Gloves come off in HUL vs P&G wars

Click here to watch a slideshow on other famous product wars in the recent past

Also See Rise and Fall of Detergent Giants (Graphic)

“The court has instructed HUL to take the advertisement off immediately," P&G said in a release. “The court has also stated that HUL is barred from showing any such advertisements in the future."

All-out competition: On 26 February, HUL launched an advertisement that said Rin washed whiter than P&G’s Tide Naturals.

HUL will comply with any order as soon as it received a copy of the court’s ruling, a spokesperson said. P&G said the court allowed it to continue airing Tide Naturals advertisements, according to Sumeet Vohra, P&G India’s marketing director.

The two sides were battling it out elsewhere on the same day, in the Chennai high court, at the hearing of HUL’s suit against P&G’s Tide Naturals advertisement.

The court had directed P&G on 2 March to prominently display a disclaimer saying the product didn’t contain lemon and chandan (sandalwood) in all advertisements of Tide Naturals. The judge was not satisfied with the modification as it wasn’t prominent enough.

During the hearing, HUL objected to the use of the word “natural" in the brand name, packaging, advertisement and promotion, since it had been established that the product only contained synthetic compounds. The next hearing will be held on 9 March.

The third edition of the detergent wars between two of the world’s largest consumer goods firms in India has everything befitting a soap opera: aggressive advertising, a price war and legal battles on several fronts.

The Rs13,000 crore Indian detergent market is the largest segment in the consumer goods sector and both players are struggling to protect their market share and boost profit. A bruising battle may lead to a loss of credibility and bleeding bottom lines for both brands, said some advertising experts and analysts.

Both P&G and HUL are losing market share as consumers cut spending due to high food inflation. According to Nielsen data, P&G’s Tide brand lost around 1.5% in market share in the 18 months till December 2009. Rival HUL’s Rin brand lost 0.6% in the same period. HUL is also facing a slower rate of growth in the laundry segment (washing powder and detergent bars). While both these companies have lost ground to smaller rivals such as Ghari and Sasa, they are taking each other on since they are the largest brands in the mid-tier category, said analysts.

While HUL and P&G took potshots at each other in the detergents category all through the late 1990s, things were more subtle then, said ad film-maker Prahlad Kakkar.

In 1991, when P&G introduced Ariel, a premium brand, in India, HUL responded with heavy promotions for Surf. In 2005, when P&G dropped prices by 30-50% to gain market share, India’s largest packaged consumer goods company by sales reacted with equivalent price cuts.

To arrest its declining market share in laundry, P&G launched the Tide Naturals variant in December, priced 30% cheaper than Tide. According to Nielsen data, Tide Naturals has taken a 0.6% share in the two months since its launch.

HUL responded on three fronts. In January, the unit of the Anglo-Dutch company cut prices of Rin and Surf by 10-30%. On 25 February, it filed a petition in the Chennai high court saying Tide Naturals did not contain natural substances. On 26 February, it launched an advertisement that said Rin washed whiter than Tide, naming the rival brand.

The Rin commercial shows two mothers waiting at a bus stop for their sons to return from school, one with a Tide Naturals packet. The other woman’s son asks: “Aunty chaunk kyun gayi? (Why is aunty shocked?)", playing on the Tide punch line: “chaunk gaye". It ends with a voice-over: “Tide se kahin behatar safedi de Rin."

Apart from filing the petition in the Calcutta high court against the Rin advertisement, P&G has cut prices of its Tide bar by some 30-50%.

HUL’s move smacks of desperation, said an executive with a media agency that services P&G. He added that P&G was sure to kick off a series of commercials against HUL, but declined to share details. “We cannot comment on future plans," said a P&G spokeswoman.

But ad guru Alyque Padamsee, a former head of Lintas, said both brands are likely to lose. “It’s going to highlight all the inadequacies and lead the consumer to mistrust both of them. I am not sure who gains from it," Padamsee said.

Sunil K. Alagh, former managing director of Britannia Industries Ltd and now running SKA Advisors, which specializes in consultancy services in the consumer goods space, has a different view. “Whenever a challenger has taken on the market leader, the challenger has won," he said.

According to Alagh, Tide Naturals is a new but smaller brand compared with its heavyweight rival. Rin’s strategy is to kill two birds with one stone. “It has taken on the mother brand Tide by making a sweeping statement, even as it takes a swipe at the P&G brand Tide Naturals," Alagh said.

Apart from credibility, there also arises the question of declining margins. In 2005, both companies saw a significant decline in profit which they are still trying to recover from.

“Lever has still to recoup the damage that was done five years back. The margins are still not at the same level," said Nikhil Vora, managing director of brokerage IDFC-SSKI Ltd. However, HUL “has managed to rejuvenate Rin, a dying brand in the last one month".

P&G’s detergents business is part of Procter & Gamble Home Products, a 100% subsidiary of Procter and Gamble Co. “It is not possible to know how the division is doing," said Anand Shah, an analyst with Angel Broking Ltd, who sees the decline in margins being carried forward.

What is worrying analysts is the possibility that the price cuts may be extended across brands as the two rivals widen their attacks against each other. “If the company (HUL) does not gain volumes, it may actually see (revenue shrink) this quarter," said Shah. The laundry segment is a highly saturated segment with single-digit growth, and price cuts may not see an accompanying increase in volumes.

Graphic by Ahmed Raza Khan / Mint

sapna.a@livemint.com

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