HUL losing market share as rivals gain

The countrys largest maker of home and personal care products, Hindustan Unilever Ltd (HUL), has lost market share by value over the five quarters ended 31 March, the erosion cutting across key categories such as soaps, shampoos, toothpastes and skin creams, even as the broader market expanded significantly.

 The decline, ranging from two to six percentage points, was at least partly the result of pricesensitive consumers switching to cheaper products made by rival manufacturers as HUL increased prices, analysts said. Price increases have helped shore up HULs financials, but analysts say the decline in market share is a matter of concern at a time when the broader market is expanding. HUL has been gradually losing market share in soaps and skincare products from the past seven-eight quarters, which is a major concern, said Vanmala Nagwekar, a research analyst at Mumbai-based India Infoline Ltd.

 In the past five quarters, HULs rivals increased their own share of a consumer goods market that defied a downturn in the larger economy, estimated to have grown at its slowest pace in six years during the 12 months ended March. Home and consumer care products are considered relatively immune to economic cycles. HUL lost considerable market share in soaps, detergents and shampoos that contribute threequarters of its sales, securities house DSP Merrill Lynch Ltd said in a recent report, citing data from market research firm ACNielsen.

 Market share for soaps, detergents and shampoos declined to 47.5%, 36.8%, and 44.7% in the three months ended March, from 53.4%, 38.9% and 46.3%, respectively, in the January-March quarter of 2008. In some categories such as tea and coffee, HUL expanded its market share marginally. In tea, for instance, its share rose to 23%, from 22.6%. In soaps, the companys market share dropped in each of the five quarters even as the overall soap market, according to ACNielsen, grew 18% in the year to Rs7,967 crore. HULs soap portfolio includes popular brands such as Dove, Lux, Hamam and Breeze. Discount brands such as Godrej No.1 and Santoor have been gaining share from HULs Breeze and Lux, said India Infolines Nagwekar. Godrej No.1 is a product of Godrej Consumer Products Ltd (GCPL) and Santoor is made by Wipro Consumer Care and Lighting, a unit of Wipro Ltd.

 Pays for price rises Much of the erosion in market share was the outcome of steep price increases by HUL 15% on average across product categories that caused consumers to switch to comparatively cheaper brands made by rivals, analysts said. In soaps, for instance, HUL increased prices by an average 20% over the past one-and-a-half years, according to Tata Securities Ltd analyst Sameer Deshmukh, even as GCPL and Wipro held their prices steady.

 Though ITC does not have a significant share in the market as of now, some consumers and firsttime users have shifted to ITC for the novelty factor, said Anand Shah, an analyst at Mumbaibased Angel Broking Ltd. In shampoos, which according to ACNielsen grew 18% to Rs2,605 crore as a category in the year to March, Dabur India Ltd expanded its market share from 5.4% in the quarter ended March 2008 to 6.1% in the three months ended March 2009. P&Gs share grew from 24% to 24.3%. HUL owns well-known shampoo brands such as Clinic Plus, Sunsilk and Dove. Dabur sells Vatika and P&G markets Head & Shoulders and Pantene.

Novelty attracts

Volume-led growth
In contrast, rival Colgate-Palmolive (India) Ltd, which owns brands such as Colgate and Cibaca, increased its market share to 50.1% from 47.8 %. Even Daburs share, with brands such as Babool and Meswak, rose marginally to 10% from 9.8%. Dabur India chief executive officer Sunil Duggal explained the companys strategy. The growth in both shampoo and toothpaste categories has been volume-led, riding on the herbal platform, he said. In case of shampoos, we expanded the portfolio by launching two new variants and a whole new range of anti-dandruff shampoos. On the toothpaste side, we took some price correction in the middle of 2008-09 fiscal by reducing the prices of Babool from Rs11 to Rs10 and offering value packs to consumers. To be sure, despite the decline in market share, most HUL brands remain market leaders in their respective categories. The company, according to ACNielsen figures, still accounts for 47.5%, 36.8%, 44.7%, 28%, 23% and 47.2% share of the soaps, detergents, shampoos, oral care, tea and skincare categories, respectively.