The recent price cuts by fast-moving consumer goods giants, Hindustan Levers Ltd (HLL) and Procter and Gamble (P&G) proves, once again, that the Indian market still, by and large, supports volumes, not value propositions. No matter how hard one may try and brand a product price sensitivity overrules brand preference - if its not priced right, it''s just not going to generate sufficient volumes.

Realisation has come to P&G - though a bit late and now it wants to become more ''affordable''. By slashing prices from nearly 25 to 50 per cent on its two detergent brands, Tide and Ariel, P&G has not only restructured the balance of brand power in India, but has also hurt HLL - and itself - where it hurts the most … its bottom line.

As the two traditional rivals in the global FMCG market carry out their slugfest in India, their share values have tumbled; P&G which launched the price war has seen a 14 per cent decline in its share price, the HLL stock fell 19 per cent on the same day. The share of an uninvolved Nirma, too, was dragged down by eight per cent.

P&G''s move from a premium niche to a mass base, is indeed a proactive marketing effort. But, as industry watchers point out, HLL''s reaction in slashing its prices is merely an attempt to protect its turf. If so, is ''marketing'' really about how low you can price your product?

Concepts like ''market research'', ''value'', ''branding'' and ''loyalty'' seem to have been dumped with HLL''s counter offensive of a price cut of its own. The rationale, in HLL''s words, is to face competition without blinking.

Till recently, the price war was restricted to HLL and P&G. Now, to square off the probability that customer loyalties would shift with price cuts, even smaller players have entered the fray. Henkel Spic has cut the prices on its detergent brand Henko Stainchampion by 15 per cent to Rs.75 per kg.

With revenues already hard to generate and margins under tight pressure, this decision is going to prove expensive for HLL. Analysts estimate that the price cuts will cost HLL between Rs120 and 150 crore.

As a market leader in almost all the major product lines that it operates in, HLL did what it had to do. But then, as a market leader with a 40 per cent share of the detergents market, as opposed to P&G''s 10 per cent, isn''t the onus of growing the market on the market leader?

The sachet was an innovative stroke of marketing genius that reduced product differentiation and changed the dynamics of the detergents market. Today, sachet sales constitute about 15-20 per cent of the detergents market. But innovation seems to have deserted the soaps and detergents industry ever since.

With penetration at it''s highest and the market saturated, the Rs4,000-crore detergents market has been stagnating for almost five years. Compounding this problem are the smaller players like Ghari detergents, who offer products of similar quality, at almost half the price.

On the face of it, the price cuts seem logical. Lower prices should get new users into the market and propel others to upgrade from the not-so-premium brands to Tide, Ariel or Surf Excel. P&G saw the volumes of its sachet sales almost tripling when it halved the prices on the 20-gram packs of Tide and Ariel, to Re 1 and Rs 1.50 respectively, in September 2003.

But will price cuts on larger packs prove equally successful? And if not, then will there be another round of price cuts? HLL, at least, has definitely ruled that out, saying there was "no room for more price cuts on Surf Excel".

A further round of price cuts indeed seems unlikely for both manufacturers since raw material costs have been rising. The Consumer Guidance Society of India has already initiated a probe, to find out if there has been any degradation in the quality of products to enable the current round of price cuts.

Everybody knows that India is a ''volumes'' market, and as marketers, both HLL and P&G understand that pricing and distribution are the key to success. But unless marketers come up with something radical, cutting prices will only get them thus far and no further. A sustained growth will be hard to come by, and players will just have to make do with a shrinking pie.

What is needed now from the rivals is something like a ''sachet'', a conceptual breakthrough, to stimulate fresh growth.