FMCG market leaders feel the heat

Market leaders in the domestic consumer goods segment are increasingly feeling the heat in categories ranging from wafers to toothbrushes. Reason: the number-two ranked players are inching closer and occasionally upstaging the numero uno.

In the Rs 3,950 crore packaged tea segment, Tata Tea has been steadily inching up to play catch up with market leader Hindustan Unilever, which dominates the market with its Brooke Bond and Lipton brands. Over the years, Tata Tea has been steadily closing in. In 2002, HUL had a volume market share of 26 per cent. At the end of 2006, HUL's share has dropped to 22 per cent. At the same time, Tata Tea's market share climbed from 16 per cent to 18 per cent. The latest market share figures of research agency AC Nielsen show for the first time ever that Tata Tea has managed to edge out HUL in June, with a market share of 19.2 per cent compared with HUL's 18.6 percent.

The story is also being repeated elsewhere. In the Rs 4,800 crore fabric wash segment, India's largest consumer goods company Hindustan Unilever's fabric wash brand Rin Advanced has been overtaken by P&G's detergent brand Tide. At present, Tide has a value market share of 7.5 per cent, while Rin Advanced is at 5 per cent.

In 2003, three years after its India launch, Tide had a paltry 0.7 per cent market share. In comparison, Rin Advanced, which is the relaunched version of Rin Shakti in 2004, had a market share in excess of 6.6 per cent three years ago. In the Rs 644 crore toothbrush category, Oral-B is rubbing shoulders with market leader Pepsodent with a 15 per cent market share. In the latest retail audit, Pepsodent's share is marginally lower.

Market observers attribute this trend to customers who are more willing to experiment. "Consumers tend to play safe and not shift loyalties with products that directly affect their body, like food or skin lotions. But in other categories, consumers are now willing to experiment and shift their brand loyalty towards products that offer higher value for money," said an analyst.

The change is also attributed to consistent focus on specific segments within bigger categories, price wars, aggressive advertising and discounts. Says analyst Hemant Patel of ENAM, "P&G's Tide has definitely benefitted from the price war that it launched in the past. In such a scenario, the companies generally forgo short-term profits to gain an edge over the competition." But another industry watcher adds, "To be fair, Tide has captured markets only in major metros, while Rin is still well entrenched in rural markets." Others suspect that a part of the Rin customer franchise would have migrated to the company's other detergent brand Surf. Recently, HUL had migrated Rin Supreme bar to the Surf Excel umbrella. When asked about competitors eating into market share, HUL Chairman Harish Manwani said, "We have many brands in the fabric wash category. Hence if the whole category is seen, we are ahead in terms of market share."

ASK senior research analyst Avinash Wadhwa adds, "Sometimes market shares change because of serendipitous events. But when companies maintain focus on a target segment for a long time, they gain competency and attract market share. Considering the case of Tata Tea, its core competency is tea, whereas HUL has a very large product portfolio, making growth difficult for the company across the board."