HUL will lower prices by 7-10%, in line with GST rate cut: CEO Sanjiv Mehta

Mumbai: Hindustan Unilever Ltd (HUL), India’s largest consumer packaged goods company, will reduce prices by 7-10% on an average across categories following the reduction in the goods and services tax (GST) from 28% to 18% for categories like detergents, cosmetics, deodorants and packaged foods, chief executive Sanjiv Mehta said in an email interview.

The impact will be seen across almost 600 of its stock keeping units (SKUs), with some items seeing an almost 20% reduction. Prominent products that will see price reductions include its Fair and Lovely 15 gram pack, from Rs25 to Rs20; Sunsilk Shampoo 340 ml from Rs204 to Rs165 and Wheel 1 kg pack from Rs52 to Rs48.

Companies like Dabur India Ltd, Godrej Consumer Products Ltd and ITC Ltd have already made similar announcements. Dabur has reduced prices of its existing stocks by 9% across categories like shampoo, skin care and home care products. Likewise with GCPL. The maker of Cinthol soaps and Hit insecticides has initiated a 7-10% price reduction on all its products across hair colours, air fresheners, liquid detergents and deodorant categories.

These announcements follow a diktat from Central Board of Excise and Customs chairperson Vanaja Sarna to consumer goods companies to immediately revise the maximum retail price on all products in line with the GST rate cut announced by the GST Council on 10 November.

Edited excerpts from Mehta’s interview:

Will HUL reduce prices in categories where GST has been reduced?

The recent rate reductions have come across multiple categories for us, such as shampoos, detergent powders, cosmetics, instant coffee, skin care, deodorants, dishwash bars and packaged foods. We are committed to ensuring that all benefits to the business in terms of the reduction in GST rates will be passed on to the consumers in the form of lower prices or increased grammage.

By how much and by when will these new lowered prices come into effect?

As we pass on GST rate reductions the benefits to consumers across the categories will be in the range of 7-10%. On certain consumer packs, the benefits will be lower and in some others, it will be as high as 20%. Nearly 600 of our stock keeping units (SKUs) are being impacted by MRP reduction/increase in grammage, consequent to our decision to pass on the benefits of GST rate cut to the consumers. Under normal circumstances, changes to a network of this magnitude would run into a few months. However, to ensure that the consumers can enjoy these benefits at the earliest we have already commenced production of many of these packs. We are discarding/writing off our old packing material to ensure that the price changes can be printed on the packs at the production stage itself.

As an example, in mass laundry products, price reductions and grammage increase have already been taken across the entire portfolio in a matter of just one week and should be landing in the market very soon.

We are confident that the transition of a sizeable part of our portfolio to reduced MRPs/increased grammage will be completed in the next few weeks.

Will you also be reducing the prices on the existing inventory in the market?

As an immediate measure, to address the stocks with trade, we have advised our modern trade customers to pass on the benefits and you must have seen that many of these have started to land in the market. With reference to general trade, we have asked our distributors to communicate to the trade that the benefits that would be accruing to them during the transition should be passed on to the consumers.

Will you be advertising the new prices?

We will be communicating the benefit to consumers, attributing it to GST. You have already seen the first of our advertisements starting with Bru Gold and we will continue to communicate over the next few weeks as we land the networks to ensure that the consumers are fully aware of the benefits.

While the GST has been reduced, commodity prices are firming up. Will this restrict you from passing on the benefits of reduced GST to consumers?

You are absolutely right in stating that many commodities have started to firm up due to global factors. For example, crude that was hovering in the $40/barrel range is now close to $60/barrel. We will continue to monitor them and use all available levers such as our portfolio, savings, leverage etc., to manage the business.

However, our immediate priority is to pass on the benefits to the consumers in the form of lower prices or increased grammage.

Rural India demand remains muted. Will this help?

This will give a fillip to both the FMCG sector and the economy at large. As far as rural India is concerned besides the reduction in the consumer prices consequent to GST reduction, factors like good monsoon in large parts of India and increase in minimum support prices should also have a favourable impact on rural demand.

Source: http://www.livemint.com/Companies/QTrMLJNxkCjnI1Ox70dpZK/HUL-will-lower-prices-by-710-in-line-with-GST-rate-cut-C.html

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