| Hindustan Lever (HLL) is trying to beat input cost pressures without adversely impacting the offtake of its economy detergent brand, Wheel.
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| Retailers say the company has reduced the weight of its 125 gram Wheel detergent cake to 120 gram, while maintaining the price at Rs 2.50.
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| The move comes at a time when HLL has been undertaking marginal price increases in categories such as toothpastes and shampoos to counter rising raw material costs.
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| Another player in the low-end segment, Shri Mahila Griha Udyog Lijjat Papad, has also reduced the size of its 125 gram Sasa detergent cake to 110 gram while maintaining the price at Rs 3.
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| The Ahmedabad-based Nirma, on the other hand, is looking at a price increase for its 125 gram detergent cake which is currently available at Rs 2.50. Henkel Spic too may take the price hike route for many of brands, including its low-end brand Chek.
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| The price of liquid alkaline benzene (LAB), the main component in detergents, has gone up by 20 per cent since last year. The price of soda ash increased by 10 per cent during the same period. Overall, detergent raw material costs have gone up by around 20 per cent year on year.
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| “Nirma does not intend to reduce grammage. But our prices will definitely have to go up thanks to input costs,” said Rajan Vazirani, National Sales Manager, Nirma.
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| “Input cost pressures are definitely there and if push comes to shove, we might look at nominal price increases. Reducing weight by 5-10 grams will not make much of a difference since costs have gone up substantially,” said an official from Henkel.
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| Analysts, however, say since the lower end of the market is extremely price sensitive, reducing grammage works better in the short term.
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| “It is very difficult to make an increase with price points such as Rs 2.50 and Rs 3. You will have to take it up by at least Rs 0.50, and then the percentage increase becomes big. For long-term benefits, however, prices will have to go up since that’s what helps bottomlines and margins,” said an analyst.
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| Analysts also agree that while consumers are price conscious, they usually do not notice a change in the weight of the product. Companies, therefore, see a reduction in grammage as a way of realising costs without affecting volumes much. |
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