UNETHICAL COMBAT OF RIN OVER TIDE NATURALS -- C.V.KRISHNA1

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1 UNETHICAL COMBAT OF RIN OVER TIDE NATURALS -- C.V.KRISHNA1 Quote: "Bad publicity is better than no publicity -- Alyque Padamsee Introduction: In February, 2010 HUL through its latest advertisement openly challenged the superiority of its product Rin over P&G's Tide Naturals, which is the new product that P&G launched a couple of months ago in the mass segment positioning it against Rin as well as Wheel. It s the first time in India that competing brands have been named rather than pixilated (as they usually are) in a TV commercial. The Rin advertisement claim is limited to a whiter wash- Tide se kahin behatar safedi de Rin (Rin gives better whiteness than Tide), without getting into specific, feature-to-feature comparison. Almost all detergent ads promise a whiter wash except that they used to refer to ordinary detergents leaving the consumer to figure that they are talking about her brand. The only difference here is that a competitor has been named, and shown brazenly. HUL claimed that the ad was in retaliation to P&G s claim that the Tide Naturals brand had natural ingredients. Direct competitors out rightly lashing out at each other in this case do bring 1 This case was prepared by (Mr. C.V.KRISHNA Associate Professor-Raghu Engineering College- Visakhapatnam and Research Scholar Utkal University-Orissa) and is intended to be used for class discussion rather than to illustrate either effective or ineffective handling of the situation. Presented to and accepted for the International Case Conference, November 2010, Goa, India.

2 forth the evils arising out of cut-throat competition and unsuccessful price wars in an oligopolistic market structure. HUL2 claims that the Rin commercial is in line advertising regulations laid by the industry. HUL terms its claim to be factual, accurate and substantiated based on laboratory tests done through globally accepted protocols in independent third party laboratories. ASCI3 has even issued a notice to HUL to substantiate its claim. Although Indian marketing world have seen lot of comparative ads, the current Rin Vs Tide4 is a rare case of direct comparative ad where the brand has taken the competitor brand's name and challenging it head on. That is the main reason behind the media noise about the campaign. India has been quite liberal as far as advertising laws are concerned. There has been ample of leeway in advertising norms. Any company that advertises its brand has to adhere to the ASCI rules. ASCI rules state that comparison to the rival brand has to be backed by factual information and tested results and secondly in no event should the consumers be deceived due to comparison. Thirdly competitors products cannot be degraded explicitly or implicitly. Indian Fabric Wash Market The Indian fabric wash market is estimated to be worth around Rs. 55 billion and a volume turnover of 2.6 million tons. In India fabric cleaning is very welldeveloped category and is having penetration of 99% for laundry products. The per capita consumption is 2.65 kgs per 2 HUL stands for Hindustan Unilever Limited the Indian subsidiary of U.K. based Unilever Ltd, which is the India s largest FMCG Company which also manufactures Rin detergent brand. 3 ASCI stands for Advertising Standards Council of India, which takes care of Ehical code of conduct for Indian Advertising. 4 Tide is the detergent brand of USA based Multinational Company Procter & Gamble.

3 annum. The penetration of detergent powder is 86% while that of detergent bars is 64%. Laundry soaps have a much lower penetration at 33% and it is restricted to few regions. West India and South India are detergent bar markets while North India and East India are laundry soap markets. Majority of consumers use more than one product and they use combination of detergent powders and bars which are the most prevalent and about 82% consumers prefer such type of usage pattern. The washing frequency per week is 6.9 times, and the product usage of any type is around 97%. The current trends indicate an upward shift in the usage of detergent powders and a downward shift in the usage of laundry soaps. Hence the detergent market is maturing and more consumers prefer detergent powder even if it is priced higher to laundry soaps. Background: The Cold War: Rin being the first national detergent bar in India initially it had first mover advantage in the Indian detergent maket. But, Rin Powder White was launched in the year 1994, and the Tide has entered in the year During 90s the Rin was undergoing innovations continuously and improvements in the product were done rapidly. Initially Rin positioned itself in the minds of the consumers through attractive advertising campaigns like Uski saari, meri saari se safed kaise 5, to Safedi ka Shehanshah 6etc. Exactly at the same period Tide was launched in the market as a premium detergent brand in the market. 5 As shown in Television Commeraicals 6 As shown in Television Commeraicals

4 P&G launched Tide detergent at a price of Rs. 120 per kg. And the analyst opinion was that, initially Tide could not grab the market share primarily due to the launching price of Rs.120 per kg as the then competitor brands were available at a cheaper price. And even P&G s another brand Ariel was performing quite well in the market during the same time of the launch. Hence, there was slow growth in the Indian market for Tide and it could get only 0.3% market share out of the total detergent market in India during 90s. STAGE I: 2003-Starting of the Cold War: In 2003, P&G initiated the cold war by slashing the prices of detergent sachets of its brands Tide and Ariel at around 50%. Then immediately HUL's margins dipped by 500 basis points and even its earnings declined approximately by 33%. Then after the success of its pricing strategy P&G planned to adopt a similar strategy in detergent bags as well. So, in March 2004 P&G slashed the prices of its brands Tide and Ariel around by 20-50%. Whereas, P&G did not admitted its pricing strategy and moreover it mentioned that "By improving internal efficiencies within the company in areas such as distribution, manufacturing and cost of raw material, the company is now in a position to pass on these benefits to the consumer". So, the Ariel s price was reduced from Rs. 135 per kg to Rs. 99 per kg and the price of Tide was slashed from Rs. 85 per kg to Rs. 46 per kg. This price war has critically impacted the HUL's financials which resulted even in a overall collapse of its Soaps & Detergent Segment margins by almost 750 basis points. Now HUL was forced to react to the pricing strategy of P&G and it also has slashed the prices of its brands Surf Excel and Surf Blue. Surf Excel is the premium detergent brand of HUL which is positioned against P&G s Ariel brand HUL slashed its price from Rs. 130 per kg to Rs. 99 per kg so that it matches the price of Ariel brand. Whereas for the Surf Blue which is HUL s mid-price

5 segment detergent powder the price was slashed from Rs. 85 per kg to Rs. 60 per kg, which is still higher than P&G s Tide brand s Latest price of Rs46/kg. And the price of New Rin was Rs. 80 per 2 kg pack, Rs. 42 per 1 kg, Rs. 20 for 500 grams, Rs. 10 for the 250 gram pack and Rs. 1 for the 25 gram sachet, which is considered to be a counter attack from HUL. In 2004 January HUL positioned its New Rin Powder with a unique double whiteness proposition in the market. It even positioned the new Rin that it dissolves completely in water without leaving any mud like residue unlike other detergent brands in the market. The New Rin brand even promised its enhanced fragrance. On the other hand P&G has positioned its Tide brand against the HUL s Rin brand on the `whitening' platform. STAGE II Aggression in the Cold War Since the beginning P&G s Tide brand has steady gaining share along with the HUL s Rin brand almost near behind it. Tide was positioned as the standard brand in delivering whiteness and cleansing advantages unmatched by any other detergent in the market. It was even positioned in such a way that the powder could prevent molecules of dirt from setting on to the clothes, and hence providing better cleanliness and whiteness to the clothes. The additional advantage was the augmentation of pleasant lemon flavor which was added to the powder to increase the fragrance. So, the HUL s Rin brand lost out its leading position in the market even in terms of whiteness also P&G Launches Cheaper Variant Of Tide Naturals: Already in the year 2009 HUL was wounded as the market share and HUL s Rin brand was severely hit by P&G s Tide brand which was capturing 8% of the market share against HUL s

6 Rin which posted only a 5.1% of the market share. Added to this impact P&G has aggravated the situation by launching a cheaper variant of Tide which is Tide Naturals. P&G launched the Tide Naturals in order to up-trade the consumers of other mass detergents to safeguard its flagship brand Tide. Tide Naturals was initially priced at Rs. 50 per kg whereas the Tide is Rs. 70 per kg. This move was a direct attack to its key competitor HUL as already HUL is struggling with market share erosion. This pricing strategy of P&G hits the entire mid-priced segment of Laundry portfolio brands in the market and especially the HUL. With this pricing strategy P&G has perfectly placed its new brand Tide Naturals between HUL s Wheel and Rin, which were priced at Rs. 32 per kg and Rs. 70 per kg respectively, providing more freedom of choice to consumers either to upgrade from Wheel or shift to a cheaper brand than Rin. After this incident a price difference of around Rs. 20 was observed for a one kilo gram pack between Tide Naturals and other brands. In order to enter in the rural markets P&G has followed this strategy, which is again an immediate threat to HUL. Due to this HUL s Rin was hit by a fall of 2.5% in its share in December 2009, and now the only available option for HUL was to react similarly by slashing the prices for Rin also. So, HUL slashed the price by 30% to Rs. 50. Again following to HUL's price reduction, P&G counter attacked by slashing the price of its 250gm Tide bar from Rs17 to Rs9, and the 105gm bar was reduced from Rs6 to Rs4. FINAL STAGE-2010-The Real War of Advertising Attacks between HUL Rin Vs P&G Tide Naturals:

7 Finally, the pressure was aggravated on HUL and this desperation is manifested through various advertising attacks as given below: 1. HUL has initially challenged P&G Tide's claim of "whiteness with special fragrance" in the Chennai High Court. The Chennai High Court in turn has passed an order CS 189/2010 on 25 February 2010 asking P&G to change the advertisement as it was unable to substantiate its claim of "whiteness with special fragrance". The court also has granted an injunction and asked P&G that it has to respond within three weeks. 2. HUL also has moved P&G to court regarding a Tide Naturals Television Commercial. HUL claims that the commercial has given customers the wrong impression that Tide Naturals contains natural ingredients such as sandal and lemon, and even the brand name itself was proposed to be "misleading". Then the court ordered P&G to modify the campaign, and even P&G admitted that Tide Naturals did not contain any natural ingredients. Finally, P&G was instructed by the court to clarify to the consumers the fact that Tide Naturals did not contain the ingredients as claimed by it. 3. On 28 February, HUL has launched an aggressive Comparitive Advertising Campaign on TV, where in the advertisement Rin was directly compared to Tide Naturals and the competitor product was directly shown even without blurring the brand, which created tremors in Indian Comparative Advertising. The advertisement sequence is given as follows a. Two ladies stand at a bus stop, waiting to pick their kids from the school bus. b. Both of them are carry shopping baskets.

8 c. Another Lady referred to as Lady 1 has Rin packet in her bag d. One Lady referred to as Lady 2 has Tide Naturals packet in her bag. e. Then both the women look at each other s bags and Lady 2 boasts that Tide has a good fragrance and it even provides better whiteness/brightness to the clothes f. When the school bus arrives, it was shown that the white shirt of Lady 1 s kid is strikingly brighter and whiter then the Lady 2 s kid. g. Then Lady 2 gets astonished by looking at the whiteness. h. And the Lady 1 s kid reacts by asking her mother, whether why is the other lady so amazed and observant i. A disclaimer that the analysis has been done by an independent agency is displayed during the advertisement j. The advertisement also claims that now there is a promotional price of Rs. 25 on Rin as opposed to the earlier price of Rs. 35. Ethical & Legal Issues: The Contested Issue This Advertisement campaign of HUL against P&G has provoked debate on comparative advertising. The main issue is that whether HUL's explicit TV commercial of Rin is being superior to P&G's Tide amounts to disparagement or is a permitted form of free speech protected under ''commercial speech''as part of freedom of speech under Article 19(1)(a) of the Constitution7. 7 As quoted in Article 19(1)(a) of the Constitution

9 There are various legal tools which govern comparative advertising, the Monopolies of Restrictive Trade Practices, 1984, (MRTP Act) and Trade Marks Act, 1999, (TMA) provide the basic idea for such advertising. The Trade Marks Act, 1999, has also incorporated provisions pertaining to comparative advertising under Sections 29(8) and 30(1). Comparative advertising is permissible but it is subject to certain limitations as to unfair trade practices. The unfair trade practices are defined under Section 36A of the Monopolies and Restrictive Trade Practices, Even though the Act now stands repealed, its provisions continue to stand. Section 29 (8) of the Trade Marks Act, 1999 provides certain limitations to comparative advertising, according to which advertising infringes on a trade mark when it: takes unfair advantage and is contrary to honest practices in industrial or commercial matters; or is detrimental to its distinctive character; or is against the reputation of the trade mark 8. Section 30 (1) of the Act read as: ''Nothing in Section 29 shall be preventing the use of registered trademarks by any person with the purposes of identifying goods or services as those of the proprietor, provided the use: is in accordance with the honest practices in industrial or commercial matters, and is not such as to take unfair advantage of or to be detrimental to the distinctive character or repute of the trade mark.''9 8 As quoted in Trade Marks Act, 1999

10 Section 36A of the MRTP Act lists several actions to be an 'unfair trade practice'. For instance, Section 36A (1)(x) reads: ''36A 'unfair trade practice' means a trade practice which, for the purpose of promoting the sale, use or supply of any goods or for the provisions of any services, adopts any unfair method or unfair or deceptive practice including any of the following practices, namely:- (1) the practice of making any statement, whether orally or in writing or by visible representation, which (x) gives false or misleading facts disparaging the goods, services or trade of another person.'' 10 ASCI's stand The Advertising Standards Council of India has also laid down a specific code of conduct for self-regulation in advertising, with the sole aim of regulating the content of advertisements. Chapter 1 of the Standards of Conduct not only deals with the honesty of representation, but also deals with misleading advertisements as well. It lays down the following criterion11: 1. Advertisements must be truthful. All descriptions, claims and comparisons which relate to matters of objectively ascertainable fact should be capable of substantiation. Advertisers and advertising agencies are required to produce such substantiation as and when called upon to do so by The Advertising Standards Council of India. 9 As quoted in Section 30 (1) of the Trade Marks Act, As quoted in Section 36A (1)(x) of the MRTP Act 11 As given by the ASCI on the Comparative Advertising

11 2. Where advertising claims are expressly stated to be based on or supported by independent research or assessment, the source and date of this should be indicated in the advertisement. 3. Advertisements shall not, without permission from the person, firm or institution under reference, contain any reference to such person, firm or institution which confers an unjustified advantage on the product advertised or tends to bring the person, firm or institution into ridicule or disrepute. If and when required to do so by the Advertising Standards Council of India, the advertiser and the advertising agency shall produce explicit permission from the person, firm or institution to which reference is made in the advertisement. 4. Advertisements shall neither distort facts nor mislead the consumer by means of implications or omissions. Advertisements shall not contain statements or visual presentation which directly or by implication or by omission or by ambiguity or by exaggeration are likely to mislead the consumer about the product advertised or the advertiser or about any other product or advertiser. 5. Advertisements shall not be so framed as to abuse the trust of consumers or exploit their lack of experience or knowledge. No advertisement shall be permitted to contain any claim so exaggerated as to lead to grave or widespread disappointment in the minds of consumers. Followed by this advertisement P&G has filed case against HUL in Kolkatta High Court and even the ASCI has asked HUL for explaination regarding the advertisement. Both the Kolkatta High Court and ASCI have recommended and ordered HUL to ban the advertisement as it is a direct comparative advertising which is not allowed in India.

12 Future Outcome: The cold war of 2004 almost took a year for HUL to get over when P&G has finally announced a price hike of approximately 4-5% in February 2005 in Ariel and Tide, which witnessed HUL following suit. But, that was not before the damage was done to HUL's Margins and Profitability. Hence, even in the 2010 cold war, though it is lower in quantum, the war has just started and is likely to significantly impact HUL's Earnings. It could be anticipated that in the coming months the price war spreads to other brands, players and categories as well. REFERENCES 1. Barry, Thomas E. and Roger L. Tremblay (1975), "Comparative Advertising: Perspectives and Issues," Journal of Advertising, 4 (4), Belch, George E. (1981), "An Examination of Comparative and Noncomparative Television Commercials: The Effects of Claim Variation and Repetition on Cognitive Response and Message Acceptance," Journal of Marketing Research, 18 (3), Chevins, Anthony C. (1975), "A Case for Comparative Advertising," Journal of Advertising, 4 (2), Donthu, Naveen (1992), "Comparative Advertising Intensity," Journal of Advertising Research, 32 (6), Gorn, Gerlad J. and Charles B. Weinberg (1983), "Comparative Advertising: Some Positive Results," Advances in Consumer Research, 10 (1),

13 6. Harish Bijoor (2010), e-paper( Business Today) Evolved marketing for an evolved consumer, task=view&id= Hisrich, Robert D. (1983), "Executive Advertisers' Views of Comparison Advertising," Sloan Management Review, 25 (1), Jain, Shailendra P. (1993), "Positive versus Negative Comparative Advertising," Marketing Letters, 4 (4), Levine, Philip (1976), "Commercials That Name Competing Brands," Journal of Advertising Research, 16 (6), Pechmann, Cornelia and S. Ratneshwar (1991), "The Use of Comparative Advertising for Brand Positioning: Association Versus Differentiation," Journal of Consumer Research, 18 (2),