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P&G may not respond to HLL cuts

18-March-2004
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P&G may not respond to HLL cuts

In the battle for market share or mind share, Procter & Gamble (P&G) has done the unexpected. Informed sources said that P&G is not reacting to Hindustan Lever’s (HLL) move to offer one shampoo free on the purchase Sunsilk/ Clinic Plus, and is thus not reducing prices immediately.

P&G, sources said, sees the move as temporary and thus will continue to follow the strategy of offering superior value to the consumer. In effect, P&G has cold shouldered HLL’s move and has evaded a price war in shampoos. Analysts are, however, surprised by this move as they feel it contradicts common sense expectations.

The company imports most of its shampoo products. With the strengthening of the rupee and reduction in import duties, P&G has greatly benefited with cost savings. Thus, it was expected that it would slash the prices and share the benefit with consumers.

HLL is likely to lose more in this war due to pressure on its profitability, in spite of the spurt in volumes. Analysts believe that the ongoing scheme from HLL was a result of some quick thinking from the management. At the same time, significant shift is expected from brands like Kavin Care and P&G’s Rejoice to HLL brands.

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