Wring out in the economy segment

Aarati Krishnan

The economic slowdown has proved a major handicap for players in the detergent industry. Unlike the earlier years, they have been unable to push through price increases. Consider this.

Between 1998 and 1999, the selling prices of major detergent powder brands were raised 9-25 per cent, as detergent makers passed on large cost escalations in their inputs to consumers. Low-priced brands such as Wheel and Nirma hiked prices by around 9 per cent; mid-priced brands, such as Ariel Supersoaker, raised by 20-25 per cent; and premium brands such as Surf and Henko Stain Champion by 10-12 per cent. Between 1999 and 2000, manufacturers hiked prices again, but by a lower proportion. This time round, low-priced detergents were pegged up around 7 per cent, mid-priced brands 6-7 per cent and premium brands by 11-14 per cent.

In 2001, low-priced detergents did not effect any price increases. In fact, economy brands Wheel (Green) and Nirma (Yellow) actually reduced selling prices marginally. Industry-watchers point out that at the current price levels, it is difficult to envisage profit margins on these brands. But "input price increases have been offset by supply chain efficiencies", says a Hindustan Lever spokesperson. Mid-priced brands such as Rin Shakti and Mr White raised prices by 8 and 11 per cent, while premium brands such as Surf and Henko Stain Champion upped by 10-11 per cent over the year.

Procter & Gamble's Tide was the only exception. The brand actually slashed prices from Rs 125 to Rs 85 per kg. Whether this was an indication of the lukewarm response to the product is difficult to say.

However, after occupying a slot slightly above the premium segment, Tide is now priced in line with the major brands in the premium segment - Surf and Henko Stain Champion.

Economy and mid-priced segment

5As a result of the changes in pricing, the difference between the mid- and low-end powders widened significantly. For instance, in 2000, HLL's mid-priced brand, Rin Shakti, was priced around 75 per cent higher than its economy brand, Wheel Green. But now, Rin Shakti is retailed at over two times the price of Wheel Green. A similar divergence has been noticed for other brands as well.

Has this prompted consumers to downtrade from mid- to lower-end brands?

Not really, assert industry players. For instance, Hindustan Lever says its mid-priced brand, Rin Shakti, has achieved strong growth rates during the year.

"We believe that consumers who used to purchase discount products have upgraded to Rin Shakti. This leads us to conclude that consumers are choosing products that offer value irrespective of its price, and not simply opting for low-priced products," says an HLL spokesperson.

Other mid-priced brands have also managed to deliver strong growth rates. For instance, Henkel SPIC's Mr White has managed a 25 per cent growth rate over the year.

How marketers responded

Capturing the downtrading consumer

In fact, the intense price pressure at the lower end of the market made players redouble efforts to get consumers move up the value chain. Both HLL and Nirma brought in offerings at various price points just above the economy segment.

For instance, HLL priced the blue variant of Wheel at Rs 22 per kg, just above the green variant priced at Rs 18 per kg. Rin Shakti was another relaunch from HLL priced at Rs 39 per kg, pegged at the lower end of the mid-priced segment.

Rin Supreme, priced at Rs 65 per kg, at the higher end of the mid-priced segment took care of the consumers downtrading from the premium segment. These initiatives appear to have paid off for HLL, which regained some market share from Nirma after a setback over 2000.

Fortunes reversed

HLL's market share in washing powders, which fell from 38.8 per cent to 38.6 per cent in 1999-2000, inched up again to 38.8 per cent by August 2001. In detergent cakes, HLL was able to regain most of the market it ceded to Nirma in 1999-2000. Its share, which declined from 46.3 per cent in October 1999 to 45.2 per cent in December 2000, had inched back to 46.5 per cent by August 2001.

Nirma, on the other hand, made headway in detergent cakes between 1999 and 2001 (share climbed from 18.6 per cent to 19.1 per cent), but lost ground in washing powders (26.2 per cent to 24.8 per cent). In fact, HLL claims its brands Wheel and Rin now occupy the top two slots in the detergent market.

This is also partly the result of HLL's attempt to migrate users of its other brands Sunlight and 501 to Wheel and Rin. This is part of HLL's strategy of retraining focus on just 30 'power' brands in its portfolio while whittling down the non-core brands in its product basket.

Scaled down versions

At the higher end of the market, the players responded to the slowdown by launching scaled-down versions of their products.

Most compact and premium brands were made available in sachets, 125 and 250 gm packs, to induce trials by users daunted by the large price tags on the 1 kg packs of the premium brands. Whether this pepped up volumes is not clear.

But the players certainly have nothing to lose in the process, considering that the scaled down versions bring in higher realisations (on a price per gm basis) than the larger pack sizes.