Hindustan Unilever Ltd (HUL) continues to be plagued by market-share loss across its key categories — toilet soaps, tea and toothpastes, among others. According to AC Nielsen’s retail audit data for October, the fast moving consumer goods major saw decline in volumes in eight of its top ten categories year on year, of which six categories have also shown a loss in market share.
This is despite company’s increased advertising spends in first half of this year, price corrections and grammage increases on products. The majority of volume decline has taken place in the categories of tea, coffee, toothpaste, talcum powder and toilet soaps that have gone down by 16.4%, 12.7%, 11%, 10.3% and 9.5%, respectively, yoy. AC Nielsen suggests that volume growth, however, has taken place in two categories — washing powder and skin creams, which are up by 7% and 5.3% respectively, yoy.
HUL which has been reporting sequential market-share loss, is aware that the majority of its share loss has been in the mass-end segment and thus has increased presence in this end by means of correcting price and renewing communication. In the last two quarters, the company has taken price cuts, increased presence in modern trade and upped advertising spends to gain its share back. As per the AC Nielsen update, the highest share loss for HUL has been in detergent cakes (105 bps) followed by packaged tea (93 bps), toothpaste (83 bps) and cleaner-utensils (73 bps).
A sector analyst from a leading brokerage firm on the condition of anonymity, said, “Volumes are still not favourable for HUL. The increased spend towards re-launching brands might help, but it is difficult to predict when the company will finally start re-gaining market share in key categories such as soaps and detergents, as the past two quarters where the company has taken several actions, have not yet been fruitful.” HUL has been losing share in toilet soaps since January 2008 as cheaper and aggressive brands and local companies kept gnawing away.
HUL’s mass-end detergent brand Wheel is still facing stiff competition from national as well as regional brands. The grammage increase on the brand is yet to bear fruit on the market-share front. ICICI Securities analysts Sanjay Singh and Pratik
Biyani in a note to clients on Thursday quoting the AC Nielsen numbers, wrote, “Despite many re-launches and heavy investments driving volume growth (A&P rose 31.5% year-on-year in H1FY10), most categories continued to lose on volumes.” Intense competition is not new to HUL, but with expansion of margins for other mid-tier companies, higher investments might be seen for new launches, the note said.
Comments