Home >Home-page >HUL losing market share as rivals gain

New Delhi: The country’s largest maker of home and personal care products, Hindustan Unilever Ltd (HUL), has lost market share by value over the five quarters ended 31 March, the erosion cutting across key categories such as soaps, shampoos, toothpastes and skin creams, even as the broader market expanded significantly.

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The decline, ranging from two to six percentage points, was at least partly the result of price-sensitive consumers switching to cheaper products made by rival manufacturers as HUL increased prices, analysts said.

Price increases have helped shore up HUL’s financials, but analysts say the decline in market share is a matter of concern at a time when the broader market is expanding. HUL has been gradually losing market share in soaps and skincare products “from the past seven-eight quarters, which is a major concern", said Vanmala Nagwekar, a research analyst at Mumbai-based India Infoline Ltd.

HUL, a unit of Anglo-Dutch consumer products maker Unilever, declined to comment for this story. A spokesperson said HUL is observing the so-called silent period when it is required by stock market regulations not to comment publicly on business matters ahead of its latest earnings announcement.

In the past five quarters, HUL’s rivals increased their own share of a consumer goods market that defied a downturn in the larger economy, estimated to have grown at its slowest pace in six years during the 12 months ended March. Home and consumer care products are considered relatively immune to economic cycles.

HUL lost considerable market share in soaps, detergents and shampoos that contribute three-quarters of its sales, securities house DSP Merrill Lynch Ltd said in a recent report, citing data from market research firm ACNielsen.

“We understand from the management that share loss is of concern primarily in soaps and oral care...," DSP Merrill Lynch said in the report.

Market share for soaps, detergents and shampoos declined to 47.5%, 36.8%, and 44.7% in the three months ended March, from 53.4%, 38.9% and 46.3%, respectively, in the January-March quarter of 2008. In some categories such as tea and coffee, HUL expanded its market share marginally. In tea, for instance, its share rose to 23%, from 22.6%.

In soaps, the company’s market share dropped in each of the five quarters even as the overall soap market, according to ACNielsen, grew 18% in the year to Rs7,967 crore. HUL’s soap portfolio includes popular brands such as Dove, Lux, Hamam and Breeze.

“Discount brands such as Godrej No.1 and Santoor have been gaining share from HUL’s Breeze and Lux," said India Infoline’s Nagwekar.

Godrej No.1 is a product of Godrej Consumer Products Ltd (GCPL) and Santoor is made by Wipro Consumer Care and Lighting, a unit of Wipro Ltd.

Pays for price rises

Much of the erosion in market share was the outcome of steep price increases by HUL—15% on average across product categories—that caused consumers to switch to comparatively cheaper brands made by rivals, analysts said.

In soaps, for instance, HUL increased prices by an average 20% over the past one-and-a-half years, according to Tata Securities Ltd analyst Sameer Deshmukh, even as GCPL and Wipro held their prices steady.

“In an effort to deliver true value to the consumers, we absorbed the impact of increase in raw material prices," said R.K.Sinha, chief operating officer of marketing and operations at GCPL.

GCPL’s share of the soap market grew to 10% in March from 9.2% a year ago, according to the ACNielsen data. Likewise, HUL’s arch-rival P&G Home Products Ltd, a 100% subsidiary of Procter and Gamble Co. (P&G) of the US, increased its share of the detergents market from 13.7% to 14.2% during the period. Overall, the category grew 23.4% to Rs6,310 crore in 2008-09.

HUL’s detergent portfolio comprises brands such as Wheel, Rin and Surf Excel that compete with P&G’s Ariel and Tide.

The entry of ITC Ltd—which has interests in cigarettes and hotels—in the consumer products business also may have dented HUL sales, some analysts say. ITC has aggressively expanded its personal care portfolio across categories such as shampoos, hair conditioners and soaps with brands including Vivel, Fiama Di Wills and Superia in the past one year.

Novelty attracts

“Though ITC does not have a significant share in the market as of now, some consumers and first-time users have shifted to ITC for the novelty factor," said Anand Shah, an analyst at Mumbai-based Angel Broking Ltd.

In shampoos, which according to ACNielsen grew 18% to Rs2,605 crore as a category in the year to March, Dabur India Ltd expanded its market share from 5.4% in the quarter ended March 2008 to 6.1% in the three months ended March 2009. P&G’s share grew from 24% to 24.3%. HUL owns well-known shampoo brands such as Clinic Plus, Sunsilk and Dove. Dabur sells Vatika and P&G markets Head & Shoulders and Pantene.

In the skincare segment, the market share of HUL, which owns brands such as Pond’s, Vaseline and Fair & Lovely, declined from 52.2% to 47.2%. The category, on the other hand, grew 21% to Rs3,465 crore.

P&G, L’Oreal India Pvt. Ltd, Emami Ltd and CavinKare Pvt. Ltd have chipped away at HUL’s share of the skincare market. “P&G has increased its focus on the category. Also, smaller companies such as Elder Pharmaceuticals and Dabur have become aggressive," said Shah of Angel Broking. “It should be a matter of concern for HUL..."

In toothpastes, a segment that grew 14.7% to Rs3,241 crore in the year to March, HUL’s market share slipped from 29.9% to 28%. Closeup and Pepsodent are the well-known toothpaste brands from HUL.

Volume-led growth

In contrast, rival Colgate-Palmolive (India) Ltd, which owns brands such as Colgate and Cibaca, increased its market share to 50.1% from 47.8 %. Even Dabur’s share, with brands such as Babool and Meswak, rose marginally to 10% from 9.8%.

Dabur India chief executive officer Sunil Duggal explained the company’s strategy.

“The growth in both shampoo and toothpaste categories has been volume-led, riding on the herbal platform," he said. “In case of shampoos, we expanded the portfolio by launching two new variants and a whole new range of anti-dandruff shampoos. On the toothpaste side, we took some price correction in the middle of 2008-09 fiscal by reducing the prices of Babool from Rs11 to Rs10 and offering value packs to consumers."

To be sure, despite the decline in market share, most HUL brands remain market leaders in their respective categories. The company, according to ACNielsen figures, still accounts for 47.5%, 36.8%, 44.7%, 28%, 23% and 47.2% share of the soaps, detergents, shampoos, oral care, tea and skincare categories, respectively.

The market share erosion has not affected the company’s financials yet, mainly because of the price increases. HUL’s net sales and profit grew in the 12 months ended December to Rs16,345 crore and Rs2,101 crore, from Rs13,717 crore and Rs1,925 crore, respectively, in the same period of the previous year.

The company is yet to announce results for the quarter ended March. A report by SBI Capital Securities Ltd expects HUL to post a 10% rise in revenue to Rs4,178 crore, and a 37.2% increase in net profit to Rs522 crore in the quarter from a year ago. Angel Broking expects a 14.9% growth in sales to Rs4,359 crore and a 19.3% rise in profit to Rs451.6 crore.

Graphic by Ahmed Raza Khan / Mint

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