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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Consumer products
India
Bazaar bytes #2. ITC has launched a new Kings Size Filter cigarette (84 mm length)
brand ‘Players’ priced at Rs50/pack of ten. The move is aimed at plugging the price-gap
between Wills (Rs44/pack of ten) and Gold Flake Kings (Rs55/pack of ten), in our view.
The Government of India has implemented new pictorial warnings in cigarettes; these
are incrementally more impactful, in our view. We find stock-outs of most of Nestlé’s
products in one of the largest modern retail outlets in Kerala State’s Palakkad town
(district headquarters with population of ~700,000). Price war conditions in detergents
mid-segment seem over. However, we would keenly watch for any potential activity by
P&G in ‘Ariel’ brand (top-end brand competing with HUL’s ‘Surf’).
‘Players’—new KSFT cigarette brand from ITC
ITC has launched a new Kings Size Filter cigarette (84 mm length) brand ‘Players’ priced at
Rs50/pack of ten (Exhibit 1). The move is aimed at plugging the gap between Wills Navy Cut
(Rs44/pack of ten) and Gold Flake Kings (Rs55/pack of ten), in our view. It is a smart move as the
company could continue to have a KSFT offering at Rs5 price point, whereas its Gold Flake Kings
and Classic would retail at Rs6.
New cigarette pictorial warning is here
The Ministry of Health & Family Welfare has implemented the new pictorial warnings in cigarettes.
The pictures are probably (and incrementally) more impactful, in our view (please see Exhibit 2 for
the old and new pictorial warnings).
Nestlé’s products facing stock-out at point of purchase
We were surprised to find stock-outs of most of Nestlé’s products in one of the largest modern
retail outlets in Kerala State’s Palakkad town (district headquarters with population of ~700,000).
It was a random visit to the store; however, the observations were surprising. We found stock-outs
of Maggi noodles, Everyday dairy whitener and Nescafe coffee (Exhibit 3). The store attendant told
us that stock-outs are frequent. A few enquiries at nearby mom and pop stores confirmed this.
Nestlé’s (SELL, TP Rs3,600) travails can be traced to poor capacity planning (wherein it is now—
behind the curve—investing in aggressive capacity expansion), in our view.
Price-war conditions in detergents mid-segment seem over. What about top-end?
Our recent visits to the ‘bazaar’ suggest that rational competition in mid-segment detergents has
come back—the recent price increases by HUL and competition in CY2011 is testimony for it. We
highlight that the December 2011 retail price of HUL’s Rin is Rs70/kg (which was the price in
January 2010 prior to the price cut to Rs50) and P&G’s Tide is now at Rs84/kg (Rs70/kg in January
2010). Interestingly, Tide is now at a 20% premium to Rin.
We would keenly watch for any potential activity by P&G in its ‘Ariel’ brand (top-end brand which
competes with HUL’s ‘Surf’). Industry sources indicate that while P&G has gained market shares in
the mid-segment with its success in ‘Tide’ brand, ‘Ariel’ still lags ‘Surf’ by a substantial margin in
the top-end. We highlight that during the detergents price war in 2004, P&G had initiated cuts in
both Ariel and Tide whereas in 2010, the activity levels were limited to Tide (and its variants). We
see some risks in the horizon for HUL (ADD, TP Rs420).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Consumer products
India
Bazaar bytes #2. ITC has launched a new Kings Size Filter cigarette (84 mm length)
brand ‘Players’ priced at Rs50/pack of ten. The move is aimed at plugging the price-gap
between Wills (Rs44/pack of ten) and Gold Flake Kings (Rs55/pack of ten), in our view.
The Government of India has implemented new pictorial warnings in cigarettes; these
are incrementally more impactful, in our view. We find stock-outs of most of Nestlé’s
products in one of the largest modern retail outlets in Kerala State’s Palakkad town
(district headquarters with population of ~700,000). Price war conditions in detergents
mid-segment seem over. However, we would keenly watch for any potential activity by
P&G in ‘Ariel’ brand (top-end brand competing with HUL’s ‘Surf’).
‘Players’—new KSFT cigarette brand from ITC
ITC has launched a new Kings Size Filter cigarette (84 mm length) brand ‘Players’ priced at
Rs50/pack of ten (Exhibit 1). The move is aimed at plugging the gap between Wills Navy Cut
(Rs44/pack of ten) and Gold Flake Kings (Rs55/pack of ten), in our view. It is a smart move as the
company could continue to have a KSFT offering at Rs5 price point, whereas its Gold Flake Kings
and Classic would retail at Rs6.
New cigarette pictorial warning is here
The Ministry of Health & Family Welfare has implemented the new pictorial warnings in cigarettes.
The pictures are probably (and incrementally) more impactful, in our view (please see Exhibit 2 for
the old and new pictorial warnings).
Nestlé’s products facing stock-out at point of purchase
We were surprised to find stock-outs of most of Nestlé’s products in one of the largest modern
retail outlets in Kerala State’s Palakkad town (district headquarters with population of ~700,000).
It was a random visit to the store; however, the observations were surprising. We found stock-outs
of Maggi noodles, Everyday dairy whitener and Nescafe coffee (Exhibit 3). The store attendant told
us that stock-outs are frequent. A few enquiries at nearby mom and pop stores confirmed this.
Nestlé’s (SELL, TP Rs3,600) travails can be traced to poor capacity planning (wherein it is now—
behind the curve—investing in aggressive capacity expansion), in our view.
Price-war conditions in detergents mid-segment seem over. What about top-end?
Our recent visits to the ‘bazaar’ suggest that rational competition in mid-segment detergents has
come back—the recent price increases by HUL and competition in CY2011 is testimony for it. We
highlight that the December 2011 retail price of HUL’s Rin is Rs70/kg (which was the price in
January 2010 prior to the price cut to Rs50) and P&G’s Tide is now at Rs84/kg (Rs70/kg in January
2010). Interestingly, Tide is now at a 20% premium to Rin.
We would keenly watch for any potential activity by P&G in its ‘Ariel’ brand (top-end brand which
competes with HUL’s ‘Surf’). Industry sources indicate that while P&G has gained market shares in
the mid-segment with its success in ‘Tide’ brand, ‘Ariel’ still lags ‘Surf’ by a substantial margin in
the top-end. We highlight that during the detergents price war in 2004, P&G had initiated cuts in
both Ariel and Tide whereas in 2010, the activity levels were limited to Tide (and its variants). We
see some risks in the horizon for HUL (ADD, TP Rs420).
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