Market and product

Mumbai: After detergents, it’s shampoos. In a move that could spark off another price war, P&G Home Products Ltd, a subsidiary of US-based Procter & Gamble (P&G), has taken an indirect price cut of 17% on Rs 3 sachets of its Head & Shoulders and Pantene brands by increasing the content 20% at no extra cost.

“There is a limited period summer offer of 20% extra on Rs 3 sachets of our shampoo brands Pantene and Head & Shoulders. Summers are witness to more frequent hair washes and consumers need more quantities of their favourite brands,” a P&G spokesperson said in an email response.

Analysts say P&G is also planning cuts of 11-16% on Head & Shoulders bottles across all stock-keeping units (SKUs) starting next week, which would be followed by price cuts in Pantene SKUs.

Rival Hindustan Unilever Ltd (HUL) is expected to follow.

“If P&G extends the price cuts in shampoos to bottles, then HUL will react by slashing prices on its shampoo brands,” Anand Shah, FMCG analyst, Angel Broking said.

The shampoo market in India is estimated to be Rs 2,500-3,000 crore.

HUL is the leader with approximately 44% share of this market through its Sunsilk, Clinic Plus, Clinic All Clear and Dove brands.
P&G is the second-largest player, with a market share of around 25%.

However, while HUL gets 7-8% of its revenues from shampoos, P&G gets 15-17% from the category.

P&G’s market share in shampoos has remained flat in the recent times, though others like Dabur India, which sells the Vatika brand of shampoos, have seen their market share grow.

The price wars, coupled with higher input costs, could be a negative for players in the category, say analysts.

P&G’s move comes shortly after it threatened HUL’s market share in the mass-detergent segment by launching Tide Naturals, a low-cost variant of its Tide brand, and later taking a 20% price cut on detergents. HUL responded by slashing the prices of its Rin and Wheel detergents by 10-30% fearing loss of market share.

Both players aggressively communicated the price cuts, discounts and benefits of their respective detergent products through television commercials.

The two players are even fighting a court battle over each other’s detergent product claims and television commercials. HUL has been losing market share in both Rin and Wheel.

In a note to clients on Thursday, analyst Gautam Duggad of Prabhudas Liladhar said P&G’s rising ambition and aggressive growth target of taking current revenues to five times higher in five years will put pressure on HUL.

“Initiative to take price cut in shampoos, despite being a significant player in the category (about 23-24% market share, revenues of about Rs 500 crore for FY09 and YTD growth of approximately 30%) indicates P&G’s aggression and intention to build size in the category. We expect more such initiatives in the near term in various categories where P&G is already present,” Duggad said in the note.

(Source: www.dnaindia.com)