The Hindu Business Line : Price war in detergents: What's in store for players?

While P&G India announced aggressive price cuts for its brands Ariel and Tide, HLL, retail sources say, has been forced to follow suit. The price of Surf Excel, its premium detergent positioned against Ariel, will be slashed from Rs 130 a kg to Rs 99, to match Ariel's price.

The price of Surf Blue, its mid-price detergent powder, sources say, will be cut to Rs 60 a kg from Rs 85, still higher than Tide's new price of Rs 46 a kg.

The third large player in the market, Henkel Spic Ltd, is, according to a company official, watching the situation and does not intend to announce price cuts immediately. Says this official: "Price cuts can mean an expansion of the market, but there may not be value growth for detergents." Mr Raghu Pillai, President, Retail, RPG, said, "It's a mature category in urban India, so growth should come from semi-urban areas. Smaller players will be under pressure."

According to P&G officials, the entire price reduction exercise is aimed at upgrading consumers in the Rs 4,000-crore detergents market. The company is hoping that its volume growth will offset the percentage margin drop for its brands. It insists that its profits will remain the same.

Mr Rahul Malhotra, Country Marketing Manager, P&G, India, refrained from a comment on the absolute profit margins, although he claims there will be no change in the trade margins.

However, analysts and retailers say that the aggressive price cuts by P&G could be part of a greater gameplan. As Mr Nikhil Vora, Vice-President, Research, SSKI Securities, points out that this move is intended more to drag market leader HLL into a price war and bruise its margins, than to capture any significant market share gains. "Once that is done, P&G would try to consolidate its position further," he added.

P&G has a mere 5 per cent share of the detergent market, which HLL dominates with a share of 40 per cent. A Chennai-based retailer, who sells large volumes of brands from both companies, says that P&G's products are perceived as superior to HLL's so the latter will be forced to match P&G's moves. Once HLL's profitability is hit, then P&G can choose to come in strongly. "This is a guerrilla tactic; I won't be surprised if they try this in other categories like shampoos," he said.

Agrees SSKI's Mr Vora, "P&G has done nothing to expand its distribution reach. Its high decibel advertising will force HLL to cut prices and reduce profitability in the segment. That done, we suspect P&G would look to build its sales and distribution to consolidate initial gains."

Mr R. Subramaniam of discount chain Subhiksha believes that detergents are over-priced. He points to Ariel sachets of 20 gm being sold at Rs 1.50 a sachet, which works out to Rs 75 a kg, still less than the Rs 99-a kg P&G charges now. "Ariel used to sell for Rs 155 a kg in December 2002, now it's less than half the price!" Points out Mr K. Radhakrishnan, Vice-President, FoodWorld Supermarkets: "Consumers have reason to be happy; a one kg pack of Surf used to cost Rs 48 in 1991; it's coming back to those levels."

More Stories on : Soaps & Detergents | Trends

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Price war in detergents: What's in store for players?

MFs, agents still don't see eye-to-eye on service tax

GM to buy Daewoo assembly assets — Production of mini-car Chevrolet Spark to begin next year

ONGC: Shourie sees no legal hitch in participatory notes

Rs 680-750 band for ONGC; 5% discount for retail investors

ICICI Bank lures insurance VRS optees for deposits

SEBI bars Cyberspace promoters' associate

Govt to float co for circular train in South