Companies

‘We've responded unblinkingly to price wars'

Vinay Kamath Aarati Krishnan | Updated on June 21, 2011

Ponds

Mr Gopal Vittal, Executive Director, Home & Personal Care, Hindustan Unilever Ltd.

“The question is, are we winning in the markets of tomorrow, with the consumers of tomorrow, in the segments and the channels of tomorrow, because in each of these there are tailwinds coming our way.” — Mr Gopal Vittal, Executive Director, Home & Personal Care, Hindustan Unilever Ltd





Mr Gopal Vittal, Executive Director, Home & Personal Care, Hindustan Unilever, is gung-ho about his charge. The skincare category has been one of the star performers in the HUL portfolio, growing at above 15 per cent, while, what he calls the TLC, or tender loving care, categories of hand wash, home and fabric cleaners, have been growing at 40-50 per cent. “Last year we added about Rs 450 crore of (incremental) turnover from the TLC categories,” he says. While the shadow of rampant food inflation threatens to impact the “core categories” of laundry and soaps, skincare has seen runaway growth. While conceding that there is competitive pressure from a host of brands, Mr Vittal is emphatic when he says HUL will not cede market share even at the cost of a knock in margins. Excerpts from an interview:

Are you concerned about the much-talked about slowdown and food inflation?

I am worried about food inflation. The reality is that the bottom 70 percentile of India's population earn 30 per cent of India's income, and contribute to less than 10 per cent of savings. If you see the bottom two quintiles, 40 per cent of India, they spend 65 per cent of incomes on food. With food prices growing the way they are there is bound to be pressure. What happens to market growth in this context? Core categories will feel the pinch. It's a schizophrenic market, there is skin and hair which is exploding and all core categories which are more equitably consumed are seeing pressure.

Your pricing strategies have to reflect that. Do you pass on higher prices in the premium categories while holding prices in the core categories?

That's a good point! We are well poised as we have a portfolio unlike many other companies. In each category we have many brands, so as a consequence, we can make adjustments in passing on input costs and use all the levers which are there. We look at the price elasticity of various brands, and we look at market mix modelling. We are putting our money in those levers which drive growth; one of the things we are driving is return on marketing investment. We need better yield for the money we are spending.

For the laundry business, because of competition, segment margins are under pressure and price increases are not back at earlier levels. Do you see the risk of this happening in other categories because of price competition?

In laundry some of our competitors have been a bit irrational in pricing. But the reality is that we will not cede an edge, we are not here for a few quarters, we've been here 75 years; holding on to a competitive position in terms of market share. So we will do what is needed to hold on to our positions. If that means taking a knock in margins for a couple of quarters, so be it.

That's a new philosophy for you?

No, if you go back in time, every time there has been a price battle, we have responded unblinkingly, that's very clear, that philosophy has not changed. In the mid-'90s margins dropped for these same reasons. Wherever we can make judicious pricing moves, wherever we can calibrate it, where there is lower price elasticity we will pass on costs judiciously. Gaining back a position is much more difficult than retaining it.

HUL has done remarkably well in skincare of late, how has that been possible?

Skincare has been one of our star performers in the past nine quarters. We've been able to step up our personal products growth which used to be in the region of 8 per cent, has now jumped to 15 per cent and is moving northwards. We've been able to build strong volumes in soaps and detergents as well, there has also been a much greater cost focus in one side of the business while there has been much more experimentation, and a willingness to take risks on the other side. This is what is needed to win in a changing India. The question is, are we winning in the markets of tomorrow, with the consumers of tomorrow, in the segments and the channels of tomorrow, because in each of these there are tailwinds coming our way.

What about your presence in colour cosmetics? It is not as prominent as other brands at least on the shop shelves?

We are the leaders by far, we have a market share of 30 per cent. We have done two things for Lakme. One is (consolidate) our leadership position itself, and second, premiumised Lakme. For example, three years ago, below the Rs 350 price point, 90 per cent of our business was there. Today, above that price point, almost 35 per cent of our business comes from it. So, we've premiumised by innovating much more. We have the largest spread on counters, almost 1,100 counters across the country and the pace of innovation in Lakme is something we have stepped up. This segment is small but is going to grow.

Published on June 21, 2011

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