The toothpaste market in India is growing but Hindustan Unilever Ltd (HUL) has little reason to smile. While the oral care industry in the country continues to grow at double-digit rates and smaller rivals such as Dabur India Ltd have gained share, HUL hasn’t just lost market share but also grown slower than the industry.
In the quarter ended June, the oral care industry grew 12%, but sales of HUL’s flagship toothpaste brand, Pepsodent, grew by only 4.5%. Colgate-Palmolive (India) Ltd (C-P) grew its business 14% in the quarter, Dabur India, 32% and HUL (the oral care business), 11% according to data released by AC Nielsen a market research firm. HUL declined to comment.
Analysts say oral care is an extremely competitive category and product positioning as well as marketing communications impact sales to a great extent. “The positioning of the products and advertising and promotional campaigns play an important role in boosting products sales in such categories,” says Sumeet Budhiraja, senior vice-president, First Global Securities Pvt. Ltd, a Mumbai-based brokerage firm.
In an effort to boost sales across all its product categories, HUL spent Rs1272.88 crore, 26.5% more than it did the previous year, on advertising in the fiscal year ended December 2006. It restructured its oral care portfolio, which includes brands such as Pepsodent and Close Up; the ‘Pepsodent germi-check’ range was relaunched as ‘Pepsodent Complete’, but none of this seems to have helped.
AC Nielsen data shows that HUL’s oral care business has been bleeding since 2003. The business’ compounded annual growth rate (CAGR) between 2003-04 and 2006-07 was 4% (in volume terms) against an industry average of 8%. In 2006-07, while the Rs3052 crore (by sales) oral care industry grew 15.3% in value terms, HUL’s oral care business grew by 11%. The difference was even more stark in volume terms (total number of units sold) with the industry growing by 12%, and HUL, 6%. The company earned around Rs753.8 crore from the oral care sales during the period. For the fiscal year ending December 2006, the company reported a turnover of Rs12457.9 crore.
Meanwhile, HUL’s rivals, particularly Dabur India have registered impressive growth, albeit on a lower base, in the period. While Dabur India recorded an impressive growth of 24%, clocking Rs374.7 crore in revenues, Colgate-Palmolive’s oral care division grew 17% to report Rs1445.8 crore in revenues. Colgate markets brands such as Cibaca and Colgate, while Dabur’s brands include Babool and Dabur Last. The CAGR of the two companies between 2003-04 and 2006-07 was 9% and 32%, respectively. Colgate Palmolive did not respond to an e-mail query from Mint.
Analysts say Dabur’s growth can be attributed to its diversified product portfolio, whereas HUL is limited to the premium segment only. “Dabur’s Babool, Meswak, and Red cater to all consumer segments whereas HUL has a limited presence. Besides, the value-for-money segment, which Dabur has a strong presence in, has been growing faster than the premium segment; HUL is primarily limited to this segment,” said Budhiraja.
Dabur, however, credits the success of its oral care brands to consistent investments in brands, product upgradation, repackaging and aggressive marketing communications. “Babool was a Rs30 crore brand in 2005 while today, it has grown to become a near Rs100 crore brand, while Meswak is an over Rs20 crore brand. Once the brands were acquired (from Balsara Hygiene Products), Dabur went about repositioning and repackaging them. Alongside, Dabur also invested in marketing the brands much more aggressively than before. For instance, we signed film star Vivek Oberoi to endorse Babool,” said V.S. Sitaram, executive director (consumer care Division), Dabur India.
According to AC, Nielsen HUL’s market share in the oral care market has slipped over the past four years, from 26.5% in 2003-04 to 24.7% in 2006-07. The company’s biggest rival, Colgate retained its leadership with 47% market share, while Dabur’s share grew from 5.3% in 2003-04 to 12.3% in 2006-07.