Where to from here?

Year 2008 was a pivotal one for Hindustan Unliver Limited (HUL). The rapid increase in prices followed by decline caught it offguard. Its volume growth fell 4 per cent in the March 2009 quarter compared to a rise of 10 per cent in the March 2008 quarter. Since then volumes have recovered: at the end of March 2010 they were up by 11 per cent. However, the event exposed the chink in the market leader's armour. The company services one million retailers directly and another six million indirectly. With such a massive supply chain to cater to, it got stuck with high levels of inventory. Its competitors, who have smaller networks to cater to and hence carry lower levels of inventory, were able to quickly introduce cheaper products that ate into the leader's market share. The company that has taken the maximum advantage of HUL's shortcomings is long-time arch rival Procter & Gamble (P&G). In recent months P&G has upped the ante by aggressively pitting its lower-priced detergent Tide Naturals directly against Rin (the latter is currently the biggest brand in the low-cost detergen

This article was originally published on August 23, 2010.