Mumbai: Tide Naturals detergent powder from Procter and Gamble Home Products Ltd (P&G) seems to have gone off retail shelves in the past two weeks even as its manufacturer is locked in a fierce battle with Hindustan Unilever Ltd (HUL), the maker of Rin, Surf and Wheel detergents.
Fallout: Tide and Rin detergent powders stacked at Vishal Mega Mart, in New Delhi. Retailers are complaining of lack of fresh stock of Tide. Rajkumar / Mint
Distributors and retailers are wary of holding products carrying a higher price tag.
“As companies are making the new stock cheaper, retailers don’t want to be stuck with the old high-priced inventory and this is causing a supply lag,” said Anand Shah, an analyst at Mumbai-based brokerage Angel Broking Ltd.
P&G said it expects the detergent to be available soon.
“It is not uncommon for new product initiatives to face an interim lag between production and retail and we are confident that Tide Naturals will be back on the shelves shortly,” a P&G spokeswoman said.
While Tide Naturals is key to the current conflict, the firms are fighting on several fronts, ranging from advertising that disparages each other’s products, law suits at the high courts in Chennai and Kolkata, and price wars. P&G, for instance, has started offering 25% more of Tide, its flagship brand, at the same price. HUL has reduced prices of Rin and Surf by 10-30% since January.
Meanwhile, supermarkets, retail stores and hypermarkets in Mumbai and Delhi have run short of the detergent.
“No fresh stock of Tide (Naturals and the flagship brand with increased grammage) has been available for the last 15 days since the company announced increased grammage (weight),” says the sales manager at Shivraj Super Shoppe in Andheri, a suburb in Mumbai. “We are not sure when the stock will be available.”
Concerned over an extended price war, brokerages such as Antique Stock Broking Ltd, Anand Rathi Securities Pvt. Ltd, Batlivala and Karani Securities India Pvt. Ltd, Enam Securities Pvt. Ltd and Kotak Institutional Equities have reduced their estimates for earnings per share, downgraded HUL or changed their recommendation from buy to sell in recent reports.
“We feel the price war between HUL and P&G will spread out to even the premium categories in detergents as volumes for both the companies in this is still to pick up,” said Abhijeet Kundu, a senior analyst at Antique Stock Broking in a 22 March report. “It will last for another quarter. The situation will play out similar to 2004 where the pricing actions taken were much steeper than what we have seen so far.”
The price war has spilled over to other products as well.
In February, HUL reduced the price of Lux soap from Rs18 to Rs15. It was accompanied by a reduction in weight—to 90g from 100g.
P&G has reduced the price of its shaving equipment to Rs125 from Rs199 and is expected to reduce the price of its Oral-B toothbrush by Re1 to Rs15 after a Rs2 price cut in December.
“In January and February, there has been 13% volume recovery for HUL. However, the value erosion (price decline) was 8.5% during the period in the soaps and detergents category, which accounts for 51% of overall company revenue,” said Shirish Pardeshi, industry specialist, institutional equities, Anand Rathi, who has had a sell position on the stock.
This round of rivalry started in December when P&G launched Tide Naturals, a 30% cheaper variant of the mother brand Tide, targeted at the mass end of the market. Within two months of the launch, Tide Naturals got a 0.6% share of the Rs10,000 crore Indian detergent market.
In the last week of February, HUL, India’s largest packaged consumer goods firm by sales, contested the use of the word “Naturals” in advertising, communications, branding and promotions at the Madras high court and simultaneously launched direct advertising, claiming behatar safedi (better whitening) than Tide Naturals.