Procter & Gamble (P&G) will more than double the production of Tide, one of its best-selling detergent brands. The development is significant as it comes just days after a fierce advertisement war launched by its competitor Hindustan Unilever (HUL).
HUL’s Rin competes directly with Tide and the two companies are locked in a leadership battle in the Rs 10,000-crore detergent market.
In its recent announcement, P&G said it would increase Tide production by another 100,000 tonnes per annum through JHS, a contract manufacturer, in an excise-free zone in Himachal Pradesh. The company sells just about 40,000 tonnes of the Tide detergent as of now.
P&G’s move to have a buffer production capacity that is two-and-a-half times more than its current sales volume explains its aggressive growth plans and the marketing and advertising war it has waged against HUL’s mid-market detergent brand, Rin, according to industry experts.
HUL, of course, responded to P&G’s overtures with a commercial for Rin recently that openly displayed a low-priced variant of Tide – Tide Naturals – drawing comparisons between the two. The matter is currently in court.
A detailed questionnaire seeking HUL’s comments on its production plans in response to P&G’s moves remained unanswered. A company spokesperson said that such market-sensitive information cannot be shared.
The need for an open comparison between competing brands – a practice which is not very common in Indian advertising – highlights just how competitive the laundry/detergent space is today.
Says a Mumbai-based FMCG analyst: “Despite price cuts, companies are fetching more revenues from their laundry business due to the growing size of this market. The huge capacity addition by P&G suggests a more intense competition in the coming days.”
HUL is clear leader
At the moment, HUL is the clear leader in the laundry segment with P&G a distant second. But P&G has been growing steadily over the last several months, even as HUL’s pace appears to be slowing down a bit. For instance, for the quarter ended June 2009, P&G’s value share was 11.6 per cent, while rival HUL’s share stood at 36.2 per cent. Six months down the line, for the quarter ended December 2009, P&G had a value share of 16.5 per cent, while HUL’s slipped to 37.5 per cent.
In terms of production, too, HUL steals a march over rivals at the moment in the detergent segment. For the year ended March 31, 2009, HUL’s total detergent production was 1.54 million tonnes, while total sales was 1.53 million tonnes. P&G’s total detergent production, meanwhile, hovered around its sales numbers, which was 675,000 tonnes for the year ended March 31, 2009.
P&G’s production facility, which got commissioned in Himachal Pradesh recently (March 23, to be precise), enjoys the excise and income tax concessions that are available for units that begin manufacturing in the hill state before March 31.
Before this, the entire production of P&G was sourced from its own plants in Bhopal and Baddi (Himachal Pradesh).
HUL is also said to have a facility that enjoys tax exemptions in Uttarakhand, though the major product from that facility is not detergent, but soaps, say sources.
According to JHS Managing Director Nikhil Nanda, the facility will be the largest off-site plant for P&G in India. “The plant will provide employment to 400 people and will be operating at full capacity in the next two years,” he said.
The JHS facility is spread over 110,000 sq ft and is equipped to manufacture all 17 variants of Tide.
