labels: procter & gamble india, henkel spic, hindustan lever, soaps and detergents, advertising/branding
Henkel Spic now challenges HLL and P&G with price cutnews
Our Corporate Bureau
07 May 2004
Chennai: Now it is the turn of the Rs.362-crore detergent maker Henko Spic India Limited to attack the larger Hindustan Lever Limited (HLL) and Procter & Gamble Home Products Limited (P&G).

At a time when the two detergent majors HLL and P&G are in the midst of a deadly price war, which is eating into their margins, Henkel Spic could not have avoided getting into the ring for long.

After offering its Pril cleaning bar free with its premium detergent powder, Henko Stain Champion, the company has now cut the product price by Rs15 / kg to Rs75 / kg.

The company is also relaunching the Rs103 crore brand in a new gusset packaging (changing from pillow pack), with a new ingredient and a new media campaign.

“The price cuts have merged the two detergent segments — compact and premium — into one, that is, premium,” says managing director A Satishkumar.

With its latest move, Henkel Spic has made its premium detergent the cheapest in the premium category. The others in this segment are Surf Excel and Ariel both priced Rs99. “We are not entering the price war. The reformulation of Henko Stain Champion and relaunch were on the cards for the past six months. And that has happened now,” Satishkumar adds.

While the price cuts are damaging their margins — around 33 per cent for their premium categories — the companies need not fear for their bottomlines.

Henkel Spic will make up the price cut by further increasing volumes. With a market share of 9.8 per cent in its category, Satishkumar says the company’s target is to increase it to 11 per cent. In terms of volumes, the company sells around 12,000t of Henko Stain Champion.

Strangely enough, the company had increased its sales of Henko Stain Champion during the first quarter of this year even before the latest price reduction. During January-March, 2004, the company increased its detergents and cleansers sale by Rs13.62 crore to Rs.62.43 crore.

The total company turnover during January-March, 2004 was Rs93.18 crore (detergents and cleansers Rs62.43 crore and cosmetics Rs30.35 crore) and the net profit is Rs61 lakh.

At a time when Procter and Gamble has gone back to pillow pack from gusset pack mainly to cut its costs and to safe guard the margins was not Henkel Spic doing exactly the reverse? The company had earlier done the same with its mid price detergent brand Mr.White.

Agreeing on the increased cost aspect of the gusset pack, Satishkumar justifies the move on the ground that it gives more visibility at the retailers shelves and attracts the shoppers eyeballs.

“After the relaunch Mr.White has increased its market share by 1.5 per cent to 12.4 per in mid priced detergent market.”

Henkel Spic is also focusing its efforts on cutting its costs in production, supply chain and the finance. The finance cost during the first quarter of this financial year (January — December) has marginally come down to Rs1.50 crore from Rs1.52 crore incurred the previous year.

The company’s move to increase the price of Henkomatic, the detergent powder for washing machines, by Rs10 to Rs110 / kg will also help in frothing the bottomline.

On the cosmetics and toiletries front that contributes nearly 35 per cent of its turnover, Henkel Spic is improving its performance. The company is selling soaps, talcum powder, deodorants, lotions, creams, toothpaste etc and has increased its turnover from this segment by Rs.5.61 crore during the first quarter.

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Henkel Spic now challenges HLL and P&G with price cut