Procter & Gamble Buys Out Remaining Hutchison
Stake In P&G China Joint Venture
Cincinnati-based Procter & Gamble has bought out
the remaining 20% stake held by Hutchison Whampao China
for US$1.8 billion to consolidate its position in the
fast-moving consumer goods (FMCG) market in China. China
is currently the sixth largest FMCG market in the world,
and is continuing to grow at a brisk pace.
Hutchison Whampao China is owned by Li Ka-shing, who
is considered to be the wealthiest person in Hong Kong.
The company is involved in diversified businesses, including
shipping, retailing and communications.
The joint venture company, P&G Hutchison Ltd., was
created in 1988 as P&G began its presence in China.
When it started, Procter & Gamble held a 69% stake
and Hutchison had 31%. In 1997, a restructuring took place
with P&G increasing its position to 80%, and adding
an option to buy out the remaining Hutchison stake between
2007 and 2017.
P&G's decision to exercise its option ahead of the
original agreement means that it would be cheaper for
the company to complete full ownership now than later.
It also means that the Chinese FMCG market is growing
quickly, and demand for the company's products, which
include Crest toothpaste and other leading brands, continues
to grow.
The fastest consumer growth in China has come in the
leading cities of Beijing, Shanghai and Guangzhou. Now,
consumer demand is beginning to build in the second-tier
cities of Wuhan, Chongqing, Jinan, Tianjin and Nanjing
as well. Most consumer product buying decisions are made
by the women in the household, and most of the buyers
get their information from TV commercials.
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