Competition holds back FMCG from price hike
Amid mkt rumours that a price increase by HUL is expected in a few days, cos are unsure about what would transpire in reality. Biz Week in pics | Weekend Platter
By Namrata Singh, TNN |
MUMBAI: Large FMCG firms are in a bit of a quandary. Inflation has hit a 13-year high and there have been no price increases in soaps, one of the largest and deeply penetrated categories in the sector.
Hindustan Unilever (HUL), which controls a little over half the personal wash market in India, has so far held on to the price line in the current quarter . This is said to be creating a squeeze on the margins of other soap makers, including immediate rival Godrej Consumer Products (GCPL), who are unable to take the lead in effecting price changes.
'It's a question of who will blink first. Since the market leader has not raised prices, other companies cannot follow suit,'' said an industry official . Some of the factors for the status-quo in prices include , competition, both regional and national, fear of losing out on market share and the fear of downtrading. Consumers may start downtrading to cheaper products, a fact that is well documented in times of high inflation.
Hindustan Unilever (HUL), which controls a little over half the personal wash market in India, has so far held on to the price line in the current quarter . This is said to be creating a squeeze on the margins of other soap makers, including immediate rival Godrej Consumer Products (GCPL), who are unable to take the lead in effecting price changes.
'It's a question of who will blink first. Since the market leader has not raised prices, other companies cannot follow suit,'' said an industry official . Some of the factors for the status-quo in prices include , competition, both regional and national, fear of losing out on market share and the fear of downtrading. Consumers may start downtrading to cheaper products, a fact that is well documented in times of high inflation.
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������ HUL can hold on to prices as it is big enough to absorb input cost pressures. However , if the pressure builds up further, the company may have no choice but to revise prices upwards,'' said an analyst . Another executive from an FMCG firm said companies may not wait for a price revision from HUL as they are already neck deep in water.
Even amid market rumours that a possible price increase by HUL is expected in a few days, companies are unsure about what would transpire in reality.
Another MNC, Procter & Gamble (P&G ), has maintained prices in most of its brands, except Vicks and Ariel, where the company took prices up. Said Sumeet Vohra, marketing director, P&G India: ������ P&G is committed to delivering value to its consumers despite business challenges that arrive time to time. Inflation is a business reality that we all face yet all decisions impacting value are made with the consumer in mind.''
Even though large firms have managed to hold on to prices of most of their products , smaller players like Henkel and Cavin Kare have not been so lucky.
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