Will P&G go ?Olay??

This could be just the break that Procter & Gamble (P&G) India is seeking. For years now, the fast moving consumer goods company – the largest in the world?has trailed rivals such as Hindustan Unilever Limited (HUL) in terms of market share in critical categories such as detergents. But this has hardly prevented the FMCG major from trying to improve its position in the country. Emerging markets are crucial for the FMCG player, with more than a fourth of its global sales coming from these areas.

Unilever, however, has almost half of its global sales coming from emerging countries, which means that P&G still has some catching up to do in these markets. This is why the company continues to keep its focus on countries such as India, where it has just launched Olay?one of the largest brands in its international portfolio.

?P&G has had a strategy of launching products every year in the country,? says Abhijeet Virmani, director of Delhi-based consultancy Positron Advisory. Kids? diaper brand New Pampers, for instance, was launched by P&G in December ?06. Rejoice shampoo was launched in January ?04. The gap between these two key launches was filled with the unveiling of a number of variants for existing brands such as Pantene and Head & Shoulders.

On Olay, which has worldwide sales of $2 billion, there is much riding though. It marks the foray of the company into the skincare segment?something it has been intending to do for a while now. Olay has been available through the import route in India, but it is now officially part of the P&G portfolio in the country.

Four products have been launched including an anti-aging moisturiser, cleanser, radiance cream and lotion in India. ?The focus, with the launch of Olay here,? says Sumeet Vohra, marketing director, P&G India, ?is on the anti-aging segment.? At about three per cent of the Rs 2,100-crore branded skincare products market in India, the anti-aging segment is small.

But it is also a segment that is growing fast, fitting in well with P&G?s overall scheme of things. Says Jagdeep Kapoor, chairman & managing director of the Mumbai-based Samsika Marketing, ?I think it?s a good move to have launched a product in that segment. It is growing, which means that the company could gain from the growth coming from there.?

Says a Bangalore-based FMCG analyst, ?For a long time, the skincare market in India largely constituted winter moisturising creams and fairness creams. Over the years, some diversity did creep in with the entry of players such as L?Oreal. HUL, the leader in the skin care space, did respond to this diversity with product extensions and variants of its existing brands. For instance, it launched the Ponds Age Miracle some time ago preempting the entry of Olay. It now has the Ponds White Radiance range, which again competes with Olay. All of this will actually help grow the skincare market.?

Costing Rs 599 for a 50-gram, anti-aging moisturiser, Olay is a premium product. The foaming cleanser, which goes with the moisturiser, costs an additional Rs 125.

Rivals such as the Ponds? Age Miracle lotion costs about Rs 450 for a 50-ml bottle, while Garnier?s and Zydus Cadilla?s anti-aging creams, available in 50-gram packs, are cheaper still at Rs 179 and Rs 150 respectively. Clearly, P&G has no intentions to dilute the brand equity of Olay by reducing its price despite pressure from competitive brands.

The company has launched its Olay products, especially, the anti-aging moisturiser, in the top six metros only, marking its presence in major departmental stores and retail outlets with display counters, beauty consultants, et al.

This strategy of being premium in its approach to consumers is nothing unusual with the company. Most of its brands have traditionally targeted a slightly upscale audience, which, in turn, has determined their price. In recent years, though, P&G has looked to address the last mile?something that archrival HUL has done successfully across categories?by adopting a dual pricing strategy. This is most obvious in the detergents segment, where it has waged a protracted battle with HUL for a while now.

In March 2004, it triggered a price war with HUL, when it dropped prices of Ariel and Tide substantially. At the current point, however, both players are almost neck-and-neck when it comes to the pricing of their detergent brands. A one-kg pack of Tide, for instance, costs roughly Rs 53 to HUL?s Rin, which is about Rs 52 per kilo. Ariel costs about Rs 108-110 per kilo to HUL?s Surf Excel, which is about Rs 116 per kilo.

?The dual pricing strategy can be seen in other categories too,? says Ranjit Kapadia, head of research at Mumbai- based brokerage firm Prabhudas Liladhar. In the men?s shaving products category, for instance, Gillette, acquired over two years ago by P&G Worldwide and now part of the P&G India fold, has the mass-market twin-blade razor Vector Plus competitively priced at Rs 45, while the shaving gel costs Rs 53 for a 50-gram pack and Rs 30 for a 25-gram pack. ?In a portfolio, where there are products at a much higher price point, brands such as Vector Plus are a key lever for the company to push up market share,? says Kapadia.

With an overall market share of about 75-77%, Gillette is the clear leader in the men?s shaving products segment straddling the space with mass-market brands such as Sensor Excel and Vector Plus and premium products such as Gillette Mach 3 and Mach 3 Turbo.

Vector Plus, launched in October 2003, actually marked the foray of the company into the mass-market space, helping it graduate consumers from a regular shaving-blade experience to a twin-blade one. In the process, it has helped the company garner significant market share, as Kapoor of Samsika Marketing explains, ?If you have a larger base of consumers at the lower end, it means you have more people at your disposal to help graduate them to better offerings in your portfolio.?

Gillette has been doing precisely this, which makes it a key element in P&G India?s arsenal. Other important constituents include Vicks and Whisper – category leaders – where the company continues to raise the bar as far as product innovation and pricing goes. Whisper, in particular, has been crucial for the company even as sales of Vicks have hit a plateau in recent months. For the first nine months of the latest accounting year of July?06-June?07, Whisper had a sales growth of 22% to Vicks?s 8%. In the last accounting year of July ?05-June ?06, however, both brands were evenly placed at a 20% average growth rate in sales.

?What is working for Whisper is the ability it has to fill need gaps. In the last few years, it has launched a number of variants that address precise needs of women,? says an FMCG analyst based in Mumbai. Here too the company has gone for a dual pricing strategy with Whisper Choice available at an affordable price to the regular Whisper products, which cost Rs 60 for a pack of about seven to ten napkins. Rejoice Shampoo is another example of the company?s attempt to pitch a lower-priced option in a portfolio consisting of slightly premium products such as Head & Shoulders and Pantene. Will the company adopt a similar strategy in skincare though? That is anybody?s guess at this stage.