“It will be a knife fight, it will be brutal,” said William Schmitz, an industry analyst with Deutsche Bank North America. “It will be fought in shampoo, detergent, deodorant, and Unilever and Colgate won’t roll over.”

It is not a surprise P&G would prefer to keep the price premium and not fight the market share battle. In the same NYTimes article, P&G executives stated:

they think their company and Unilever can find plenty of business without engaging in hand-to-hand combat. Even more, P.& G. is confident it can trump the products offered by local and regional companies.

“When two or three companies come in offering these products, it builds awareness of them,” Mr. Geissler said.” Across emerging markets, we can take market share without having to do battle with Unilever.”

This is very subtle but I believe this is price signaling (legal) to let Uniliver know – “You are hurting as well, we can stop this blood-letting”.

The question is whether Unilever is receiving this signal loud and clear and whether its current profit woes will push it to adopt price improvement.

This quarter’s earnings are out and validates my claim (although at a reduced level):

For the quarter ended Jan. 24, Hormel reported a profit of $111.2 million, or 82 cents a share, up from $81.4 million, or 60 cents a share, a year earlier. Revenue increased 2.3% to $1.73 billion and volume rose 3%.

Gross margin rose to 18.4% from 16.1% amid reduced commodity costs.

That’s effective price management!