Comparative Advertising: The Rin and Tide tussle

Comparative Advertising: The Rin and Tide tussle




April 10, 2010



My last article about Vodafone’s advertising genius elicited a classic example of an oligopolistic product. In stark contrast with the former, this article states the evils of oligopoly namely the non-price wars that take the form of comparative advertising.

Comparative advertising entails advertising a particular brand in direct comparison with a competitors’ brand to make it appear more attractive to consumers.



The recent Rin vs Tide ad is a classic example of comparative advertising that took the Indian advertising industry to a different level. HUL’s controversial ad claiming that Rin was far more superior than Tide on the ’whitening’ aspect was aired on televisions at the end of the month of February and it created a furor among the industrial fraternity, media and consumers as well. 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 forth the evils arising out of cut-throat competition and unsuccessful price wars in an oligopolistic market structure.



Implications of Price Wars



Hindustan UniLever and Procter & Gamble, the two FMCG giants had been competing for market share lately. With the advent of Tide in India in 1998, as a new entrant in the Indian market it had a miniscule market share in the detergents market but in 2004 it witnessed a turnaround. P&G changed focus to the mid-segment, targeting a specific clientele. It reduced price of its Tide brand drastically in order to gain a greater share in the detergents market. Initially Tide was trailing behind Rin but since 2007, sales picked up, and its market share rose posing a threat to HUL whose share started eroding. P&G then introduced its Tide ‘Naturals’ brand targeted at the rural segment, with its landmark price. The 200 gm pack was priced at Rs 10, 400 gm for Rs 20 and the promotional offer was for 250 gm pack for just Rs 10. This pricing strategy turned out to be highly successful and it greatly aided the company to penetrate and consolidate in the Indian market. While HUL witnessed erosion in market share, the company’s quarterly results ended December 2009 do show a dip in revenues in the soaps and detergents segment. HUL’s revenue growth declined by 2.4%, market share dipped that was grabbed by rival P&G. It is thus evident that Hindustan Lever in order to maintain its position in the detergents market did take to comparative advertising (non-price war mechanism) to outwit its rival P&G.



But if HUL’s segment-wise revenues are reviewed over the years it is found that there is no major loss of revenue in the detergents segment in terms of % of the total revenues. Illustrated below is the revenue of the detergents segment as % of total revenues.



Revenues in the Detergents Segment (% of total revenues):



1999 – 41

2000 – 40

2001 – 40

2002 – 45

2003 – 44

2004 - 45

2005 – 45

2006 – 47

2007 – 47

2008 - 49



The above statistics do not show a fall in revenues in the detergents segment except for years 2000 and 2003.



HUL filed a case against P&G in the Madras High Court while P&G’s case against HUL lies in the Calcutta High Court. Whatever the outcome of the court proceedings, the question to be asked is what effect do these misleading ads have on consumers? A commoner with preferences for a specific brand would be iffy whether to continue buying or shift loyalties. Secondly market values of company stocks are largely affected by market sentiments and such controversies would definitely affect stock prices. As was seen in the month of March, post the ad, HUL’s market price fell 8.75% over March 11th and 12th while most of the brokerage firms also downgraded the HUL stock.



Comparative Advertising Worldwide



Comparative advertising has been prevalent in countries like the US where generally precautions regarding disclosure of company brands are taken. In the US comparative advertising is permitted but under strict control. As per ‘Millward Brown’ research statistics there are certain countries where comparative advertising is more prevalent than others. Among these are the US, India and the Philippines with 7% while Australia, Taiwan and Brazil with just 4%. Europe has the least number of comparative ads than any other nation. In any country, culture plays a great role in determining mass acceptance and responses to comparative advertising



Comparative Advertising – India



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. On all three aspects, it seems ambiguous for HUL to get a clean chit. With both the companies having filed their cases against each other in their respective courts, one has to wait and watch the outcome of the court proceedings.



Rashmi Ponkshe

Email: rash.ponkshe@gmail.com