“We’ve got the scores on the board; they’ve yet to bat”. That summed up Hindustan Lever’s (HLL) first official reaction to the latest price war in detergents where the company has a 40 per cent share, while rival Procter & Gamble’s (P&G) share is four per cent of the overall market.
n an interview with FE, HLL head (marketing and consumer development) Sanjay Dube said: “There’s not going to be any blood-bath. It’s a logical marketing strategy with a longer-term gameplan.” The strategic move to drop prices of Surf Excel to widen the net to the mass consumer is a deliberate and cautious approach, according to Mr Dube.
Mr Dube, however, said there is no room for more price cuts on Surf Excel. Further, no price cuts will be taken on its other detergent brands — Rin and Wheel (claimed to be the largest laundry brand) — he added. On the contrary, the price of Rin was increased a few months ago on the brand’s upgradation in quality.
P&G announced price cuts on Ariel (500 gm) from Rs 70 to Rs 50 and on Tide (500 gm) from Rs 43 to Rs 23, on March 2. Following this, HLL immediately reduced Surf Excel’s price to match Ariel’s.
HLL, which has been quiet on the issue, said its strategy was not a reaction to P&G’s. The company pointed out that it was HLL which initiated such moves by introducing Lux at Rs five sometime back. “We were the first to reduce the price of Surf Excel in January 2003 from Rs 153 to Rs 135. Then we brought down the price of sachets from Rs three to Rs 1.50,” he said.
The company got the value equation right for Lux, Lifebuoy and Wheel, he added. “We may or may not apply this strategy across categories,” said Mr Dube.
On the reduction of margins on account of cut in Surf Excel price, he said the move would lead to higher profits and sales as volumes were expected to go up substantially. However, HLL did not commit on any volume numbers. Mr Dube said there would be both bottomline and topline growth in detergents, despite the price reductions.
The company is hopeful that the strategy will unlock growth potential for its detergent brands in a now sharper price-point detergent market where the price spectrum has compressed to three levels — premium (Rs 99), mass (Rs 40-45) and discount (Rs 20-45).