InvestorQ : Is it true that Hindustan Unilever and Godrej Consumer Products have cut prices of their products?
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Is it true that Hindustan Unilever and Godrej Consumer Products have cut prices of their products?

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1 month ago
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Hindustan Unilever and Godrej Consumer Products cut prices of some soap brands by as much as 15%. This is intended to pass on the benefits of reduction in palm oil prices to the end consumer. While price cuts have ranged between 5% to 11% in the case of Hindustan Unilever, it has been between 13% to 15% in the case of Godrej Consumer Products Ltd. Certainly, analysts are impressed with this move. In a tough second half, this reduction in prices would help drive growth in volumes. These price drops would put more purchasing power via lower prices. It will also boost demand, as 7% inflation is demand depressing.

Hindustan Unilever cut prices for mass market soaps like Lifebuoy and Lux, while it has left the upmarket brands like Dove intact. Also, the price cuts have not been extended to detergents like Surf. Not just Hindustan Unilever, but even Godrej has also focussed its price cuts more in the similar space. Godrej has also positioned its price cuts as bigger savings in absolute terms. Godrej No.1 Soap, five units bundle of 100 grams each, has seen its price cut from Rs140 to Rs120; a price cut of nearly 14.3%. In the case of Hindustan Unilever, the price cuts have been focussed more in the Western region of India, which is price sensitive.

This is a smart move. Normally, when raw material prices fall sharply, regional and unorganized players come into the fray in a rathe big way. The best way to pre-empt competition from this segment is to drop prices early so existing customers don’t shift their loyalties. Hindustan Unilever and Godrej saw volumes dip due to price hikes and grammage cuts (demand for smaller units). Now, this can be reversed. But, high retail inflation and slowdown in rural demand is still a big challenge for FMCG companies. However, this should give the FMCG players more steam to fight the segment in the second half of FY23.

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