Mumbai: In an attempt to consolidate its position in the haircare segment, India’s largest consumer products company Hindustan Unilever Ltd (HUL) will launch more products from the portfolio of its parent Unilever Plc., introduce new products at both the low-end and the high-end of the price spectrum, and strengthen its distribution network.
“In the developed market, we have a varied range of haircare products beyond shampoos and conditioners. We will bring these into India sooner than later,” said N. Rajaram, general manager and category head for haircare, HUL.
According to Rajaram, the company believes there is “opportunity” in the top- and bottom-end of the market.
In May 2007, HUL launched Dove shampoo from Unilever’s portfolio.
The same year, the company also launched shampoo sachets priced at 50 paise each in an effort to increase penetration and usage of the product in rural and poor households.
Until these launches HUL’s presence in shampoos has largely been restricted to so-called mid-priced shampoos with its Clinic and Sunsilk brands and their variants. The company has, meanwhile, discontinued the herbal shampoo brand, Ayush, at the retail level. It is now available only at the Ayush therapy centres.
Globally, Unilever sells hair sprays, gels and styling aids, besides shampoos and conditioners under brands such as Vibrance, Suave, Lux and Axe. Lux and Axe are present in India as well but are confined to categories such as bathing soaps, gels and body spray.
The changes seem to have worked for the company. According to research firm AC Nielsen, HUL’s share in the haircare business went up by one percentage point from 47% in the first quarter of 2007 to 48% in the December quarter. In comparison, its nearest rival Procter and Gamble’s (P&G) share fell from 25% to 23.3%.
The segment is important to HUL. It contributed 7.5% to the company’s total revenues of Rs13,718 crore in 2007 and around 26% by revenues to its personal products business, which in turn accounted for 46% of HUL’s net profit in 2007. In 2007 (HUL’s accounting year ends in December), the company grew revenues 13.3% (compared with the previous year) to Rs13,718 crore and net profit of 14.5% to Rs1,769 crore.
“The biggest growth factor (for the company) last year was the launch of Dove, a high-margin product. HUL managed to connect with the urban consumer by the sheer quality and positioning of the product. It should further consolidate its status in the segment this year,” said Unmesh Sharma, an analyst at Mumbai-based brokerage firm Macquarie Securities.
Despite the growth in market share, HUL faces stiff competition in the Rs2,200 crore by sales market for haircare.
Besides multinational firms such as P&G and L’Oreal, many local companies such as Dabur India Ltd, Marico Ltd and CavinKare Pvt. Ltd have brands in various price points. And new players such as ITC Ltd and Godrej Consumer Products Ltd have also entered the market.
HUL claims that its rivals cannot match its reach. “We still dominate the rural segment, as our rivals (such as P&G) cannot match our wide distribution network in the villages,” said Rajaram.
The company has tweaked this distribution network— premium products are now being sold through modern or organized retail outlets, while the lower- and middle-end products will continue to be sold through local or kirana stores.
Analysts say that despite all this, HUL will have to watch for competition. Dabur, for instance, increased its market share by two percentage points in 2007 to 6%, according to AC Nielsen. “The category is getting crowded and bigger players such as ITC could be a threat for the market leader in the near future,” said Sharma.