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HLL, P&G hike prices again as costs bite

HLL, P&G hike prices again as costs bite

Author | Source: The Economic Times | Monday, Nov 28,2005 9:00 AM

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HLL, P&G hike prices again as costs bite

Consumer goods majors, HLL and P&G have hiked the prices of detergent brands, Surf Excel and Ariel by 4-5% for the second time this year to protect margins and fight cost pressures. The newly-priced packs are expected to hit the market early this week. Both companies had hiked prices in February '05, citing increasing pressures on bottomlines owing to rising raw material costs.

Analysts say the detergent majors seem confident of raising the price bar in an upbeat consumer market.

Senior HLL officials said the hike has been done on specific SKUs and not across the board. Both HLL and P&G had slashed prices by around 25-30% in March '04. P&G officials also said that the price hike is an attempt to tackle rising LAB prices.

Following the hikes, 1kg of Surf Excel will now cost around Rs 107, against Rs 103 earlier, a 4% rise, while a similar pack of Ariel will also be priced at around Rs 107.5. Prices of Liner Alkyl Benzene (LAB), one of the major ingredients in detergents, has shot up sharply over the past few months.

“LAB prices are expected to touch over Rs 100 a kg due to a global shortage of benzene (the main ingredient of LAB) this year. This will mean further pressure on detergent makers,” said an industry analyst. Both HLL and P&G have gained market share and volumes in the domestic detergents market seem to have paid off. Rough estimates available with ET show P&G with a value market share of 12%, while HLL's value market share is placed at around 38-39%.

The growth seems to be driven largely by sachets, which constitute 15-20% of the total detergents market.

The urban market has slowly been shifting towards compact detergents (detergents with dirt-removing intensive enzymes), in which HLL and P&G are fighting to prove their dominance. Surf Excel, Ariel, Tide and Henko's intense competition in this segment has come at the cost of low-end players.

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