Nearly four months after the first price cuts were announced by Hindustan Lever and Procter & Gamble, Dabur India Ltd has decided to cut Vatika shampoo prices by 20 per cent from next month besides launching the brand in one-rupee sachets to gain volumes.
Not to be left behind, LG Care has unveiled smaller SKUs (stock keeping units) beginning with the 60 ml pack size priced at Rs 39. The company has also indicated that it will introduce shampoo in sachets over the next few months.
P&G has taken the celebrity endorsement route by signing on Bollywood actress Preity Zinta to endorse `Head & Shoulders'.
Asked whether the decision to slash prices of Vatika shampoo has been taken in response to competitive pressures, the CEO of Dabur India Ltd, Mr Sunil Duggal, told Business Line: "The decision to cut prices was carefully planned, taking into account the competitive landscape, product costing and our own brand strategy".
He said after prices are reduced next month, 100 ml Vatika at Rs 38 would be comparable to the same pack size for HLL's Sunsilk. On why the company has decided to enter the one-rupee sachet segment, he said this was being done to gain deeper penetration in rural markets. "We expect volumes to double in the rural market.''
The company is eyeing 20 per cent volume growth due to the price correction even when it has decided against any price correction in the Anmol shampoo brand.
LG Care's Associate Vice-President (Marketing and Sales Planning), Mr K.V. Augustine, said the company will review its pricing initiatives in the next three months. "However, we will continue to introduce smaller SKUs in different products to gain volumes and initiate trials. We are also working on launching shampoo sachets."
Ruling out any further price corrections, analyst with SSKI Securities, Mr Nikhil Vora said despite price cuts shampoos are unlikely to witness any significant value growth over the next few quarters.
"Already, there is a mismatch between volume and value growth. HLL witnessed volume growth of 40 per cent in the quarter ended June 2004 but value growth was a mere 2 per cent. Dabur's price initiative is clearly a reaction since it failed to gain incremental market share," he said.
An HLL spokesperson said the cornerstones of its pricing strategy have been bottle price reduction, value improvement of sachets and driving new price points. He said the company's value market share fell to 49.4 per cent in the last quarter from 51.3 per cent in the March quarter because of pricing decisions.
Clearly, companies are looking at sustained volume growth at the cost of value in the long run in shampoos.