N. L.

Dalmia Institute of Management Studies and Research Srishti, Sector

1, Mira Road (E) - 401104

PROJECT REPORT ON

“COMPETITIVE ANALYSIS OF TOILET SOAP INDUSTRY”

Competitive Analysis of Toilet Soap Industry

Vishal Mungekar

TABLE OF CONTENTS

Sr. No

Particulars

Page

No.

1
Introduction

Porter five forces model

11

PEST Analysis

17

4
SWOT Analysis

19

Value chain Analysis

21

HLL (Overview & Swot analysis)

24

7
Nirma (Overview & Swot analysis)

38

Godrej (Overview & Swot analysis )

42

Suggestion & Conclu

sions

46

Competitive Analysis of Toilet Soap Industry

Vishal Mungekar

Toilet Soaps- An Introduction

The toilet soaps market is estimated at 530,000 tpa including small imports. Hindustan Lever is, of
course, the market leader. The market is littered over with several, leading national and global
brands and a large number of small brands, which have limited markets. The popular and premium
brands include Lifebuoy, Lux, Cinthol, Liril, Rexona, and Nirma. Toilet soaps, despite their divergent
brands, are not well differentiated by the consumers. It is, therefore, not clear if it is the brand
loyalty or experimentation lured by high volume media campaign, which sustain them. A
consequence is that the market is fragmented. It is obvious that this must lead to a highly
competitive market. Toilet soap, once only an urban phenomenon, has now penetrated practically
all areas including remote rural areas. The incremental demand flows from population increase and
rise in usage norm impacted as it is by a greater concern for hygiene. Increased sales revenues would
also expand from up gradation of quality or per unit value. As the market is constituted now, it can
be divided into four price segments: premium, popular, discount and economy soaps. Premium
soaps are estimated to have a market volume of about 80,000 tonnes. This translates into a share of
about 14 to 15%. However, by value it is as much as 30%. Competitive Analysis of Toilet Soap
Industry

Vishal Mungekar

Market Segmentation

Size (In Lakh Tonnes)

0.8

2.2

1.3

1
Premium

Popular

Economy

Discount

Soaps are also categorized into men's soaps, ladies' soaps and common soaps. There are a few
specialty soaps as transparent Glycerine soaps, sandal soaps, specially flavored soaps, medicated
soaps and baby soaps. Specialty soaps are high valued but enjoy only a small share of the market in
value terms. The market is growing at 7% a year. This means that the incremental demand
generation is 5% over and above the population growth. With increasing awareness of hygienic
standards, the market could grow at a rate higher than 8% annually. Interestingly, 60% of the market
is now sourced from the rural sector. This means that the variance between the two segments is not
very large. Since upper-end market focus is the urban areas, margins come from the urban sector.

Factors affecting buying behaviour

Price is the most important factor which effects the buying behavior of consumer, by which a
consumer goes for the various segment of soap like premium, popular, sub-popular and carbolic
which are basically decided by the cost factor and fat content in the soap. The buying frequency is
either monthly that is done by the families or in case of bachelors it is more than once in a month.
The occasions when premium soaps are Competitive Analysis of Toilet Soap Industry

Vishal Mungekar

purchased are usually when there are festivals and ceremonies. Moti Soaps are usually presented
during festivals and occasions for presents and gifts.

The promotional techniques help to boost sales. Various tactics like the price off‘s,

buy one get two free, free gifts and other schemes help boost sales in short run and also help in
clearing stocks. One of the important points a soap marketer should note is that the soaps are
usually purchased by women in urban areas as most of the day to day consumption of personal care
products are made by women. A point to note is that women use more personal care product than
men do and hence premium soaps are mostly targeted at them. Men normally make purchase
decisions in rural areas. Hence the marketer has to adopt different strategy for such a market. The
market shows a seasonal behavior for some brands, i.e. the brands change as per the customers'
need for that particular season. For e.g. in summer - running brand popular and sub-popular most of
the buyer take bath twice in a day specially in northern belt, in monsoon - running brand antiseptic
and medicated soap, in winter running brand premium (moisturizer and creamy soap).
Demand

0200400600

1990-91

1992-93

1994-95

1996-97

1998-99

2000-01

Year

Tonnes

TonnesCompetitive Analysis of Toilet Soap Industry

Vishal Mungekar

Benefits sought by various customers from various brands are

Beauty - Lux Freshness

Liril, Cinthol Natural

Medimix, Margo Baby

Johnson & Johnson, Doy Cream

Dove, Doy Care (moisturizing) Medicated

–

Dettol, Savlon, Glycerine

Pears, Emami

Penetration

One of the factors, which affect the demand of soaps, is the penetration, which the products have in
market. In case of soaps this has not been a major issue as the penetration in the rural area is as high
as 97% and that for urban area is around 99%. Thus the approximately the penetration is around
99% for overall India. Competitive Analysis of Toilet Soap Industry

Vishal Mungekar

Market Share

In terms of market share, the data indicates that HLL had a market share of 64 per cent in the soap
market, followed by Nirma at 16.8 per cent and Godrej at 4.4 per cent. However, when contacted by
ET, Nirma officials said their market share was in the region of 21 per cent. Hindustan Lever is the
largest contributor to the toilet soaps market of India. It enjoys almost a two-thirds share, with the
second ranked Nirma Soaps placed at a distantly low share of 16.8%. Lux and Lifebuoy have held the
sway of the market for almost fifty years. While the former brand remained the preserve of the high-
end rich consumers, Lifebuoy ruled the roost with health-conscious users as a hygienic soap. The
products underwent up-gradations with the introduction of versions like International Lux and
Lifebuoy Personal. In between came brands like Nirma Rose, Nirma Beauty Soap, Breeze, Caress, and
LeSancy. In 1993 came Dove. Earlier, Liril made waves with its lemon touch and bathing acrobatics.
At the medium and lower rungs, brands like Hamam, Moti, Jai, Rexona (third largest brand) were
well supported by OK and later by OK NSD Bar. The brands have undergone a full foray of launches
and relaunches, making each occasion to give a more vigorous thrust to the marketing effort. Quite a
few of the

Market Share

64

16.8

4.4

14.8
020406080

HLL

Nirma

Godrej

Others

Players

% ShareCompetitive Analysis of Toilet Soap Industry

Vishal Mungekar

brands have been acquired: Hamam from TOMCO and Baby Toilet soap from Johnson & Johnson, for
example. While Pears has dominated as high profile specialty soap, HLL undertook, in 1992, a project
to manufacture the product for the world market at Khamgaon in Maharashtra. Commercial
production commenced in 1993. To provide a sound base to its toilet soaps operations, HLL has also
branched out into other toiletries like shampoos and related products like glycerine, fatty acids.
Godrej Soaps had a disappointing experience in forging an alliance with Procter & Gamble (P&G).
Infact P&G is withdrawing itself from the premium soap segment like Camay. P & G has now a fully-
owned subsidiary in India and now it is concentrating more on personal care products. Godrej
retained all soap brands and transferred detergent brands to P&G in 1993. Godrej found it
convenient to shed the detergent brands - Ezee, Key, Biz and Trilo - as they represented a losing
portfolio. Godrej is promoting a number of brands, Cinthol, Ganga, Shikakai, Fairglow, No.1 and
Crowning Glory, while it has others to bother about such as Vigil and Fresca. Cinthol ranks third and
accounts for 60% of all Godrej Soap's brands. It is an old brand launched about five decades ago in
early 1950s. New Cinthol Lime and Cologne gave it a new look in 1985. Two variants were introduced
in 1989 placing an added emphasis on their brand of soaps. Its deodorant and complexion soap is
styled as Cinthol Spice. Cinthol is perceived largely as a male soap, as Lux is a lady's soap. The
company expects a very high growth for Cinthol in 1997-98. Ganga did well and a new version Doodh
Ganga has been introduced. Ganga had notched up a 5% market share but declined to 2% later with
sales at Rs 350 mn. Godrej wants to revive it. Godrej Soaps was giving a tough competition to
Hindustan Lever. Crowning Glory was pitched for hair care. Competitive Analysis of Toilet Soap
Industry
Vishal Mungekar

Even Nirma has achieved a significant penetration and has notched up an impressive 60,000 tonnes
sale in just three years. Nirma Ltd has been putting up a backward integration plant to produce soda
ash and linear alkyl benzene (LAB). Capacity utilization in the industry varies from as low as 50% to
80%. Godrej Soaps Limited (GSL) has been using its capacity by working for other producers. GSL
makes Rexona and Dettol for Reckitt & Colman of India and Johnson's Baby Soap for Hindustan Lever
(Johnson & Johnson). And yet only half of its capacity of 71,000 tonnes is being used. Also companies
like VVF Ltd. has state of the art technology oriented plants, which they mostly use for producing
brands like Dettol, Nivea Creame soap and also internationally well know brands like Fa for other
marketers. It seems Indians have sacrificed hygiene at the altar of thrift. If numbers are anything to
go by, Indians do seem to be washing themselves, as well as their clothes, rather less. Data collated
by industry certainly points to this rather unpleasant conclusion. The consumption of soaps and
detergents has shrunk substantially with volumes declining by 11.5 per cent and consumption of
detergents declining by 4.1 per cent in the year. The evidence of this decline in consumption is
somewhat perplexing in a country with a growing population as the consumption of soap and
detergents should logically be directly proportional to population growth. "Soaps and detergents are
at the back of the house and are not status products like TVs or refrigerators. It

‘s

possible that consumers may be economizing on their use or buying cheaper brands during a
downturn," explains an official at a leading FMCG firm. One possible reason could be

increased production in the small-scale sector

. For instance, besides detergents sold as powders and bars, which is produced by organized players,
a large quantum of detergents are sold in the form of laundry soaps, which are used for washing
clothes. Production of laundry soaps are reserved for the small-scale sector and data is not readily
available. There is also a large Competitive Analysis of Toilet Soap Industry

Vishal Mungekar

10

cottage industry producing cheap soap, used for personal wash, for which reliable numbers are not
available. Another possible reason for the apparent decline in consumption could be the free
samples of soap which have been handed out as part of

incentive schemes
, say

industry sources. ―The quantum of such samples may not be picked up in the data,‖

said the official. There is another whacky hypothesis. Many households earlier used soaps for twin
purposes: for body wash as well as shampoo substitutes. However,

successful sachet marketing in shampoo seems to have now penetrated this market, which has
directly impacted the sales of soaps.

A detailed analysis of the data shows that sale of premium soaps, the likes of HL

L‘s Lux or Godrej‘s Cinthol, declined by 13.1 per cent. But even the carbolic or

discount soaps

the likes of HLL‘s Lifebuoy or Nirma —

saw volumes decline by 9.9 per cent. Even though the market has shown de-growth in t

oilet soaps segment, analyst say that it will grow at a meager rate of

3 to 4 per cent especially in the premium category, which was previously looking attractive. This can
be attributed to factors like excessive dependent of Indian rural sector on monsoon, which can be
uncertain. Also due to high excise duty prices have remained high enough to keep the huge middle
class chunk away from this market. Thirdly 80% of the raw materials used in premium soap are
imports, which attract high import duty. All this factors lead to increase in cost, which deters the
players to provide value for money product to the middle class consumer. Competitive Analysis of
Toilet Soap Industry

Vishal Mungekar

11

Porters 5 Forces Model

SUPPLIER POWER
Supplier concentration

Importance of volume to

supplier

Differentiation of inputs

Impact of inputs on cost or

differentiati

on

Switching costs of firms in the

industry

Presence of substitute inputs

Threat of forward integration

Cost relative to total purchases

in industry

BARRIERS TO ENTRY

Absolute cost advantages

Proprietary learning curve

Access to inputs

Gove

rnment policy

Economies of scale

Capital requirements

Brand identity

Switching costs

Access to distribution

Expected retaliation

Proprietary products

THREAT OF

SUBSTITUTES

-
Switching costs

Buyer inclination to

substitute

Relative price

performance of

substitutes

BUYER POWER

Bargaining leverage

DEGREE OF

RIVALRY

RIVALRY

Competitive Analysis of Toilet Soap Industry

Vishal Mungekar
12

Buyer volume

Buyer information

Brand i

dentity

Price sensitivity

Threat of backward integration

Product differentiation

Buyer concentration vs.

industry

Substitutes available

Buyers' incentives

Exit barriers

Industry concentration
ratio

Fixed costs/Value

added

ndustry growth

Intermittent

overcapacity

Product differences

Switching costs

Brand identity

Diversity of rivals

-
Corporate stakes

New Entrants

The major raw material required for toilet soap is palm oil which is required to be imported from
countries like Malaysia. Palm oil is an expensive ingredient and this gives a low cost advantage to
the soap industry of countries like Malaysia, China etc. The exporters of these countries could supply
good quality soaps at rates less than the Indian competitors. There are companies like Marico,
Kopran, and Anchor to launch soaps in the premium category. Oriflamme has entered the market
recently with premium soap for the niche segment Milk & Honey (40 Rs 100 Gms) and Kopran has
titled its new offering Shine & Smile. The new entrants generally cater to small markets for e.g. there
are a large number of soap manufacturers catering the local markets of southern states. Most of
these players are a part of the large unorganized sector, which directly purchases fatty acids of palm
oil from the Indian manufacturers. Competitive Analysis of Toilet Soap Industry

Vishal Mungekar

13

HLL takes complete advantage of the economies of scale by procuring huge quantities of raw
material and flushes the market with vast varieties of soaps with minor variations. Brands like Liril,
Lux, Dettol created by existing players proves a hurdle for the new entrants like Doy Care (VVF Ltd.)
but there are a large number of players operating at the local level. The switching cost for the
consumers is not very high in the soap category. Premium Category, although compared to other
does enjoy a better Brand Loyalty. Even in case of specialty soaps like J&J, Santoor, where Brand
Loyalty is generally high. The capital required for manufacturing process is very high in this sector
especially if one needs to manufacture standardized quality soap. Most manufacturers in the
organized sector like import the machinery from Italy. Distribution is the key factor in this sector.
Companies having a good distribution network are able to cater to a wider market across the
country. Sales are volume driven and not value driven. The specialty about this sector is that it has a
high level of learning curve that improves with experience and therefore soap manufacturing is quite
often called an art rather than a science. The duties applicable to this sector are very high and thus
prove to be major barrier for the new entrant.

Substitutes

Generally one can point at two general broad substitute threats in the Premium soap category. One
threat is from the use of products like body wash and face wash. Though the use of these products
forms a very small part of consumption this is Competitive Analysis of Toilet Soap Industry
Vishal Mungekar

14

basically due to the high costs associated with such products. One can see in the some developed
countries which have already registered a cent percent penetration, the consumption of soap has
now decreased due to the customers upgrading to Body wash and Face wash. The second threat is
from downtrading i.e. the consumers from the premium category opting for the popular category
soap. Any small change in the price of the Premium soap can cause in the shift of the price conscious
consumer to opt for shifting to a soap in the Popular category. Most companies like HLL, Nirma cater
to both the categories.

Suppliers

The major input for the soap manufacture is vegetable oil (around 80% of the raw materials). Earlier
Animal Fat was used which was even cheaper, but after the Indian government banning animal fat,
one had to shift to vegetable oils. They are not available in India and thus have to be imported from
countries like Malaysia, Indonesia and China. There are only few players who export palm oil from
these countries and as such these exporters have a commanding position. There are various grades
of palm oil available and the manufacturer can switch between these grades to save on the cost of
inputs. Besides, soap can be manufactured either from fatty acids or directly from the oil. The soap
manufacturers cater to the current and future needs of consumers through the development of new
formulations and relate these to their suppliers. A prime example of this is the current trend towards
producing higher quality soaps and the customization of the products for e.g. Soap for different skin
types. Such moves result in new formulations that force suppliers to modify quality of inputs.
Competitive Analysis of Toilet Soap Industry

Vishal Mungekar

15

Companies like Godrej and VVF who previously used to supply soaps to other bigger companies have
gone for forward integration and started selling their own brands. Small players cannot afford to
import Oils as the price of Oil keeps on fluctuating and these fluctuations, if on the higher side
cannot be incorporated in the price of the product in this age of cut-throat competition. So they
directly purchase fatty acids of oils from large-scale Indian manufacturers who import Oil and
convert them to fatty acids.
Buyer

To a large extent, Premium Soap is a price sensitive market. Off late there has been an increasing
trend towards downtrading. And this has forced the manufacturers to lower the prices or offer
temporary discounts to woo the consumers who are either downtrading from the popular segment
or graduating upwards from carbolic soaps. This sector faces low level of brand loyalty. Switching
costs is very low and these results in price war and people are concentrating on value-for-money.
This forces a lot of players to go for frequent promotional schemes like 3-on-1, 2-on-1. Earlier the
decision for purchasing the soaps was equally balanced between man and woman (50:50). Now the
decision ratio is 60:40 in the favor of woman purchaser. This proves the fact that today most soaps
are targeted at the Indian woman. The buyers, even in the rural area are subjected to the media
invasion and are well informed about the basket of products available in the market and thus take a
rational decision. Competitive Analysis of Toilet Soap Industry

Vishal Mungekar

16

Industrial Rivalry

As India has a low per capita consumption of soaps the growth in this sector has been stagnant.
Penetration though on an average is 95%, consumption in our country, as compared to other
developed countries is a bare minimal (In the rural market, even though penetration is high the
frequency of taking a bath with soap is one out of 5 occasions). Capacity utilization in the industry
varies from as low as 50% to 80%. The market is littered over with several, leading national and
global brands and a large number of small brands, which have limited markets. There exist high exit
barriers in the industry due to high capital investment. Competitive Analysis of Toilet Soap Industry

Vishal Mungekar

17

PEST Analysis

: Political Factors: --

Earlier the soap industry was under the Licence-raj restrictions. But, after liberalization of economy
by the Narshima Rao government there has been a spurt in the number of players in the organized
as well as the unorganized sector. A player like Henkel SPIC is good example of this. The political
system in India is undergoing vast change. There has been competition between various states like
Maharashtra, Gujarat, Andhra Pradesh and Madhya Pradesh. The sops given to new entrants like
sales tax concessions and other incentives help encourage players to open their shops in these
states. Government banned the import of tallow, a soap making raw material (which was requiring
a very little processing to make soap). It then followed an incidence of adulteration of vanaspati by
unscrupulous manufacture.

Economic Factors

Soaps in India cost very high in India as compared to other countries like Indonesia. E.g. 100 gms of
soap in Indonesia costs rs.4.25 whereas in India it costs rs.10 approximately. This is primarily
attributed to the high cost of imports due to high import duties. Since India is now a WTO member
India will have to bring down the import duty rates to as much as 20% from 35%. Also the excise rate
at 16% forms formidable portion of the cost. The Indian players are lobbying with the government
agencies to reduce this duty which can bring down the cost of the final product. For toilet soap, the
average expenditure per user household for low-income households is Rs. 237, while it is Rs. 706 for
high-income groups. Competitive Analysis of Toilet Soap Industry

Vishal Mungekar

18

Social factors:

The social factor is very important when it comes to Premium soaps segment of the soap market.
With the rising education and disposable income levels, the need for hygiene and personal / skin
care becomes important. Premium soaps are thus targeted at the audience to change their habits by
raising their aspiration levels. Lack of good hygiene factor like availability of clear water for bathing
purpose also discourages extensive use of premium soaps by vast population. Fragmented

approach of govt. and NGO‘s towards inefficient PHC

-primary health center also aggravates the problem. Investment in basic sanitation will make biggest
improvement to health and also to the soap market. The growing reach of advertising medias like
satellite and cable TV too is expected to give a boost to the market penetration initiatives of the
industry players.

Technological Factors:

The industry though capital intensive is not very technology intensive. Premium soap manufacturing
though compared with other soaps manufacturing relies to an extent on technology (especially in
the finishing stage). The more important is logistics management where marketing and distribution
play a pivotal role. Here technology like (SCM) Supply Chain Management and (E-CRM) Electronic
Customer Relationship Management will play a pivotal role. Companies like HLL are working very
hard towards such a system to rope up the entire small stores and retailers (Kirana Stores). The
results of a survey done by National Council of Applied Research (NCAER) suggest that Indian FMCG
space is all set to enter a new growth phase, sample this: the study says that the lower income group
is expected to shrink from over 60 percent (1996) to 20 per cent by 2007 and the higher income
group is expected to Competitive Analysis of Toilet Soap Industry

Vishal Mungekar

19

rise by more than 100 per cent. It looks; the industry is all set for a fast-paced race ahead.

SWOT ANALYSIS

Strengths

Soap penetration: soap has a very high penetration of 95% in the urban region while the rural region
contributes to 85% penetration, which shows a potential for growth in the rural sector. Soaps is a
Delicenced Industry, which symbolizes that any individual with finance and marketing skills can enter
the industry.

Weakness

The duty structure: excise duty is at the rate of 16% on all toilet soaps and the sales tax structure
varies from state to state with a minimum of 8 % in some states ranging upto 20 % in most of the
southern states like Andra Pradesh, Tamil Nadu, and Orissa India solely depends on the Imports for
vegetable oil mainly from Malaysia & Indonesia and import duty is as high as 35%. The fairly high
contribution from rural market makes this category sensitive to the fortunes of the agriculture
economy The large-scale organized sector where the Technology and Capital Invested are high. The
other popular and carbolic soaps are manufactured by small manufacturing units predominantly
existing in the southern sector. Heavy launch costs Competitive Analysis of Toilet Soap Industry

Vishal Mungekar

20
Opportunity

Indian Exports for Soaps are quite insignificant. The reason being other South Asian countries like
Malaysia, Indonesia and China have Palm Oil available in abundance. Hence exporting Soaps
becomes an expensive proposition. India can concentrate on exports of specialty soaps like
ayurvedic, herbal and special categories like fairness soaps. Internet is fast emerging as a strong
distribution channel and the new players are finding it easier to launch assaults through this medium
very effectively.

In the world of cut throat competition ‗Quality‘ at an affordable price is the new

mantra. Companies are trying every measure to improve the quality of the product by maintaining
or at times even decreasing the price to make the product affordable and competitive.

Presence of a large unorganized market: branded products can wash the unorganized market by
providing value for money products at competitive market

Threats

Industry Growth

the entire soap Industry is growing at a minimal rate of 3 % and the entire FMCG industry is passing
through turmoil, where the soap segment registered actually a negative growth leading to
saturation. The only players we see are the low (cheap) quality soaps from countries like Indonesia,
Malaysia and China, which has a low freight cost structure and also a substantially low cost of
manufacturing. Competitive Analysis of Toilet Soap Industry

Vishal Mungekar

21

Value Chain Analysis

There has been rapid change taking place in the way firms function as a result of changes in the
external environment. Instead of a constant and predictable demand pattern, firms now have to deal
with tremendous variations in demand patterns. In the case of FMCG companies, this is especially
true in the commercial soap business. Also, instead of limited product offerings, firms now have a
wide range of products to offer
–

soap manufacturers manufacture as many as 350 different brands today. Earlier, firms used to work
with a high level of outsourcing. At present however, vertical integration is the preferred option and
is increasingly gaining importance. Companies like HLL have become a leader in the soap sector
because of this vertical integration. The supply chain is fast evolving (see figure above). The
customer is now at the top of the chain; offerings from firms have become varied and cater to the
specific need

End of the value

chain

Few

Brands

Supplier of

product

Intermittent

Only support

function

Beginning of the value

chain

Variety

to suit the

needs

Supplier of value for

money

Intense &

Extensive

Important role

right product, right place

THEN

NOW

Supply Chain Management SOAP

THE NEW

(OUT)LOOK

Customer

Offering

Role of

Manufacturer
Advertising & Sales

Promotion

Distribution

Competitive Analysis of Toilet Soap Industry

Vishal Mungekar

22

of the customer, competition is high and there is high level of price war that induces players to
provide the

value for money product for the customer

. Companies are now focusing on logistics both inbound as well as outbound which will supply
product to the lowest level of the value chain that is the end user. Transporters are graduating from
offering merely the transportation of goods to providing end-to-end logistics solutions. The duty
rates on the higher side coupled with the fluctuating price of imports make it very important to have
good procurement system. These go a long way in controlling and at times minimizing costs of raw
material that can then add value to the final product. There are three important and inter-linked
variables in the supply chain

Cost reduction,

Quality improvement,


Logistics both inbound & outbound.

The focus at soap manufacturers is equal on all the above factors as these are interlinked to large
extent. Quality is linked to Total Fatty Matter (TFM) which increases the cost of the soap. This is
because this fatty matter is imported which attract high import duty. These costs can be controlled
by good procurement system that will minimize the inbound logistics cost. Soaps are manufactured
by two methods. Directly from oil where you do not get glycerin as a byproduct. From Fatty acids
where you get glycerin as a byproduct. Thus by using the second method soaps manufacturer sell
glycerin and reduce cost of actual final product i.e. soap. But the technology is far more superior
when it comes to using the second method that increases the fixed cost of manufacturing soap.
Competitive Analysis of Toilet Soap Industry

Vishal Mungekar

23

While inbound logistics helps to minimize cost at input stage, a good out bound logistics support will
help in reducing cost of the product by providing the product at the right place and at the right time
with minimum inventory levels. An important factor in soaps industry is that there are many channel
of distribution like stockists, distributors and retailers. At every stage margins (stockists 2-6 %,
distributors 6-10 %, retailers 5-10 %) are added to the product cost which increase the price of the
product. These margins are added for non value adding activity. A proper management of channel
using computerized (SCM) Supply Chain Management system along with good outbound logistics
support enhances the value of the product. HLL envisages its success on this factor as it has a very
good distribution and channel management system. Competitive Analysis of Toilet Soap Industry

Vishal Mungekar

24

HLL-The FMCG Giant

Hindustan Lever is the largest contributor to the toilet soaps market of India. It enjoys almost a two-
thirds share, with the second ranked Nirma placed at a distantly of 16 %. Some of the big brands in
Soaps are Lifebuoy, the largest selling soap in India, Lux, Liril, Pears, Hamam, Rexona, Breeze, Dove,
and Savlon. Lux and Lifebuoy have held the sway of the market for almost fifty years. While the
former brand remained the preserve of the high-end rich consumers, Lifebuoy ruled the roost with
health-conscious users as a hygienic soap. The products underwent up gradations with the
introduction of versions like International Lux and Lifebuoy Personal. In between came brands like
Breeze, Caress, LeSancy. In 1993 came Dove. Earlier, Liril made waves with its lemon touch and
bathing acrobatics. At the medium and lower rungs, brands like Hamam, Moti, Jai, Rexona (third
largest brand) were ruling the roost. While Pears has dominated as high profile specialty soap, HLL
undertook, in 1992, a project to manufacture the product for the world market at Khamgaon in
Maharashtra. Commercial production commenced in 1993. To provide a sound base to its toilet
soaps operations, HLL has also branched out into other toiletries like shampoos and related products
like glycerine, fatty acids.

Denim is HLL‘s franchise for Men‘s toiletries.

The Core Competencies of HLL is its nation wide strong Distribution network. Before we look at its
distribution network, the best so far in this country, let us reflect on the rural India scenario. Around
700 million people, or 70% of India's population, live in 6,27,000 villages in rural areas. 90% of the
rural population is concentrated in villages with a population of less than 2000. Competitive Analysis
of Toilet Soap Industry

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25

The statistics is daunting. Particularly for HLL, which markets Packaged Mass Consumer Goods
(PMCG) of everyday use, the size of the rural market makes it essential to tap. HLL has traditionally
focused on the rural market. Several of our company's major business categories, such as Fabric
Wash, Personal Wash and Beverages, already get over 50% of their sales from rural areas.

Rich Company Poor Consumers:

The Plan of Action HLL realises that there is much more that needs to be done. To service rural

markets, the key issues that need to be addressed are the 3 important A‘s viz.

availability, awareness and overcoming prevalent attitudes and habits

Extending Availability
Data on rural consumer buying behaviour indicates that the rural retailer influences 35% of purchase
occasions. Therefore, sheer product availability can determine brand choice, volumes and market
share.

Project Streamline

was conceptualized to significantly enhance HLL‘s control on

the rural supply chain through a network of rural sub-stockists, who are based in these very villages.
As part of the project, higher quality servicing, in terms of frequency, credit and full-line availability,
is provided to rural trade. Thereby, giving HLL a substantial competitive edge over the next decade.

The principle of Project Streamline is to leverage HLL‘s scale and organizational

synergy to increase reach in rural markets. The pivot of Streamline is the Rural Distributor (RD), who
has15-20 rural sub-stockists attached to him. Each of these sub-stockists is located in a rural market.
The sub-stockist then performs the role of Competitive Analysis of Toilet Soap Industry

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26

driving distribution in neighboring villages using unconventional means of transport such as tractor,
bullock cart, and other means of transport. From 1998, the project has been rolled out in select
states of the country where the terrain or poor stage of market development typically makes any
distribution system unviable. The Streamline system has extended direct HLL reach in these markets
to about 37% of India's rural population from 25% in 1995. Most important, the number of HLL
brands and SKUs stocked by village retailers has gone up significantly. Having done that, the project
now aims to expand our coverage to 50% of rural population by 2003.

Influencing Affordability

Influencing affordability Project Streamline focused on extending distribution,

Project Bharat‘s influence was restricted to raising penetration and awareness

levels. On the anvil, is a new rural program, which will reach villages with a population below 2000
and influence income as well. This path-breaking venture aims to facilitate the doubling of our share
of the rural consumer's wallet in three years. The model is unique in that it influences all the
variables that influence growth. The model triples physicals reach, doubles communication reach,
creates a platform for influencing attitude changes and raising incomes.

HLL‘s rural growth engine raises incomes of rural families by channel intervention
through rural Self - Help Groups (SHG), which operate like direct-to-home distributors. The model
consists of groups of (15-20) villagers below the poverty line (Rs.750 per month) taking micro-credit
from banks, and using that to buy

HLL‘s products, which they will then directly sell to consumers. In the process,

generating employment and incomes for themselves, and increasing the reach of their products.
Competitive Analysis of Toilet Soap Industry

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27

HLL is tying up with various Non-Governmental Organizations, United Nations' Development

Programme (UNDP), and voluntary organizations to propagate health and hygiene messages. The
goal is to reach 2,35,000 villages up from the current 85,000; 75% of the population up from 43%
today; and a message reach of 65% up from the current TV reach of 33%. In the process we aim to
increase access, influence attitudes, create a channel to raise awareness of its brands and catalyze
affluence in rural India

Enhancing awareness

Mass media reaches only 57% of the rural population. Generating awareness, then, means utilizing
targeted, unconventional media including ambient media. HLL has been utilizing events such as fairs
and festivals, etc. as occasions for brand communication. Cinema vans shop-fronts, walls and wells
are other media vehicles that we have utilized to heighten brand and pack visibility.

Overcoming attitudes and habits

Creating distributive reach is not sufficient to tap the rural markets. Market development can be a
difficult task because in rural India, both

consumption

and

penetration

of Soaps is quite low. For instance, even for other personal care products only three out of 10 people
in rural areas use toothpaste or talcum powder, or shampoo and skin care products, and only six use
washing powders.
In Soap category, which has the most high penetration amongst the other PMCG, the consumption is
barely once per five bathing occasions.

Project Bharat, the first and largest rural home-to-home operation to have ever been mounted by
any company, sought to address many of these issues. The operation was conducted in high-
potential districts of the country. The exercise was started by the Personal Products Division in 1998,
and covered 13 million households by the Competitive Analysis of Toilet Soap Industry

Vishal Mungekar

28

end of 1999. In the course of the operation, company vans visited villages across the country and
distributed sample packs comprising a low-unit-price pack of soaps. The distribution was supported
by explanation of product usage and a video show, which was interspersed with product
communication. Thus we generated awareness of its product categories and the availability of
affordable packs. Consumers were also made aware of the superior benefits of using our products
vis-à-vis their current habits (example: stress on hygiene), and the affordability of the pack sizes on
offer. The project, thus, successfully addressed issues of awareness, attitudes and habits. Hopefully,
as consumers in rural areas get exposed to such value-added, value-for-money alternatives, they will
continue to buy into the categories. The project saw a 100% increase in penetration, user-ship and
top-of-mind awareness in the districts targeted. However, sampling once is not adequate to convert
non-users. So Personal Products rolled out a follow-up program, the Integrated Rural Promotion Van
(IRPV), to once more target villages with a population of over 2,000. Competitive Analysis of Toilet
Soap Industry

Vishal Mungekar

29

HLL - SWOT

Strengths

Local Subsidiary of Unilever, world‘s largest manufacturer of Consumer Goods.

 Cutting edge distribution network in place, which ensures that the products reach across the length
and breadth of this vast country. Maintaining favorable trade relations, providing innovative
incentives to retailers and organizing demand generation activities among a host of other things.
The evolution of HLL's distribution network

4 Phases

Phase 1:

The first phase of the HLL distribution network had wholesalers placing bulk orders directly with the
company. Large retailers also placed direct orders, which comprised almost 30 per cent of the total
orders collected. The company salesman grouped all these orders and placed an indent with the
Head Office. Goods were sent to these markets, with the company salesman as the consignee. The
salesman then collected and distributed the products to the respective wholesalers, against cash
payment, and the money was remitted to the company.

Phase 2:

The focus of the second phase, which spanned the decades of the 40s, was to provide desired
products and quality service to the company's customers. In order to achieve this, one wholesaler in
each market was appointed as a "Registered Wholesaler," a stock point for the company's products
in that market. The company salesman still covered the market, canvassing for orders from the rest
of the trade. He would then distribute stocks from the Registered Wholesaler through distribution
units maintained by the company. The Registered Wholesaler was given a nominal margin of 1 per
cent to cover the cost of warehousing and financing the Competitive Analysis of Toilet Soap Industry

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30

stocks held by him. The Registered Wholesaler system, therefore, increased the distribution reach of
the company to a larger number of customers.

Phase 3:

The highlight of the third phase was the concept of "Redistribution Stockist" (RS) who replaced the
RWs. The RS was required to provide the distribution units to the company salesman. The RS
financed his stocks and provided warehousing facilities to store them. The RS also undertook
demand stimulation activities on behalf of the company. The second characteristic of this period we
realised that the RS would be able to provide customer service only if he was serviced well. This
knowledge led to the establishment of the "Company Depots" system. This system helped in
transshipment, bulk breaking, and as a stockpoint to minimise stock-outs at the RS level.
Phase 4:

In the recent past, a significant change has been the replacement of the Company Depot by a
system of third party Carrying and Forwarding Agents (C&FAs). The C&FAs acted as buffer stock-
points to ensure that stock-outs did not take place. The C&FA system has also resulted in cost
savings in terms of direct transportation and reduced time lag in delivery. The most important
benefit has been improved customer service. The role performed by the Redistribution Stockists has
also undergone changes over the years. Financing stocks, providing manpower, providing service to
retailers, implementing promotional activities, extending indirect coverage, reporting sales and stock
data, screening for transit damages are some of the functions performed by the RS today.

Competitive Analysis of Toilet Soap Industry

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Nationwide manufacturing facilities

The diverse product range of this giant is manufactured in close to 100 factories, located across the
length and breadth of India. The operations involve 2,000 suppliers and associates. About 28
factories are situated in backward areas. In fact, all major investments of HLL, in recent years, have
been either in A-Category backward areas or No-Industry Districts. These include factories in
Khamgaon and Yavatmal (Maharashtra), Chhindwara (Madhya Pradesh), Orai and Sumerpur (Uttar
Pradesh), Dabgram (West Bengal), Silvassa (Dadra & Nagar Haveli) and Pondicherry. Equally, HLL has
an enviable track record in taking over sick enterprises, in response to requests from government
authorities, and converting them into viable operations. The company's units at Mangalore, Rajpura
and Gajraula all bear testimony to this achievement. In the process, HLL has saved precious jobs and
developed local economies. Many of HLL's factories, including the export-dedicated units, have
already received ISO 9002 certification. Some manufacturing facilities, like the Khamgaon soap plant
and the Sumerpur detergent bar unit, have been recognized as among the best in the Unilever
world. The Sumerpur unit has also been conferred with the Total Productive Maintenance (TPM)
award for excellence by the Japan Institute of Plant Maintenance (JIPM), the first Unilever factory in
the Central Asia & Middle East region to get the award.

State-of-the-art research facility

HLL has traditionally been a company, which incorporates latest technology in all its operations. The
Hindustan Lever Research Centre (HLRC), with facilities in Mumbai and Bangalore, has over 100
highly qualified scientists and technologists, many with post-

doctoral experience acquired in the US and Europe. Set up in 1958, HLRC‘s aim
is to develop new products and processes, improving benefits and quality of existing Competitive
Analysis of Toilet Soap Industry

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32

products, optimal use of resources, energy conservation and pollution control. The company has
many achievements in these areas, with 169 patents till date. Unilever has set up an International
Research Laboratory in India, its sixth worldwide and second outside Europe and North America. It
focuses on Skin Research to meet both global and regional requirements in these two core product
categories. One of the most significan

t breakthroughs of HLL‘s research initiative has been the

development of a technology to use non-conventional forest seed oils for soap-making, which, since
the 1970s has helped save around $1.2 billion in foreign exchange. HLL has received the Government
of India's prestigious award for import substitution. Development of Structuring Technology for soap
manufacturing also helps save costly conventional oils without any compromise on product
performance and quality. The latest technology to produce Distilled Fatty Acid for soap making and
the resultant plant capacity expansion has drastically brought down specific energy consumption
while improving distillation yields.

Product and process innovations

Valuable insights have also been gathered in understanding soap phases and how soap properties
such as the feel, lather, colour, appearance, size and shape can be improved, resulting in better
performance. Research into how soap gets its rigidity has enabled development of bars containing
liquid actives. HLL has also developed the capability to design and manufacture machines in-house
or have them assembled by third parties as per given specifications. This enables the company to set
up plants at half the cost of others. Such technological developments have also led to significant
improvement in productivity. The capacity of a toilet soap line has gone up from 6,000 tonnes per
annum in the early nineties to 10,000 tonnes per annum now, while that of a detergent bar line has
gone up from 7,000 tonnes per annum to 25,000 tonnes per annum now, thus substantially
increasing capital productivity. Competitive Analysis of Toilet Soap Industry

Vishal Mungekar

33
Strong Brand equity

While other players are concentrating on the popular and sub-popular segments, HLL is making a
bold decision of appealing consumers in the Premium. Lux- the Beauty bar of film stars has managed
to tap the aspiration levels of Indian woman and today enjoys a big chunk of the Premium market.
Close on its heals is Liril, again dominating the Premium market and enjoying a strong brand equity.
Lifebuoy is a major cash cow of HLL which currently enjoys the place of being the largest selling soap
brand in India. The company in this stagnant market has made a bold decision to relaunches lifebuoy
in the popular segment, with Lifebuoy plus and Lifebuoy Gold and has been successful.

Product Innovations & Niche markets

HLL has fragmented the market and has soap for every segment. A pear is doing very well as the
translucent soap and has a popular catch line of

‘Kuch Nahi’. Dove

cleverly positioned as not soap but a ‗moisturizer‘ which takes special care of your

skin. Fair & Lovely soap, launched after the immense success of its parent F&L Fairness Cream
(Leader in the fairness cream segment) promises to change the melanin of your skin by making you
fairer. Lux International Skin Care, a

innovative patented formula which protects your skin from the sun, ‗ab dhoop se kya darna‘ claims
the beautiful Aishwarya Rai facing the bright sun. Savlon

specially targeting the health conscious family members who need a soap to fight bacteria and
germs. Lux is now re-launched with extracts of mil, almonds and honey keeping with the popular
natural theme. And Denim, as the name symbolizes soap targeted to the rugged masculine male. HLL
has thus been very successful to have a product positioned in every segment. Competitive Analysis
of Toilet Soap Industry

Vishal Mungekar

34

Constant Marketing Initiatives

Few Examples
Soap executives at HLL realized that people who didn't see dirt on their hands thought that their
hands were clean. This attitude partly explained why people didn't wash their hands after washing
clothes in the river or feeding the cows, a key cause of disease transmission. Although the
connection was clear in the executives' mind, they had to create a similar urgency and emotional
connection to soap for the consumer. And what better place to educate people about the
importance of frequent soap use than where 70 million people come to clean themselves?
Hindustan Lever joined the pilgrims visiting Allahabad for Kumbh Mela, the religious festival held
every 12 years. Executives wanted to show that dirt is always present, though often invisible.
Marketers waved an ultraviolet-light wand over attendees' hands to show where germs and dirt
resided. While the pilgrims came to bathe at the confluence of India's sacred rivers to cleanse their
souls, they also learned to keep their hands free of pathogens. The village street theaters
represented a more emotional play. Lever and Ogilvy Outreach, the unconventional marketing arm
of Ogilvy & Mather, recruited local magicians, dancers, and actors who knew each market and village
that the company wanted to target. In total, 50 teams of 13 performers were recruited to serve as
connections between the brands and the residents. Scripts were changed for different dialects,
education levels, and religions. In all, Ogilvy coordinated two-hour performances at 2,005 haats over
six months. The results seem compelling. Awareness of Breeze, a low-cost soap with more of a
beauty pitch, increased from 22% to 30% over the six months that the performances were running.
Competitive Analysis of Toilet Soap Industry

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Opportunities

Converting the users of the Popular segment to the Premium segment. Presence of a large
unorganized sector, who find it difficult to import oil from south east Asian countries hence buy oil
from local manufacturers and cannot produce on the economies of scale. HLL is countries one of the
largest five exporters, but exports in the soap segment are bare minimal. Challenges and
opportunities for the future in the urban market While it is difficult to predict the exact nature of
developments that would take place in future distribution networks, early signs of certain changes
are clearly visible. The concept of organized retail chains (the one-stop shops), which seemed
unlikely to take off in a major way, has now been accepted as an area of major growth for the future.
Indeed, retail chains are on the rise regionally, and a major influx is expected to take place in the
future. A clear trend, therefore, is the shift from intermediation to dis-intermediation. A major
determinant here would also be the real estate costs. Quality of transportation infrastructure,
special intra-city road networks, would be a key factor in determining the penetration of organized
retail chains. Reduced travel time would help in the growth of organized retail chains.

Evolution of retail policies

 As organised retail chains come into vogue, intermediaries would start to dwindle. The value will
begin to shift and retail chains will demand higher margins and their share of profits. This would, in
turn, make it imperative for companies to evolve a new set of retail policies that would be radically
different from traditional retail policies of companies. Competitive Analysis of Toilet Soap Industry

Vishal Mungekar

36

Increase in Discretionary Spends

Discretionary spends of consumers is already on the rise; and it would continue to increase in the
future. This would be particularly of interest to HLL in the personal products business.

Business to Business connectivity

B2B connectivity (between a company and its supply chain partners) would help reduce costs,
improve inventory management, facilitate flow of information and enhance efficiency in the
distribution system. The challenge for companies in B2B would be to ensure that all supply chain
partners operate on a common platform and packages. HLL would therefore, need to consider
lending support to their supply chain players to bring about uniformity of operating platforms. B2C
too will grow, but will not be a major strategic focus for companies selling low-value items. The rural
markets are expected to witness a different kind of a shift. As companies aggressively compete to
get a higher share of the rural pie, competitive advantage will lie with those who have a higher
reach. An effective way to achieve reach in rural markets would be to farm out, to divest the
reaching mechanisms to third-parties like stockists/star-resellers, etc.

Threats

Major threat, especially to the Premium soaps of HLL is that of Down-threading, the prolonged
drought in the North and West of the country (until 2000) and the sharp fall in the farm disposable
incomes has persuaded the households to downtrade, that is , switch from high to low-priced brands
resulting in a de-growth in the Premium segment. This can lead to the cannibalization of its own
brands in the segments. Competition activity, in particular the pricing and advertising strategies of
main competitors. Competitive Analysis of Toilet Soap Industry

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37
Backward Integration resorted by other players (Nirma producing Caustic Soda), giving others a cost
advantage. Success of new launches in the niche segment by the competition Volume growth in
personal products and ability to protect market share Raw material (Palm Oil) prices as cost
increases cannot be passed on fully, in a competitive scenario. Competitive Analysis of Toilet Soap
Industry

Vishal Mungekar

38

Nirma: The David challenging Goliath.

Nirma‘s success is based on the premise of consistent and e

ffective delivery of value for money equation to our customers. These benefits along with
betterment in the areas of distribution, packaging, advertising will ensure steady growth for Nirma in
future. Nirma's low-cost strategy is putting rivals through the wringer. Nirma's strategy appears to
have become a fashionable mantra, even among large Indian groups. Non-

premium products account for 92% of Nirma‘s revenues

- and it spends little on promoting its premium labels like Nirma Premium. Karsanbhai Patel says that

Nirma‘s strategy is to get into a niche market.

Karsanbhai Patel, a 55-year-old chemist, has his rivals in lather. In three decades, his company,
Nirma, has grown from a one-man operation to a cleaning-products empire that employs 12,000
people. It recorded sales of Rs15 billion (US$345 million) for the year ended March 1999. And it's
giving multinational rivals, including Hindustan Lever and Procter & Gamble, a run for their money.
A cost-conscious approach forced Nirma into backward integration by setting up an 80000-tpa LAB
(linear alkyl benzene) plant in 1998 and a 400000-tpa soda ash plant in 2000. Nirma has achieved a
significant penetration and has notched up an impressive 16.8%, second stand in the industry in just
three to four years. Nirma Ltd. has been putting up a backward integration plant to produce soda
ash and linear alkyl benzene.

Nirma‘s formula for cleaning up? Sell at lower prices than the competition by cutting costs
throughout the production and distribution chain. Nirma‘s strate

gy is particularly applicable in a developing country such as India where consumers are price
conscious. Before Nirma entered the market, rivals had used high-cost foreign technology to
produce detergents. Nirma pioneered a lower-cost manufacturing method. He looks Competitive
Analysis of Toilet Soap Industry
Vishal Mungekar

39

for ways to save costs throughout his organization. Raw materials had accounted for almost 80% of
his manufacturing costs before 1998. Nirma saw vertical integration as a way to slash those costs
and remove uncertainties in supply. So it set out to have the company manufacture the key raw
goods it needed itself. It invested Rs3.8 billion in a plant that makes linear alkyl benzene, a key
ingredient for Nirma detergent. The factory churns out 75,000 tonnes of it a year. Now, Nirma is
setting up another plant to produce a second ingredient that's used in making his cleaning products:
soda ash. The Rs10 billion factory will make 420,000 tonnes of soda ash each year. Iodized salt,
another commercial commodity, is a by-product.

Why is Nirma investing crores in raw materials that are in oversupply?

The three major LAB makers --Reliance, Tamil Nadu Petrochemicals and Indian Petrochemicals
Corporation Ltd (IPCL)--were more or less serving the market adequately with their combined 2 lakh
tonne-plus capacity. If anything, 1997-98 saw a 15,000-tonne surplus that was exported. Worldwide
there is a glut since most detergent brands now prefer enzymes or another chemical called STPP.
And prices in India are aligned to global prices, so it isn't even as if Nirma is being cheated as a
domestic buyer Nirma's over 8-lakh tonne detergent volume makes it highly dependent on LAB, in
which cartelisation is said to be rife -- prices fluctuate, wildly at times. Recently, they hit a high of
about Rs 50,000 per tonne against Rs 39,000 at the end of last year. Today, Nirma is a giant to
challenge with and it has moved up the value chain.

Nirma‘s new strategy includes:

Bringing together the distributors and retailers so as to ultimately eliminate carrying and forwarding
agents. Investment in its own fleet of 400 trucks to cut transportation costs. Competitive Analysis of
Toilet Soap Industry

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40

Discarding dependence on contractors. Nirma has today forayed into toiletries such as bath soap,
toothpaste and shampoo. Even in the premium categories, Nirma prices its products 25-35% lower
than major competitors. That strategy is paying off: So Nirma, though a late entrant in bath soaps, is
now second in market share after Hindustan Lever.

Strengths:

Strong Brand equity. Nirma is a Rs.17 billion umbrella brand offering consumers a broad portfolio of
products at multiple price points in the Detergents, Soaps & Personal Care market. Produces a range
of industrial chemical products which primarily serve as raw material or intermediates for Soaps &
Detergents business. Market leadership in detergents market and fabric wash industry and second
largest player in Toilet soaps industry. Wide distribution network.

Weaknesses:

High interest burden. Less presence in premium segment. Lack global tie ups and thus lacking in
export markets.

Competitive Analysis of Toilet Soap Industry

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41

Opportunities:

Exports. Acquisitions for strengthening its distribution tie ups. Entry into other categories apart from
soaps like shampoos, toothpastes and fabric whiteners.

Threats:

MNCs coming to India particularly in Toilet and Soap industry. Emergence of small but strong
regional players. Competitive Analysis of Toilet Soap Industry

Vishal Mungekar

42

Godrej Soaps

–
All‟s „Fair‟ in Love and War

Godrej is currently the number three player, volume wise in the Industry. Cinthol its flagship brand
has recorded since the past few years decline in its sales. This has led to the re-launch of Cinthol
targeted for the entire family unit. Currently even when the market is declining Godrej is recording a
high sale in terms of value of 24% by competing vigorously in the marketplace. A correction in the
prices of inputs resulted in better margins in the soaps business as compared to the previous year.
Godrej has come out with a number of innovative consumer and trade offers. The highlight was the
launch of Fairglow which is the first innovative breakthrough soap offering in the Indian market for
many years. The product meets a stated need of the consumer at no extra cost or effort and has met
with universal acceptance by the trade and consumers. Sandal and Natural variants of No.1 soap
launched keeping with the rising populari

ty of ‗natural‘ variants in the soap industry.

Renewed focus on Institutional sales and sales to Canteen Stores Department led to growth in sales
value in this segment. 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. It is also manufacturing for other
players in the Industry. Contract manufacturing of toilet soaps registered a 20% volume growth but
grew by only 7% in value terms to Rs618mn. Capacity utilization in the industry varies from as low as
50% to 80%. Godrej Soaps has been using its capacity by working for other producers. It still makes
Camay and has arrangement to produce it for two more years. GSL makes Rexona and Dettol for
Reckitt & Colman of India and Johnson's Baby Soap for Hindustan Lever (Johnson & Johnson). And
yet only half of its capacity of 71,000 tonnes is being used. Competitive Analysis of Toilet Soap
Industry

Vishal Mungekar

43

The company manufactured 45530 tons of toilet soap in 2001. Capacity utilization of toilet soaps has
improved from 46% in 2000 to 64% in 2001. In 1996, Godrej Soaps undertook an expansion
programme. It set up new toilet soap finishing lines with a 48 tpd capacity each at its Vikroli and
Malanpur factories. It also set up a fatty acids distillation plant with a 75 tpd capacity.

SWOT

Strengths
The new product launches from Godrej have been a major success, Godrej FairGlow which created a
segment in the Industry for the color conscious Indians. Godrej FairGlow in just a year of its launch
managed to garner 1 % of the total market share. Looking at the success of FairGlow, HLL launched
Fair & Lovely an extension of its largest selling fairness cream. But Godrej FairGlow had the first

mover advantage of being the India‘s first Fairness soap. FairGlow has been a part

of innovative marketing since it was a technological innovation. It is promoting a number of brands,

Cinthol, Ganga, Shikakai, Marvel, Evita and Crowning Glory, while it has others to bother about such
as Vigil and Fresca. Cinthol ranks third and accounts for 60% of all Godrej Soap's brands. It is an old
brand launched about five decades ago in early 1950s. New Cinthol Lime and Cologne gave it a new
look in 1985. Two variants were introduced in 1989 placing an added emphasis on their brand of
soaps. Its deodorant and complexion soap is styled as Cinthol Spice. Cinthol is perceived largely as a
male soap, as Lux is a lady's soap. The company expects a very high growth for Cinthol in 1997-98.
Ganga did well and a new version Doodh Ganga has been introduced. Ganga had notched up a 5%
market share but declined to 2% later with sales at Rs 350 mn. Godrej wants to revive it. Godrej
Soaps was giving a tough competition to Hindustan Lever. Its Marvel for women, who demanded a
gentler soap than Lux Competitive Analysis of Toilet Soap Industry

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44

and Vigil, was for those who like non-carbolic soaps. Crowning Glory was pitched for haircare. Godrej
has also realized the gap in some segments and is giving Lifebuoy and Savlon competition in the form
of its offering Godrej All Care. Besan has always been an household name, Godrej has used B

esan (along with ‗haldi‘) as an

ingredient and is marketing it as a sopa doing well in the northern parts called as Godrej Nikhar.
Godrej has priced all its new launches in the popular band of Rs. 10, signifying Pricing plays an
important role in the niche segment. Godrej has doubled its advertising & promotion spends since
1999 and it amortises advertising and publicity expenditure on major product launches over 12
months from the product launch.

Weakness

Even though the new products of Godrej have done reasonably well, it does not offer soaps at a high
end of the segment. The premium segment is estimated to grow, but Godrej believes in
concentrating on the Popular and sub-popular segments. Unlike other major FMCG companies (HLL,
Nirma), Godrej has a presence only in soap and Hair Dye segment (where presently it enjoys a major
market share), Godrej Soaps had a disappointing experience in forging an alliance with Procter &
Gamble (P&G). Its sales, which were placed at a little over Rs 6000 mn, registered a decline of Rs 930
mn from that of the previous year. In volume terms, the sales dropped from about a little over
40,000 tonnes to over 30,000, marking a decline of 25%. This reduced its market share to 5.5%. In
the process of restructuring, the Equity Capital of Godrej Soaps has expanded from Rs 600 mn to Rs
3200 mn. The promoters and associates own most of this. P & G has now a fully-owned subsidiary
Competitive Analysis of Toilet Soap Industry

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45

in India. Godrej retained all soap brands and transferred detergent brands to P&G in 1993. Godrej
found it convenient to shed the detergent brands - Ezee, Key, Biz and Trilo - as they represented a
losing portfolio. After the divorce from P&G, the company is now undertaking the marketing of toilet
soaps while the distribution of consumer company products has been handed over to Godrej Hi-
Care. During all this while other entrants like Nirma went past Godrej and currently acts as a
challenger to HLL.

Opportunity

To create more out of Niche and driving volumes in a stagnating market. Building strong Brand
Equity and being leader in the niche segment. Technology and R&D innovations in the segment
would further come out with new products like Multani Mitti, & Neem. Innovations in the
manufacturing technology, as it currently have an excess capacity and is manufacturing for other
players in the market. Exports of niche soaps like Fairglow in Middle East, and other Asian countries.

Threats

Unorganized sector, especially in the south also catering to the niche segment having variants like
ayurvedic, natural, etc. and also delivering products at the same (or cheaper) price points. Godrej is
a very tiny player in an arena dominated by subsidiaries of Global companies (HLL) and other players
like Nirma who refuse to enter in the niche segment, concentrating only on popular and sub-popular
segment and substantially reducing its costs and increasing net margins by backward integration.
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Summary & Conclusion

It seems Indians have sacrificed hygiene at the altar of thrift. If numbers are anything to go by,
Indians do seem to be washing themselves, as well as their clothes, rather less. Data collected by the
industry certainly points to this rather unpleasant conclusion. The consumption of soaps has shrunk
substantially. The evidence of an absolute decline in consumption is somewhat perplexing in a
country with a growing population as the consumption of soap and detergents should logically be
directly proportional to population growth. Soaps are at the back

of the house and are not status products like TVs or refrigerators. It‘s

possible that consumers may be economizing on their use or buying cheaper brands during a
downturn. There is another whacky hypothesis explaining the decline in consumption. Many
households earlier used soaps for twin purposes: for body wash as well as shampoo substitutes.
However, successful sachet marketing in shampoo seems to have now penetrated this market which
has directly impacted the sales of soaps. Penetration of toilet soaps is very high However per capita
consumption levels remain low India's per capita consumption of soap at 460 gms per annum is
lower than that of Brazil at 1,100 gms per annum. Competition amongst the MNCs has intensified,
leading to shrinkage of margins. Low margins and high volumes characterize the industry. While the
level of disposable incomes determines the overall sector growth, the market has already been
segmented and sub-segmented. Positioning of the product is very important in this market. The
leading players in this market are HLL (Lux, Lifebuoy, Breeze, Rexona)

Nirma (Nima), Godrej Soaps (Cinthol, FairGlow, Shikakai, Nikhar), and Reckitt & Benckiser (Dettol).
The rest of the market is highly fragmented, with companies having strong presence in select
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47

segments or a regional presence only. Brand loyalty is very low, except at the premium end. Key
factors to success are distribution (in rural markets) and advertising (in urban markets). A lower
price differential between the organized and the unorganized sectors from reducing excise duties
allows the former to grow at the expense of the latter. The organized sector also has a superior
distribution reach. Innovation holds the key. New innovative products will grow the category.
Through experience, we know that an innovative product will make a success In terms of
distribution, visibility will be of vital importance with the retail shelves getting overcrowded with
more and more brands and new products. Soaps are available in 5 m retail outlets in India, 3.75 m
of which are in the rural areas. Therefore availability of these products is not a problem. 75% of
India's population is in the rural areas; hence about 50% of the soaps are sold in the rural markets.
Merchandising will also be of core importance, which will involve getting the POPs right to attract
consumer attention. Intense Distribution welfare will prompt companies to give more freebies and
better margins to retailers. Price offs and consumer offers will be predominant, this will put
tremendous pressure on companies to make their products more visible on the retail shelves. Better
sophistication will come about in terms of merchandising so as to increase visibility. Product would
reign supreme, even as consumers would want to have a value-for-money product in FMCG. Thus
pricing would also be important Rural demand growth is expected to occur mainly with consumers
moving up towards premium products. But in the past, the proportion of premium soaps to
economy soaps has not changed much, in volume terms. This is because as some Competitive
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48

consumers move up the value chain with increase in disposable incomes, some consumers move
down looking for cheaper substitutes as prices move up. This has been the case especially, as growth
in soap prices has generally outpaced overall consumer inflation. Deeper penetration in urban areas
also holds the key to unlocking growth potentials especially in the Premium Segment. Thus, Product
innovation, smart merchandising and distribution would be of key importance for FMCG products to
become a success in the coming years. While marketers will need to explore new areas of growth
potential, FMCG marketers also warn against being laid back to the fact that retail shelves are
overcrowding by the day. Even as toilet soaps market faces a slowdown in growth, there is still
potential to stoke growth through increasing product usage. The only reason is not that markets
have matured, but that usage and consumption of a particular product per person is still low. The
manner in which marketers tap this growth potential in the years to come - be it through advertising
or creating awareness through below-the-line activities - will be worth watching.