FMCG War in India: Is it for real?

[anshulseth]

HI ppl,

The recent FMCG war started by P&G is creating great waves and has caused many a flutter as well as rolling of heads among the rivals, lead by HLL.

The war started with P&G slashing its rate for washing powders by almost half, bringing the rate of 'Tide" from 43 for half a kg, to 23 per kg, and similar cuts in Ariel, and other products. This almost swept HLL off the ground, which came out with the knee-jerk reaction of slashing its prices in the similar fashion, and also a restructuring in its hierarchical structure, with Vindi Banga facing the music.

Also heard are the stories of P&G doing the same in other sectors like toothpaste with the imminent launch of "Crest" toothpaste , which is quite famous worldwide, into the Indian market.This has made bellwethers like Colgate already taking the preventive path of setting new prices. That is the preface to the story. Surely, P&G has reinvigorated a smooth sailing sector, industry has moved with daggers having being drawn and arsenals being put up by everyone.

But that is not the issue i want to discuss?
The real issue is: Is this war for real? And how far it will help the consumers like us?

Obviously, as of now, consumer is the winner, who is able to make most of its ruppe spent. But will this run can be sustained in the long-run? Will not the runners run out of steam, with bottomline depleting and margins falling, they will have no alternative but to revert back. But will that be on the current prices, of course not, but at a much higher level so as to make up for the money lost in this bloodshed.

This is nothing new to Indian markets, with many other sectors being manipulated into the same dragnet over n over again, and the foolish consumers finding solace in the money saved, and later blaming govt. or any other factor for the rise in prices.

I can cite some examples:
1. The two leading magazines, India Today and Outlook, had their prices slashed some time back to Rs. 10, and they publicised about it much. But when it started affecting their bottomlines, they reverted back to Rs. 15. N lo n behold, there was no brouhaha about it, it was done so passively as it is very normal. Who suffered? We the people.

2. Similar case happened with The Times of India and Hindustan Times.

3. Coke and Pepsi.

There are many other such cases. What i want to stress, in the case of duopoly its very difficult to avert such behind-the-back bickerings.

It can only be averted with the enlightenment of the Indian consumer, who should be concerned abt the quality and not the prices.

Indian market is considered as the most price-sensitive market, but this has to change. This image has to change to a most intelligent market, which being conscious of prices, is not the one to compromise on quality. This change is happening but is slow. But it will be nothing short of a revolution, and can only be brought about by more awareness.

What's ur gutfeel?????????

[Editor]

My gutfeel about the issue raised by Anshul is that slashing down the prices of products is a part of the strategy to lure consumers. Though it depicts superficially that consumer is the king as competitors also follow suit and consumer has the benefit to make a choice. However, in the long run even increasing the prices of the product or service might not affect the sales as much if the brand name and loyalty of the consumers is established. So even when the price of India Today or Outlook for that matter was raised from 10 to 15 bucks, nobody complained. We are the people who are still purchasing and reading it.

Having said that, i would also point out that Indian consumers cannot be fooled and awareness is increasing slowly but steadily. In the end quality matters.

This FMCG war may look real on the face of it, but with the standard of living and awareness of Indian consumers slowly on the rise, let's see where does it take the companies operating in the Indian market. Any comments...

Cheers,
Editor