What happened
Hindustan Unilever (HUL), India's biggest FMCG company, has raised the printed prices (MRPs) of several home care products, including its three big detergent brands. Reports put the rise at between ₹1 and ₹10 a pack, and link it to higher input costs and HUL's effort to protect its margins.
- Surf Excel Quick Wash 1 kg went from ₹235 to ₹245, and the 500 g pack from ₹123 to ₹128.
- Surf Excel Easy Wash 1 kg went from ₹167 to ₹172, and the 500 g pack from ₹85 to ₹87.
- Rin powder 1 kg went from ₹120 to ₹123, and the 500 g pack from ₹61 to ₹63. Rin Ala 500 ml went from ₹90 to ₹95.
- Wheel powder 1 kg went from ₹90 to ₹93, and the 500 g pack from ₹46 to ₹47.
- Outside detergents, Moti Gulab soap (150 g) went from ₹74 to ₹82, a rise of just over 10%.
Last month, HUL's CEO Priya Nair said the company would keep taking calibrated price rises as input costs move. Dabur's India CEO also told investors last week that Dabur is looking at calibrated price increases, citing costs linked to crude oil.
When the market leader moves prices, every rival brand manager gets the same question from their boss the next morning.
The case
You're the brand manager for a mid-priced detergent powder sold mostly in kirana stores in north and central India. Your 1 kg pack sells at ₹95, close to Wheel. HUL has just raised its prices, and your own input costs are up too. Your head of marketing asks: do we hold our price, match HUL, or go further?
1Clarify
- How much have our own costs gone up per pack? If costs rose, holding the price isn't free. We'd be paying for it out of margin.
- Who do we take buyers from, and lose them to? If our shoppers compare us with Wheel at ₹93, Rin at ₹123 matters much less.
- Which packs carry our volume? A ₹3 rise on a 1 kg pack feels different from a ₹1 rise on a small pack. HUL moved Wheel 500 g by only ₹1.
- Do we expect other brands to follow HUL? If most of the shelf moves up, holding our price makes us stand out more.
2Structure
- Our economics: what each option does to the money we make per pack.
- The shopper: how price-sensitive our buyers are, and whether they would notice a ₹2 or ₹3 gap.
- Competitors: where HUL and others now sit on the shelf, and how they might react to us.
- The trade: retailers and distributors, who earn a share of MRP and hold stock printed at the old price.
3Analyse
Read HUL's move pack by pack
The rupee figures hide the pattern. Turn them into percentages:
Worked out from the old and new MRPs reported by PTI. Wheel 1 kg is our closest competitor in this case.
Two things stand out. Every detergent rise is between about 2% and 7%. And the mass-market packs moved least: Wheel 500 g went up by just ₹1. HUL seems to have been gentlest where shoppers are most price-sensitive.
Work out what each option earns per pack
We need some numbers of our own. These are assumptions for the case, not real company data:
- Retailers and distributors keep 20% of MRP, so on a ₹95 pack we receive ₹76.
- Our variable cost was ₹57 a pack. That left a contribution of ₹19 (25% of what we receive).
- Input costs have added ₹3 a pack, so the variable cost is now ₹60.
Before we do anything, our contribution has fallen from ₹19 to ₹16, a drop of about 16%. Now compare three options. The sensible baseline is matching Wheel's ₹3 rise, since that keeps the gap our shoppers are used to.
| Option | New MRP | We receive (80%) | Contribution per pack | Volume needed vs matching |
|---|---|---|---|---|
| Hold | ₹95 | ₹76.00 | ₹16.00 | 15% more (18.40 ÷ 16) |
| Match HUL | ₹98 (+3.2%) | ₹78.40 | ₹18.40 | Baseline |
| Go to ₹100 | ₹100 (+5.3%) | ₹80.00 | ₹20.00 | Can lose up to 8% (18.40 ÷ 20) |
To beat matching, holding at ₹95 must sell 15% more packs than matching would. That's a big ask. Holding only makes us about ₹3 cheaper than we would otherwise be, roughly 3%. Our shoppers would need to be very price-sensitive for a 3% gap to win 15% more volume. Also, Wheel now sits at ₹93, so holding at ₹95 shrinks our gap to Wheel from ₹5 to ₹2. Some shoppers may then decide the HUL brand is worth the extra ₹2.
Going to ₹100 earns the most per pack, and we could lose up to 8% of volume and still beat matching. But it widens our gap to Wheel to ₹7 and takes us past a round ₹100 mark that shoppers notice. If buyers switch, they'd go straight to the market leader.
Don't forget the trade
Because retailers earn a share of MRP, a higher MRP also gives them a few more rupees per pack. That helps the brand stay on shelves. Shops will still hold stock printed at ₹95, so a rise takes a few weeks to reach shoppers. That gives us time to watch what other brands do.
4Recommend
I recommend matching HUL on the 1 kg pack, taking it from ₹95 to ₹98, and keeping our small packs where they are for now.
First, our costs are up ₹3 a pack, and matching recovers most of the lost margin: contribution goes from ₹16 back to ₹18.40. Second, holding would need about 15% more volume to pay off, which a ₹3 gap is unlikely to deliver. Third, HUL barely moved its small mass-market packs, so keeping our small packs steady protects the shoppers who are most sensitive to price.
The risk is that shoppers trade down to smaller packs or switch to Wheel. So I'd track weekly sales in our top kirana markets for six weeks and be ready with a short trade scheme if volume falls more than a few per cent.