Professional Documents
Culture Documents
Dr Amit Rangnekar
www.dramitrangnekar.com
Case learnings
Success story of a local detergent brand to national leader
Detergents business
Low cost/ tech/ entry barriers, easy set-up, competition, short PLC Critical- low price, channels, local promotion, dealer margins Regional players- only in mass, NC and MNC in all 3 segments Drivers- changing lifestyles, increasing purchasing power & personal hygiene awareness, prefer superior value brands, media reach Dip in washing machine prices- high washing powder growth, more m/c powder required to wash same quantity of clothes Packaging innovation + price wars- increased penetration FAB-whiteness, freshness, fragrance, ease of use and stain removal
Dudh si safedi Nirma se aye, rangin kapda bhi khil khil jaye
1975 radio, 1982 TV, housewife friendly ads, always starlets
1987- KTC (Kanpur Trading Chemicals), detergent manufacturing Founders Muralidhar & Bimal Gyanchandani
Brand Ghari
2011 Rs 2083 cr, CAGR 25% , 20% growth in recession Aggressive pan-India distribution push, audacious pricing Net margin 9% v 12-13% MNCs, dealer margins 9% v 6-7% MNC 95% Ghari, 5% soap & dishwashing brands MR2, Xpert, Ven
Colgate
Cadbury
Reckitt Benckiser
Rs 45,000cr HPC (home & personal care)- detergents, soaps, oral care, skin care & hair care
Wheel Ghari Lifebuoy Lux Surf Colgate Nirma
2400 2500
2300 2083
1400
1400
1400
1250
800
RSPL restructuring
2006, declined Citigroups 14% stake offer over valuation 2008- GHARI GROUP same management Ghari Industries- GHARI+other FMCG + Leayan Overseas Rohit Surfactants-manufacture detergents+ other FMCG Poonam Developers & Infrastructure - construction & real estate Calcutta Detergents- manufacture & trade detergents Closely held, freedom to expand, strong internals, no need for IPO, 2010 net Rs 190 cr (> MNCs)
Origin
NPL, inspiration- Nirmas model, Nirma at its peak Tin-shed start, street-smart marketing- quality at affordable price Target- UP mass market (large home base) - 17% of AI FMCG Use porters as salesmen, recruit needy, training in house, PLP Support distributors with local ads to boost reach, higher margins Scale up distribution, deep penetration, only then expand UP - 900/3000 dealers, 25 in Kanpur , 9/18 manufacturing units Secured large home base, then spread out
National expansion
Adjacent expansion- Bihar, MP, Punjab- 16% AI FMCG
Marketing strategy
Targeted segment- mass + mass premium Positioning- VFM
Target audience- Housewife- decision maker, buys weekly or monthly, extremely value-conscious, willing to switch brands
Insight- Small towns/ village buyers seek cheaper options in staples (soap, detergent, toothpaste) so as to spend more on discretionary items like mobiles, TV, automobiles. They inevitably choose detergents that give maximum results at lowest price
Promotion
Out of the box thinking to break the clutter, desi common sense
Ghari Express
Insight- Train is a medium that masses interact with 2008 Ghari Detergent Express, train painted with Ghari branding
Mass Premium
Mass
Regional
Pricing
Value pricing, not penetrative pricing (Nirma) Price 10-20% above mass brands, (Wheel & Nirma)- quality 30% below mass premium brands Price (Tide and Surf)- economy Higher dealer margin of 9%, rivals 6-7%, no customer promotion
Ghari cake Gm 350 220 160 Rs 15 10 7 Ghari Powder Gm 1000 525 255 Rs 36 20 10 MR2 Premium Detergent Gm 1000 500 75 Rs 80 40 5
110
65 43
5
3 2
110
17
5
1
22
12
2
1
Competition
HUL, leader, reach, straddles all price points- Surf, Rin, Wheelprotects franchise, flanked Nirma with wheel, regained leadership
Ghari held on, benefited from recession / inflation as mass premium down traded and mass uptraded, gained
HUL fought P&G, Wheel fought Nirma, Ghari won
Insight- laundry consumers trade up if price differential narrows Ghari favourable price-quality ratio
Cost leadership
Keep costs tight, keep prices low, low 9% margins v 12-13% MNC Volumes- economies Globally firms use this penetrative pricing, then raise prices Tight wage bills- no high-profile marketers on sky-high salaries Shoestring marketing budget<2%/Rs 50cr, National brands 13-15% Focus on BTL activities, low ATL Marketers- hire smart people from 20+ local business / engineering schools in Kanpur, Lucknow, train in-house
Firm unknown Attracting & regaining top talent Brand known, but mass image, build awareness / image Managing diverse markets and new customers Aurangabad- only manufacturing outside cow belt, South critical Wheel- rural initiative Shaktiman driving deep rural penetration Consumer aspirations shift from bucket-wash brand (Ghari) to more urban- washing machine product
Future Plans
Valuation Rs 7000 cr (>Gillette, Britannia, Emami) IPO planned for Rs 1,000 cr- expansion, factories, competition
Mid-priced segment, Rs 50/kg, few brands, potential, high margin Target- P&G Tide 13.7% MS, HUL Rin 6% Laundry segment- HUL & P&G 25%+ sales, will retaliate Limited pricing power, new entrant can affect margins Challenge- establishing UniWash brand Mass segment- No 1, but margin pressure, RM costs, competition Ghari No 1 in 2011, Rs 2400 cr
We already have a solid platform now, which we can leverage for the new brand to push it Gyanchandani Distribution network in 19 states, 3500 dealers, 21 manufacturing units New plants in - Bihar, Raipur and Karnataka
Input costs- Key RM LAB 19% price increase, soda ash 4% HUL, high inputs- moderating ad spends to protect margins P&G, expand production capacity, produce cheaper locally
References
Wheel Comes a Full Circle as Ghari Tops the Laundry Charts- SAGAR MALVIYA MUMBAI ET Jan12
http://www.bing.com/images/search?q=ghari+detergent&view=detail&id=5AEBCBF9A4AAF785A0A845 90472C7AA6D1F22B4A&first=0&FORM=IDFRIR Price war between MNCs, growth of Ghari threatens small detergent with washout ET Bureau, Apr 22, 2011, 03.17am IST Citigroup in talks to buy 14% in Ghari detergent maker Chaitali Chakravarty and Bhanu Pande, TNN, Aug 1, 2006, 02.57am IST
References
Detergent war: Ghari gains at Nirma's expense Viveat Susan Pinto/11 Sep 10 | Big Business Small Towns Enterprise / Business / Cover Stories Outlook Business MAGAZINE | OCT 17, 2009 Small detergent cos eat into biggies pie Namrata Singh, TNN, Sep 15, 2009, Washing Powder Up 13% Surina Sayal, afaqs!, 9 Feb 2011
After Wheel, Ghari Maker to Take on Rin & Tide ET 18Apr12 SAGAR MALVIYA MUMBAI http://www.afaqs.com/news/story.html?sid=29403_Washing+Powder+%28Up+13+Per+Cent%29