costs and gain a competitive edge in the market. The existing player and leader in branded coconut hair oils, Marico Industries, has a well established system of raw material procurement.HLL is looking at either entering into an alliance for procuring raw materials (copra) or executing the task on its own. This is expected to lead to sufficient optimisation of supply chain costs. However, the company does not intend to set up its own manufacturing unit for producing its coconut hair oil brands, the officials said. Coconut hair oils is a fairly new area for the multinational - HLL has assumed aggressiveness in marketing coconut hair oils only in the last two-three years. According to industry analysts, backward integration in coconut hair oils will be the key to HLL's growth. Marico Industries, one of the oldest players in this area, commands a strong hold on copra sourcing, as its key strength is long term commodity sourcing relationships. Further, Marico's low cost manufacturing base combined with the nature of its products are strategic in a competitive industry. Copyright © 2000 Indian Express Newspapers (Bombay) Ltd.
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