Just a week after suspending its activities in financially crippled Russia, American consumer products company Procter & Gamble announced last week it had no immediate plans to shut down its operations in similarly troubled Ukraine.
In making the announcement at a Sept. 25 press conference dedicated to the company’s fifth anniversary in Ukraine, Herbert Scmitz, Procter&Gamble’s president for Central and Eastern Europe, acknowledged that Ukraine right now is a less than perfect environment for doing business.
‘I’d be dishonest if I said this crisis does not concern us,’ Schmitz said.
Schmitz said Procter & Gamble had stopped producing, shipping and selling its products in Russia, in addition to dramatically scaling back its advertising budget. Nevertheless, he voiced hope that Russia would eventually right itself and the company would be able to resume its operations there.
While the Ukrainian crisis has also taken its toll on Procter & Gamble’s Kyiv office, Schmitz said the company is not planning to scale back its investments in Ukraine. For now, he is hoping for a rebound.
‘I hope the domino effect in neighboring countries will be limited,’ Schmitz said. He added that the healthiness of macroeconomic indicators and stability of the banking system relative to Russia, plus the government’s passing of a host of anti-crisis measures, form a basis for optimism.
Until those measures take effect, however, the company’s sales will most likely continue in the direction they have been headed over the last two months: south. Scmitz admitted sales had tailed off, but declined to provide concrete figures.
According to Qaisar Shareef, Procter & Gamble’s general manager for Ukraine, the government’s recent anti-crisis campaign has only contributed to the complexity of doing business in Ukraine.
‘It all makes doing business in Ukraine much more difficult, but not impossible,’ Shareef said. He said the company’s short-term forecasts for Ukraine are now much less optimistic than they were only two months ago.
Shareef will not be present to witness it. On Oct. 1, Christopher Delaney takes over for Shareef as country manager.
Procter & Gamble has been working in Ukraine for the last five years, and now boasts a staff of 525 employees, including 512 Ukrainian citizens. The company has invested more than $50 million in Ukraine over the last two years. Earlier this year, the company announced plans to invest another $230 million into Ukraine over the next five years.
Schmitz said the company has no immediate plans to scale back those planned investments, which will go toward manufacturing new products in Ukraine, developing the company’s distribution infrastructure, stepping up marketing and upgrading the company’s Tambrands factory in Boryspil, outside of Kyiv. The Tambrands factory is the company’s main producer of women’s hygiene products in Europe.
Schmitz said the route the company takes in Ukraine will depend on how it perceives long-term rewards. Ideally, the company is looking for investments to return within 5-10 years. If the crisis persists and this target no longer looks feasible after 3-6 months, the company may reconsider its investment policy for Ukraine.
‘It’s business. I can not give 100-percent guarantees,’ Schmitz said.
Procter & Gamble suffered a setback in March of this year when the State Standards Committee, the Ukrainian government organization charged with approving imported goods, canceled certificates covering about half of Procter & Gamble’s Ukrainian product line and ordered the company to suspend sales and advertising on the affected goods.
The Standards Committee said Procter & Gamble had failed to conduct adequate inspections of products coming into Ukraine from its plants abroad. It also said the company had come up short in acquiring the myriad certificates necessary to register certain product lines.
The ruling took Procter & Gamble products off most store’s shelves for about a week, cutting the company’s revenue by about 50 percent during that time.
The action was the most high-profile example yet of the Ukrainian government’s stiflingly complex certification procedure obstructing the operations of a major foreign investor. Foreign businessmen have long lambasted Ukraine’s byzantine system of licensing and certification.
In April, the Standards Committee accused Procter & Gamble of diluting the strength of some of its imported laundry detergents and falsely advertising others. A Procter & Gamble spokesman said all of those disputes had been fully resolved.
