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P&G kicks off sudsy war, HLL to follow suit

BS Corporate Bureau in Mumbai | March 03, 2004 09:08 IST

Procter & Gamble has decided on a revamped pricing strategy to take on rival Hindustan Lever in the Rs 500 crore (Rs 5 billion) detergent industry.

After slashing the prices of detergent sachets, the Indian arm of the Cincinnati-based transnational has now applied the same strategy to its large detergent packs.

The company has cut the prices of Ariel and Tide detergent bags by up to 50 per cent in a move to ramp up volumes.

While the price of Ariel has been slashed from Rs 70 to Rs 50 for a 500 gm pack, Tide will be available at Rs 23 for a 500 gm pack, down from Rs 43 earlier. P&G has changed its strategy of being value focused -- it is now betting big on volumes.

P&G's brands account for 11.5 per cent in value terms and 7 per cent in volume terms of the detergent market.

Hindustan Lever, the largest player in the segment, will also be following suit by cutting the prices of its detergent brands. However, HLL executives refused to comment on this issue. HLL has Surf, Rin, Wheel and Sunlight in its stable.

The detergents market has been witnessing a decline in growth in the past few quarters. Also, large detergent packs constitute over 60 per cent of the market.

Six months ago, in September 2003, P&G slashed the prices of Ariel and Tide sachets by 50 per cent in order to cover a large segment of the consumer base. The revised price of Ariel and Tide stood at Rs 1.50 and Re 1 against Rs 3 and Rs 2 earlier, respectively.

After the cut in prices of sachets, P&G claims its sales have doubled. The decision to adopt the pricing strategy was taken as P&G, through research, found out that consumers said high prices were a constraint on using Ariel and Tide regularly.

Rahul Malhotra, country marketing manager, P&G India said: "With this move, we expect that the volumes of Tide and Ariel detergent packs will grow two-fold. This initiative was possible as the company was able to achieve internal efficiencies in our distribution, manufacturing and raw material costs, coupled with the economies of scale that came from the sachet price reduction."

The detergents market is divided into the premium (Rs 80-Rs 140 per kilo), mid price (Rs 30-Rs 50 per kilo) and popular (Rs 15-Rs 25 per kilo) segments. The popular segment accounts for 80 per cent of the detergents market.

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