Unilever expects a possible deflation in pricing in India in its skin and fabric cleansing business as it relies very heavily on commodity prices.
“A couple of our categories in India, fabric cleaning and skin cleansing, are very heavily correlated to the underlying commodity prices. Local competition has entered the market and we have to simply adjust pricing there in order to maintain competitiveness and our volume position,” Greame Pitkethly, chief financial officer at Unilever, told investors post its earnings.
The management also pointed out that India saw a gradual recovery in the market, with growth led by urban areas, while rural areas continued to remain subdued.
The management also noted that due to the re-entry of smaller players in the country, it has seen some increased media intensity.
“Our performance in India remains competitive, with price and volume both positive,” Pitkethly said.
Last week, Hindustan Unilever (HUL) logged a net profit of Rs 2,656 crore in the second quarter, down 0.3 per cent from Rs 2,665 crore posted a year ago. Revenue, on the other hand, rose 3.1 per cent year-on-year to Rs 15,364 crore. The maker of Tin detergents also registered a volume growth of 2 per cent during the quarter.
The management of HUL said that it has reduced its product prices over the past eight to nine months following a correction in prices of commodities used by HUL in three-fourths of its business — home care and personal care.
“We are taking prices down as we’ve been doing over the past eight to nine months, and the transition from high to low prices in the market takes time. Volume recovery will be gradual, which is exactly what we are seeing now,” Rohit Jawa, chief executive officer and managing director of HUL, said last week.
Jawa also said that the company continues to witness pressures at the mass end. “When we look at the market share on the whole, we are still holding. We have lost some share of late in the mass end of the segment, which is on account of the price-quality equation, and we have adjusted. In some cases, it’s taking time to recover. But that’s really where we have lost because the number of local players that have come into the market has increased,” said Jawa.
According to HUL’s investor presentation in August, the market value growth of regional players in the last three months compared to last year in tea was 1.4 times that of large brands, and in detergents, regional brands gained six times faster in the same period.
The country’s largest consumer goods manufacturer had pointed out this issue even in the quarter ended June and had then said that regional players in tea grew 1.6 times faster than national brands in the three months ended May compared to last year and three times faster in detergents compared to last year.