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P&G sheds premium tag; to target masses like rival HUL

Having set up its India operations way back in 1930, the 89-year-old Hindustan Unilever is a deeply entrenched Rs 37,000 crore business, while P&G entered the Indian shores only in 1989

twitter-logoAjita Shashidhar | November 14, 2019 | Updated 17:16 IST
P&G sheds premium tag; to target masses like rival HUL
(Photo: Reuters)

The battle for supremacy between consumer giants P&G and Unilever is well known across the globe. With a range of offerings across home care, personal care and food, the two FMCG majors have always tried to prevail over one another. However, their story in the Indian subcontinent has not been one of neck-and-neck rivalry.

Having set up its India operations way back in 1930, the 89-year-old Hindustan Unilever is a deeply entrenched Rs 37,000 crore business, while P&G entered the Indian shores only in 1989.

The Cincinati-headquartered FMCG major saw more value in servicing the premium masses with its brands such as Ariel, Pantene and Head and Shoulders, while the Unilever brands, Surf, Lifebuoy and Clinic Plus were already household names.

Now, a Rs 10,000 crore entity, P&G India does have market share dominance in categories such as Whisper sanitary napkins, Vicks and Pampers. However, the company has had a bumpy journey in India, where it made losses for several years.

The premium positioning didn't give the company the desired returns and its products (Pantene, Head & Shoulder and Ariel) were more an urban, modern trade phenomena.

P&G, which has three legal entities in India - P&G Homecare, P&G Hygiene and Healthcare (listed entity) and Gillette India (listed entity) - has significantly changed its style of doing business in the country over the last couple of years.

Most importantly, it has shed its premium focus and has not just come with a slew of India-specific launches, it has also significantly deepened its reach by distributing to over seven million outlets unlike earlier, when its products were available in just about two-three million outlets.

After all, 88 per cent of India's retail business comes from the 12-million strong network of mom and pop stores that dot the country and to achieve scale one has to be present there.

"Earlier, premium products such as Pantene shampoo and Ariel detergent were not available in our village but the distributor has started coming for the last one year," says Yogesh Khanpara, owner of a kirana store in Lasangaon, a village 65 kilometres away from Nashik in Maharashtra. 

Khanpara says that there are takers for the Rs 4 sachet of Pantene shampoo. He says consumers use Pantene on days they have to dress up for an occasion, while on other days they prefer the Re 1 Clinic Plus (HUL product) shampoo.

The company has launched India-specific variants such as Whisper Choice Aloe Vera Freshness, Pampers Premium Care and Gillette Mach 3 Start razors. In fact, the Rs-25 pack of Pampers which contains two diapers is quite popular in tier 2-3 and even in semi-urban markets. Pampers, says, a senior retail expert, has literally wiped out other diaper brands such as Huggies from the market.

P&G India's recent aggression clearly reflects in its growth. Its listed entity P&G Hygiene and Healthcare witnessed a revenue growth of 20 per cent in the fiscal year 2018-19, from Rs 2455.3 crore to Rs 2946.5 crore.

The profitability increased by 11.9 per cent as opposed to a loss in the previous fiscal. The cut in corporate tax will also help in improving P&G's profitability.

While HUL continues to be far ahead in the race, P&G has succeeded in securing a strong number two position in categories such as detergent and shampoo where it competes with HUL," points out Abneesh Roy, Executive Vice-President, Institutional Equities Research, Edelweiss Securities.

Roy believes that a large part of the losses was due to price cuts the company did last year in categories such as detergents. "They have realised that price cuts are not sustainable. They are instead investing on product development and distribution which is more long-term," adds Roy.

A senior retail expert, however, says that the innovation speed over the last couple of years seems to have lost momentum. "Though P&G has succeeded in protecting its core categories such as detergents and sanitary napkins, HUL is clearly ahead of the curve by innovating more aggressively in new-age categories such as liquid detergents and body washes.

P&G has benefitted in the last one year, but their next pipeline of innovation isn't visible to us," he says.

P&G ($67.6 billion) globally is bigger than Unilever ($61.48 billion), but still has a long way before it can call itself a cut throat competitor of HUL. However, the company over the past few years has definitely been making the right moves.

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