Marketing Strategies / Strategic Marketing Case Study

HLL vs P&G: Price Wars - An Effective Business Strategy?

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Abstract:

Hindustan Lever Ltd., (HLL) Unilever’s subsidiary was one of the main detergent players in India. By launching a price warrior, HLL overcame the competition from a host of local players like Nirma. But in 1991, HLL had to face tough competition from Procter & Gamble (P&G) which adopted price cuts as a strategy to improve sales. The price cuts initiated by P&G saw HLL follow suit. As a result of the price cut, P&G recorded an increase in both value and volume shares whereas HLL could increase its volume share only. However, HLL’s margins were eroded significantly and it reported a drop in profits. This price war of 2004 was significant in the timeline of the Indian Detergent Industry.

The case while outlining the strategies adopted by HLL and P&G in the detergent market provides a scope for discussion on the effectiveness of the price cutting strategy.

Pedagogical Objectives:

• To discuss price wars in an FMCG market
• To discuss how an established brand can be overtaken by a new entrant through price cutting strategies.

Keywords : HLL, P&G, Price Wars, Price cuts, Detergent market, FMCG sector, Marketing Strategies Case Study, emerging markets, Indian detergent industry, Nirma, Market shares, profit margins, types of markets, competition, marketing, strategy

Contents:

• Background
• The Detergent Price War in 2004
• The aftermath of the price cuts
• Future Challenges