Gethin Chamberlain, in Mumbai, for The Observer, 13 June 2010
Workers at a factory in India have been paid just 26p an hour to make perfume bottles for England World Cup sponsor Umbro and the glamour model Katie Price, better known as Jordan.
An Observer investigation found that the 7,000 employees at the factory in Gujarat are rewarded with a basic wage that is below even the minimum expected in India, and is just half the estimated minimum living wage.
The average take-home pay of 141 rupees, about £2.05 per day, would barely even cover the cost of buying food, according to one recent study of the Indian market, where inflation is currently running at 10%. The firm, Pragati Glass, was approached three years ago by Price’s representatives and was contracted to produce 300,000 bottles. Marketed under the name “Stunning”, the first perfume she launched sells in Superdrug for £19.99 for a 50ml bottle.
Pragati also manufactured the bottles for Price’s second perfume, Besotted, which also sells for £19.99 for a 50ml bottle. The scents were an instant success and, in a UK perfume market estimated to be worth about £640m, they further boosted Price’s already swelling coffers. She is estimated to be worth £30m, thanks to a range of business interests that also includes her bestselling books and jewellery.
Pragati’s factory is in Kosamba in the state of Gujarat, where nearly one third of the population live below the national poverty level. There, according to Dinesh Gupta, managing director of Pragati Glass, employees are paid a basic wage equivalent to £1.75 per day for an eight-hour shift, with an additional 31p from the government bringing the wage up to what he says is the legal minimum of 141 rupees (£2.05).
This does not appear to be correct. Official figures do not list glass workers in Gujarat as a unique category, as they do in some states such as Maharashtra where the firm is based and where the minimum wage for an unskilled glass worker works out as £2.45 per day, rising to £2.55 for a skilled worker. But the minimum wage for an unskilled worker involved in a manufacturing process in Gujarat is listed as £2.25, rising to £2.40 for a skilled worker. Gupta insists that the company has done nothing wrong and that it is paying the minimum wage. When it was put to him again on Friday that 141 rupees is below the minimum wage, he refused to comment other than to deny any wrongdoing.
The perfume itself is often the cheapest part of the package, accounting for as little as 3% of the overall cost for the cheaper fragrances, according to one industry estimate. Packaging and marketing make up a far larger proportion of the cost to the manufacturer, but the potential to make money should not be underestimated: the profit margin on a celebrity perfume can be as high as 95%.
Even with such colossal margins some businesses are determined to keep costs to a minimum. India offers that opportunity. Price’s people were quoted £113 for 1,000 bottles. For the complete boxed and bottled package they were charged £342 for 1,000 bottles – 34p each.
In a small room in Pragati’s offices in Mumbai, Stephen Noronha, the vice-president in charge of export, showed off a room in which the walls were lined with cabinets full of hundreds of bottles produced by the company. Holding two empty bottles produced for Price’s perfume, he explained they were made in the Gujarat factory, while the stoppers were made in Mumbai.
He said his company also handled the packaging and filled the bottles with perfume supplied to them. The original order was placed by Bob Coleman, a perfume tycoon who used Pragati to produce a perfume for the late reality TV star Jade Goody.
The firm produced more than 300,000 bottles for her perfume, Shh. Goody, who died last year, visited the factory in 2006, but production ended after the racism row that erupted following comments she made on the Celebrity Big Brother programme to the Indian Bollywood star Shilpa Shetty. Coleman, who also launched a perfume for Jordan’s ex-husband Peter André, died last year.
Last night a spokesman for Price said: “The manufacturers of Katie’s perfumes insist that at least the minimum ethical trading policies are met and in many cases they are exceeded. They take the report of the minimum wage not being met very seriously and will take it upon themselves to investigate these reports further.”
He said the “ethical production of the manufacturing and selling of Katie Price’s perfume was of paramount importance to her”, adding that “all products manufactured by Katie Price have a checking policy that ensures health, safety and ethical trading guidelines are met or in most cases exceeded and any third parties working with Katie are made to meet the same standards”.
Although many of the other bottles Noronha displayed were for relatively unknown brands, a couple of names were more familiar. Noronha pulled out a small clear glass bottle, embossed with the Umbro logo. He said the company had won a contract to produce bottles for the England sponsor, which sells a range of branded fragrances, including eau de toilette spray. Most are in the budget category and retail for about £1.50.
Last night Umbro, which is owned by Nike, said it had ended any relationship with Pragati. A spokeswoman explained that a licensee had subcontracted the work to another company, Aroma de France, based in India, which in turn had subcontracted it to Pragati Glass.
She said that at no point was Umbro aware that Pragati was the subcontractor. She explained that, when Umbro was bought by Nike two years ago, new and stricter rules were introduced on suppliers, and when the licensee revealed it was subcontracting an audit was ordered, which had revealed that the company was out of step with Umbro’s code of conduct.
In January, she said, the contract was terminated because “the high compliance standards we demand from our suppliers were not being met despite endeavours to improve the situation”. The company has since moved its production operations to China.
Noronha also produced a bottle embossed with the name of Encona, the UK spicy sauce producers. George Phillips, commercial director of Enco Products, confirmed that the company had approached Pragati Glass and had visited its factory to investigate the possibility of using its services but had not reached the stage of conducting due diligence, which it would do with any company before entering into a contract. He said that Pragati had produced a mould for a bottle, but no decision had yet been taken on whether to proceed. He stressed that his company was not a regular client of Pragati and added that any suggestion of underpaying workers would be a matter of “grave concern”.
Last year an in-depth study by the Ambekar Institute for Labour Studies in Mumbai examined the cost of living in India for industrial workers. The monthly living wage in Gujarat, the study concluded, was 6,757 rupees (£98).
A Pragati worker putting in six days a week at the factory earns the equivalen of £49 per month. Food costs alone would consume all but £1.22 of that. Last night anti-poverty campaigners said it was unacceptable for western companies to cut costs by using subcontractors who pay low wages to workers in the developing world.
Dominic Eagleton, policy officer for ActionAid, said: “A bad job is better than no job at all, but by paying such low wages employers are keeping workers trapped in poverty rather than helping them escape it.
“Rather than driving down prices at every opportunity, British companies should pay a fair price to their suppliers in India and should make sure these suppliers pay a decent wage. Anything else is profiting from other people’s dire poverty.”