Hindustan Unilever draws up fresh strategy for its laundry business

Hindustan Unilever draws up fresh strategy for its laundry business
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First Published: Wed, Sep 12 2007. 01 13 AM IST

A worker stacks Hindustan Unilever products in a store in Mumbai
A worker stacks Hindustan Unilever products in a store in Mumbai
Updated: Wed, Sep 12 2007. 01 13 AM IST
Mumbai: After having fought a bitter price battle for market share with its rivals, Hindustan Unilever Ltd (HUL), Indian subsidiary of the Anglo-Dutch consumer goods company Unilever Plc, is now working on a new growth strategy for its laundry business.
“Price cut or hike is not a long-term growth strategy. Pricing, in fact, is now passe,” insists Sudhanshu Vats, category head, home care.
“Our strategy for growth, now is focused on product innovation, new consumer and retail trends and aggressive marketing and promotions,” he said.
This comes even as Unilever is scouting for a potential buyer for its laundry business in the US.
A worker stacks Hindustan Unilever products in a store in Mumbai
HUL says it is quite upbeat about the segment and says the laundry segment is one of its “key growth areas.”
“We have done key innovations across the product portfolio and it is working for us,” says Vats. “We successfully migrated from Rin Supreme to Surf Excel and Wheel Smart Srimati—which was rolled out in 2006—is also on the right track.”
HUL’s market share in the laundry segment grew to around 37.8% in the quarter ended June from 35.5% in the same period last year, according the market research firm ACNielsen. However, this time, the increase was not at the expense of price war with its multinational rival Procter & Gamble Co. P&G also gained 0.5 percentage points, up to a 7.6% share. Nirma Ltd, the Ahmedabad-based manufacturer, however, saw its market share dip by 1.7% percentage points to 13.5%.
Wheel, a value brand that, according to Vats contributes around 50% of HUL’s laundry segment revenues, increased its market share by 2 percentage points in the same period, with a total share of about 18%.
According to ACNielsen, the laundry industry in India was worth Rs7,908 crore in 2006 and rose 8.4% over 2005. HUL doesn’t report its laundry revenues separately but puts them under the soaps and detergent category.
In 2006, HUL’s soaps and detergents segment contributed around Rs5,596 crore to the company’s total sales of Rs12,103 crore.
“Laundry has been an attractive segment in the past and is likely to keep growing in the near future. The recent price war between companies led to erosion in their profitability but now, the industry is stabilizing,” says Unmesh Sharma, an analyst at Macquarie Securities here.
According to Vats, the laundry business is witnessing a surge in demand from cities and HUL is focusing on Tier I and II cities to tap that demand.
“Consumers today are buying more clothes,” says Vats. “Trends suggest that the usage of detergents has gone up as a result. Also, with premium quality of clothes, people want to use better and branded products.”
Still, analysts remain cautious. “Some of HUL’s recent moves, such as promotional campaigns and advertising, seem right,” says Macquarie’s Sharma. “Still, it is too early to say what result their new strategies will yield.”
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First Published: Wed, Sep 12 2007. 01 13 AM IST