J&J's $85M India plant stood idle for three years after a demand miscalculation

The 2014 groundbreaking for Johnson & Johnson's plant at Penjerla, on 47 acres outside Hyderabad, was a public celebration: Telangana's chief minister hailed the foreign investment, and the company's India managing director attended. It was meant to be J&J's biggest plant in India — its third in the country — making cosmetics and baby products, and local media reported it would employ some 1,500 people. A J&J official told Business Standard in December 2016 that the $85 million plant would be operational by 2018, and said another $100 million was earmarked for expansion.

Three years after construction was completed, the facilities stood idle. An April 2017 document J&J filed with Telangana listed the products: baby oil, baby shampoo, baby lotion, face wash and creams. Reuters reported in 2019, citing two sources familiar with its India operations and a state official, that production never began because demand growth slowed: one said demonetisation — the late-2016 currency ban — and the 2017 GST were key reasons; another said the company 'miscalculated Indian market demand.' The site manager confirmed the machines sat idle; the plant had all approvals.

The demand shock was real: business surveys showed sales of products like shampoos and soaps fell more than 20% in the first month after demonetisation, and Hindustan Unilever's volume growth shrank to 7% in the quarter ended March 2019. J&J declined to respond to Reuters' questions, Modi's office did not respond, and at a tea stall outside the gate, local workers still checked in routinely for job vacancies that never materialised.

An $85M plant finished and idle for three years; a planned 1,500 jobs never created and a further $100M earmarked for an expansion that never started

J&J sized its biggest India plant on a demand forecast that assumed uninterrupted consumer spending growth.

Demonetisation and the GST rollout dented FMCG demand — shampoo and soap sales fell more than 20% in the month after demonetisation in some surveys.

Even with all approvals in hand, the company chose not to start production, leaving an $85M asset idle while 1,500 promised jobs never appeared.

Its expansion plan — another $100M earmarked — sat unused alongside the idled plant, compounding the overcommitment.

Capacity built for a forecast can outlive the forecast: when policy shocks hit consumer demand, the fixed asset remains — and a plant that never starts costs as much as one that fails later.

As of the April 2019 report the plant remained idle, with no production start announced. J&J's spokespeople in Mumbai and New Brunswick declined to answer Reuters' questions, and the state officials said they did not know why the plant had not started — 'It is unusual for such a big plant to stay idle for so long,' the pollution control board's member secretary said. Local workers kept checking for vacancies years after the groundbreaking.