Marketing (BSMK2102) - Case Study 6 "Soap Wars in India" When price wars do erupt they have considerable effects on companies within the industry. In the Indian detergent market (ie washing powder for cleaning fabrics), Hindustan Lever Limited (HLL), a subsidiary of FMCG giant Unilever, fought a tough price war with Procter & Gamble (P&G) for control of the detergent market in early 2004. After years of small-scale price reductions, from March 2004, P&G lowered the price of Tide from 43 rupees for a 500-gram pack to 23 rupees and Ariel from 70 rupees to 50 rupees for the same size pack. For the 1 kg pack, P&G's Tide brand was reduced from 89 rupees to 46 rupees and Ariel from 135 rupees to 99 rupees. As a direct response to these significant price reductions, HLL reduced the price of its own major brands (among others), Surf Excel and Surf Excel Blue, from 70 rupees for a 500-gram pack to 50 rupees and from 50 rupees to 38 rupees respectively and from 85 rupees for its 1 kg pack to 60 rupees and from 130 rupees to 99 rupees respectively. The new prices were broadly designed to correspond with the P&G prices. However, HLL's changes in price led to a drop not only in category profitability (le the detergents division, but also in HLL's overall profitability which fell from 19.5% to 14.5% that year. By comparison, P&G's net profit rose 35,5% for the year ended June 2004. The lesson is salutary. Beware of how you respond to a competitor's price changes. Questions: 1. How else could HL have responded instead of dropping its prices? Elaborate. 2. What do you think caused this price war in the first place? 3. What other price wars do you know (whether for local or international products), or that you can remember? What sector were they in? Explain the incident