Hindustan Lever has unveiled the Calvin Klein luxury range of fragrances in the Indian markets. The company will be importing the products and marketing it domestically.
The decision to launch a premium product is a far cry from the company's mantra to generate profits by stepping up volumes. Luxury products in India have a very limited market, estimated to be 600,000 households in the income bracket of Rs 1 million or more per annum category. The company nonetheless stands to benefit as the promotional costs are to be borne by Unilever. Moreover, as its distribution network is already in place, the incremental costs will be limited.
Making an entry into the premium end of the market will ensure that the company has a complete range of products on offer. Moreover, if volumes were to pick up, the company's profitability could benefit significantly, as these products are high margin items.
Many manufacturers have tapped the market for premium goods in India in the early stages of liberalisation. However, the experiences have been varied with a number of them actually winding up operations in India. Hindustan Lever on the other hand has adopted a very cautious approach by launching the Calvin Klein range in India by waiting for the market to grow. Whether this patience will pay off will be seen as the events unfold.
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