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Price war over, FMCG prices may be nearing stabilisation

03-June-2004
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Price war over, FMCG prices may be nearing stabilisation

After months of price wars, the FMCG war horses seem to have had enough of fighting. Price cutting has its own limits and beyond a point the players have to look at protecting their margins too. SSKI Securities VP Nikhil Vora said that although some realignment can be seen, FMCG prices are likely to reach stabilisation at the present levels, which are normative. Substantial price cuts have already been seen in segments like shampoos and detergents.

The issue arises in light of the recent 15 per cent price cuts in shampoo brands of Hindustan Lever (HLL), a fact confirmed by the company’s spokesperson. The spokesperson added that the information about price cuts and smaller pack sizes, along with new stocks, is on its way to the distributors and dealers. But given the size of the market, it cannot be completed in one go.

Mr Vora said that the price wars in shampoo segment had been initiated by both the leading players and he was not surprised by the recent 15 per cent cuts. Pack size, for instance, whether 125 ml or 100 ml, does not matter in this segment, added Mr Vora.

Procter & Gamble (P&G) officials, when contacted for a possible reaction on the price cuts by their arch rival, HLL, declined to comment. On asked whether P&G would react with price cuts or bring some new offer/scheme, the officials added that they will not speculate on the future course of action based on competition. They declined to reveal any plans on agenda.

Sources at a distributor of P&G said that P&G may react by strengthening its marketing strategy. It is likely that the company may take the wait-and-watch route. They also felt that pack sizes do not matter, while pricing does have an effect on the consumer’s decision. They added that Pantene from P&G is a quality product with different attributes and is above the competition with a different set of users. Moreover, many HLL dealers are yet to get the new stocks and it will be a while before the effects can be seen.

A re-distribution stockist of HLL reiterated that he is yet to receive the new stocks from HLL. He was not aware of the new development at the time of contacting and could not comment at this stage on the likely fallout of the same in terms of more sales or market share.

Sources from a leading FMCG company agreed to the fact that the margins need to be taken care off, henceforth. However, if one player goes ahead with price cuts, the rival will have to follow suit. Nevertheless, in segments like shampoo, toothpaste, etc, a lot of action has already been seen and prices are unlikely to fall substantially in future.

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