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A Project Report

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TABLE OF
CONTENTS
TOPIC

EXECUTIVE SUMMARY
INRODUCTION
INDUSTRY PROFILE
SWOT ANALYSIS
FMCG INTRODUCTION
BCG MATRIX
COMPANYS PROFILE
SWOT OF NIRMA
RESEARCH METHODOLOGY
FIVE FORCES ANALYSIS
SWAOT OF HLL
SWOT OF GODREJ
FINDINGS & SUGGESTIONS
CONCLUSIONS
BIBLIOGRAPHY

PAGE NUMBER
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EXECUTIVE
SUMMARY
FMCG industry is the most emerging industry nowadays in Indian
as well as global market. In India it is the 4th largest market, which
shows that how important the industry is and how much it
contributes towards our economy.
FMCG includes the personal care products also like soaps,
shampoos, etc. so our project mainly focuses on the market and
study of BATH SOAPS IN INDIA. It consists various multi national
and domestic companies. Major players are Unilever(HLL), Nirma,
Godrej, Johnson & Johnson, colgate-palmolive, etc.
Our main focus is on Hindustan lever ltd, Nirma, and Godrej. HLL is
having largest market share within our country which gives tough
competition to other local and domestic companies also. Bath soap
market is gradually developing very fast and day by day many new
varieties, flavours, and fragrances, are added in it by various
companies to exist in the market.
Our project consists study of 3 major players of bath soap market
and their SWOT analysis, BCG Matrix, 5 forces model of the
industry and the companies. Various suggestions and
recommendations are also been given to the FMCG sector bath
soap segment. HLL is the most dominating company across the
world in FMCG sector due to its vertical and horizontal integration.
Then also Nirma and Godrej are trying to give tough fight to it.
Main mantra for success of the companies is the diversification of
their business and their products. Thus the study provides detailed
study of FMCG sector with focus on bath soap industry.

INTRODUCTION
History of Bath-soap
Soap has been with us in one form or another for thousands
of years. The story goes that in Rome in around 1,000 B.C. at a
place called Sapo Hill, the women were washing their clothes in a
small tributary of the river Tiber, below a religious site where animal
sacrifice took place. They noticed that the clothes became clean
upon contact with the soapy clay which was dripping down the hill
and into the water. It was noticed later that this cleansing agent was
formed by the animal fat soaking through the wood ashes and into
the clay soil.
Strangely, in the first century A.D., the Romans are credited
with the making of a soap-like substance using urine. The
ammonium carbonate in the urine was reacted with oils and fat in
wool to form this 'soap'.
During the Eighth Century the Spanish and Italians began
making what was more like modern soap from Beech Tree ash and
Goat fat, whilst the French are credited with replacing the animal fat
with Olive oil.
In England during the 17th century under King James I, soap
makers were given 'special privileges' and the soap industry started
developing more rapidly, although soaps were generally still made
using caustic alkalies such as potash, leached from wood ashes
and from carbonates from the ashes of plants or seaweed. The
soaps made in this way were harsh and often rather unpleasant.
Soap as we know it today did not come about until the 18th
century, when Nicholas Le Blanc, a Frenchman, discovered a
reliable and inexpensive way of making sodium hydroxide (caustic
soda), or lye as it is known to the soap maker, which forms the base
with which soaps are made to this day.

Further developments in soap making were pioneered in


Britain during the late 18th century with the invention of
'Transparent' soap by Andrew Pears, the son of a Cornish farmer.
This refined soap was known then as it is now as Pears
Transparent Soap.
Over the years and to the present day, opaque soaps have
remained the favourite, mainly because transparent soaps tend to
be more expensive and also don't last as long.
Factors likely to encourage soap marketing and consumption
in developing countries in the future include:
More discriminating educated and aware consumers.
Growth of the media, especially TV
Improvements in transportation and communication networks.
Innovative R&D for raw materials and finished products.
Growth of supermarkets and retail outlets.
High speed packaging machines and attractive packaging
materials.
State of the art technology to enhance productivity and
reduce cost.

Increasingly talented advertising and market research


agencies.
Liberalisation of markets and growth in free trade.

INDUSTRY
PROFILE
The Fast Moving Consumer Goods (FMCG) sector is the
fourth largest sector in the economy with a total market size in
excess of Rs 60,000 crore. This industry essentially comprises
Consumer Non Durable (CND) products and caters to the everyday
need of the population.
Product Characteristics
Products belonging to the FMCG segment generally have the
following characteristics:

They
They
They
They
They

are used at least once a month


are used directly by the end-consumer
are non-durable
are sold in packaged form
are branded

Industry Segments
The main segments of the FMCG sector are:

Personal Care: oral care; hair care; skin care; personal wash
(soaps); cosmetics and toiletries; deodorants; perfumes;
paper products (tissues, diapers, sanitary); shoe care.

Major companies active in this segment include Hindustan Lever;


Godrej Soaps, Colgate-Palmolive, Marico, Dabur and Procter &
Gamble.

Household Care: fabric wash (laundry soaps and synthetic


detergents); household cleaners (dish/utensil cleaners, floor

cleaners, toilet cleaners, air fresheners, insecticides and


mosquito repellants, metal polish and furniture polish).
Major companies active in this segment include Hindustan
Lever, Nirma and Reckitt & Colman.

Branded and Packaged Food and Beverages: health


beverages; soft drinks; staples/cereals; bakery products
(biscuits, bread, cakes); snack food; chocolates; ice cream;
tea; coffee; processed fruits, vegetables and meat; dairy
products; bottled water; branded flour; branded rice; branded
sugar; juices etc.
Major companies active in this segment include Hindustan
Lever, Nestle, Cadbury and Dabur.

Spirits and Tobacc Major companies active in this segment


include ITC, Godfrey Philips, UB and Shaw Wallace.
An exact product-wise sales break up for each of the items is
difficult.

The size of the fabric wash market is estimated to be Rs 4500


crore; of household cleaners to be Rs 1100 crore; of personal wash
products to be Rs 4000 crore; of hair care products to be Rs 2600
crore; of oral care products to be Rs 2600 crore; of health
beverages to be Rs 1100 crore; of bread and biscuits to be Rs 8000
crore ; of chocolates to be Rs 350 crore and of ice cream to be Rs
900 crore.
In volume terms, the production of toilet soap is estimated to
have grown by four per cent in 1999-2000 from 5,30.000 tonnes
from 5,10,000 tonnes in 1998-99. The production of synthetic
detergents has grown by eight per cent in 1999-2000 to 2.6 million
tonnes. The cosmetics and toiletries segment has registered a 15
per cent growth in 1999-2000 as against an annual growth of 30 per
cent recorded during the period 1992-93 to 1997-98.
In the packaged food and beverage segment, ice cream has
registered a negligible growth and the soft drink industry has
registered a six per cent growth in 1999-2000.

Toilet Soap Industry in India:


Today, the FMCG sector is the fourth-largest sector in the
Indian economy, with an estimated total market size of around Rs
450 bn. Further, the growth potential for all the FMCG companies is
huge, as the per capita consumption of almost all products in the
country is amongst the lowest in the world. Further, if these
companies can change consumer's mindset and offer new
generation products, they would be able to generate higher growth.
For example, Indian consumers used to wear non-branded clothes
for years, but today, clothes of different brands are available and the
same consumers are willing to pay almost 5 times more for branded
quality clothes. It is the quality and innovation of products, which is
really driving many sectors. Thus, FMCG companies should use
their imagination and respect the tastes of Indian consumers by
offering quality products.
Toilet soap industry is one of the oldest Fast Moving
Consumer Goods (FMCG) industry in India. It is among the highest
penetrated category within FMCG sector reaching an estimated
95% urban and 87% of the rural households. In value terms the
industry is worth Rs.45000million and in volume terms it is worth .53
million . The main characteristic of the industry was severe
competition and high level of brand proliferation. Toilet soaps
account for more than 50% of the Consumer
After expanding at a snail's pace, the market for personal
wash products appears to have come to grinding halt in 2001.
After posting a modest single digit growth in 1997-2000,
figures for the first seven months of this year suggest that the
market for toilet soaps has actually shrunk.
Estimates about the extent of the decline of market size vary.
Hindustan Lever, which straddles the category with a 59.9 per cent
market share by value, says the market shrank by 4.4 per cent in
value terms in the first half of 2001.
The Indian Soaps and Toiletries Manufacturers Association,
puts the decline at 1 per cent. Other industry sources suggest that
the extent of `de-growth' in the first eight months of 2001 could be
as high as 7 per cent.
8

This is despite the fact that this usually sleepy category has
seen a spate of new players debut new offerings in recent times.
Over the past couple of years, Nirma has launched a slew of lowpriced soaps under the banner of Nima and Nirma Beauty. Godrej
Consumer, a long-standing player, has relaunched old brands such
as Cinthol, apart from new ones such as FairGlow, Allcare, and
Nikhar.

Henkel SPIC has made a maiden foray into the market with
the Fa range of soaps. Colgate Palmolive has pepped up its soap
range with extensions such as Palmolive Naturals and Palmolive
Extra Care. The market leader HLL, has relaunched Breeze, apart
from launching Skin Care and Sunscreen variants of its premium
soap -- Lux International.
If the shrinking market size suggests that Indian consumers
have actually been cutting back on their use of toilet soaps, this is
not really the case. In volume terms, the market for toilet soaps has
continued to show a growth of 6 per cent in the first eight months of
2001.
The major players have certainly managed to sell more toilet
soaps by volume. But price competition in the segment and a slew
of promotional campaigns have reduced the effective realisations
per unit sold. This has probably neutralised the gains from volume
expansion. Theories about the reasons for the shrinking the market
size vary.
Low-priced brands
Industry players commonly attribute the `de-growth' in the soap
market to downtrading. Toilet soaps are among the highest
penetrated products within the FMCG market, reaching an
estimated 95 per cent of the urban and 87 per cent of the rural
households. The fairly high contribution from the rural market makes
this category sensitive to the fortunes of the agricultural economy.

The prolonged drought in the North and West of the country


(until 2000) and the sharp fall in farm disposable incomes (brought
on by falling farm product prices) has probably persuaded low9

income households to downtrade, that is, switch from high- to lowpriced brands.
This is indeed supported by the fact that within toilet soaps, it
is the discount segment (soaps that cost between Rs 5 and Rs 8
per 75 grams) that has registered the highest growth rates over the
past year.
HLL, too appears to endorse the phenomenon of downtrading.
``There has been an inter-sectoral shift in the soap market, with
consumers downtrading from premium and popular to discount
soaps'', explains the company's spokesperson.
However, Mr Hoshedar K. Press, Godrej Consumer Care,
begs to differ. ``We think consumers have already pre-committed
their incomes for instalments on durables. The substitution of soap
with shampoos for hair wash has also impacted growth'', he said.
Better quality
The crowded market place has also brought a few benefits to
the consumer as marketers of soap have tried to woo consumers
through upgraded offerings and better quality soaps. Aided by low
input prices, the marketers of toilet soaps have increased the TFM
(total fatty matter) content in their brands, to offer better quality
soaps at a lower price. Industry watchers say that the TFM content
on some brands has moved up from the 50-60 per cent earlier to
over 70 per cent of late.
Therefore, per unit realisations on soaps have declined, the
marketers of soaps have actually sacrificed a part of their margins
on hiking the TFM content.
Tough times ahead
With competitive pressures on the rise and a larger number of
brands jostling for consumer attention in a sluggish market, the
soap market is likely to remain a difficult one for most players.
Smaller players such as Godrej Consumer and Henkel SPIC have
been in a position to report robust sales growth in the category over
the past year despite the bruising competition.
However, this is partly due to a relatively small base of
comparison. Unless the market expands, the frenetic promotional
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activity may soon tell on the growth rate of the players. And when it
comes to sustaining a high decibel promotional campaign, HLL's
size certainly gives it the wherewithal to do it.
Rural revival -- A wild card
It appears that a genuine boost to the market size for toilet
soaps will still have to come from a revival in rural demand.
Evidence from the past does appear to suggest that a sharp rise in
rural incomes would have a cascading effect on FMCG demand.
The pick-up in volume growth in the soap market in 1999, after a
year of sluggish growth in 1998, demonstrated that a recovery in
agricultural output does have an indirect impact on sales volumes of
FMCG products.
This year, reports of a good monsoon in the northern and
western parts of the country have sparked off speculation about a
revival in FMCG growth rates. The fact these two regions account
for 55 per cent of the demand for FMCG products strengthens this
argument. However, it appears to be a bit early in the day to call it a
revival. For one, while the northern and western regions have
received satisfactory rains, southern India has been the victim of a
very erratic monsoon. Second, given that the good monsoon in the
current year succeeds two or three consecutive years of drought in
some regions, there could be a substantial time lag before higher
rural incomes translate into better FMCG demand
Third, the key crisis in agriculture over the past year has been
that farm product prices have dropped sharply in response to a build
up of surplus foodgrain stocks. Therefore, even if a good monsoon
translates into a higher agricultural output, there is the question of
whether this will actually expand or shrink farm incomes.
These factors suggest that it may be premature to take
investment exposures in companies focussed on toilet soaps in the
hope of a revival. It may be better to wait for concrete signs of a
pick-up in rural demand, which is certainly some way off.
Nature of the global Industry
The global soap market is dominated by a small number of
multinational companies. Soap is only one sector of their product
ranges. In multinational companies such as Unilever and Procter &
Gamble, soap and detergent ranges typically account for less
11

than 20% of group turnover (in 1999).


The largest toilet soaps and detergents only company, by
volume sales, is the Unilever Group, which has strong presence in
all regional markets in the world. The top ten leading manufacturers
and distributors of soap worldwide account for more than 55% of
total sales by value in 1999, totalling in excess of US$80
billion.
Position
1
2
3
4

Company
Unilever
Procter & Gamble
Gillette Group
Colgate Palmolive

% Value of World
10.07
7.41
7.66
4.5

Promotion and branding


Soap manufacturers start their marketing strategy by first
identifying whether a marketing opportunity exists. They proceed to
determine whether to target the mass market or a niche market, and
subsequently position their products. Very often, metoo looking
products, despite their superior performance, fail to break the barrier
of routine buyer behaviour. Where the market is crowded,
companies try to differentiate their products by new forms or new
packaging concepts.
With the increase in both domestic and global competition,
companies are having to deal with and reconcile two conflicting
elements in marketing strategy namely
profitability and market share. Greater market share involves higher
marketing costs and lower profitability. In India, Hindustan Lever's
share of the soap and detergent market was dented severely by the
Nirma (an Indian national, privately owned company) strategy of
developing a product especially for the poor, until Lever managed to
develop its own product.
A teaser ad on Lux soap recently unleashed by FMCG-major
Hindustan Lever (HLL) gives an indication that the company is
planning to launch a soap which protects fairness -- in evident
competition to Godrej's FairGlow fairness soap.
12

The Lux commercial was kicked off almost in tandem with the
launch of FairGlow, which is touted as India's first fairness soap.
FairGlow has marked a breakthrough in the stagnant toilet soaps
market and has kindled hopes of fuelling growth with the creation of
a new category.
The industry was rife with speculation that market leader HLL
would follow in the footsteps of Godrej Soaps to launch a soap
product on the same USP. While details of the proposed Lux soap
are not available, the product is expected to be launched in the next
fortnight.
The ad depicts how, by using the soap, one can block the sun
rays from tanning the skin surface. However, the ad does not reveal
the name of the product. But it clearly signals that a new product
offering from the Lux stable, albeit on the fairness plank, is in the
pipeline. It has been a couple of weeks since the teaser ad was
launched on select channels.
The move is seen by industry observers as a knee-jerk
reaction to combat the launch of FairGlow. The only catch here is
that while Godrej Soaps directly claims delivering fairness through
FairGlow, the proposed Lux product talks about protecting fairness
by offering sunscreen benefits. FairGlow is being promoted as a
beauty and complexion soap which contains a bio-extract called
natural Oxy-G which is said to make skin fairer naturally.

For Levers, point out industry analyst, it is crucial to defend


any market share erosion at a time when the industry is strutting at
growth levels of 2-3 per cent per annum. Given that the Rs 2,900
crore industry has reached saturation levels in penetration in both
urban and rural markets, it is becoming increasingly challenging for
marketers to develop value-added soap products in the market.
Industry analysts point out that manufacturers will have to
design products which offer unique benefits so as to stoke volumes
growth. It is not surprising then that FairGlow is targeted at both
men and women. Research findings show that a section of men too
are users of fairness creams.

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Production
size)

(market

Unit

Est
2002- %
20032003 growth
2004
600
2%
609

EST %
growth

FMCG (overall)
Rs billion
1.5%
Soap
&
Toiletries
Rs billion 90
-5%
90.9
1%
(overall)
Soap
&
Toiletries
Mn tonn
60
4%
60.09 1.50%
(overall)
There were 45 leading national brands. None of the national
brands had more than 5% market share and many more regional
and unorganised sector/local brands. 9Hindustan Lever was the
market leader with about 30 (number) of toilet soap brands with a
total market share of 67% in 1998-99 in organised sector as seen
from Table-1 below, which gives the lead players and their
respective market share.

Table-1: The Lead Players and their Market Share


Percentage of Market
Company
Share
HLL
67
Godrej
10
Nirma
8
Colgate Palmolive
1
Others
14
Source: Vanscom Database

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Percentage of Market Share


HLL
Godrej
Nirma
Colgate
Palmolive
Others

The leading brands in the market are Dove, Pears, Lux,


Dettol, Liril, Rexona, Lifebuoy, Nirma, Palmolive and Hamam. A
survey reported in Vanscom, which was conducted in Ahmedabad,
showed that 103 toilets soap brands were available in this city
alone.
The industry had witnessed many innovative sales promotion
activities in the recent past. Numerous factors were responsible for
such a phenomenon. One of the reasons being that the market
being sluggish, companies were trying to increase market share in
stagnant to declining (volume terms) market in order to retain
consumers, to encourage switching, to induce trials and liquidate
excessive inventories. Another reason possible was that with the
presence of so many brands the competition had increased
severally leading to fight for market share and shelf space.
Inflationary trend had made both the consumer as well as trade deal
prone.
Due to such a dense market like India big companies adopt
different strategies and coming up with various sales promotion
schemes continuously.
Today big players in Indian bath-soap market are
1. HLL (Hindustan lever limited a subsidiary of Unilever)
2. Godrej
3. Nirma

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4. P&g (Procter and gamble)


Among these players HLL is the biggest player with around 67%
of market share. For HLL most of the soap has become a brand
they have their own identity.LUX is the most recalled soap in the
mind of the consumers.
For these main four players , each soap is described in brief as
an introduction about which soap belongs to which company.
There is a strong MNC presence in the Indian FMCG market and
out of the top 10 FMCG companies, four are multinationals while
two others have significant MNC shareholdings. Unlike several
other sectors where multinationals have entered after 1991, MNCs
have been active in India for a long time. The top five listed FMCG
companies on the basis of their sales turnover in the last financial
year (either year ended December 31, 1999 or March 31, 2000) are:

Company Name

ym(finance_year) sales
Rs.
Crores
Hindustan Lever Ltd.
199912
10978.31
I T C Ltd.
200003
7971.94
Nirma Ltd.
200003
1717.88
Nestle India Ltd.
199912
1546.43
Britannia Industries Ltd. 200003
1169.84
Colgate-Palmolive
200003
1123.53
(India) Ltd.
Godfrey Phillips India 200003
1082.63
Ltd.
Dabur India Ltd.
200003
1046.28
Smithkline
Beecham 199912
743.38
Consumer Healthcare
Ltd.
Godrej Soaps Ltd.
200003
714.74
Marico Industries Ltd. 200003
649.05

Profit After
Tax
Rs. Crores
1073.73
792.44
234.1
98.47
51.02
51.79
42.1
77.67
97.61

61.89
35.73

16

Cadbury India Ltd.


199912
Procter
&
Gamble 200006
Hygiene & Health Care
Ltd.
Reckitt & Colman Of 199812
India Ltd.
I S P L Industries Ltd. 199903

511.08
492.85

36.7
75.03

435.33

31.47

21.57

0.04

Among the major companies, Hindustan Lever has a strong


presence in the food, personal care and household care
(detergents) sectors; ITC is the market leader in cigarettes; Nirma
has a strong presence in the detergent market; Nestle and Britannia
are active in the food sector and Colgate has a strong presence in
the oral care segment.

Exports
India is one of the worlds largest producer for a number of
FMCG products but its FMCG exports are languishing at around Rs
1,000 crore only. There is significant potential for increasing exports
but there are certain factors inhibiting this. Small-scale sector
reservations limit ability to invest in technology and quality
upgradation to achieve economies of scale. Moreover, lower volume
of higher value added products reduce scope for export to
developing countries.

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INDUSTRY SWOT
ANALYSIS
Strengths:
Well-established distribution network extending to rural areas.
Strong brands in the FMCG sector.
Low cost operations
Weaknesses:

Low export levels.

Small scale sector reservations limit ability to invest in


technology and achieve economies of scale.

Several "me-too products.


Opportunities:
Large domestic market.
Export potential
Increasing income levels will result in faster revenue growth.
Threats:
Imports
Tax and regulatory structure
Slowdown in rural demand

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FMCG
Introduction
The Fast Moving Consumer Goods (FMCG) sector is the
fourth largest sector in the economy with a total market size in
excess of Rs 60,000 crore. This industry essentially comprises
Consumer Non Durable (CND) products and caters to the everyday
need of the population.
Product Characteristics
Products belonging to the FMCG segment generally have the
following characteristics:

They
They
They
They
They

are used at least once a month


are used directly by the end-consumer
are non-durable
are sold in packaged form
are branded
Industry Segments

The main segments of the FMCG sector are:


Personal Care: oral care; hair care; skin care; personal
wash (soaps); cosmetics and toiletries; deodorants;
perfumes; paper products (tissues, diapers, sanitary); shoe
care.
Major companies active in this segment include Hindustan
Lever; Godrej Soaps, Colgate-Palmolive, Marico, Dabur
and Procter & Gamble.
Household Care: fabric wash (laundry soaps and synthetic
detergents); household cleaners (dish/utensil cleaners,
floor cleaners, toilet cleaners, air fresheners, insecticides
and mosquito repellants, metal polish and furniture polish).

19

Major companies active in this segment include Hindustan


Lever, Nirma and Reckitt & Colman.
Branded and Packaged Food and Beverages: health
beverages; soft drinks; staples/cereals; bakery products
(biscuits, bread, cakes); snack food; chocolates; ice cream;
tea; coffee; processed fruits, vegetables and meat; dairy
products; bottled water; branded flour; branded rice;
branded sugar; juices etc.
Major companies active in this segment include Hindustan
Lever, Nestle, Cadbury and Dabur.
Spirits and Tobacc Major companies active in this segment
include ITC, Godfrey Philips, UB and Shaw Wallace.
An exact product-wise sales break up for each of the items is
difficult.
The size of the fabric wash market is estimated to be Rs 4500
crore; of household cleaners to be Rs 1100 crore; of personal wash
products to be Rs 4000 crore; of hair care products to be Rs 2600
crore; of oral care products to be Rs 2600 crore; of health
beverages to be Rs 1100 crore; of bread and biscuits to be Rs 8000
crore ; of chocolates to be Rs 350 crore and of ice cream to be Rs
900 crore.
In volume terms, the production of toilet soap is estimated to
have grown by four per cent in 1999-2000 from 5,30.000 tonnes
from 5,10,000 tonnes in 1998-99. The production of synthetic
detergents has grown by eight per cent in 1999-2000 to 2.6 million
tonnes. The cosmetics and toiletries segment has registered a 15
per cent growth in 1999-2000 as against an annual growth of 30 per
cent recorded during the period 1992-93 to 1997-98.
In the packaged food and beverage segment, ice cream has
registered a negligible growth and the soft drink industry has
registered a six per cent growth in 1999-2000.

20

BCG MATRIX
The BCG matrix method can help understand a frequently made
strategy mistake: having a one-size -fits-all-approach to strategy,
such as a generic growth target.
In such a scenario:
A. Cash cows business units will beat their profit target easily; their
management has an easy job and is often praised anyhow. Even,
worse they are often allowed to reinvest substantial cash amounts
in their businesses, which are mature, and not growing anymore.
B. Dogs business units fight an impossible battle and, even worse,
investments are made now and then in hopeless attempts to turn
the business around.
C. As a result (all)question marks and stars business units get
mediocre size investment funds. In this way they are unable to ever
become cash cows. These inadequate invested sums of money are
a waste of money. Either these SBUS should receive enough
investment funds to achieve a real market dominance and become
a cash cow(or star), or otherwise companies are advised to
disinvest and try to get whatever possible cash out of the question
marks that were not selected.
Limitations of BCG matrix:
Some limitations of Boston consulting group matrix include:
High market share is not only success factor.
Market growth is not the only indicator for attractiveness of a
market.
Sometimes dogs can even more cash as cash cows.

21

BCG MATRIX..

?
HLL
Rexona , Pears
,Lifebuoy, breeze
Johnson & Johnson
-Savlon,Dettol, breeze,
Maisur Sandal soap,
Godrej-shikakai ,

HLL-Lux, Hamam,
Dove,Liril
NIRMA-beauty soap
Johnson & Johnson
baby soap
Godrej-Cinthol, Godrej
no.

HLL:
Santur
Nirma
soap
Godrej-

lifebuoy +,
nirma bath
nirma lime soap
camay,
Fairglow

Colgate pamolive
Godrej-Ganga, Godrej
No.1
breeze

22

Cash cow A business unit has a large market share in a mature, slow
growing industry. Cash cows require little investment and
generate cash that can be used to invest in other
business units.
Star A business unit that has a large market share in a fast
growing Industry. Stars may generate cash, but because
the market is growing rapidly they require investment to
maintain their lead. If successful, star will become a cash
cow when its industry matures.
Question mark (problem child) A business unit that has a small market share in a high
growth
market. These business units require resources
to grow market share, but weather they will succeed and
become stars is unknown.
Dog A business unit that has a small market share in a mature
industry. A dog may not require substantial cash, but it
ties up capital that could better be deployed elsewhere.
Unless a dog has some other strategic purpose, it should
be liquidated if there is little prospect for it to gain market
share.

23

COMPANY
PROFILE

24

NIRMA
Background
Toilet soaps recorded a strong 40% plus volume and value growth
The Nirma story began in 1969 and since then it has expanded its detergents
(cakes and powders), soaps, soap intermediates Alfa Olefin Sulphonate (AOS) to a
level of Rs. 82 billion. Today, Nirma has a Rs.17 billion share in this market and has
been acknowledged as a marketing miracle. Nirma known for its focus on cost
effectiveness by integrating latest technology manufacturing facilities with innovative
marketing strategies to create world class brands, has by passed MNCs like HLL,
P&G to become the market leader (in terms of volumes) in this price-sensitive
industry. In value terms, Nirma holds 16% market share in the branded detergents
segment.
The manufacturing and marketing operations were divided in several closely
held group companies. In FY97, Nirma group restructured its operations and merged
4 companies, namely Nilinta Chemicals Ltd, Nirma Detergents Limited, Nirma Soaps
and Detergents Limited and Shiva Soaps and Detergents Limited, with its flagship
Nirma Limited. Kisan Industries, the sole separate detergent manufacturing unit has
been merged with Nirma in March '00. Nirma now owns all the detergent
manufacturing facilities of the group, besides toilet soap/other industrial chemicals
manufacturing facilities and a modern packaging unit owned by Kisan.
Marketing of products is carried out through a 100% subsidiary, Nirma
Consumer Care Limited (NCCL). NCCL is the licensee for using the trade marks and
the brand Nirma, which are owned by Nirma Chemicals Pvt Ltd. NCCLs lease for the
brand will be in perpetuity, except in the event of Karsanbhai & Associates equity
stake in NCCL falling below 51%. olding Pattern

Share Holding Pattern


The share capital of the company is Rs.33.9 crore and the total shares
outstanding amount to 3.39 crore. The face value per share is Rs.10. The stock is
currently trading at Rs. 418, as on May 28, 2001. The market capitalization of the
company is Rs.1415.85 crore. The free float is 18% and the promoters hold 72%
stake in the company.

Business Overview
Nirmas principal business activities pertain to manufacture and sale of detergents
and toilet soap. Nirma dominates the popular detergent segment with brands like
Nirma Popular powder, Nirma Detergent powder, Nirma bar, etc. Super Nirma
25
detergent powder is positioned in the mid-priced segment. Toilet soaps recorded
a
strong 40% plus volume and value growth driven by the success of the launch of
"NIMA" brand in FY00. Nirma also sells glycerine, LAB and other industrial

Nirma Bath Soap

Toilet soap market in India was dominated by a very few


MNCs which could monopolistically price their product. In
1992, sensing a strong need to expand the market through
Penetrative Pricing, Nirma entered this market with the launch
of Nirma Bath Soap, which is a carbolic (Red) soap. Although
the carbolic soap segment is on decline, Nirma Bath has
generated larger volumes each year. Packed in a red colour
wrapper and available in 75 gram and 150 gram pack sizes,
this soap has a Total Fatty Matter (TFM) of 60 %.
Nirma Beauty Soap

With its market promise to offer Better Products, Better


Value, Better Living, Nirma introduced Nirma Beauty Soap in
the year 1992. Available in three different variants and pack
sizes, this soap has a TFM content of 70%. Due to its
admirable perfume and a higher TFM content, this brand,
within a short span of five years, had achieved the status of
the third largest selling toilet soap brand and still continues its
outstanding performance.
Nirma Lime Fresh Soap

26

This product had created a sensational marketing


history in the Indian Toilet soaps market, when it was
launched in 1997. Seventeen million packs of Nirma Lime
Fresh soap were sold in the very first month of its soft launch.
Packed in a poly coated 75 gm carton, which is printed on the
worlds best Cerruti 8-colour printing machine, this soap is
available in green colour. With a lime aroma that tingles in
ones sensory buds for a long time, this soap contains 80%
TFM. The product launch of Nirma Lime Fresh had been
extremely successful, being ranked as the Seventh Most
Successful Brand Launch for the year 1998, as ranked by the
Business Standard Marketing Derby, 1998. (as featured in
The Strategist Quarterly, July-September 1998).

Strategy
Nirma's large capex backward integration projects had been
undertaken with a strategy to become the lowest cost detergent
manufacturer in the world. Self sufficiency in key raw materials will
give protection against commodity cycles besides yielding
substantial savings in raw material cost. The company estimates a
total cost saving of 25% in material and handling costs due to the
backward integration projects. The LAB plant has yielded about
12% cost savings and the company expects a similar cost saving of
about 12-15% once the soda ash plant stabilizes. Overall the
backward integration has yielded a cost saving of Rs0.8-1bn last
year. Post completion of backward integration the company now
plans to focus on building large volumes and gain from economies
of scale. The company plans to tap export markets and is alos
looking at acquisition opportunities or distribution tie up
arrangements in other FMCG categories. Branded salt will be
launched by the end of the year. The company is also considering
other categories such as shampoo, toothpaste and fabric whiteners.

Earnings sensitivity factors:


Stabilization of backward integration projects
Volume growth in detergents as well as toilet soaps and
utilization of expanded capacity
Toilet soap market share : Success of new launches,
market share growth will drive profitability.

27

Commodity price movement of LAB and Soda ash will


have significant impact on companys competitive
position, as Nirma will be the only company to have its
own raw material production facility.

The Consumer products division continued to grow at a


healthy pace of 26% yoy, driven by the success of the Nima launch.
Nirma has for the first time diverted from its strategy of umbrella
branding and has launched Nima as a 'fighter brand' - to fight
competition and the unorganized sector. And the company has
achieved tremendous success. In a scenario where the average
industry has been growing at a poor 2-3%, the company has
managed to almost achieve double digit volume growth.

1. HINDUSTAN LEVER LIMITED

Mission

28

Unilever's mission is to add Vitality to life. We meet everyday needs for


nutrition, hygiene, and personal care with brands that help people feel
good, look good and get more out of life.
Hindustan Lever (HLL), India's largest fast-moving consumer goods
company is also the country's largest company in terms of market
capitalisation. It leads in home and personal care products, and foods and
beverages with over 110 brands. The Far Eastern Economic Review rates
HLL as the best Indian company and recognises it as one which all others
want to emulate. Its market capitalisation went up 18% to Rs 324351 mln
(taking it to the first position from last year's third) when the total market
capitalisation of the Top 500 companies was down 22%. It now accounts
for almost 8.4% of the total market capitalisation of the Top 500. HLL's
rank on other parameters are - capital employed: 87, gross block: 59, sales:
8, net profit: 12, net forex earnings: 6 and trading value: 8.
Products :
Lux
Rexona
Pears
Dove
Breeze
Hamam
Liril
Lifebuoy

Lux
Lux stands for the promise of beauty and glamour as one of India's most
trusted personal care brands. Lux continues to be a favorite with
generations of users for the experience of a sensuous and luxurious bath.
Since its launch in India in the year 1929, Lux has offered a range of soaps
in different sensuous colors and world class fragrances. 2003 saw one of
the biggest milestones in the history of Lux. From being just a beauty soap
of film stars, Lux recognized the need for a compelling message about
beauty that would resonate with women of today.
Lux is available in four different variants Exotic flower petals and Jojoba
Oil, Almond Oil and Milk Cream, Fruit Extracts and Honey in Milk Cream
and Sandal Saffron in Milk Cream.

29

Rexona
Rexona is one of India's pioneer brands in family soaps. Launched in 1947,
it was positioned as a natural skin care soap to give silky, glowing skin.
Since then the product has been constantly improved to keep up with the
expectations of the consumers.
In 1989 coconut was introduced in Rexona for the first time to strengthen
the overall skincare appeal of the brand. Rexona has now been relaunched
with cucumber extracts, in addition to coconut oil and moisturising milk
cream. Its creamy lather purifies the skin, leaving it clear and flawless. It
has also been enhanced with a perfume that lingers well after a bath.

Pears
Introduced in India in 1902, Pears soap has no equal. It is gentle enough,
even for baby's skin.
Pears is manufactured like any other soap, but unlike in conventional
soaps, the glycerine is retained within the soap. That is the cause if its
unique transparency. After manufacturing, the soap is mellowed under
controlled conditions over weeks. At the end of this maturing process, it is
individually polished and packed in cartons.
Today Pears is available in three variants - the traditional amber variant, a
green variant for oil control and a blue variant for germ protection.

Dove
Dove soap, which was launched by Unilever in 1957, has been available in
India since 1995. It provides a refreshingly real alternative for women who
recognise that beauty is not simply about how you look, it is about how
you feel.
30

The skin's natural pH is slightly acidic 5.5-6. Ordinary soaps tend to be


alkaline, with pH higher than 9. Dove is formulated to be pH neutral (pH
between 6.5 and 7.5) and to be mild on skin. This makes it suitable for all
skin types for all seasons. While Dove soap bar is widely available across
the country, Dove Body Wash is available in select outlets.
Globally, Dove has been extended to many other countries. Since the
1980s, for example, Unilever has launched a moisturising body-wash,
deodorants, body lotions, facial cleansers and shampoos and conditioners,
providing a comprehensive range of solutions to bring out true inner
beauty.

Breeze

Breeze Scent Magic is the soap which fulfills the aspirations of women of
rural India. Breeze has offered them 'beauty at an affordable price', making
them look and feel beautiful.
Research and consumer visits have shown that the desire for great
fragrance featured highest in the daily beauty regime of discount-soap
users. Breeze explores this through the proposition of 'scent in a soapScent ka kamaal, ab sabun mein' and explicitly propagates the brand
promise of the "Hameshaa kuchh extra". It delivers all this and still
matches consumer's needs in terms of price and quantity offered, staying
true to its word.
Breeze has been enriched with 19 special scent oils, which ensure that one
smells good for a long time through the day. Introduced in variants like
Scent Magic, Scent Magic Lime, and Scent Magic Sandal, Breeze strives
towards fulfilling the company's mission of being inventive in creating
value.

Hamam

31

When it comes to soaps, Hamam is considered to be the most reliable


option. Launched in 1934, Hamam has traditionally been a soap that takes
care of your skin in a natural way.
According to a research conducted By Indica Research in May 2003, 78%
of Doctors in Tamil Nadu recommend Hamam.
Besides being a perfectly balanced soap, Hamam takes on a very modern
and trendy look. Hamam's enhanced fragrance now provides a longer
lasting freshness. The new attractive oval shaped Hamam comes in an
attractive and modern packaging. The ingredients that are used in Hamam Neem, Tulsi and Aloe Vera - by themselves have great therapeutic values.
Hamam, the brand is very true to its tagline that says, "Everything in life
is about balance".
Liril

For 28 years, freshness has been clearly identified with one name Liril
Liril expressions have always set trends whether it is a bathing beauty in a
waterfall or "Oof Yu Maa!" The energy and excitement levels associated
with the brand have to be experienced to be believed with changing times.
Liril has donned many avatars; Presently, Liril Soft Aloe Vera & Lime,
Liril Icy Cool and Liril Orange splash are making waves.
What's next? Wait and Watch! The show has just begun...
Lifebuoy

Making a billion Indians feel safe and secure by meeting their health and
hygiene needs is the mission of Lifebuoy.
The world's largest selling soap offers a compelling health benefit to the
entire family. Launched in 1895, Lifebuoy, for over a 100 years, has been
synonymous with health and value. The brick red soap, with its perfume
and popular Lifebuoy jingle, has carried the Lifebuoy message of health
across the length and breadth of the country.
The 2002 and 2004 relaunches have been turning points in its history. The
new mix includes a new formulation and a repositioning to make it more
relevant to both new and existing consumers.
At the upper end of the market, Lifebuoy offers specific health benefits
through Lifebuoy Gold and Plus. Lifebuoy Gold (also called Care) helps
32

protect against germs which cause skin blemishes, while Lifebuoy Plus
offers protection against germs which cause body odour.

Hindustan Levers SWOT analysis

Strengths:
With identified strengths including a
strong brand portfolio;
consumer understanding;
R&D ability;
distribution reach(networking) and high quality manpower
Strong media personalities
As the production is on large scale it has the benefit of economies
of scale.

33

Being very old and reputed company, the company and its brands
achieves highest trust of the consumers.

Weaknesses:
The company's weaknesses spotted thereby include
Increased consumer spends on education, consumer durable,
entertainment, travel, etc resulting in lower share of wallet for
FMCG;
Complex supply chain configuration and unwieldy number of stock
keeping units (SKUs) with dispersed manufacturing locations;
Price positioning in some categories that allows for low price
competition and high social costs in the plantation business.

Opportunities:
HLL sees its opportunities as
market and brand growth through increased penetration especially
in rural areas;
brand growth through increased consumption depth and frequency
of usage across all categories;
upgrading consumers through innovation to new levels of quality
and performance;
emerging modern trade to be effectively used for introduction of
more upscale personal care products;
growing consumption in out of home categories;
positioning HLL as a sourcing hub for Unilever companies
elsewhere and leveraging the latest IT technologies.
Threats:
Perceived threats
span low-priced competition now being present in all categories;

34

grey imports
spurious/counterfeit products in rural areas and small towns;
changes in fiscal benefits.

3. GODREJ

VISION:
Godrej in every home and work place.
MISSION:
Enriching quality of life everyday everywhere.
We will provide branded products and services of superior quality
and value that improve the lives of the world's consumers. As a
result, consumers will reward us with leadership sales, profit, and
value creation, allowing our people, our shareholders, and the
communities in which we live and work to prosper.
VALUES:
Integrity, Trust, To serve respect, Environment.
Company Overview
Godrej Industries Limited, formally Godrej Soaps, is India's large
manufacturer of oleochemicals. As well as the chemicals industry,
Godrej also operates in the food and medical diagnostics markets.
The company is part of the Godrej Group conglomerate. Godrej
Industries is headquartered in Mumbai, India
For the fiscal year ended March 2004, the company generated
revenues of $417.34 million (Rs18.23 billion), an increase of 9.7%
on the previous year. The company saw a net income of $13.14
35

million (Rs573.8 million) during fiscal 2004, an increase of 72.5% on


fiscal 2003.
Godrej Consumer Prodiucts Ltd (GCPL) was formed wef April1,
2001 with the demerger of the consumer business of the erstwhile
Godrej Soaps Ltd. GCPL has emerged as a focussed FMCG
company. Its main product lines now consist of toilet soaps, liquid
detergent, cosmetics such as hair care, fairness creams, etc and
mens toiletries. The company also undertakes contract
manufacturing of toilet soap for third parties. All interests of the
erstwhile Godrej Soaps in other businesses such as industrial
chemicals, medical diagnostics and financial investments continued
to remain in the existing entity, post demerger and the company has
been renamed Godrej Industries Ltd (GIL)
Godrej has the distinction of being the first company in the world to
develop technology to make soap with vegetable oils, way back in
1930. In the early 90s Godrej had created strong brand equities for
its leading brands Cinthol, Ganga, Marvel, Evita etc. In 1994, Godrej
entered into a strategic alliance with P&G for inter alia toilet soap
business, under which Godrej used to manufacture soaps, which
were marketed by a joint venture company. However post marketing
alliance with P&G, the company lost significant part of its market
share and subsequently the arrangement was discontinued.
Godrejs entire distribution network was then taken over by P&G.
Godrej reestablished a distribution network by utilizing the network
of group company Godrej Hicare for marketing of its brands and in
FY00 took over the entire distribution network from them.
Toilet soaps account for more than 50% of the Consumer business
sales. Hair Color (20%), Contract manufacturing of toilet soap for
other industry players (13%), Detergents (6%) and Cosmetics and
Toiletries (8%) are the other contributors to GCPLs turnover.
Exports of Godrej Brands (2% of overall sales) grew by 28% yoy in
FY01.

Soaps

% of
Sales
53

FY2001 FY2000 Growth


2,476

2,119

16.9

Toilet soaps Godrej brands (53% of turnover)


36

Godrej has the distinction of being the first company in the world to
develop technology to make soap with vegetable oils, way back in
1930. In the early 90s Godrej had created strong brand equities for
its leading brands Cinthol, Ganga, Marvel, Evita etc. In 1994, Godrej
entered into a strategic alliance with P&G for inter alia toilet soap
business, under which Godrej used to manufacture soaps, which
were marketed by a joint venture company. However post marketing
alliance with P&G, the company lost significant part of its market
share and subsequently the arrangement was discontinued.
Godrejs entire distribution network was then taken over by P&G.
Godrej reestablished a distribution network by utilizing the network
of group company Godrej Hicare for marketing of its brands and in
FY00 took over the entire distribution network from them.
The company has been very aggressive during the year in the toilet
soap business and has launched a number of new products in the
market in the last two years. It pioneered the concept of a fairness
soap through launch of Fairglow soap. New variants like Sandal and
Natural in the Godrej No.1 brand also aided high growth. Toilet soap
volumes of Godrej brands grew by 30% yoy in FY01. In value terms
sales grew by 17% yoy to Rs2.5bn. The company also launched
new brands like Godrej Nikhar during the year. The companys
market share in toilet soaps improved marginally to 5.6% during
FY01. The companys oldest and well know brand Cinthol is
proposed to be repositioned and relaunched during FY02.
Toilet soaps - Contract manufacturing (13% of turnover)
Contract manufacturing of toilet soaps registered a 20% volume
growth but grew by only 7% in value terms to Rs618mn. Margins
earned on 3P manufacture are significantly lower as compared to its
own brands. Margins on own brands are estimated to be 60% more
than that on 3P manufacturing. The company manufactured 45530
tons of toilet soap in FY01. (32754 in FY00) Capacity utilization of
toilet soaps has improved from 46% in Fy00 to 64% in FY01.
Segment

Brands

Toilet Soap Cinthol, Fair Glow, Nikhar,


Ganga, Goderj No 1

Market
Share
FY00
5.2

Market
Share
FY01
5.6

37

Cinthol
Cinthol is the flagship brand of Godrej Consumer Products Limited.
The brand was launched in 1952 as the first Deodorant Soap in the
country.
In 1960 Cinthol Deodorant Talc was launched. It continued to sell as
a freshness talc thereafter. The brand, over the first three decades
of its existence, took the platform of protection from body odor.
In 1986 , in an attempt to modernize the image "New Cinthol " soap
was launched with new look packaging , shape and advertising
using celebrities like Vinod Khanna and Imran Khan . This
communication campaign developed strong "confident" , "active"
associations with Cinthol which became a part of the essence of the
brand
Godrej FairGlow
The Godrej FairGlow fairness soap contains a powerful fairness
ingredient ' Natural Oxy-G ', which makes you fairer by reducing the
dark melanin without changing the skin's natural balance. In
addition, it also removes blemishes to give you a clear, glowing
complexion.
Godrej FairGlow Soap was India's first and is the largest selling
fairness soap. It helps you become fairer in a convenient way,
simply through a daily bath. It is a quality Grade 1 fairness product
having 76% TFM (Total Fatty Matter). It has a pleasant fragrance
and is white in colour.

Godrej no1
Godrej no.1 is another popular soap from godrej product line , it is
proved popular in the rural market due to the affordable price and
38

the quality offered.it comes in three colours and flavour, it is giving


good fight to the leading brands too.
Godrej Shikakai soap
This is also one of the popular soap of the godrej product line. This
soap is used to wash hairs. Many people believes shikakai as a
best thing to wash the hair . black ,long and silki hairs are result of
utilization of the soap. This soap is giving fight to all the shampoo
for washing the hairs. It is proved very popular among women.
All of these soaps can be further classify in to three basic segments
Price Segments of Bath Soaps
Segment
Premium
Popular
Economy

Price
> Rs.15
Rs.815
< Rs.8

Weight
75 gm.
75 gm.
75 gm.

Godrej refreshes itself


Godrej Consumer Products has beaten the stagnation in the FMCG
segment through a host of initiatives that saw it introducing new
price points, enter new territory and strengthen its brands.

39

FORTIFYING its soap brands, introducing new price points,


entering new categories such as babycare and hand sanitisers ... it
has been a busy year at Godrej Consumer Products Ltd (GCPL).
While FMCG categories such as toiletries, hair care and soaps have
been under pressure, the company has outperformed the still
sluggish FMCG industry primarily because it has been operating on
a relatively smaller base compared to the biggies, and also because
of the urban-centric nature of its brands.
Focusing on its stronger and faster growing brands, the Rs 550crore Godrej Consumer Products began the year by extending
Godrej No.1 ayurvedic soap to more markets and at an attractive
price. At the same time it also decided to capitalise on the success
of its FairGlow soap, instead of trying to push the languishing
cream, to take on Hindustan Lever Ltd (HLL) in the fairness
segment.
In fact, Godrej is almost consciously targeting the fairness cream
users through its newly relaunched fairness soap. `The cool way to
fairness and freedom from oily skin' is the message the company
wants to convey to all its prospective users. Launching the All New
FairGlow soap, Hoshedar K. Press, Executive Director & President,
Godrej Consumer Products, said, "There is an increasing demand
among Indian women for convenient and inexpensive solutions to
skincare and a need to look good naturally. The soap keeps this
need in mind."FairGlow soap, a pioneer in its category which
managed to find a niche in the fairness market in spite of the
looming presence of HLL's mega brand Fair & Lovely, has
intentions of doubling its turnover from Rs 60 crore to Rs 120 crore

40

within the first year of the relaunch. The brand was relaunched last
month.
According to industry observers, HLL is not in a position to push its
Fair & Lovely soap for fear of losing its share in the fairness cream
market.
This situation gives Godrej an opportunity to strengthen its position
in the fairness soaps category while phasing out its cream, which in
any case did not manage to register any significant volumes.
In fact, the company suffered a loss in sales for its toiletries division
primarily due to the failure of its FairGlow cream. Admits Press,
"FairGlow cream did badly, leading us to withdraw the product. Our
toiletries margins have been affected by its failure." Besides, Godrej
Shave Gel for men has also failed to register any significant
volumes.
The relaunch of FairGlow soap is expected to add weight to
Godrej's soap portfolio. Says Anand Shah, FMCG Analyst at ICICI
Securities, "FairGlow has been registering declining sales over the
past two years. The All New Godrej FairGlow is aimed at female
teenage college students instead of the previous positioning of that
for women in their early 20s. This move could help GCPL build a
younger clientele and broaden its target base."
Besides, the largest soap brand in Godrej's kitty, Godrej No. 1,
managed to maintain robust growth and today accounts for nearly
60 per cent of GCPL's toilet soap volumes. Its low pricing and valuefor-money proposition has worked for the company and it has been
steadily increasing its variants with an ayurvedic offering.
Observes Shah, "Toilet soaps are likely to maintain robust growth of
15-20 per cent on the back of FairGlow's relaunch and the
continuing growth of Godrej No.1." The new unit for toilet soaps in
Himachal Pradesh would also lead to an improvement in
profitability, as it is located in a tax-free zone. The unit would
provide income-tax relief and exemption from excise duty, which is
likely to improve the company's soap margins.

41

Meanwhile, its Cinthol soap franchise has taken a backseat,


primarily due to lack of proper positioning. "Cinthol as a brand has
been over-extended and we are in the process of redefining the
positioning," says Press. This is being done through a new
campaign and positioning statement which is likely to be unveiled
soon through its advertising agency, Orchard.
Last year, Godrej decided to stretch the Cinthol brand to a hand
sanitiser. "There is heightened hygiene consciousness emerging
among consumers and we realised it would be ideal to introduce the
hand sanitiser, a revolutionary concept for germ-free hands," says
Press. Godrej already supplies hand sanitisers under the Cinthol
brand to West Asia. The SARS epidemic did help in gaining sales
for the product.
Beefing up its rural initiatives to accelerate sales growth, Godrej
also decided to increase its rural penetration by introducing small
unit packs of its soap brands in the Bimaru States of Bihar, Madhya
Pradesh and Uttar Pradesh. By introducing its three power soap
brands - Cinthol, FairGlow and Godrej No.1 - in 50gm SKUs (stock
keeping units), the prices of these respective brands have been
pegged between Rs 4 and Rs 5.
"We have decided to target these States with low per capita
incomes through our small unit packs. This will be a great
opportunity to grow since consumption levels of soap are still low in
these parts. These small pack sizes will not be made available
nationally and are meant specifically for these three States," says
Press.

42

Research
methodology
Need for study
Fmcg sector is very vast and 4th largest sector in Indian economy in
which different marketer use different strategies for the survival and
make profit from their products or brands. In this sector there is very
tough competition between players.they are using large number of
advertising,sales promotions, positioning, and pricing strategies.

Research design
We have used secondary data as a source of this research.

Data sources
Secondary data:
Web sites,
Magazines,
Newspapers

Limitations of study
Lack of sufficient material.
Lack of time.

43

Five forces
analysis of bath
soap industry
SUPPLY
Abundant supply in metros
Competition is beefing up their distribution network to penetrate the
rural areas.
DEMAND
At an average GDP growth of 5.5% until February 2007, and the
present consumer demand is set to boom by almost 60% over this
period.
Most fmcg companies are awaiting to tap this latent.
BARRIERS TO ENTRY
Huge investment in promoting brands, setting of distribution network
and intense competition.
BARGAINING POWER OF SUPPLIERS
Many established players have a slight edge in bargaining power
giving the competition among suppliers.
Some of the companies have backward integration, which reduces
the suppliers clout.
BARGAINING POWER OF CUSTOMERS
Due to increase in branded products, there is less chance that the
consumer can influence, but intense competition within fmcg
companies result in value for money deals for consumers.(eg
getting one soap free with one unit of soap)

44

COMPETITION
In bath soap industry there are low profit margins about 5 10% but
they are selling in huge volumes.
To beat the competition companies mainly use various strategies
like discounts and freebies.
Unbranded players are size of Rs.1-3 billion and they are growing
at the rate of 10%.
Local players have no large distribution network so they are giving
fight to the branded products by giving huge margins to retailers
which is an important part of supply chain.

45

Hindustan Levers SWOT analysis

Strengths:

With identified strengths including a


strong brand portfolio;
consumer understanding;
R&D ability;
distribution reach(networking) and high quality manpower
Strong media personalities
As the production is on large scale it has the benefit of
economies of scale.
Being very old and reputed company, the company and its
brands achieves highest trust of the consumers.

46

Weaknesses:
The company's weaknesses spotted thereby include
Increased consumer spends on education, consumer durable,
entertainment, travel, etc resulting in lower share of wallet for
FMCG;
Complex supply chain configuration and unwieldy number of
stock keeping units (SKUs) with dispersed manufacturing
locations;
Price positioning in some categories that allows for low price
competition and high social costs in the plantation business.

Opportunities:
HLL sees its opportunities as
market and brand growth through increased penetration
especially in rural areas;
brand growth through increased consumption depth and
frequency of usage across all categories;
upgrading consumers through innovation to new levels of
quality and performance;
emerging modern trade to be effectively used for introduction
of more upscale personal care products;
growing consumption in out of home categories;
positioning HLL as a sourcing hub for Unilever companies
elsewhere and leveraging the latest IT technologies.

Threats:
Perceived threats
span low-priced competition now being present in all
categories;
grey imports
spurious/counterfeit products in rural areas and small towns;
changes in fiscal benefits.

47

Personal wash market: While the growth rate for the overall
personal wash market is only 1 per cent compared to average
growth rate of 5 per cent, premium and middle-end soaps are
growing at a rate of 10 per cent. The leading players in this market
are HLL (Lux, Lifebuoy, Breeze, Rexona), Nirma (Nima), Godrej
Soaps (Cinthol, FairGlow, Shikakai, Nikhar), and Reckitt & Colman
(Dettol).

Growth in production of FMCG

FMCG (overall)
Soap & Toiletries
(overall)
Soap & Toiletries
(overall)
Fabric wash market

Rs billion

Est
2002- %
20032003 growth
2004
600
2%
609

Rs billion

90

-5%

90.9

1%

Mn tonn

60

4%

60.09

1.50%

MN tonn

50

4%

50.25

0.50%

Laundry soaps/bars

Rs billion

53.3

-6.5%

50.64

-5%

Rs billion

45

5%

45.45

1%

Rs billion

42

-3.2%

40.11

-4.5%

Production (market
size)

Personal wash
market
Toilet soap

Unit

EST %
growth
1.5%

48

Projected Growth in Production of FMCG Sector

FMCG (overall)
Soap & Toiletries
(overall)
Soap & Toiletries
(overall)
Fabric wash market

Rs billion

First two
quarters
(Apr-Sept
2003-04)
Actual
1.50%

Rs billion

-4%

1.50%

MN tonn

2%

4%

Laundry soaps/bars

Rs billion

-8%

0%

Laundry soaps/bars
MN Tonn
Personal wash market Rs billion
Toilet Soap
Rs billion

-5%
7%
-5%

1%
1.5%
1.5%

SECTOR

UNIT

First two
quarters
(Apr-Sept 200405) Projected
2%

49

SWOT ANALYSIS OF
GODREJ
Strengths
Very old and trusted domestic company in India.
Good distribution network across the country.
Cinthol is one of the popular and strongest brand of the
company.
Diversification of the products and deepens each product
vertically.
Economical products with wide product line.

Weaknesses
Medium focus on advertising as compared to other
competitors.
Focused attention on cinthol brand.
Less focus on product variety.
Lack of promotion of its products by influential celebrities.
Lack of concentration on bath soap segment after
diversification.

Opportunities
Penetration in rural market area.
More brand loyalty of customers towards some of the brands.
Focusing more on its innovations and product variety it can
become a global player.
Low market share, to be focused by aggressive marketing.

50

Threats
Trust factor and emotions attached to it due to the domestic
company towards localites.
Due to successful backward integration it has a benefit of low
cost production.
Major focus on effective advertising.
Best infrastructure.

51

Growth and expansion strategies in


global scenario
Market segmentation
Most multinationals are active in almost all the regions profiled in
this report. Their global reach has been facilitated in part by the
increas ingly open economic policies that were being implemented
by developing countries such as India and China during the 1990s.
Corporate market expansion strategy by the multinational
organizations has involved increased market segmentation to create
a wide range of products especially in the toilet and laundry soap
categories. The main developments during the 1990s has thus been
the growth of task specific products. The market for bath products in
particular, has shifted toward body cleansing, as well as
moisturising, as brands become more specialised. Traditional soaps
are fighting back with a move toward nostalgia, and seem to be
attracting consumers back to the products they know best.

Mergers and acquisitions


Production of soaps for distribution on the international market takes
place as near to national markets as possible. The distance of many
of the emerging markets from major industrial nations, and the
sheer bulk of the bar soap and liquid soaps combine to make import
uneconomical in most instances. While domestic manufacturers
traditionally tend to concentrate in their countries of origin, they are
increasingly seeking to increase revenues by venturing into
neighbouring countries. This situation is most common in Asia and
Latin America.
The main strategy used by companies wishing to enter other
markets is a series of mergers and acquisitions. In addition, they
acquire manufacturing facilities and set up distribution agreements
with local companies.
With the exception of East and Central Europe, m ost soap and
other toiletry markets are becoming increasingly foreign. In Latin
America, Brazil stands out as an exception to this trend, having a
high presence of domestic companies.

52

In Asia,domestic manufacturers such as Nirma and Godrej are


gradually increasing their
domestic market share, particularly at the lower end of their
markets.
The acquisition of regional players represents a clear means of
establishing or strengthening a position in a region. Acquisition is
also being used as a means of balancing the geography of a
portfolio where a large player is weak in a particular country. This
seems to have been a major factor in Unilevers acquisition of Helen
Curtis. The alternative to acquisition or creation of a manufacturing
operation in the target country, is to set up a licensing agreement
with a local manufacturer.

How local companies are responding to


multinational strategies
Many national soap manufacturers are matching the big players
expansion strategies by expanding into niche markets where brand
loyalties are yet to form. They are becoming successful by quickly
identifying and meeting consumer needs,
and by offering more competitively priced products than the
multinationals. Another strategy involves offering products at low
retail prices and with small value shares in several sectors without
occupying leading positions in any of them.
While new product development will be important in the strategy of
niche players, it is unlikely that it will be as innovative as that
achieved by the global players. This is because investment funds
are not readily available in the same way, and new product
development will therefore tend to take the form of brand and line
extensions. Nonetheless, many local manufacturers are identifying
and exploiting pockets of innovation in niche markets especially,
where global players do not have dominant positions. In any case,
the findings of this research indicate that many sectors of the global
market for soap are not yet saturated. It is believed that additional
sales growth can be generated by targeting specific consumer
groups, for example, consumers in provincial and rural regions,
health conscious consumers, mothers, children and teenagers.

53

Threats
Without exception, all the major players and other manufacturers in
the industry list the following issues as threats to the uninhibited
growth of theindustry:
High government custom duties on essential imported raw
materials; High production excise taxes which in some cases are
higher than the import duty on raw materials; High local energy
costs including electricity and fuel; Increasing cost of policing their
products against local artisanal soap producers. This takes the form
of increasing research and development, as well as advertising and
promotional expenditure to differentiate their products in the mass
or lower market segment from local ones.
Loopholes

in government customs machinery have led to the influx


of grey imports, i.e. unofficially imported products in the local
market. In addition, official relaxation of trade barriers in all regional
markets has increased the entry of imported soap into most regional
markets that were fairly stagnant in terms of new product d
evelopment and launches.
Competition has intensified significantly over the last five years and
has resulted in heavy corporate investment in a wider range of
technologically advanced products and new product development in
general. This coincides with th e emergence of a more sophisticated
consumer base, much greater segmentation in markets, and
increased demand for value added products.
Basic products like bar soaps remain dominant in Asia, as the bulk
of consumers in most markets earn low incomes and only buy low
cost items. However, this situation showed signs of change over the
last three years with bar soap increasing in value shire from 68.2%
to 72.1%. This was due to consumers at the lower end of the market
trading up to more expensive types of soaps as their average
incomes increased. Liquid soaps became increasingly popular until
the 1997 economic crisis caused consumers to economize. The
popularity of liquid soaps and shower gels is due to their hygienic
packaging which makes them popular to use because, unlike bar
soaps, it cannot be shared by members of the family for body
cleansing.

54

The regional market presents tremendous opportunities to the soap


manufacturer in terms of the share size of the formed population.
With Indias population officially exceeding one billion at the end of
the last century and Chinas over 1.5 billion, the majority of them
living under the poverty line, appropriate marketing strategies are
needed to turn this region into an area of advantage for the industry.
Unilever is the most dominant player in the region with Japanese
companies,

Unilever
Countries of origin and bases: UK/ Netherlands
Unilever, the Anglo-Dutch consumer goods company is among the
worlds largest soap manufacturers. It is unusual in its structure,
which involves two parent companies; Unilever NV and Unilever
PLC. This structure relates back to the 1930s merger of the Lever
Soap Company with the Dutch edible (oil) fats company NV
Margarine Unie. Unilever started its involvement in the soap market
with the manufacturers of Pearls toilet soap, a major force in the
soap industry. Since the mid 1980s Unilever Has further developed
strong position in the soap sector through acquisition of various
established brand names. Unilever has been building its soap
(skincare) activities in the developing regions through acquisition. In
Eastern Europe, it acquired PTZ, the Czech state-owned producer
of toilet soaps and skincare products in 1992. In 1995 the Singapore
based Haze Line Company was acquired from Glaxo for US$150
million. This has strengthened Unilevers skincare position in China
and South East
Asia.

55

Operating structure
Unilever has operations in more than 90 countries which provide it
with a presence in every continent. Apart from direct presence,
Unilevers brands are on sale in a further 90 countries through
import arrangements and agreements with local companies. Europe
accounted for over half of the companys turnover and operating
profit in 2000. When sales from European markets and North
America are combined, they account for 2/3 of global turnover
The business coordinates its activities through divisions, These are
(i) foods (which accounts for 50% of Group turnover in 2000) (ii)
detergents, (iii) personal products including soap (accounting for
14% of Group turnover in 2000) (iv) specialty chemicals (v) other
products
Corporate strategy
The broad ranging interests of Unilever are underpinned by a strong
corporate strategy which focuses on the core activities and brands.
The company has pursued a selective acquisition and disposal
strategy with net expenditures on disposals and acquisitions
amounting to over US$ 1billion in 1999.
The company is also involved in Joint Ventures (JV) where this
method is proved to be the most effective means of entering a new
market For example, in Vietnam the company operates through two
JV agreements. Unilever also seeks to expand through organic
market development where appropriate.
The key to the companys strategy is the importance of product
innovation. A world wide network of innovation centres is in place
which allows rapid transfer of ideas and the identification of tailoring
required for local or regional markets. While the company enjoys the
benefit of owning a number of global brands, its strategy
emphasizes the importance of local requirements. The company is
keen to position itself as the Multi-local Multinational
Leading brands
Unilever has significant involvement in the global soap market
through a portfolio of strong consumer brands marketed primarily
through selective mass outlets. In the detergent market, the most
established brand is Omo in the fabric detergent sector. Omo is sold
in over 50 countries with a wide number of formulations to reflect

56

local washing preferences. Its Lux, Rexon, Dove, Ponds and


Lifebuoy brands are present
in virtually every market around the world. Other leading brands
include Hellmanns', Liptons, Knorr and Ponds.
Future strategy
Unilever is likely to continue to strengthen its presence in and
further develop its soaps and bath /shower product lines. The
company will continue to use the Dove and Lux brands to expand
into new skincare related categories. These brands have strong
consumer loyalty which will allow the brands to cross sector barriers
with relative ease.

Nirma Ltd
Nirma is a private family firm, which dominates the Indian rural
market. Largest national detergent maker and second largest selling
soap manufacturer. Success due to undercutting multinational rivals
eg. Surf. Production facilities at 6 places in India. It was able to cut
costs with a model focused on the poor. Using a lower fat-towater
ratio and indigenous oils in the formulation of the soap, the
company was able to cut production costs dramatically, and
produce a more environmentally sound product. It produces a range
of industrial chemical products which primarily serve as raw material
or intermediates for soap and detergent business.

57

Nirma has cut the cost of distribution by doing away with


intermediaries. The product travels from the factory to the d
istributor's doorstep. Though the distributors have slender margins,
they make money from sheer volume sold. The company makes
extensive use of wallpaintings for advertising.

58

FINDINGS
&
SUGGESTIONS
Tax reforms
The government has gradually removed the restrictions on imports
of consumer goods in the country and also significantly reduced
custom duties. The domestic tax structure of these products,
however, has not been rationalised to provide level playing field for
competition. This is adversely affecting the growth of the FMCG
industry and could have far reaching adverse impact. The following
taxation issues need urgent attention of the government:
1) Extremely high incidence of tax on certain product
categories
Some FMCG products such as shampoos, processed food, soft
drinks and toiletries containing alcohol attract high rates of excise
duty and sales tax. The total tax incidence in some cases is more
than 60 per cent of the cost or more than 30 per cent of MRP. Such
high tax incidence hampers growth of these product categories
besides encouraging manufacture of spurious products and
smuggling.
It is recommended that the total excise incidence of FMCG products
should not exceed 16 per cent in the case of non food items and
eight per cent in the case of processed foods. Similarly, the marginal
rates of sales tax, which is currently in the range of 10 to 25 per
cent, should not exceed 12 per cent.
2) Irrational domestic tax structure encouraging imports
Significant reduction in custom duty rates of consumer goods has
made imported product cheaper as compared to indigenously
manufactured products, due to irrational domestic tax structure. For
instance, goods manufactured in India suffer from cascading effects
of taxes on inputs as additional cost compared to imports.

59

The cascading effect of sales tax and local levies on inputs used in
domestic manufacture should be eliminated by providing either
MODVAT credit or by introducing notional VAT covering both
central and state taxes on an urgent basis. Moreover, MRP-based
excise duty is levied on a large number of FMCG products.
Countervailing duty on the same product when imported is charged
on CIF value. The MRP based assessable value for excise duty
does not allow abatement for post manufacturing costs such as
advertising and selling expenses whereas CIF value considered for
the purpose of import duty does not include costs of these elements
incurred subsequently by importers.
This differential basis creates unfair competition as tax incidence on
domestic manufacture could be considerably higher in case of those
products which incur significant marketing and distribution cost.
There is a need to bring parity in tax incidence between domestic
manufacture and imports by including all such elements of post
manufacturing costs while deciding the abatement percentage of
MRP based duty.
3) Inverted Duty structure for selected inputs
Duty on certain raw materials is higher or the same as compared to
finished products in which these materials are used. Such raw
materials include oils and chemicals like Soda ash, caustic soda
and LAB. In addition to customs duty, raw materials are also subject
to SAD/sales tax and octroi and therefore total tax incidence and
cost of indigenous manufacture goes up. The import duty on raw
materials needs to be rationalised so that it does not exceed 60 to
70 per cent of the duty on finished goods.
4) Need for rationalisation of taxes on processed foods
Processed food industry, with its vertical integration with the
agricultural sector has significant potential for employment
generation and economic growth. The existing tax structure and its
high overall incidence, however, has been hampering the growth of
the processed industry. The increase in excise duty in last years
budget from eight per cent to 16 per cent has adversely affected the
growth of processed foods industry. It is recommended that
marginal rate of excise duty on processed foods should not be more
than eight per cent and the sales tax should be levied at four per
cent.

60

5) Cascading effect of Special Excise Duty


The special excise duty introduced last year is not "cenvatable
except in the case of selected products. Most FMCG products
covered by tariff chapter 33 such as shampoos, ice creams and
cosmetics are subject to SED. This tariff chapter also contains very
wide definition of the term "manufacture which includes labeling,
relabeling or conversion of large packs into small packs. The levy of
SED on such products therefore leads to double taxation when
goods are labeled or converted into small packs after manufacture.
It is recommended that SED should be made "cenvatable;
alternatively the term "manufacture needs modification , atleast for
the purpose of SED by excluding labeling, relabeling or conversion
into small packs.

61

Other suggestions
1. A joint industry government initiative for building a "Made in
India brand for FMCG products is required. With many
multinationals moving into the Indian FMCG market, a concerted
marketing strategy which creates strong brands will be needed for
Indian FMCGs to gain recognition in the market.
2. Better packaging materials are necessary as a large number of
FMCG products are perishable . The government must facilitate
more R&D in packaging materials as this will help in cutting wastes
and costs in the sector. The possibility of a longer shelf life will
encourage production of goods of higher value addition by
companies in the sector.
3. While import of most items has been allowed, the government is
not geared to prevent import of spurious products. In other
countries, FMCG goods have to be cleared by regulatory authorities
before they are allowed to enter domestic shores. This is not
happening in India and the government needs to undertake a
comprehensive crackdown on these products.
4. The small-scale reservation policy should be reviewed as it
hampers the growth of this sector. Many reserved products,
including several FMCG products can be freely imported. Under the
current policy, not only are Indian producers of many FMCG
products restricted from attaining economies of scale, they also
have to compete against import that do not face constraints on
small scale reservations.
5. Food laws such as the PFA Act should be amended and be made
contemporary.

62

CONCLUSION
From the above detailed study of the FMCG industry with the focus
on bath soap segment we can make out that FMCG is the most
emerging sector and industry not only in India but all over the world.
The main leaders of the bath soap segment like HLL, NIRMA. AND
GODREJ are focused in the study which shows that HLL is the
leader in FMCG industry and has a large amount of market share
about 67% and even the growth rate. The main reason for the
success of some companies is their strategy and distribution
networks.
HLL is dominating due to its diversification, vertical and horizontal
integration, breadth and depth product line and innovative and
customer oriented product introduction. Thus the company needs to
focus on its distribution channels, networking, marketing strategies,
sales promotion etc to succeed in the market.
From the study we can make out that nirma and godrej still needs a
lot market penetration in the urban market also with focus on the
premium class.

63

BIBLIOGRAPHY
Websites :
www.infoline.com
www.nirma.co.in
www.hll.com
www.godrej.com
www.thehindubusinessline.com
www.google.com
Newspapers:
Business Standard
Economic Times

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