We're not in the business to defend market shares but to grow it

MUMBAI: Though the fierce price-war in detergents, which started over three and a half years ago between Hindustan Unilever (HUL) and a born-again Procter & Gamble in India, is over for good, it seems to have left a deep impression on the man who, ironically did not lead from the tranches at HUL, but was observing the fight from the sidelines, as an outsider at Castrol India.

“We are not in the business to defend or protect market shares. We are in the business to grow it,” says Sudanshu Vats, category head, home care, HUL, who has been with HUL all along (since passing out of IIM Ahmedabad in 1991), barring that brief stint (late 2004 to mid 2006) at Castrol during the height of the sudsy wars between HUL and P&G. True to HUL’s heritage of expanding the pie, its growing detergent consumption through upgradation of existing users and netting new users that preoccupies Mr Vats thoughts currently. Excerpts:

It is quiet now on the detergent front in comparison with 2004’s famous price wars...

India is a large market and all companies view a big growth opportunity in this market. Expectations also build when companies see a one billion consumer base with a 200-million potential middle class. India as a market is underdeveloped and eventually companies get down to really understanding it and strategise to build the market for the future. HUL which is the market leader will need to defend any competitive threat and continue to grow the market. At times, defense entails a price battle as it happened in laundry in 2004.

HUL may have defended its marketshares well, but growing consumption?

In a country like India we are in the business of growing the marketshare and the market. The fundamental work of developing the market alongside competitive share growth becomes critical. With the growth in organised retail abundance of choice and increase in disposable incomes, the repertoire of clothes is increasing. More and more Indians (specially in urban India) are owning a wide variety and more expensive clothes, which drives the need to take care of them. This is opening up opportunities for specific products and formats––premiumisation (in short).

The second route to upgradation is a change in habit. Direct application products (bars) to solution wash (powders). And the third route to upgradation is when consumers move from solution wash to machine wash. Even this phenomena can be further segmented into those using semi-automatic machines where personal involvement is high. And those who use fully automatic machines and completely delegate the washing much like most of the developed world. We are actively driving upgradation through all the three routes.

Input costs have been moving up significantly leading to consistent price hikes in detergent brands. Isn’t that a deterrent market growth?

Even as we speak, crude oil is threatening to cross $ 100 a barrel. The active detergent components are directly linked to crude oil leading to continued high cost pressures in the category. We manage costs through a combination of three things. Effective cost optimisation and reengineering of products, further extracting supply chain efficiencies and finally passing on judicious prices increases. As manufacturers, we optimise value and the equally value-conscious Indian consumers titrates the usage and control costs in their own way.

Costs are a challenge and an opportunity. When costs go up, the role of R&D, innovation and product engineering becomes crucial. Therefore, that’s an opportunity for bigger companies like HUL which invest significantly in these areas. When costs are down, anybody can sell. It is in a difficult market where the ability to give value comes in.

There is a frequent complaint that companies reduce product grammage to cut their own costs....

Grammage reductions are generally done at specific currency price points in the industry and specially at the bottom of the pyramid. It is done to protect the coinage factor at specific prices at say Rs 5 or Rs 10. If we hike prices at that point, it affects the convenience of the coinage. With consistent coinage based pricing and high awareness levels of the same, we see that the adherence to the MRP across the channels, especially in the rural areas, is high.

HUL is taking modern trade seriously and investing significantly in the back-end. Has there been a proportionate benefit on sales?

Our company has a huge strength in general trade and we have also equally leveraged modern trade. Laundry is a hugely penetrated category and therefore modern trade doesn’t really grow the category. But yes, our ability to interact significantly with consumers goes up. There is a lot of talking that a brand can do with consumers in modern trade. From 30 seconds advertising the consumer engagement increases to 3-30 minutes. Modern trade would be a catalyst for developing adjacent categories in the market such as post-wash. Our shares in modern trade are much better, we account for 55% share in modern trade against our total share of 37%.