A Penny a Packet.

HINDUSTAN Unilever Ltd.; UNILEVER Group (Company)

The article focuses on Hindustan Lever Ltd., the Indian arm of Unilever PLC. Ranganayaki is a 20-year-old domestic helper from Srirangam, a small south Indian town. Like many of the country's laborers, she is a regular customer for penny shampoo packs at her neighborhood shop. Used to be, the store owner would hand her one called Chik, a regional product. Today she has a wider choice, including colorful sachets made by Hindustan Lever Ltd., the Indian joint venture of European giant Unilever. Hindustan Lever formerly focused only on better-off households, the ones employing the Ranganayakis of India. The prosperous households buy not only in greater volume but also with a greater sensitivity to brand choice. But now HLL (ticker number 6261674 on the Mumbai stock exchange) jostles for display on the bargain counter with the likes of CavinKare, a privately held firm in Chennai that sells Chik. Why this down-market extension? Because, in the long run, CavinKare threatens HLL's position in the middle class, where it does $2.4 billion in annual revenues, 70% from personal and home care items. The threat comes on two fronts. One is that low-income buyers may develop brand preferences that will stick with them as they migrate up the income scale. The other is that, as the Harvard business strategist Clayton Christensen has made a career of saying, competitive attacks on big, established companies often come from underneath. In the past, when competition was scarce, HLL had more pricing power, but frequent hikes are not possible today.