Consumer goods manufacturers squeezed by costs, price freeze
Loic Tardy, left, Unilever Thai Trading chaiman, and Luc Dayot, CenCar Ltd (Carrefour Thailand) managing director, announced a joint promotion called 'Smiley Campaign 2006' yesterday.
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Makers of consumer goods are finding themselves challenged by strong pressures, sandwiched between rising costs and a price freeze and buffeted by strong competition in the market place.
To survive, many of them have reshuffled their business strategies to go beyond pricing and come up with new and improved innovations that have value-added benefits. Multinational retailers and consumer-products manufacturers are forming synergies together in more strategic and creative ways. These synergies go beyond prices to include product offerings, sales promotions, merchandising displays, event marketing and loyalty schemes. Unilever Thai Trading, an Anglo-Dutch consumer-products conglomerate, is a clear example. The company has kicked off separate campaigns in synergy with major retail clients Tops Supermarkets, Watson's, Tesco Lotus and Carrefour. "We have faced a rise in overall costs of between 6 per cent and 10 per cent since oil prices started heading up from the third quarter last year," said chairman Loic Tardy. Tardy said the cost increase had been driven by several factors, including the rising price of raw materials, up 15-20 per cent, and a 6-per-cent increase in staff salaries this year. Prices of several chemical ingredients have increased dramatically through the continuous rise in oil prices. "Inflation is a psychological game," said Tardy. "Everybody is quite panicked about inflation. The Ministry of Commerce is trying hard to control inflation by freezing the prices of consumer products." He said that while the inflation rate jumped 6 per cent last year, Unilever increased the prices of its consumer goods by only 0.9 per cent on average. So far this year, the company has raised price only another 1.5 per cent. Tardy said Unilever Thai Trading expected this year's sales to grow 7 per cent, compared with 8 per cent last year. "We are facing a lot of pressure driven by rising business costs, including the increase of salary to our employees. As a business player, you need to be disciplined and progressive all the time," said Tardy. He said consumer products were quite similar to those consumer electronics that became mature and were challenged by fierce competition from several players. Prices also come down because of competition. Tardy said the price of television sets, for instance, had declined 50 per cent every year through competition. "Many business players, including Unilever, need to reshuffle their business strategies to go beyond just cutting prices. Everybody now comes along with new improved products with value-added benefits," said Tardy, adding that manufacturers had launched a new concentrated detergent for washing machines and new skincare products for whitening and anti-ageing. He noted that Unilever Thai Trading currently had 16 strong consumer-product brands, with each one launching one or two innovations each year. Yesterday, the company launched a co-promotional campaign with Carrefour called "Smiley Campaign 2006". Under the campaign, which runs to August 14, Unilever will offer free any Unilever products with a "heart" symbol on its packaging for every purchase of three Unilever products labelled with a "Smiley" symbol. More than 200 different Unilever products are included in the promotional campaign at all Carrefour hypermarkets. "What we try to do is meet the expectations and requirements of our retail customers. They want to offer something different to their clients," said Tardy.
Kwanchai Rungfapaisarn The Nation
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