HUL cuts Lifebuoy, Lux soap prices

Hindustan Unilever, a leading fast-moving consumer goods (FMCG) company, has cut prices of some of its soap brands to spur volume growth and gain market share in the category.

The move, according to analysts tracking the company, is in expected lines post their June 2019 quarter business performance discussion by the HUL top management.

An HUL spokesperson, in response to DNA queries, said that the company does selective and judicious price changes across its portfolio in the normal course of its business. “Given that the commodity prices are expected to remain benign for certain time period, we have taken price reductions in the range of 4% to 6% in Lux and Lifebuoy portfolio while it may be higher on certain packs in order to pass on the benefits to the consumers,” said the spokesperson.

HUL did not respond to queries regarding taking the price cut by reducing the grammage or has been implemented on the same grammage. On the extent of price cuts taken, market sources indicated that HUL has reduced prices of Lifebuoy soap bars by up to 28.6%, Lux soap bars by up to 25.9% and Dove soap bars by up to 20%.

According to the HUL management, within the beauty and personal care segment, personal products' performance was steady while personal wash witnessed a muted delivery, particularly in the popular segment.

In fact, Srinivas Phatak, chief financial officer, HUL, had said during the recent earnings call that post the June quarter, looking at the future outlook of commodities and given the budget changes, the company has taken certain decisive actions from a pricing point of view.

This is the right strategy by HUL considering soaps volumes are soft and palm oil prices continue to remain lower on a year-on-year basis, although they have picked up lately, said Abneesh Roy, executive vice-president - institutional equities - research, Edelweiss Securities.

“This will help HUL gain market share from the unorganised and some of the smaller players. In our view, any pressure on gross margins, will be compensated by cut in advertising spends, so earnings before interest, tax, depreciation and amortisation (Ebitda) margins should be fine,” said Roy.