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A Project on Nihar Coconut Oil Subject: Rural Marketing



TOPIC • Introduction • Key Objective • Rural consumers and industry’s profile • About HLL • Performance of HLL in 2001 • Nihar’s market share • Marketing mix for Nihar coconut oil • Problems and strength of Nihar PAGE NO 1 2 3 5 6 9 10 14



The hair oil market is huge, valued at Rs 6 bn. Due to the varied consumption habits of consumers across the country, where coconut oil and edible oil are interchangeably used, the size of the market is likely to be higher than estimated. More importantly, the market is growing at an impressive 6-7% in volume terms despite the high penetration level. Usage of hair oil is a typical Indian traditional habit. It is perceived to offer benefits of nourishment, hair strengthening, faster and better growth, and reduce the problem of falling hair. There are two types hair oil available in the market; coconut oil and non-greasy perfumed oil. Coconut oil comprises 2/3 rd of the total market and the balance comprises the non-greasy perfumed oil. Usage of hair oil is an everyday habit with 50% of the population out of which some perceive that massaging the head with hair oil has a cooling impact. The penetration of hair oil is fairly high at around 87% and evenly distributed among the urban and rural areas. Hair care category in India consists of the following major product groups. Hair oil is a very Indian phenomenon. It is used as a conditioner and nourisher. Hair oils are broadly of two types viz coconut oil and non-greasy perfumed oil. The major positioning platforms for hair oil are purity, hair nourishing and more recently, non-greasy look. Coconut oil and perfumed oil accounts for about 65% and 35% of market in volume terms. Unlike shampoos or hair colors, which are products relatively new to the Indian psyche, the usage of hair oil is a deeply ingrained habit with Indian consumers. Therefore, this is one product where the major players do not have to fight either monetary or psychological barriers to usage. But this does not necessarily mean that being a branded player in the Rs 1,300-crore hair oils market is easy. Branded players account for just over a third of the total hair oil market. Players in the plain coconut oil segment operate in a category where there are few entry barriers in place. Loose oils are priced on the basis of input costs and availability, both of which are notoriously volatile. Since branded players have to grow at the expense of the ubiquitous unorganised segment and a host of regional and local brands, it is difficult to shield margins and selling prices from the vagaries of loose oil prices.



Key objective
The main objective of Nihar coconut oil is to overtake the loose oil consumers in rural areas. It also aims at being the market leader in rural market by overcoming other brands. It is a quiet conquest by Hindustan Lever Ltd (HLL) in the rural coconut oil market. HLL's Nihar coconut oil achieved a market leadership in the rural coconut oil market in October 2000, by displacing all-time leader Parachute of Marico Industries. As per market research firm ORG-Marg's retail audit for the rural coconut oil market, Nihar's market share stood at 25.4 per cent in volumes in October, while that of Parachute was at 23.6 per cent. The total volume of the rural coconut oil market is around 54,000 tonne, growing at 6-7 per cent annually. Even as HLL has managed to scrape through the leadership position of the rural coconut oil market, it is still far from being crowned the all-India leader in coconut oils.



• The consumer product sector mainly consists of personal care, cosmetics and home products segments. The sector can be further sub-divided into dental care products, soaps, detergents, surface cleaning products, skin care, and hair care products.

India's rural markets have seen a lot of activity in the last few years. Since urban markets are saturated in most categories, future growth can come only from deeper rural penetration. FMCG majors are aggressively looking at rural India since it accounts for 70% of the total Indian households.

The industry is volume driven and is characterized by low margins. The products are branded and backed by marketing, heavy advertising, slick packaging and strong distribution networks.

Despite the strong presence of MNC players, the unorganised sector has a significant presence in this industry.

Brand building and extensive distribution network is a key factor. A successful brand is a precious asset, which could fetch a price many times the cost of assets required to make the product. A study conducted by A&M-ORG-MARG reflects that the share of branded goods is high for a number of daily used products. Branded goods comprise of 65% of sales in villages and the share of non-branded products is shrinking dramatically.



Value-added hair oils
Given the limited differentiation possibilities in the coconut oil segment, major players in the branded hair oils market have been training their sights on value-added hair oils. This has spawned a range of product innovations -- hair oils with herbal ingredients, nonsticky oils, light hair oils, and lately, dandruff solution hair oil. An entry into the value-added hair oils segment appears to offer quite a few benefits to the branded players. One, with easier differentiation from the regional and local brands, establishing a brand identity is easier. Two, this makes value-added hair oils less vulnerable to price competition from cheaper alternatives. Third, value addition helps players command a price premium over the no-frills coconut oil brands. Both herbal oils and non-sticky hair oils have been quite successful as product concepts. Dabur India's Vatika hair oil, one of the first players to milk the herbal category through aggressive advertising, registered a growth rate of 74 per cent in 1998-99. Dabur's hair oils business continued to grow at around 18 per cent in 1999-2000. HLL's Clinic Plus non-sticky hair oil (which combines coconut oil and mineral oil) has also been an unqualified success. While Parachute continued to remain the lynchpin of Marico's hair care business, it was the value-added hair oils, such as Hair and Care, which clocked higher growth rates of late. While Parachute's growth rate fell from 14 to 6 percent in the first half of 2000-01, Hair and Care's growth rates improved from around 7 per cent to 23 per cent in the same period. HLL's Clinic All Clear hair oil and Parachute Dandruff Solution have also entered the fray. Importantly, while the plain coconut oils have revised their product prices downward, in line with the meltdown in loose oil prices, value-added hair oils have been able to maintain their price line.



About HLL

HLL has over 36,000 employees, and has created 2 lakhs indirect jobs. Its operations are spread across 70 locations in India. There are over 50 factories, of which 28 are in backward areas. The operations involve 2000 suppliers and associates and 7000 stockists and agents. HLL has emerged as a major Exporter.

Corporate Profile HLL, a 51.6% subsidiary of Unilever Plc, is the largest FMCG Company in the country, with a turnover of Rs. 118 bn. The company’s business sprawls from personal and household care products to foods, beverages and specialty chemicals. The company has a dominating market share in most categories that it operates in such as toilet soaps, detergents, skincare, hair care, color cosmetics, etc. It is also the leading player in food products such as packaged tea, coffee, ice cream and other culinary products. Market Share HLL grew at a fast pace in the mid 90’s driven by its aggressive acquisition spree. From Rs. 38 bn turnover (contributed 70% by soaps, detergents and personal products), HLL’s turnover has now grown to Rs. 118 bn, with soaps and personal products contributing 57% to turnover and beverages and food products contributing to 29% of turnover. Growth during the last few years has largely been driven by the personal products business. However the pace of growth has slackened significantly in the last two years with several key segments registering a degrowth in 2001.

M arket Capitalisation - HLL
60% HLL Other Brands 40%


Nihar Even as Hindustan Lever is armed with two brands -- Nihar and Cococare -- positioned to take on Parachute, the clear strategy adopted by HLL is to attack Parachute indirectly by targeting the loose oil consumer. HLL's overall share in the Rs 500-crore coconut hair oil market is about 24 %. Marico leads with a 53 % share. HLL's Nihar has appreciated its market share to 17.2 % in May 2000, from 12 % in end-1999, as per ORG-Marg All-India retail audit. The brand's share in the beginning of 1999 stood at 9.5 %.

Performance of HLL in 2001 Turnover for the year increased by 3.42 % gross and 3.47 % net. Product Categories: Soap and Detergent The overall market growth for Soap & Detergent was sluggish during the year with a sharp decline in the Popular & Premium segment of the market. In particular, rural market where the business had a traditionally strong presence performed poorly following decline in the agricultural growth. The discount segment continued to face severe price led competition. Against this background, the business registered a relatively better performance in term of growth. Major investment were made behind quality enhancement of key brand like Lux, Surf and Wheel during the year with clear consumer benefit. These were backed by some strong consumer promotion during the year including multi pack. Lifebuoy Active was launched during the year and in short time, the brand grew handsomely with a 3.7 % share of the segment. This helped offset the decline of Lifebuoy Carbolic. Major investment had been planned to retain and grow the Lifebuoy franchise in 2002. Overall, Power Brand grew significantly ahead of the market and are poised well for a strong performance once the market turn around with the impending economic revival. Innovation will continue to drive growth in the following year, with several projects in the pipeline. Major initiative to improve distribution reach, particularly in the rural market, were undertaken during the year to build upon the competitive advantage that the business currently hold in sales and distribution. Significant investment were also made in networking and Information Technology IT to manage supply chain more efficiently and make a quantum improvement in the customer service level. Project LEAP which bring together the combined strength of IT, Sales and Commercial to deliver better customer service and make the entire supply chain including the back end system connected with supplier of material respond faster to the short term change in the market place, had been 8

Nihar implemented toward the end of the year in the Soap Business and the initial result were encouraging. The focus in 2002 will be to stabilise the system and prepare for rolling it out to other businesses. A few highlight of the 2001 brand performance are: • • • • • With Wheel and Rin, the business not only recorded brand leadership again after a decade but also captured No 2 in Laundry. Lux recorded it highest ever share in the last 24 month. Wheel Green Powder share are at their highest in 24 month. Surf Excel had recorded it highest value share ever. The business also created new benchmark in capacity creation with 4 new plants 2 for NSD Bar, 1 for Soap for NSD Powder being commissioned in record time. These factories had stabilised very quickly giving significant supply chain and tax benefit to the business. Superior Technology in the business repertoire will be leveraged to deliver improved quality at lower cost to achieve profitable growth. The Business sees a big opportunity in market growth in the medium to long term, particularly in the rural area, and had initiated programme to drive consumption of soap in the context of the increased awareness of health and hygiene. For the year 2002, market growth, which is linked to the turnaround of the economy, remains the major risk factor.

Personal Product: Personal Product had led a good year in 2001, with double-digit growth. This was achieved by focusing on the core brand and investing in building their equity. In spite of slow market growth, your Company increased it investment in innovation, research and advertising on it big brand resulting in growth ahead of the market. The Hair Category had another year of growth, with high quality relaunches of Clinic Plus, Clinic All Clear bottle were changed in line with international development, while a new stand up pack was launched in the mid price segment. Your Company entered the nascent category of hair colourant, with the launch of Sunsilk hair colour in the metro. In order to address the opportunity at the low price end of sachet, Lux sachet were launched at price of Re1 and Re0.50, and these had met expectation. The Skincare Category had a very good year, with Fair & Lovely as star performer in 2001. In Fair & Lovely, the launches in 2001 included a fairness soap, a dark circle under eye cream, and sachet with a recloseable cap. The main Fair & Lovely cream brand was also relaunched with improved packaging and communication. All these initiative, along with investment in advertising and rural penetration, led to high growth for the franchise through the year.



The Pond brand returned to double-digit growth after a slowdown for 2 year, with comprehensive relaunches to it talc as well as skincare range. The growth was achieved by improvement in the functionally of product, packaging and impactful market activity. A new talc variant, pond Light n Fresh, and a new mini Clod Cream jar priced at Rs5 were successfully launched in 2001. The skin range of Lakme was renovated and strengthened and a premium new product, Lakme Fair Perfect, was introduced toward the end of 2001. In the Oral Category, Pepsodent was relaunched and emerged much stronger in 2001 as a result of innovation, advertising and marketplace activation. The introduction of value pack as well as new advertising helped increase market share of Pepsodent. Your Company decided to deprioritize the toothpaste brand Aim, in order to focus all effort on Pepsodent and Close Up this strategy had been successful as demonstrated by the growth and brand building that had been achieved in the second half of 2001. In the Deodorant business, Axe continued on a high growth plan, with many imaginative market activities and new introduction in 2001. Rexona was relaunched with international packaging and had achieved salience on the 24 hours delivery of deo benefit. Colour cosmetics saw many innovation on both Lakme and Elle 18 including a new range of colour based on the Lakme India Fashion Week. HLL acquired the asset and liabilities of it colour cosmetics, fragrances and personal care business from Lakme Lever Ltd at net book value, with effect from 31/3/2001. Post merger, Aviance business continued to focus on direct marketing of personal care product to gain better understanding of this channel . Supply chain and souring efficiencies led to significant cost reduction, whilst quality improvement came through technologies and innovation. Your Company continues to focus on low unit price pack, which provide the consumer with quality product at low put down price. A new Personal Product factory was commissioned in Doom Dooma in Assam, to cater to the growing market demand. Nihar Perfumed Coconut Oil continued to grow well, while Clinic All Clear Dandruff Oil registered substantial growth of more than 50 %. Nihar Amla Oil was also launched around the end of the year, to exploit opportunities in this segment of hair oil.



Nihar’s market share
For Nihar coconut oil, the company has already established rural leadership. According to ORG-Marg figures for market share in rural areas for 0ct 2000, Nihar is at 25 per cent as compared to Parachute at 24 per cent. In December 99, Parachute was at 28 per cent as against Nihar at 15 per cent. To increase urban penetration, the company is changing the imagery of the product by changing the product packaging. The 200 ml bottle is much sleeker and contemporary.



Marketing Mix for Nihar Coconut Oil
Product: Packaging innovations

Nihar, India's only double filtered coconut oil has made a change in packaging and logo, which is innovative, convenient and vibrant. The logo lettering is now in a fresh green colour and sports a leaf over the brand name. Nihar has consistently been bringing innovations to its consumers, it was the first to introduce the wide mouth jar and pouches packaging. In keeping with Nihar heritage, the new packaging is part of Nihar’s constant endeavors on improvising and providing quality to our consumers. The tamper proof jar has been introduced with grooves on the side for a firmer grip giving the jar a more feminine aspect. The flip top tin has been designed for convinience in pouring out the oil, the wide mouth jar can be used in different climatic conditions. The essence of the new packaging is to bring about practicality in daily usage of the Nihar coconut oil. The range of double filtered Nihar coconut oil includes: · Flip top tin, available in 200 ml and 500 ml · Tamper proof cap, available in 100ml, 200ml, & 500 ml with grooves on the side for an easy hold when oily. · Wide mouth jar available in 200 ml and 500 ml · Pouches available in 50 ml, 100ml and 200 ml Process of preparing the Double filtered Nihar coconut oil The double Filtration process involves the production of filtered coconut oil from copra. This is done by downsizing the copra, which is then passed through a cooker and steam heated for facilitating oil release. The copra is then crushed at a higher pressure. The final step in this stage involves sieving the oil and parts of the crushed copra through a screen. This still murky oil is allowed to partially settle in flat-bottomed collection tanks. In the second stage the filtered coconut oil is mixed with special quality silica and recirculated, this continues until the required clarity is achieved. This filtered oil with adequate purity finally goes to the packaging line. Nihar has also migrated to low unit packs to rope in new users. HLL has launched 100 ml pouches of Nihar priced at less than Rs 10.


Nihar Apart from making the product more affordable to mass market consumers, the 100 ml pouches are cheaper on a per ml basis than the larger bottles and flip top packs. This is likely to bring in new users from the loose oil segment.

So as to tackle the pricing issue, HLL has launched Nihar and Cococare in various price points in pouches, such as Rs 5.50 for 50 ml, Rs 10 for 100 ml and Rs 20 for 200 ml. HLL believes that the low-unit price packs will result in upgradation of the loose oil consumer to this brand, and enable the company to gain a higher share of the market. For example, Nihar's small packs in AP has led to the brand's market share gain in this state from a marginal 2% in April to 35 %.This example is being replicated by the company in each of the states where Nihar and Cococare draw large consumption. The company feels there is enough room for brands to gain share by upgrading loose oils users. The price of copra, the key input in coconut based hair oils, has been a key factor determining the fortunes of the major players in this segment. The continuation of the present price trends in copra would probably determine the near term financial performance of the large players in the plain hair oils business. On this count, there appears to be no near term cause for worry. A large part of the decline in copra prices is due to the substitution of copra by cheaper imported palmolein. Even after three successive import duty hikes on palmolein, it continues to the remain the cheaper option for industrial users. Prospects of a near-term up trend in coconut oil prices therefore appear remote. With an aggressive price war breaking out between the players in the coconut oil segment, value growth in this segment is likely to remain subdued. Strategies in this segment will clearly hinge on price. The value-added segment appears likely to sustain the present growth rates of 20-30 per cent.



Place ( Distribution)
Hindustan Lever Limited has a very good distribution network. Hindustan Lever has leveraged the micro-credit model to expand its rural market from its present 40 per cent penetration. Hindustan Lever Ltd is picking up where the Grameen Bank of Bangladesh left off. Leveraging the micro-credit model to expand its rural market, it is piloting `Project Shakti' -- its five-month-old marketing initiative involving women belonging to microcredit self-help groups (SHGs) in the Nalgonda district of Andhra Pradesh. The project, with an obvious `win-win' partnership potential, involves women from SHGs turning into direct-to-home distributors for HLL in their area, thus helping the company expand its rural market from its existing 40 per cent penetration in villages with population of over 2000. For the women, it means income generation without the headache of starting their own venture and becoming vegetable vendors, fish vendors, pan shop owners, etc., which has generally been the micro-credit model to date. Andhra Pradesh was obviously chosen for the pilot project as 20 per cent of its rural population is covered by the micro-credit model. The micro-credit concept, that impacts 45 lakhs women belonging to 3.33 SHGs in the State, creates wealth for the members of the groups and helps them better their lives and alleviate poverty. The micro-finance collected in the State, through savings as well as institutional loans, is around a whopping Rs 800 crore. For the project, 50 SHGs closest to the highway in Nalgonda district were identified. These are covered by three Mutually-Aided Credit Thrift Societies (MACTS), which act as semi-distributors in the project. MACTS, which generally consist of 14 to 15 SHGs, are federated into a co-operative and work in close tandem with the SHGs. In fact, the project has had several interesting spin-offs. One of the MACTs distributing HLL products has started its own supermarket, while another is shortly purchasing a vehicle for its distribution network. The investment opportunity is relatively risk-free and high on return. HLL is committed to providing the necessary training inputs to these groups on the basics of enterprise management which the groups can then use to enlarge their initiatives.



Nihar attracts a large consumer preference in Bihar, Uttar Pradesh, Madhya Pradesh, Rajasthan, Andhra Pradesh and Bengal. Promotional activities are region-specific and locally flavoured to suit the brand's requirement in its area of strength. The customers in the rural area are very price sensitive. Great emphasis is laid on the price factor and so they advertise keeping in mind the price. A lot of emphasis is given on the price and they also compare the product with the local brands and how it is superior in quality from the other available local brands. Nihar does advertise in the rural area but they don’t use much of newspaper as there is a very high level of illiteracy in the rural area. They do use advertising through T.V. Nihar's "kudrat ki shakti" ad clicked in the market place as it was distinctly different to the usual hair oil ads, HLL feels. But that is also not on a large scale as the T.V hasn’t yet reached the interiors of rural areas.



• Strong competition from other players in the market, especially Parachute of Marico industries. Pricing is a critical issue in the branded coconut hair oil market where the consumption of low-priced loose oils is huge.

Strength of Nihar
• Nihar can gain market share from conversion of loose oil consumers. The strategy is to upgrade the loose oil use to Cococare/Nihar by offering small pack forms, which are affordable. Nihar has a very strong distribution network, so it can reach more rural areas with its help and cover the market.

To conclude, in a very short period of time Nihar has been successful in gaining control over the urban market as well as the rural market. With the help of its strong distribution and its continuous innovations to match the consumers’ choice it can continue to maintain its leadership in rural market.