Rin

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Hindustan Unilever's distribution network is recognized as one of its key strengths. Its focus is not only to enable easy access to our brands, but also to touch consumers with a three-way convergence - of product availability, brand communication, and higher levels of brand experience. The general trade comprises grocery stores, chemists, wholesale, kiosks and general stores. Hindustan Unilever provides tailor made services to each of its channel partners.

SUPPLIER DEPOT

FACTORY

REDISTRIBUTION

CONSUMER STOCKISTS

RETAILER

Marketing Strategy
Tide :
Tide is the largest selling detergent brand of P&G worldwide. Tide was launched with much fanfare in 2000. Indian detergent industry is estimated to be around Rs5000 crore and is dominated by the marketing giant HLL. P& G although was in the Indian market for a long time was not a serious player in the detergent market. But when the Indian market opened up and the economy began to prosper, P&G could not resist entering the Indian marketing a big way. Tide was launched as a premium brand and as usual got a lukewarm response from the value conscious Indian consumers. P&G had to settle with a miniscule 8 % of the detergent market. Then came 2003 and the price war started and now there is no premium brands in the detergent market in India. The price war enabled P&G to popularize the brand and increase the penetration. Although HLL and P&G did not increase their market share because of the price cut, the overall

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increased because the regional players lost their share to these giants. P&G had a serious problem after the price cut because there was a chance of cannibalizing between Ariel and Tide because there was no significant differentiation between the two brands. Now Tide has found its formula, the same global positioning as a Detergent that cleans perfectly. So using whiteness (safedi) as a base Tide has now unleashed the campaign highlighting its whitening power against HLL's Rin which has the same positioning. The campaigns has a desi touch and well executed. The pricing is competitive and hence HLL was forced to rope in none other than Big B to defend Rin. Through the new strategy Tide aimed to capture the safedi segment against Rin while Ariel will fight Surf in the Color segment. In a bid to up-trade users of other mass detergents, Procter & Gamble Hygiene & Health Care (P&G) has launched a new variant of Tide called Tide Naturals. The formulation for Tide Naturals would be relatively inferior in quality, implying, lower raw material costs. Analysts, however, rule out largescale up-trading The reason? Tide Naturals is priced at Rs50 per kg compared with Rs 32 per kg for rival Hindustan Unilever‘s (HUL) mass brand, Wheel —- a premium of 56% that may be too high to up-trade in the highly price-sensitive mass segment. All the same, the move will increase competition in the mid-price level segment, intensifying competition for HUL‘s Rin, for one. Consumers in the mid-price segment could shift to the lower priced Tide Naturals. This bodes ill for HUL, which is already facing lower volumes and loss of market share in mass-end detergents. HUL may have to launch a lower priced variant of Rin, which would impact profitability. Somewhat comfortingly, Rin accounts for just 3% of HUL‘s revenues and this would limit the downside.

Rin :
Sustained volume growth for the third consecutive quarter on the back of price cuts has helped HUL in registering a 32 per cent increase in net profits at Rs 566 crore this quarter. However, its operating margins continue to come under pressure with high commodity costs. While HUL has tried to mitigate the input cost inflation through buying efficiencies and cost-saving programmes, it will continue to face challenges in the coming quarters with intense competitive pressures and innovation will be the key to the sustaining its leadership position. On the sidelines of declaring its results for the quarter, Mr Nitin Paranjpe, CEO and Managing Director, HUL, spoke about the performance of his company and what lies ahead for the FMCG major. Excerpts: In spite of double-digit volume growth, HUL's operating margins continue to be under pressure this quarter. How do you plan to address these concerns? Yes, there have been some blips this quarter as our operating margins have dipped by 170 basis points. But we are absolutely convinced that this is in line with our goals and as we have articulated, it is about getting growth which is profitable and sustainable even in the long term, and that is exactly what we want. Longer term value creation is what we are after and these

actions have been done through pricing and being competitive in the marketplace.

New strategy Rin rides a new tide
The detergent war enters a new episode with Hindustan Unilever (HUL) launching its Rin Safedi ki Challenge campaign. The brand is running a commercial and a separate website featuring the challenge. In the campaign, the brand has announced Rs 1 crore prize money if it can be proved that any other detergent provides more whiteness than Rin. Unlike last time, Rin has masked its competitor in this campaign. The Rs 1 crore challenge advertising campaign brings alive Rin's superior value proposition in a distinct and engaging manner. The challenge is based on established testing protocols."

The new campaign tries to convey the confidence in the brand's promise by offering a huge amount. It reinforces Rin's claim of providing the best whitening of clothes. "The activity gives the brand a very confident air. Rin would like to steal some thunder away from Tide. It is aiming to hit consumers hard and get back on top of the shopping list. HUL is actually putting money where its mouth is. "It's an announcement of credibility," The new ad resembles the Rs 1 crore purity challenge campaign of HUL's Pureit water purifier to the extent that the numerical value of the reward is the same magic figure. It also has the same 'in your face' confident approach. Apart from this, there is also a layer of celebrity power in the form Bollywood actor Kajol, who lends an additional punch to the mix .So Rin is offering a staggering Rs 1 crore, the charisma of Kajol, a promise of coming to our hometown in person - doesn't the brand sound like a desperate cook putting every ingredient in the cooking pot and hoping it will make a great dish? As HUL breathes fire, P&G isn't sitting idle either. It is offering 25 per cent extra in the newly launched Tide Naturals (200 gm and 500 gm packs), without increasing the price .It has also announced its plans to more than double the production of tide.

Pricing
Rin :
PRICING STRATEGY: There was price increase last quarter on the Rin brand by 7-8 per cent and also some small price increases in the personal wash portfolio of HUL. Both these need to be seen in the context of commodity cost inflation. Price increase was ‗negative' in laundry and personal wash this quarter and today pricing is still behind what it was a year ago. At this point there is a period of high volume growth with virtually ‗negative' prices (lower than in the previous year) but there are also times when prices are higher but volumes lower. But the business can still be sustainable with or without price increases. Going forward it would like to drive growth which has significant volumes. Driving strong volume growth will be central to business. In the detergents category the challenges to gain share and beat competition have been equally intense. Considering P&G adopted an aggressive strategy to increase its share in the mass market segment with Tide Naturals (resulting in the huge comparative ad war) , with its expanded distribution network and emergence as a national player, which took a toll on HUL's laundry margins. ―At the moment we are focussing on

getting back our volume shares and only then will value shares follow. We have managed to hold on to our laundry shares and they have been inching up in the last two to three quarters,'' says Vats. Today, HUL's volume share in the detergents category stands at 28.4 per cent with brands such as Surf, Rin and Wheel. But analysts feel that heightened competition would have an impact on HUL and detergent profitability will continue to get hit in the coming quarters. ―Competitive intensity has increased after the launch of Tide Naturals by P&G in the mass segment. HUL has responded with aggressive price cuts in Rin and a formulation change and has even got a new campaign for Wheel but the competitive intensity will remain high with higher costs on ad spends due to which detergent profitability will continue to get hit,'' predict analysts at Motilal Oswal. In HUL's 2009-10 Annual Report, the management discussion and analysis highlights that the soaps and detergents category recorded a modest turnover growth of 1.5 per cent. ―The growth of the soaps and detergents category needs to be viewed on a very high base in the previous year which saw price increases linked to commodity cost inflation. During the year under review, the prices of products, particularly the detergents segment, were reduced taking into account the reduction in commodity prices. The segmental margin of this category was lower by 100 bps (one per cent) linked to the volatility in commodity costs in the initial part of the year and the actions taken to defend the company's leadership position in the face of heightened competitive activity. While the company is the undisputed market leader in this category, it continues to focus on the challenge of winning back its lost market share in this important category.'' But being the market leader in this category, HUL has always been conscious of competition. ―The nature of the competition may have changed over the years but for the development of the market, competition is always healthy. Today there are 1,200 bar brands, 14,000 detergent brands and almost 800 soap brands in the category,'' says Vats, who is beginning to see volume growth in the category. ―On the whole, there are indications of initial

volumes and double-digit growth and we believe we are motoring in the right direction,'' says Vats, satisfied that he has managed to stem the fall in shares for the market leader in soaps and detergents.

Tide :
P&G drops prices of detergent brands Ariel, Tide TRYING to get further volumes in its detergent business, Procter & Gamble Home Products Ltd has decided to reduce prices of its Tide and Ariel brands by 20-50 per cent. Having reduced prices of the sachets by 50 per cent last year, the extra volumes generated by the company have led it to adopt a similar reduction for its detergent bags as well. At a press conference, Mr Rahul Malhotra, Country Marketing Manager, P&G India Ltd, said, "It was our sachet experience which gave us the confidence to drop prices for the detergent bags as well. Although we do not expect volumes to explode as in the case of sachets, the purpose is to get the masses to experience our products." Tide price has been slashed from Rs 85 to Rs 46 for 1 kg. The prices of the 200 and 500 gm packs have also been reduced Rs 10 for Tide (earlier Rs 30 and Rs 20 respectively) and Rs 23 for Tide (earlier Rs 70 and Rs 43 respectively).

Improving upon the internal efficiencies within the company in areas such as distribution, manufacturing and cost of raw material, the company claims that it is now in a position to pass on these benefits to the consumer. "The market is big but people need to wash more often and move to better quality detergents. Hopefully, then, there will be some value growth in the category," he observes. Expecting to upgrade consumers from using bars to detergents and then to more premium detergents, P&G is hoping its price cuts will accelerate this change. To convince the masses to use its products, P&G has roped in well-known faces such as Ms Smriti Irani and Ms Aparna Mehta from the popular soap opera Kyunki Saas Bhi Kabhi Bahu Thi, to endorse its brands.

Mr Malhotra says, "We expect volumes to go higher than the price reductions. So if Tide is being reduced by 50 per cent, we expect its volumes to more than double." A new price war is bubbling up in the Rs 4,500-crore branded detergents sector. Following the footsteps of its arch-rival Hindustan Unilever Ltd (HUL), Procter & Gamble India (P&G) plans to cut by 12-20% the prices of its flagship detergent brands, Tide and Ariel. Along with price cuts, P&G is also poised to increase the weights of its detergent brands, to take on market leader HUL, said key industry sources. After playing the ‗who blinks first‘ game, Hindustan Unilever took price cuts in select stock- keeping units (SKUs) of its specific laundry brands last month. According to retailers, ―The SKU price of Rin Powder 1 kg was reduced from Rs 70 to Rs 50, while the grammage for Rin Powder Rs 10 pack was increased,‖ said a leading retailer in south Mumbai. To announce the new launch, P&G is beaming a high-voltage television campaign with a tag line ‗Mehngai Maar Gayee‘. This initiative will be followed by future price cuts.

After waging an aggressive price war, HUL and P&G are now gearing up to battle for mindshare through high-decibel ads.

Price wars
Hindustan UniLever and Procter & Gamble, the two FMCG giants had been competing for market share lately. With the advent of Tide in India in 1998, as a new entrant in the Indian market it had a miniscule market share in the detergents market but in 2004 it witnessed a turnaround. P&G changed focus to the mid-segment, targeting a specific clientele. It reduced price of its Tide brand drastically in order to gain a greater share in the detergents market. Initially Tide was trailing behind Rin but since 2007, sales picked up, and its market share rose posing a threat to HUL whose share started eroding. In December 2009, P&G Home Products introduced Tide Natural, a new version of Tide, at a price lower than HUL‘s Rin brand targeted at the rural segment, with its landmark price. The 200 gm pack was priced at Rs 10, 400 gm for Rs 20 and the promotional offer was for 250 gm pack for just Rs 10. This pricing strategy turned out to be highly successful and it greatly aided the company to penetrate and consolidate in the Indian market. While HUL witnessed erosion in market share, the company's quarterly results ended December 2009 do show a dip in revenues in the soaps and detergents segment. HUL's revenue growth declined by 2.4%, market share dipped that

was grabbed by rival P&G. It is thus evident that Hindustan Lever in order to maintain its position in the detergents market did take to comparative advertising (non-price war mechanism) to outwit its rival P&G. HUL reacted by taking P&G to court, arguing the name ―natural‖ is misleading. P&G followed this by cutting the price of its Tide soap bar. HUL retaliated by offering more detergent at the same price. The war reached its peak when HUL, for the first time, brought out an ad which made a direct comparison between its brand Rin and P&G‘s Tide. This kind of price war is not new in the FMCG industry, but the severity seen this time was last witnessed in 2004. Then, P&G, cut the price of its two detergent brands, Ariel and Tide, to the extent of 50 per cent. Though HUL didn‘t match the price cut, it did reduce the price of its brands Surf Excel and Surf Blue in the range of 30-40 per cent. Soon, the price war that was initiated in the detergent segment spilled over to other categories. The result was both companies took severe hits on their margins.

The real game.
Fighting for market share is a good strategy when the market for a product is limited, but it fails to explain why HUL and P&G are fighting, when there is scope for increasing per capita consumption of FMCG products as well penetration. The reason is found in the similarities in the price wars of 2004 and 2009. P&G started the war on both occasions, in the detergents segment. So it looks like P&G is aggressive in cutting prices. But why does it do so? A comparison between HUL and P&G‘s product portfolio explains it. HUL has a product portfolio that has at least one brand for each section of the society (based on economic strata). For example, in detergents, Surf Excel is for the affluent, Rin is for the aspiring (middle segment) and Wheel for the striving. P&G till recently had failed to replicate this model in India. In detergents, it has Ariel for the affluent and Tide for the aspiring, but does not have a discount product for the striving class. This time around, during rising inflation, as HUL consumers down traded , they moved from expensive to discounted products. For example, a consumer using Rin started buying Wheel. But even as this happened , they remained with a HUL brand. So, HUL‘s volume grew but realisation did not improve. Meanwhile, P&G faced

a real threat. If a consumer of Tide down-trades, t here are no options left in P&G‘s portfolio, and the consumer switches to some HUL brand or any other brand in the market. This time, P&G tried to bridge this gap by introducing Tide Natural at a price below its brand Tide. P&G has launched Tide Naturals at a lower price point to prevent loss of consumers to the economy segment.‖ It was also priced in the range between HUL‘s Rin and Wheel to attract customers who down-trade from Rin or up-trade from Wheel. This alarmed HUL and the war began.

Sales
Rin:
After long lull, HUL's growth revs up again
Hindustan Unilever (HUL) has managed to rev up its growth momentum once again, with sales volumes shooting up and value growth picking up after a long lull. The company's sales volume growth accelerated to a healthy 14 per cent for this quarter, from 10 per cent levels over the past two. HUL's sales in rupee terms too have expanded by 10.7 per cent this quarter, shows that the dent to the top-line from the price cuts taken on some products (such as laundry last fiscal) is beginning to mend. With a good monsoon expected to perk up rural demand, the company appears well positioned to sustain the recent momentum. With input costs in some FMCG categories shooting up, players in select categories like soaps, hair oils and tea have begun to take price increases over the past quarter. The jury is still out on whether these will be taken in

stride by consumers given the high food inflation. HUL's volume numbers so far show that it has managed this balancing act well. The company's presence across many categories and price points gives it the flexibility to offset input cost increases by taking price hikes in select SKUs which are less price-sensitive while holding the price-line in others. Segment-wise numbers show a sequential (September quarter compared to June) improvement in HUL's sales growth in every one of the categories it operates in, except ice creams. Growth in soaps and detergents (6.3 per cent versus 2.4 per cent in June), personal products (14.7 per cent vs 11.4 per cent) and foods (26 vs 23 per cent) were notable. The slower growth in ice creams is explained by the peak season for product sales falling in the June quarter. As widely expected, HUL's operating profit margins have dipped year-onyear from 15.4 per cent in the September 2009 quarter to 13.8 per cent in the September 2010 quarter. That is a result of price reductions on select categories like laundry, higher raw material costs and higher investments in advertisement and promotion compared to last year. However, on a sequential basis, the company does seem to be going slower on its advertising and promotions. Even though HUL's ad budget for the September quarter expanded by 13 per cent compared to last year, there is a dip in the ad spend to sales ratio, compared to the June quarter. While it set aside 13.8 per cent of sales towards advertising and promotions in September, this is lower than the 15.7 per cent seen in the preceding quarter. This could signal a lull in competitive activity or the pace of new product launches.

Tide:
P&G posted strong year-on-year double-digit revenue growth of 19.6%. Growth in revenues was driven by a robust 32% increase in the feminine hygiene segment. Operating profit margins expanded by just 10 basis points (100 basis points make one percentage point) to 30.8%, restricted by a sharp

increase in raw material costs. Net profit increased 4.7%, impacted by higher depreciation cost and tax outgo. At Rs1,712.10, the P&G stock trades at 24 times its estimated earnings for 2010. It has outperformed broader markets in the last one month, appreciating 17% as against an 8% gain for the BSE Sensex. Investors could consider the stock on declines.

Target Market
Tide
Tide Naturals meets the mildness and value needs of approximately 80% of Indian consumers–200 million households– that often experience hand irritation during and after washing their clothes with their bare hands, while delivering great cleaning and whitening efficacy.

Tide Naturals targets lower-income Indian consumers who suffer hand irritation as the result of using less-expensive, lower quality detergent powders:
For rural consumers the key barrier to upgrading their detergent is a limited laundry budget. Consumers in this segment are looking for an affordable product that provides superior whiteness, mildness on hands and a good fragrance, which other existing lower-end products currently don‘t offer.

Rin
The target customers are housewives in the age group 25-40 yrs in middle class category using mid priced detergent powders HUL's television commercial for the New Rin Powder talks about the consumer's desire to sport Effortless cleaning is one of the key attributes that a consumer looks for in a laundry brand.

Overall view
Tide
 Target: "superior whiteness" and "whiteness maintenance " laundry needs of a homemaker in India  Showcase its cleaning power; superior whitening  Focus on value proposition: High performance at low cost  No emotional aspect  Social consciousness of white clothes  Insight Consumers believe that white clothes once dirtied or stained can never look new again. Tide wanted to change this very belief of the consumers by bringing to life the Tide dirt magnets property  Tagline: “Chaunk Gaye? White ho toh tide ho!”

Rin
 Target : ―Double Safedi‖  Focus on whitening: Direct competition with Tide  Pure clean technology: Absence of residue  Social acceptability due to white clothes  Numerous qualitative and quantitative researches done on Tier 2-3 cities in India have revealed that the average Indian housewife juggles between many chores during her day and thus looks for an easy and effortless solution, within her budget, for her laundry needs.  Tagline : “Chamakte Rehna”

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