Time: 75 Min.

Chandragupt Institute of Management Patna

PGDM 2019-21
ITM –End Term
Instructions: Read following case study carefully before answering.
 Write your answer on an A4 sheet paper (both sides can be used to write answers). No
additional sheet of paper should be used.
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Ms. Veronica, a resident of Indore, has a sum of $20 mn. She wants to start online business of
either detergents and/or shampoo amid corona crisis. You, as a consultant, would suggest her
which business she should enter and why. Also advise her where your suggested business
should reach (in value terms) after 5 and 10 years from now (it is suggested to relate it with
some of the key concepts studied in the course so far). Some description of both types of
businesses at national level is provided below.

Detergents

Detergents, as a constituent of the overall FMCG industry, accounts for a near 12% of the
total demand for all FMCG products estimated at over Rs 530 bn. Detergents, chemically
known as alfa olefin sulphonates (AOS) are used as fabric brightening agent, anti-deposition
agent, stain remover and as a bleacher. Total market of synthetic detergents and scourers was
valued at about Rs 90 bn in 2007-08. It represents an increase of 15% over that of preceding
year. A major input for the production of detergents is a petrochemical, Linear Alkyl Benzene
(LAB), while soaps rely more on an inorganic chemical, caustic soda, as a major input.

Detergents are available as powder, bars and liquids. Bars make up for less than half of the
market, while powders have more than a third of the market. Liquids have 12% presence in
the market. The bar market is dominated by Hindustan Lever (now Hindustan Unilever -
HUL) with a share of over 40% held by its brands - Rin, Wheel, 555, Shakti, OK. The super-
premium market, making up for around 10% of the overall detergents market, is dominated
by Surf Excel from HUL and Ariel from Proctor & Gamble (P&G). The two together have a
near 75% market with the rest coming in from players like Henkel SPIC. In the sub premium
segment, Nirma from Nirma Soaps and Wheel from HUL are the major brands with small
presence from an array of brands like Trilo, Hipolin, Tide, Key, Chek and others.

The detergents market in India is dominated by HUL Nirma is the second largest player with
an overall market share of 19%. Nirma is more dominant in the states of Gujarat, Rajasthan,
Punjab and Haryana, that is Northwest India. Nirma has the highest market share of around
40% in Gujarat. It has the highest market share in the mass segment, like toilet soaps.

Hindustan UniLever was the first to launch the powder detergent, Surf, as far back as 1959. A
decade later it came up with detergent bars under the brand name Rin. The market was
further extended by the HUL in mid-1980s by introducing low cost detergent bars and
powders under the brand name Wheel. The three brands are now among HULs over thirty
brands. The company had earlier commissioned a 30,000 tpa detergent unit at Haldia. This
till then was the largest detergent manufacturing unit set up in India. Wheel is HUL's leading
detergent brand and contributes around 50% to the revenues of the company's laundry
business. It also set up a Rs 1.1 bn soaps and detergents manufacturing facility in Himachal
Pradesh. The new unit has a capacity of producing 110,000 tonnes of soaps and detergents. It
helped take the annual turnover of the country's largest fast moving consumer goods
company past the Rs 163 bn mark in 2008.

Detergent Demand : Earlier, several small scale informal sector operators

(Yearwise) appeared on the scene which also included Nirma. Nirma
Year ‘000 MT
emerged as a major player threatening the market leader,
2000-01 565
HUL. Nirma projects had included the setting up of
2001-02 676
2002-03 610
facilities to manufacture 420,000 tpa (tonnes per annum) of
2003-04 590 soda ash, 300,000 tpa of synthetic detergent, 60,000 tpa of
2004-05 650 toilet soaps and 280,000 tpa of vacuum salt at Bhavnagar at
2005-06 600 an estimated cost of Rs 10.37 bn. It has got the facility to
2006-07 705 produce key raw materials such as linear alkyl benzene
2007-08 715 (LAB) and soda ash.
2008-09 730
2009-10 745
Nirma became the leader in the powder detergent market by
2010-11 770
its unique new low-priced product in direct confrontation
2011-12 795
2012-13 830
with Hindustan Lever. It captured about 43% share of the
2013-14 870 low priced detergent market. It, introduced new products
2014-15 915 like soaps, shampoos and toothpastes under the same
2019-20 1195 umbrella brand. Nirma has cornered a 19% of the detergent
market to emerge as the second largest player after HUL. It
built the state-of-the-art soap manufacturing facility in collaboration with Binnaci of Italy.
Detergent Products Variation
Procter & Gamble Home Products (P&G) of Type Share (%)
the US did not have a presence in the mid-and Powders 55
low-priced segments. P&G launched its Tide Bars 37
detergent in sachets, primarily to induce trials. Liquids 8
India is the only market where P&G has introduced both Tide and Ariel. P&G has in its
portfolio other detergent brands besides Total Compact and Gain Super Soaker.

Henkel Spic is a 47% subsidiary of German

Detergent Market Growth Rates
1990-91-1996-97 9.5%
detergent leader, Henkel AG. It has a wide
1996-97-2001-02 12.2% product portfolio consisting of detergent
2001-02-2006-07 0.8% powders, bars, dishwash bars, liquids and
2006-07-2011-12 2.4% cleansers, with a good presence in the
2011-12-2019-20 5.2% southern market. Recent product launches
have been reasonably successful. However, its all-India market shares are not very significant
both for its powder brands (Henko Megastar, Henko White Giant) and for bars.

Shampoo / Hair-care products

Haircare products have been the fastest growing segment of the personal care market. While
the market size of products such as skincare and toothbrushes nearly doubled in value, the
size of the shampoo market expanded two-and-a-half times during the last decade. The size
of the shampoo market is estimated at over Rs 25 bn corresponding to some 60,000 to 70,000
tonne of the material. Besides, the untapped market has a big potential, especially the rural
segment.

While soaps and detergents claim a Shampoo Demand (Yearwise)

penetration level of more than 90% in the Year ‘000 MT
2005-06 54.18
urban areas, shampoos remain in a low
2006-07 60.14
penetration category in rural areas with a
2007-08 67.06
penetration level of mere 15%. 2008-09 74.10
Consumption per capita of shampoos in 2009-10 81.50
India is estimated at 60 ml compared to 160 2010-11 89.25
ml in Indonesia and 330 ml in Thailand. 2011-12 96.84
2012-13 104.10
Shampoo market in India is segmented into 2013-14 111.91
three distinct parts in terms of users, namely, 2014-15 120.30
2019-20 172.71
cosmetic type (shine, health, strength); anti-
dandruff (22%) and lastly herbal (15%).

Hindustan Unilever, (HUL) is active in first two

Hair care Leading Brands
segments. It has several brands such as Sunsilk,
Clinic Plus/ Videl Sassoon
Clinic All Clear Chik Nyle
Clinic Plus and Clinic All Clear. HUL had
Sunsilk Nizral Blue introduced new variants of its Sunsilk brand,
Organics Anti-dandruff Black Shine, Bouncy Volume, Silky Strength and
Pantene Kids Detangling Natural Nourishment. It also introduced 50 paise
version of Lux shampoo. It introduced an
innovative Sunsilk 28 ml ˜Bubble Pack' priced at Rs 8. The company claims that the 30 ml
bubble pack for Clinic Plus was a more preferred substitute. Sunsilk also has special one litre
packs of and conditioners for salons.

The company had decided to take the rural route to increase market penetration for its
different shampoo brands. Lux shampoo had been relaunched with a new improved
formulation and a new packaging in 4 ml and 6 ml sachets. The rural market is growing at
7% while the total market has registered a growth of over 10% in the last five years.

The company had earlier forayed into personal Hair care Market Growth Rates
care products exclusively for kids and sold only 1990-91-1996-97 15.9%
through its network - the direct selling business 1996-97-2001-02 17.6%
arm of the company. Under the Little Animals 2001-02-2006-07 10.3%
brands, it launched shampoos, bubble baths and 2006-07-2011-12 10.0%
body lotions. It expects the brand to contribute 2011-12-2019-20 7.5%
around 20% of its turnover. Products targeting kids in India are estimated 16% of the.
Personal care products.
Clinic All Clear has launched India's first claimed to be anti-dandruff shampoo for men. The
brand is launched in two variants: Active Sport and Hairfall Decrease. HUL had conducted
intensive research which revealed men's scalp is significantly different than the female scalp
and hence requires specialized care. Also men's scalp grows to have 33% more dandruff than
that of females, reason being more sweat and less haircare. A basic reason behind this launch
was, perhaps, booming men's grooming market. Moreover, brands like Garnier are already
targeting men for their shampoo range.

Procter & Gamble's Pantene Pro-V and Heads & Shoulders brands continue to be directly
imported from other Asian countries like Thailand, Taiwan and Vietnam after the
discontinuation of production in India in 2000.

CavinKare, a Chennai based unlisted FMCG Company known for its Chik brand, has em-
barked on a strategy which will place it as a low-cost bottled shampoo-maker in the southern
markets. Chik Satin is priced at Rs 56 for a 200-ml bottle, while Clinic Plus is priced at Rs 63
and Sunsilk at around Rs 87 at the higher price point. CavinKare's sub-brand Chik Satin will
address the affluent customers, pitting the company against HUL's Clinic Plus and Sunsilk
brands.

The popular segment, where Chik Satin has been positioned, commands an estimated 25% of
this market. About 75% of Chik sales come from rural market, while the industry sells only
52% of its shampoo brands in the rural markets. In the Indian shampoo market, sachet (7ml)
format accounts for 75% of the total sales. Chik has been bringing in 90% of its sales in this
format.