Topic: Student Questions

Unilever & P&g

Posted by Anonymous on 555 Points
This is something pertaining to the Indian Markets. It is a very interesting situation that is developing here. Here are the facts.

Unilever's Indian Subsidiary HLL, is the largest FMCG company in this country and has been around for more than 5 decades. P&G India is also one of the largest FMCG companies here and between HLL and P&G, these two companies covered almost 85% of the market. However things are starting to get tougher for these two giants.
Many regional players have sprung up in the last decade and they have managed to establish themselves in their own states and have eaten up a lrge chunk of HLL's and P&G's customers. The products they offer are cheap and largely targeted towards the lower income groups in this country. HLL has also come out with products in this price category but these products are facing severe competition. HLL has been witnessing a fall in profits in the last one year.
To combat this onslaught of cost-competitive products, P&G slashed its product prices by almost 40% so that they could increase sales volumes. HLL followed suit. Shampoos, Detergents, Soaps which are the main products of these two companies are now being sold at prices 40% lower than last year's. However, its been 6 months since this move and the profits have not risen.

My question is that why is it that when these two companies have the best distribution systems in the world operating for them through a very strong distribution network(reaching out to the most rural villages), the best brains in the business working for them(MBA's from the top institutes in Asia who are even sent to the remotest parts in the country for training), the best and the most well known brands in their portfolio, a national presence, HUGE media budgets, great quality products etc etc. still they cannot compete with these local players which just operate in a few states and have been around only for a few years and are no way close to having the logistical systems that HLL nd P&G have.
Are the markets of tommorow just going to compete on cost and not brands?
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  • Posted by telemoxie on Member
    Maybe it is because the people in the rural villages do not buy distribution systems or MBAs or training or National Presences, they buy shampoo, detergent and soap from local people they know and trust.

  • Posted by Blaine Wilkerson on Member
    I think it is a matter of local loyalty. Perhaps the people see the new products as a way to strengthen their economy and get away from US and British capitalism. India has experienced its fair share of British rule, and if a local company can provide the same service, prices are not going to matter.

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