The Hindu Business Line : `We have been careful with our pricing policy'

THE detergent market in India is going through an `exciting' phase, with rising input costs on the one hand, a price war and a receding monsoon on the other.

Mr Satish Kumar, Managing Director, Henkel Spic (India) Ltd, spoke to Business Line on these issues and the impact of these developments on the company.

Excerpts:

Your company started the year on a competitive note with both the detergent majors getting into a price war. Have these price cuts impacted the volumes of your brands?

The price war was started by P&G followed by HLL. We have been careful with our pricing policy. We have looked at market conditions. The category has not grown for the last two years.

We have re-launched Mr White and Henko Stain Champion. Henko was re-launched at a reduced price, from Rs 90 to Rs 75. Mr White was launched at the same price.

There is instability and apprehension in the market because of the price cuts as to whether this was a short-term exercise or whether the quality was right or if there was a change in the quality.

Having said that, the first quarter of this year was higher than the first quarter of last year. The second quarter, again, we are higher than the second quarter of last . Probably, we have not achieved the target we set ourselves in the beginning of the year because of the price changes.

In volumes alone, we have had an overall 20 per cent growth (in the first quarter) over the last year. This did not translate into value. What about Fa? Fa's numbers have not grown...

Fa soaps, as a category, have not grown at all. In fact, we are at the same level as we were last year. I think this is because it was not really extended nationally. We are focussing only on a few States such as Delhi, Punjab, Haryana, Gujarat and Maharashtra. We have not concentrated on the South and East.

Fa deodorant continues to grow year-on-year. In the first six months of this year, there has been a growth, which is close to 20 per cent. What are your plans for Fa soaps? Do you plan to take it national?

First, we have to look at the growth in terms of positioning, the selling idea, product, packaging, pricing and communication. That is not going to happen. Not in the immediate future. Maybe we will look at that next year.

What about Margo and Neem? Were you able to maintain their separate identities?

Yes. Again we have done better than last year with annual volumes of 7,000 to 8,000 tonnes and we continue to grow. We have just launched a variant Margo Sandal in Andhra Pradesh. It is too early to make any claims but the initial response has been good.

You don't plan to take this brand at the national level?

We plan to stay there for six months and if it responds well, then we will extend it to the `so-called sandal markets' such as Karnataka and Maharashtra.

The company was planning a restructuring exercise with the reverse merger of Calcutta Chemicals Company Ltd? What is happening?

Nothing as of now. We are looking at some options. It remains a subsidiary.

Last year, the input cost went up. How did this impact the company?

Yes, the price of palm fatty acid distillates (PFAD) went up, because of that there was some price pressure. Now the PFAD prices have started coming down. So virtually, if you average it out, between last year and this year there is not much of impact. Yes, there was an impact in the first 4-5 months.

If you look at detergents, there is price pressure, as price of soda ash has gone up by 5 to 6 per cent. In fact, the international price of linear alkyl benzene (LAB) has been going up by as much as 20 per cent in the last couple of days. As of now, there is no change in the domestic price but there will be some impact, maybe not to the extent of 20 per cent. But we will have to wait and see.

It would be interesting to see how the situation develops, there is a price war - reduction in prices going on in the domestic market - and how they are going to handle this.

If it is a small increase like three to four per cent we can absorb it with our internal efficiencies. But if it is 15 to 20 per cent, how can we absorb it? It has to be passed on to the customer.

The monsoon seems to be receding. How would this impact FMCG companies?

We are getting the benefits of the good monsoon last year, now.

In our industry, we are impacted after a lag, unlike other industries where there will be an immediate impact, either negative or positive.

If there is going to be an impact of this monsoon, it will be felt only next year.

More Stories on : Interview | Soaps & Detergents

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page