As tariffs loom, Gillette-razor maker P&G sourcing more steel from India

Jindal Stainless

05/12/2024 11:00

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      P&G buying more steel from Indian manufacturer Jindal-data
    

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      Move could offset costs if Trump imposes steel tariffs
    

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      P&G shifting away from Japanese, Swedish
manufacturers-data
    

  
    By Jessica DiNapoli and Richa Naidu
       NEW YORK, Dec 5 (Reuters) - Procter & Gamble  PG.N  has
overhauled its supply chain for the tiny, extra-thin strips of
stainless steel in its Gillette razors to source from India, a
move expected to help protect its margins from any tariffs U.S.
President-Elect Donald Trump may impose.
    The stainless steel the Gillette-brand razor maker uses is
highly specialized to prevent nicks and cuts and is only
produced in large quantities by a handful of companies, none of
which are located in the U.S., P&G has told the U.S. Commerce
Department in public filings.
    A Reuters analysis of import records over the past four
years shows that P&G has shifted where it buys the stainless
steel for its top grooming brands in the United States, its
biggest market, to a cheaper Indian manufacturer, a move that
may help it offset higher costs in Trump's second term. 
    The Cincinnati-based company now primarily obtains the steel
for Gillette from New Delhi-based Jindal Stainless,  JIST.NS 
according to the U.S. import records for P&G subsidiaries,
including Gillette.
    Investors view P&G as a top operator in the competitive
consumer products industry, with its margins exceeding those of
rivals like Kimberly-Clark.  KMB.N  
    It's a pattern P&G hopes to keep after Trump takes office in
early 2025. During his first term, P&G faced $1.4 billion in
external costs including tariffs that ate into profits.
    A P&G spokesperson confirmed that the company has worked
with Jindal, adding that details of its relationships with
business partners are competitively sensitive. A spokesperson
added that "it would not be accurate to point to cost as the
sole driver of any sourcing decision."
    Previously P&G bought mostly pricier Japanese and Swedish
steel for Gillette, according to the import records, provided
exclusively to Reuters by ImportYeti. Hefty tariffs during
Trump's first term added to the costs of Japanese and Swedish
steel, although P&G eventually secured an exemption from them.
    Trump, who has said "tariff" is his favorite word, has
pitched a fresh roster of tariffs, targeting China, Mexico and
Canada, putting consumer-product makers on the defensive. 
    P&G's Chief Financial Officer Andre Schulten said during
meetings with investors on November 21 that the company will
have to adjust its supply chain as it sees how Trump implements
tariffs. Despite years of underperformance, recent strategies to
improve its grooming business have been working, the division's
CEO, Gary Coombe, said.
    Making steel for shaving razors is labor-intensive, giving
Indian manufacturers an edge on cost, said Markus Moll, managing
director at Steel & Metals Market Research, an independent
market research company. He estimates Jindal's steel is about
20-25% cheaper than competitors.
    He added that Jindal has been manufacturing the material for
about 15 to 20 years for Indian clients. 
    Jindal, which says it is the world's biggest maker of
stainless steel for razor blades, has mainly supplied non-U.S.
markets, an industry executive not permitted to speak to the
media, said. Although Jindal has long had a relationship with
P&G, P&G's imports from Jindal to the U.S. began in 2022,
according to the records from ImportYeti, which compiles bills
of lading. P&G imported at least 4,283,569 kilograms (4,721 U.S.
tons) of stainless steel from Jindal over the past 36 months,
according to the data.
    Jindal did not comment specifically on the steel used in
razor blades, P&G or its Gillette razors. Abhyuday Jindal,
managing director of Jindal Stainless, said in a statement that
the manufacturer works with its customers to "create value in
their business and using pricing as a lever is our last
priority."
    Earlier this year, P&G said Jindal was a top supplier that
"consistently performed at high levels," according to an
internal company blog. The P&G spokesperson said that P&G
constantly seeks new suppliers globally that can meet its needs,
and that very few do. P&G has not made any substantive changes
to its core suppliers, the spokesperson said. 
    According to the data reviewed by Reuters, P&G has cut back
on its imports from Japan's Proterial and Sweden's Alleima
 ALLEI.ST . In this year through October, its imports from
Proterial were nearly 59% less than in 2023, while P&G has
received no steel shipments from Alleima this year, the data
shows.
    Gillette has been working with Proterial for more than 50
years, and Alleima for over 20, according to filings with the
U.S. Commerce Department.
    Alleima did not respond to requests for comment. Proterial
declined to comment.
    Grooming, P&G's smallest business by revenue, has faced
years of struggles. During the pandemic, sales declined as men
grew beards and shaved less. Before that, start-ups like Dollar
Shave Club and Harry's were able to grab valuable market share
from pricier Gillette. A four-pack of Gillette Labs Men's Razor
Blade refills sells for nearly $29 at  TGT.N  Target.com,
according to the retailer's website.

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
P&G's Gillette growing reliance on Indian stainless steel    https://reut.rs/4htfpVA
P&G's gross, operating and net margins    https://reut.rs/3OeSrE7
Top importers of stainless steel to the United States    https://reut.rs/3BaXqTv
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 (Reporting by Jessica DiNapoli in New York and Richa Naidu in
London; Editing by Vanessa O'Connell and Anna Driver)
 ((richa.naidu@tr.com; Follow me on X https://twitter.com/Richa_Writes;
 +44 755 755 9587;))