New Delhi: India’s largest consumer products company by sales, Hindustan Unilever Ltd (HUL), is steadily losing market share by value in segments including soaps, hair, oral and skin care as economic growth slows and competition increases.
HUL’s decline, which extends to its volume growth in a still expanding market for personal care products, is a signal that consumers are switching to cheaper products made by either HUL itself or its rivals as household budgets tighten.
“HUL’s products are non-discretionary but down-trading is likely as was the case during the drought years of 2002-2003,” Merrill Lynch and Co. said in a report that cited falling employment in Tier-II cities and an uncertain economic outlook as key concern.
Buffeted by high borrowing costs and a credit crunch, India’s economy grew 7.6% in the quarter ended September, the slowest pace in 15 quarters, down from 9.3% a year earlier and 7.9% the previous quarter. Consumer sentiment has also been hit by a stock market plunge, job layoffs and a freeze in recruitment in sunrise sectors such as aviation and information technology.
To be sure, HUL, which boasts that it touches the lives of two out of three Indians every day, still remains the market leader in the personal care segment by a wide margin and analysts say the share slide is of limited significance. “It is not a big concern for a market leader such as HUL,” said Anand Shah, analyst at Mumbai-based brokerage Angel Broking Ltd. “Some percentage point decline in a few categories does not really matter.”
Still, it shows competition is beginning to make a dent in an expanding market even as economic growth slows.
HUL saw the share of its soap brands such as Dove, Lux, Hamam and Breeze dip by value to 50.3% in the September quarter, from 53.2% a year earlier, according to market research firm AC Nielsen. Market share slipped from 52.7% at the end of June.
The soaps market recorded sales of Rs 1,989 crore in the second quarter this fiscal. Godrej Consumer Products Ltd, or GCPL, whose soaps include Godrej No. 1, Cinthol and Fair Glow, was stood second with a market share of 9.47%, followed by Wipro Consumer Care Ltd’s 8.34%, according to AC Nielsen.
Stacked shelves: Cosmetic products in a New Delhi store. The downturn has not touched this segment. Madhu Kapparath / Mint
In shampoos, the market share of HUL brands like Clinic Plus, Sunsilk and Dove declined to 46.1% in the quarter ended September, from 47.7% a year earlier and 46.5% in June this year.
The shampoo market recorded sales of Rs650 crore in the September quarter, AC Nielsen said. Procter and Gamble Co. brands such as Head&Shoulders and Pantene had a share of 23.86% followed by Chennai-based CavinKare Pvt. Ltd, maker of Chik, Chik Satin and Nyle Herbal shampoos, with 11.34%.
In toothpastes, HUL’s share with brands such as Closeup and Pepsodent fell slightly to 29.6% as of September-end, from 30% a year earlier, which was unchanged at the end of June 2008.
In this category, Colgate Palmolive (India) Ltd was the leader with 48.7% of the total market, while Dabur India Ltd had a 9.19 % share with brands such as Babool, Meswak and Dabur Red. The toothpaste market had sales of Rs800 crore in September quarter.
Besides market share, the company’s volume growth has also declined by around three percentage points in the quarter ended September, compared with the first quarter. “HUL’s volume growth has been slowing down from 10% in March quarter to 7% in September quarter in response to rising prices,” the Merrill Lynch report said. “Despite stabilizing retail prices, the macro environment is not favourable enough to suggest that volume acceleration is likely near term.”
In skin creams, HUL’s share with brands such as Pond’s, Vaseline and Fair & Lovely dipped to 52.7% in the quarter ended September from 55% a year ago and 53.4% in June. L’Oreal India Pvt. Ltd, Proctor & Gamble, Emami Ltd and CavinKare are some of the competitors in the market.
“The category is at a very nascent stage and unpenetrated,” said Pritesh Chheda, analyst at Emkay Share and Stock Brokers Ltd. “There are some brands such as Nivea and Olay in skincare, which are picking up. Also, there are many imported brands which keep getting launched.”
HUL’s share has declined although the market itself is expanding in value terms, notwithstanding the economic slowdown. According to AC Nielsen, the toilet soaps market was estimated to be worth an annual Rs7,258.17 crore at the end of September, up 12.8% from a year earlier.
The market for shampoos grew 14.6% to Rs2,377.47 crore, for toothpastes 14.1% to Rs3,018.46 crore and skin creams 18% to Rs3,095.61 crore, the market research firm said.
HUL is facing increased competition with the entry of cigarette maker and hotel company ITC Ltd into personal care products such as shampoos, hair conditioners, soaps and bodywashes with brands such as Vivel, Fiama Di Wills and Superia earlier this year.
“HUL continues to be a market leader in most of the FMCG (fast-moving consumer goods) categories, but, yes in some categories the company’s share has been going down consistently such as soaps and shampoos, as ITC’s products are gaining market share,” said an analyst at a Mumbai-based firm who did not want to be named.
ITC declined to comment on its market share. “ITC’s entry has clearly impacted market shares of HUL,” said Emkay’s Chheda. “Currently, ITC must be having around 1.5-2% share and entry of a strong player definitely impacts the existing one. But still, ITC will take another two years to grab 5-7 % share of the soaps and shampoos category.” HUL posted a 19.7% increase in net sales during the quarter ended September to Rs 4,028 crore, from Rs3,365 crore a year earlier. The home and personal care division grew by 22.5%.
The company isn’t pressing any alarm buttons yet. “Market share, in the short term, is the outcome of market dynamics,” an HUL spokesman said in an email. “We continue to invest in our brands and categories through innovation, product quality and marketing spends. As we grow our core, we will continue to drive both market and category development.”
“We believe that our brand development and activation, coupled with proper investments over time, will help us maintain our leadership position,” the spokesman added.