The FMCG Industry and

Shampoo Market

Microeconomics Project Report

Prepared by –
Group 1 (Division C)
Sagar Bhawnani (C014)
Zignesh Biswal (C015)
Anshu Jain (C025)
Sahil Jain (C026)
Maitri Joshi (C028)
Ria Narayan (C042)
Shobhit Todi (C063)
 Contents
SECTOR OVERVIEW ........................................................................................................................ 3
Objective of analysis ............................................................................................................................. 4
Evolution/ Key developments in the industry along with Government policy intervention (if any)
overtime ................................................................................................................................................. 4
Evolution in Shampoo industry ....................................................................................................... 4
Key Developments and Government policy interventions in the Shampoo industry ................. 4
Market Overview .............................................................................................................................. 5
Analysis of Structure and Degree of Competition ............................................................................. 5
Market Features: .............................................................................................................................. 5
Growth Drivers: ................................................................................................................................ 5
Degree of Competition:..................................................................................................................... 5
Market Share: ................................................................................................................................... 6
Performance of Key Players: ........................................................................................................... 8
SUNSILK:...................................................................................................................................... 8
CLEAR: ......................................................................................................................................... 9
CLINIC PLUS:.............................................................................................................................. 9
DOVE:.......................................................................................................................................... 10
PANTENE: .................................................................................................................................. 10
HEAD & SHOULDER: .............................................................................................................. 11
Conclusion: .......................................................................................................................................... 11
References and sources: ..................................................................................................................... 12
 SECTOR OVERVIEW

FMCG sector is one of the largest sectors in India. For the previous Financial year the sector was determined to
be the 4th largest sector in the country. Most of the sales in the sector are driven by Household and Personal Care
products which account for over 50 per cent of the sector’s sales in the country. The growth of the sector has
certainly been driven by increased awareness, more access and improved lifestyles of the people in the country.
The urban segment accounted for a market size of about US$ 52.75 billion in 2017-2018 and was the biggest
contributor from the FMCG sector towards the economy. The urban segment alone made for a revenue share of
around 40 percent in the sector. However, the FMCG market has seen higher growth in rural India when
compared to urban India in the past few years. FMCG products make up for 50% of all rural spending’s
FMCG products have quick turnover ratio and low cost. These products need to be replaced every year; hence
they are bought by the customers at regular intervals. They maybe perishable/non-perishable, durable/non-
durable. During 2016–2020, FMCG market in India is expected to grow at a CAGR of 20.6 per cent and is
expected to reach USD103.7 billion by 2020.
 Objective of analysis
The industry sector chosen for analysis is FMCG sector and the product chosen is Shampoo. The objective of our
analysis is as follows -

(a) To study and analyse the market structure under which our industry falls.
(b) To study and reflect the effect of various government policies and regulations on the industry as a whole and a
counter impact of the same on the company.

To conclude by suggesting a way forward for the company by examining the issues and challenges faced as well
as the opportunities present.

Evolution/ Key developments in the industry along with

Government policy intervention (if any) overtime

Evolution in Shampoo industry

Once considered a lifestyle product in India, the shampoo industry has hugely evolved since 1960s. Sunsilk was
launched in 1964 and then came Clinic Plus in 1971. In 1987, Clinic All Clear entered the market and in the same
year Sunsilk relaunched in Shampoo + Conditioner segment in sachets. It was then that HUL (then HLL) tapped
the rural sector with sachets.

The health platform shampoos came in the market with Clinic Active (with pro Vitamin B) in 1991. Then Sunsilk
entered the health hair care market with Nutracare in 1994 and divided the variants in shampoo by colour coding
the bottles like Pink for dry hair, yellow (normal hair).

P&G entered the market in Nov 1995 with Pantene, the world’s largest selling shampoo brand. In the same year,
Colgate Palmolive entered the market with a breakthrough in keratin treatment with Optima. In 1997, per capita
consumption of shampoo increased in India. Then the shampoo market share was of Rs. 350 Cr and 20% of it
was in the Anti dandruff segment.

Key Developments and Government policy interventions in the Shampoo industry

Since the pass of GST in India, tax savings (tax rate under 18%) has benefitted the FMCG sector. Moreover, the
government has allowed 100% FDI in single-retail brands and 51% in multi-brand retail. This would lead to
increased employment and supply chains and improve the visibility of the FMCG brands in retail markets. This
in turn would improve customer engagement and better the frequency of innovation and product launches. The
new Consumer Protection Bill has special emphasis on setting up a mechanism to ensure simple, accessible and
speedy delivery of justice to consumers. The disposable income of citizens has increased and hence the
purchasing power of the people also improved.

Studies claim that poor diet and food habits have a direct impact on hair quality and hair fall rate thus
strengthening the need of hair care further. Innovations in technology has enabled the incorporation of new
ingredients in shampoos, leaving hair cleaner and better conditioned. Some important developments are being
made in the development of polymers, silicones and surfactants. These materials will be less irritating, less
expensive and more environment friendly and additional functionality and performance is an add on.
The multi stage Viscoprop impellers are helping in mixing different densities of constituents
decreasing mixing time hence improving efficiency.
Market Overview

FOOD AND BAKER PRODUCTS,

BEVERAGE CEREALS, CHOCOLATES,
RICE, FLOUR, ICE
19% CREAM, ETC

OTC PRODUCTS
HEALTH CARE
FMCG 31%
AND ETHICALS

HOUSEHOLD AND ORAL CARE, HAIR

PERSONAL CARE CRAE, BODY
CARE,HOUSEHOLD
50% CLEANER, ETC

Analysis of Structure and Degree of Competition

Market Features:
• Rs4.5 Billion market in 2015
• Rural penetration low at 12% only
• Urban penetration level is 36%
• Urban areas contribute to 80% of shampoo sales
• 40% of volumes are in sachets
• 50% of consumers use toilet soap for washing hair

Growth Drivers:
• Heightened awareness about personal grooming
• Gender specific shampoo products are becoming increasingly popular
• Increasingly diverse portfolio of shampoos
• Smaller SKUs/shampoo sachets at reduced prices increase new product trials
• Distribution networks to expand their reach in rural India
• Increasing middle class in urban areas have higher disposable income and are willing to buy premium
products
• Increasingly brand conscious and benefit-conscious consumers

Degree of Competition:
• There are many competing producers
• Each firm makes a product that is slightly different from the others
• The products are different, each firm has some control over the prices it charges
• Shampoo is now an essential product for more than 50% of India
All the above points make us conclude that Shampoo market has a MONOPOLISTIC
COMPETITION STRUCTURE.
Market Share:

• Market Leader is HUL with 46% of market share with 5+ Brands (now including
InduLekha)
• Second largest share is held by P&G which hosts premium shampoo brands
• Brand loyalty is not very much in monopolistic competition structure as 80% users
are switchers.
Porter’s Five Force Framework analysis for Shampoo Industry:

•High – Presence of multiple brands

• Narrow product differentiation under and across many brands
Threat of •Chances of cannibalization
Substitutes • Similar pricing for similar product ranges

•High – Private label brands by retailers are priced at a discount to mainframe brands which inturn limits
competition for the weak brands
Competitor •Highly fragmented industry as more MNCs are entering in the existing competitive space
Rivalry

•Low – Huge investments in setting up distribution network and promoting brands

Threat of New •Spending on advertisements and sales promotion is aggressive
Entrants

•Low – Big FMCG companies are able to dictate the prices through local sourcing from a fragmented
Bargaining group of key commodity suppliers.
power of
suppliers

• High – Low switching cost induces the customers’ product shift

Bargaining • Influence of marketing and communication strategies
power of • Availability of similar alternatives and value propositions
Buyers
 Performance of Key Players:

BRANDS PRICE QUALITY ADVERTIZING MARKET DEMAND SUPPLY

SUNSILK Average Average Good Good Good Good
ALL CLEAR Average Good Good Good Good Good
CLINIC PLUS low Low Low Average Average Good
DOVE High Very good Very good Very good Very High Excellent
TRESEMME Average Good Good Good High High
PANTENE High Very good Very good Good High High
HEAD & Average Very good Good Very good Very good Excellent
SHOULDER
WELLA High Good Good Good Good Good
LOREAL High Very Good Very Good Good High High

SUNSILK:

1.PRICE-The most important determinant of demand is price. Sunsilk practiced value-based pricing in which the
starting price develops the market for them as well as satisfying the consumers. The price of a 100 ml Sunsilk
shampoo is 56. It is an average price with regards to their quality. The quality is also average. So, the shampoo is
well accepted by the consumers and the demand is also good. Sunsilk with their value-based pricing system are
getting their profits and also successful in holding the demand in the ever-changing market.
2.INCOME -Normally income bears a positive relationship with demand. Observing the price of the Sunsilk, it
can be stated that Sunsilk is not for higher income group. We know that Sunsilk is also available in pouches of
Rs.3. So, it is very easy to consume Sunsilk for lower income group. As we know, normal goods have positive
relation between demand and income and inferior goods have negative relation between demand and income. We
can categorise Sunsilk as normal goods. But increase in income will always increase the demand for Sunsilk is
not granted. Because it is a average priced group, the increase in income can also decrease the demand for Sunsilk.
But now by doing the study the demand for Sunsilk is good. From the lower income group to middle income
group, Sunsilk is well accepted. Sometimes higher income people also enjoy this product.
3.PRICE OF THE RELATED GOODS-If we see the table again, we can say that except few products like Dove
,Wella and loreal , the prices of the related shampoos are not very high. Sometimes it is low also like clinic plus.
So, there is a fair competition among them but Sunsilk is successful to hold their market.
4.TASTES & PREFERENCES- The middle income people, the school and college girls prefer Sunsilk. As their
income, culture and many other intermediates influence the consumption of a particular brand ,the observation is
that most of the college girls and middle income groups are likely to use Sunsilk.

5.MARKET-The market for the shampoo is monopolistic competition. This market consist of many buyers and
sellers over a range of element, which allows the sellers to gain market shares in contrast to competitors. In this
market condition, Sunsilk differentiated its products and also sell them in different prices to cover at least a large
portion of the market.
CLEAR:

Another brand of Hindustan Unilever Limited is Clinic All Clear. It is basically a anti dandruff shampoo with
different ranges.
PRICE-The price of 100ml clinic all clear shampoo is Rs.69. Mainly, this shampoo is meant for men. According
to the quality their pricing is good. The demand of this particular shampoo from its launching till today is just
great. Compared to Sunsilk, its price is high but its demand is also high and the company also supplies it in a
better way as per demand
INCOME -As the price of this shampoo is high so it can be stated that as income of the consumers increases the
demand for this shampoo will also increase.
PRICE OF RELATED GOODS-As clinic all clear is a anti dandruff shampoo, there are so many competitors
in the market like Sunsilk ,vatika head & shoulders etc. The price of vatika is comparatively low but quality is
also low .But in case of head & shoulders there is a tough competition between the two. As they both are mainly
anti-dandruff shampoo and the price of H&S is relatively high, they are tough competitors. Sometimes it is seen
that because of this reason the demand of all clear shampoo is fluctuating.
TASTES AND PREFERENCES-Taste for this shampoo is broadly depend on men. Men prefer the shampoo
most. At first its target was men only but later they wanted to cater their market among women also but they are
not fully successful because it was already accepted by the men and women could not accept this shampoo well.
So, as taste and preference concern the demand for all clear shampoo is among the men is very high

CLINIC PLUS:
Now come to the clinic plus shampoo, the oldest & trusted brand of HUL shampoo section in India.
PRICE-The price of clinic plus shampoo of 100 ml pack is 47.No doubt that the price is low but there is no
meaning that the demand of this shampoo is high as its price is low. As quality concern ,in early days its demand
was so much high as it was the oldest brand in India but now-a-days the scenario is totally different. May be its
price is low but demand is also low.
INCOME-In case of clinic plus shampoo, as income increases the demand of this shampoo will decreases. The
demand for this shampoo is negative relation with the income.
PRICE OF THE RELATED GOODS-In concern of price of related shampoos there is no shampoo of a reputed
company with this price. So, there is no competitor in market. It is meant for lower income group. Its demand is
basically high in lower income people and children.

TASTE AND PREFERENCES-As already said, this brand is mainly preferred by lower income group and
parents for their children. and it is also a major point that this product is out of fashion and that’s why the demand
is also decreased. But some old people still prefer this brand as it is most trustworthy brand for them.
DOVE:

It the most powerful brand in shampoo of HUL. The maximum profits, revenue is gained from DOVE in HUL.
PRICING-The price of 100 ml dove shampoo 64.HUL has created a remarkable pricing of dove. The quality of
dove shampoo is very good but its price is comparatively is lower. For that reason, the demand of dove is always
high and HUL also supplies excellently to handle its demand. And it is very obvious that if HUL increases its
price, the demand for this brand is not going to decrease.
INCOME -In the market its demand is so high that if a consumer’s income decreases, the demand remains the
same. But if income increases of a consumer than early income obviously the demand will increase. It has no
negative relation with income.
PRICE OF THE RELATED GOODS- Yes, shampoo like head & shoulder and Pantene is a strong competitor
of dove. So, it makes competition between HUL and P&G. If the price of Pantene is suddenly decreases ,it may
happen that it will have effect on the demand of dove.
TASTE AND PREFERENCES-Company claim by its advertising that it is a women product but it is also well
accepted by men. The people from middle class to higher income group all prefer this brand. Also, the working
women prefer this brand.

PANTENE:

Pantene is the strongest brand of Procter & Gamble in India. It is the main competitor of dove in Indian market.
PRICING-The price of the Pantene 90ml pack is 59Rs.P&G very cleverly did this pricing system to cater for the
Indian market. Every brand does price in respect to the 100 ml pack. But as the price should not show high , P&G
launched Pantene in India in 90ml pack and wonderfully it worked in market. Its quality is excellent and for that
its demand is also good in the market. And it can be hoped that there will be no decrease in demand if its price
increases.
PRICE OF RELATED GOODS-If the price of dove decreases it would affect the demand of Pantene. They are
the tough competitor in this sector.
INCOME-As the income increases the demand of Pantene will also increases. Being a prestigious brand of P&G,
Pantene is in high demand always. It has a positive relation between income and demand.
TASTES AND PREFERENCES-From middle income group i.e. college girls and working women to high
income group, Pantene is preferred. It is also recognized as fashionable shampoo that enhance the young public
to encourage to consume Pantene.
HEAD & SHOULDER:

Another strong brand of P&G is head & shoulder shampoo in India. It is an anti-dandruff shampoo.
PRICING-The price of 90ml shampoo is 69.P&G also used the same strategy in case of H&S like Pantene. The
price is quite high as compared to other brands. But its demand is not low ,the reason is same quality.
INCOME -If income increases the demand for this brand will also increase. But if one’s income decreases there
is a possibility to decrease its demand because its pricing is high. So,it has both positive & negative relation with
demand.
PRICE OF THE RELATED GOODS-If Pantene, dove increases their price, there is a possibility to increase
the demand for head & shoulder. As dove and Pantene comparatively low in price than h&s, so the demand may
increase.
TASTES AND PREFERENCES-This brand is equally accepted by men and women both. The company is
successful to cater their product among men as well as women. It is the most trusted brand in anti-dandruff
shampoo category.

Conclusion:

Current Trends:

• Excessive fragmentation with wide range of products

• New product development through R&D and innovation
• Demand for Salon services are on a rise
• Demand for professional shampoos and herbal shampoos
• Penetrative pricing- value packs
• Online selling to account for 40% sales by 2020

Strengths:

• Shampoo industry accounts for 23% market share (highest followed by food segment) in the FMCG
industry
• Low capital intensity
• Simple technology that makes it easy to differentiate product through innovation
• Indian demographics support the industry, whose product has almost become an essential product for
50% of industry
Prospects:

• Innovation key growth driver due to consumer awareness

• Low penetration of the industry in India, still many use soap as a substitute for shampoo.
• Increasing disposable incomes of Indian families
• Weakening rupee
• Increase in awareness about shampoos due to monopolistic competitive market structure
• Untapped rural market and increase in disposable income of rural households.
Issues and Challenges:

• Removal of import restrictions may flood the Indian markets and increase competition in an already
competitive market
• Intensive competition which leaves the market with no single leader in terms of Brand.
• Cannibalization of the brands from same companies
• Entry of spurious goods into the market
• Low export levels
• Most of the products are Me-too products
• High excise duty

References and sources:

https://www.ibef.org/download/FMCG-Report-July-2018.pdf
https://viden.io/knowledge/739/attachments/4207?name=viden-clip-K662-
shampoo+industry+in+india.pdf