Henkel, Nirma refuse to join detergents price war

Henkel Spic and Nirma have refused to join the price war triggered by market leader Hindustan Lever and Procter & Gamble in the Rs 4,000 crore detergents market. Both the companies said they would not like to slash the prices of their products for the time being.

HLL has cut the price of Surf Excel 500 gram package sharply to Rs 50 from Rs 70 while Surf Excel Blue 500 gm pack price has been slashed to Rs 38 from Rs 50.

Earlier, P&G had cut prices of 500 gram Ariel pack to Rs 50 (Rs 70). In case of Tide, the price was cut to Rs 23 (Rs 43).

HLL dealers said the company may have to slash prices of its other detergent brands as well. However, the company officials were not available for comment.

Surf Excel Blue is now priced lower than HLL's other power brand Rin. Rin Supreme is priced at Rs 40, Rin Shakti (Rs 20), Wheel Active (Rs 13) for 500 gram packs. Wheel is HLL's largest brand with a turnover of around Rs 1,000 crore.

A Nirma executive said: "There won't be any immediate price cuts from our side. We are not worried about the price cuts undertaken by HLL and P&G, as our product falls in another segment." Nirma is priced at just Rs 19 per kg.

Satish Kumar, managing director of Henkel Spic, told Business Standard: "There will not be any knee-jerk reaction from us. We would continue to give good quality products at the present price."

He added that if due to improvement in operational efficiency the company can pass some price reduction to the consumer it would do so. But he refused to quantify the possible cut or the timeframe for such price cuts.

Henko and Mr White, two leading brands from Henkel, are priced at Rs 42 and Rs 21, respectively, for 500 gram packs.

Satish Kumar said that the recent price cuts by Hind Lever and P&G might result in volume increase but it may not really result in any value increase.

The price cut by the two leading players might bring some volume back to the market that has been de-growing for the last 18 months.

According to analysts, the washing powder market declined 3 per cent last year, while the market for detergent cakes fell 6 per cent. Henkel is not intimidated by the price cuts resorted by competitors.

"We have our own loyal customers whom we think will continue to buy our brands," Satish Kumar said.

Rs 100 cr bill for HLL?

HLL is likely to take a hit of over Rs 100 crore on its bottomline, analysts tracking the FMCG sector said. In calendar year 2003, detergents and soaps contributed Rs 4,379 crore to HLL's turnover of Rs 10,000 crore.

The hit is the fallout of the price war on the detergents market turf.

HLL executives declined to comment on this. In calendar year 2003, HLL's margins in the soaps and detergents business fell by 100 basis points owing to increased competition. The current price cuts will have an even more severe impact on margins, say analysts.

The HLL share price lost nine per cent over the last two trading sessions to close at Rs 158 on the BSE yesterday.