P&G cuts shampoo prices, offers clutch of freebies online

Procter & Gamble (P&G) India is heating up the turf for consumer goods rivals Hindustan Unilever Ltd (HUL) and Dabur India yet again.

The company last week cut prices of its Pantene brand 15% across stock-keeping units (SKUs). Following this, Pantene prices are down `10 on 90 ml SKUs, `40 on 700 ml SKUs and 50 paise on sachets.

Analysts see P&G effecting a similar price cut in the Head &
Shoulders brand, though this could not be independently verified from the company.

Competition in shampoos has been intensifying, with prices ever on the decline. Indeed, shampoo is the only category where the price war continues even as detergent, toilet soap and food prices continue to soar.

The heightened competition has, in fact, led Dabur India to re-enter the 50 paise price point in shampoo sachets and other players could follow suit.

This is partly due to the healthy margins personal care categories such as shampoos command, leaving scope for manufacturers to cut prices.

Exactly a year ago, in April, P&G had indirectly slashed prices of
shampoo sachets under both Head & Shoulders and Pantene brands 17%, by giving 20% extra content. It later cut prices on shampoo bottles of both the brands, again to the extent of 11-16%. A P&G spokesperson had then said that the idea was to provide an extra quantity during summer, when consumers prefer frequent hair washes.

Analysts feel P&G’s pricing strategy is aimed at taking on HUL’s Dove and Sunsilk brands.

But if HUL, the leader in shampoos with a market share of around 44% through its Sunsilk, Clinic Plus, Clinic All Clear and Dove brands, was to respond to P&G’s move with a 15% price cut, its earnings could be hurt by 5-6%, say analysts.

P&G is the second-largest player in shampoos, with a market share of around 24%. Other significant players in this market include CavinKare and Dabur India.

The Indian unit of US-based P&G appears to have realised the immense potential India holds and is making inroads further in the country.

Compared with HUL, however, P&G’s distribution is quite humble. This may be the reason the company is placing volumes before profitability.

In March, P&G reduced the prices of its sanitary napkin brand Whisper and baby diaper brand Pampers by up to 15%, due to the cut in excise duty offered in the Budget. And now, it is trying to add newer consumers by giving away free samples of products across brands Pampers, Olay, Gillette, Ariel, Pantene and Head & Shoulders, to whoever requests them online under a campaign called Improving Life (www.pgimprovinglife.com).

The company’s advertising spends too are up nearly 55% year on year because it sees India playing a role in its global quest to add a billion new consumers by 2014.