New Delhi: Battling declining volumes and loss in market share over the past six quarters, the country’s largest consumer goods company by sales Hindustan Unilever Ltd (HUL) has begun a damage control exercise that includes cutting prices, increasing grammage, running attractive promotions and boosting advertising spending.
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These moves could mean the firm will focus on protecting market share rather than margins in a slowing economy. “We have begun to see the pressure of downtrading...between competitive growth and profitable growth, the attention would be won by competitive growth,” HUL chairman Harish Manwani said at an analyst conference on Monday.
Downtrading is the process through which consumers shift to cheaper brands, especially in times of economic trouble.
In the same conference call with equity analysts, Nitin Paranjpe, managing director and CEO of HUL, said the company has put in place a strategy to identify areas of concern and take corrective action. “We are working internally to improve competitiveness and (have) put 30-60 day plans in place,” he said.
The company that owns market leading brands such as Lux, Wheel, Clinic, Close-Up, Lifebuoy and Sunsilk has identified “right pricing” as a primary tool to increase its competitiveness in a market where most of its brands were losing customers to their rivals. The loss in market share was a result of a steep average 15% price increase undertaken by HUL across product categories in the last 18 months
Identify concerns: Managing director and CEO of HUL Nitin Paranjpe. Ashesh Shah / Mint
“...right pricing across segments will be the key...We are determined to make sure that we are ‘right priced’”, said Paranjpe.
Though most consumer goods companies increased product prices during the past two years to fight rising input prices, analysts say HUL’s price increases were the steepest. “In case of soaps, the company hiked prices much before and more than the competition,” said Sameer Deshmukh, an analyst with Mumbai-based brokerage Tata Securities Ltd.
Some of HUL’s rivals such as Godrej Consumer Products Ltd, Dabur India Ltd and Wipro Ltd did not resort to any price increases. A report by Mint on 7 May had noted that HUL lost market share in terms of value across key categories, including soaps, shampoos, toothpastes and skin creams, even as the broader market expanded. The decline, ranging from 2-6 percentage points, was mainly because consumers switched to cheaper products made by the rivals even as HUL increased prices.
Talking to analysts, Paranjpe admitted that consumers were trading its brands in favour of cheaper products and underscored the steps the company will take to check the trend. “We have begun to see the pressure of downtrading...to regain consumer confidence, it takes lot of interventions such as pricing, promotion and others to drive consumption,” he said.