Price rises and cuts have both gathered momentum among major consumer product companies. While the rationale for price rises are runaway input costs, cuts have come for various reasons.
Procter & Gamble (P&G), for instance, cut the price of its sanitary napkins and diapers between 3 per cent and 15 per cent last month, in response to a 9 per cent reduction in excise duty announced during the 2011-12 Union Budget.
But this wasn’t the only category where it slashed prices. Since April 1, the firm has begun sales promotion of its Head & Shoulders brand of shampoo. Prices have been revised downwards by Rs 10 on its 90 ml, by Rs 20 on its 200 ml and by Rs 35 on its 400 ml bottles, respectively. Channel sources describe this as a “temporary reduction in price”. “There is no price cut on Pantene (another brand),” they say. “This is merely an offer on Head & Shoulders.”
A mail to P&G, seeking a response on the time frame of this particular offer, elicited no response till the time of going to press.
It’s also raised prices. On April 1, it again took up prices of its Tide Plus detergent by five per cent. A one-kg pack now costs Rs 74 from Rs 70 earlier, while a 500g pack has moved to Rs 35 from Rs 34 earlier. P&G’s move follows intense pricing action in detergents in recent months. In February, arch rival Hindustan Unilever (HUL) took up the price of its one-kg pack of Rin from Rs 54 to Rs 58. This followed P&G’s move to increase the price of Tide from Rs 56 to Rs 63.
While input cost pressures compelled the two to take up prices, there is no denying the timing of their response to each other, say analysts. In a recent interaction with media at the Mumbai headquarters of HUL, Unilever’s global chief executive, Paul Polman, said the firm would take the necessary steps needed to defend market share. “We are not going to be silent and let such companies take away half of our business through short-term pricing strategies. So, we will do what it takes to protect our business,” Polman had said.
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In detergents, HUL has a 37-38 per cent share, while P&G has a 12-13 per cent market share. In shampoos, HUL has 45-46 per cent and P&G about 24 per cent. In soaps, HUL has 44-45 per cent; Godrej Consumer Products Ltd (GCPL) has 10-11 per cent.
In January, GCPL had taken a price rise of about 3 to 5 per cent in soaps. According to Chairman Adi Godrej, there would be one more round of price rises in soaps.