Proposed price cap on premium hygiene products worries manufacturers

The government’s recently announced intention to cap the prices of premium value-added products of the hygiene sector has sent product makers into a tizzy. The Economic Times reported that manufacturers may have to stop pushing innovation within segments like sanitary napkins, hand washes, disinfectants and adult diapers.

A list of essential hygiene products is reportedly being finalised and these categories could come under price control. But according to companies, such premium items that cost more to manufacture compared with basic versions, are still being sold by them at lower margins, unlike pharmaceutical companies that use similar technology and raw materials but have different pricing. Since premium products in this sector are still nascent and companies are focusing on driving up usage by keeping margins as low as possible, a price cap will leave little room for profitability, which is necessary for advertising spends, new launches and innovation. Companies also say that they will have to use cheaper raw materials to maintain the same price, which will translate into lower-quality products.

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The proposal comes months after RB introduced a high-margin, chemicals free range of soaps and handwashes under the Dettol flagship brand, which is about 10-20% more expensive than the base brand. India is a top-five market for Dettol and has over 10% value share in bar soaps; in the smaller, hand-wash category it has 45-50% share. Dettol has also been the face of the company’s `100-crore Banega Swachh India campaign for five years now.

Prices of adult diapers or feminine hygiene products in India are among the lowest in the world. And, in an ultracompetitive, open market, companies already find it difficult to make large profits. Some companies feel that the government may be referring to capping the prices that consumers have to pay at institutions and hospitals, where such products are marked up to several times their price; this price may be capped.