Pricing Practice

Often Hindustan Unilever must invest in production capacity before a product is brought to market. At the time of investment, product demand is uncertain, and the capacity decision might be made using a forecast of the product sales, where the forecast may take the form of a probability distribution. This uncertainty in the product demand complicates the capacity investment decision and any reduction in the uncertainty would be desirable. In some circumstances, the company may have the ability to make capacity investments over a number of periods.
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While the company lost significant market share in soaps and detergents in the last few years due to intense competitive environment, it seems to have improved market shares across the two categories by 140-160 basis points each. HUL’s approximate market share in toilet soaps is 46% and about 36% in detergents.
Analysts said the company will have better pricing power in the key business while volume growth in these categories too is estimated to be in double digits. After discounting prices on toilet soaps and detergents to grow volumes, the company in FY11, took a corrective pricing action in both categories, as input costs rose.
According to annual report, the company had lost around 590 basis points (bps) of market share in the soap category, between December 2007 and March 2009, as consumers downtraded to competitors’ brands such as Santoor, Godrej No.1, Dettol and Cinthol. the company will have better pricing power in the key business while volume growth in these categories too are estimated to be in double digits. After discounting prices on toilet soaps and detergents to grow volumes, took a corrective pricing action in both categories, as input costs rose.
“HUL’s aggressive ad-spend, promotions and price cuts are resulting in volume gain at the cost of profit.
http://www.dnaindia.com/money/1563881/report-hul-seen-regaining-market-share-in-key-business