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No One to No.

Dr Amit Rangnekar

www.dramitrangnekar.com

Case learnings
Success story of a local detergent brand to national leader
Smart segmentation and consistent positioning
Value pricing
Consolidation, no mindless expansion
Out of the box marketing strategies
Focus

Detergents market 11,000 cr @ 6%


1st detergent Swastik (Det) 1957
2nd Surf (HUL) 1959
3rd Magic (TOMCO) 1966

Detergents business
Low cost/ tech/ entry barriers, easy set-up, competition, short PLC
Critical- low price, channels, local promotion, dealer margins
Regional players- only in mass, NC and MNC in all 3 segments
Drivers- changing lifestyles, increasing purchasing power & personal
hygiene awareness, prefer superior value brands, media reach
Dip in washing machine prices- high washing powder growth, more
m/c powder required to wash same quantity of clothes
Packaging innovation + price wars- increased penetration
FAB-whiteness, freshness, fragrance, ease of use and stain removal

1969 Karsanbhai Patel, NPL Nirma, Ahmedabad, new mass category


After office, hand made powder, door-to-door, cycle, lower/middle
Nirma@Rs3/kg+ money back, Surf Rs 13, Value, Gujarat+ MS
Dudh si safedi Nirma se aye, rangin kapda bhi khil khil jaye
1975 radio, 1982 TV, housewife friendly ads, always starlets
1980s Nirma No1 (35%MS) beat Surf (HUL), No1 N10Y
Umbrella branding- ad economy, instant recall, extension
1980s HULs STING (Strategy To Inhibit Nirmas Growth)

All in the family

1987- KTC (Kanpur Trading Chemicals), detergent manufacturing


Founders Muralidhar & Bimal Gyanchandani
Muralidhar, still hands-on
Son Rahul manages daily operations
Nephew Rohit (Bimals son) in charge of marketing+ real estate

Explosive company growth

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X
2

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5y

Brand Ghari
2011 Rs 2083 cr, CAGR 25% , 20% growth in recession
Aggressive pan-India distribution push, audacious pricing
Net margin 9% v 12-13% MNCs, dealer margins 9% v 6-7% MNC
95% Ghari, 5% soap & dishwashing brands MR2, Xpert, Ven

Ghari sales > Top MNCs

Rs 45,000cr HPC (home & personal care)- detergents,


soaps, oral care, skin care & hair care

2400

2300

RSPL restructuring
2006, declined Citigroups 14% stake offer over valuation
2008- GHARI GROUP same management
Ghari Industries- GHARI+other FMCG + Leayan Overseas
Rohit Surfactants-manufacture detergents+ other FMCG
Poonam Developers & Infrastructure - construction & real estate
Calcutta Detergents- manufacture & trade detergents
Closely held, freedom to expand, strong internals, no need for IPO,
2010 net Rs 190 cr (> MNCs)

Origin
NPL, inspiration- Nirmas model, Nirma at its peak
Tin-shed start, street-smart marketing- quality at affordable price
Target- UP mass market (large home base) - 17% of AI FMCG
Use porters as salesmen, recruit needy, training in house, PLP
Support distributors with local ads to boost reach, higher margins
Scale up distribution, deep penetration, only then expand
UP - 900/3000 dealers, 25 in Kanpur , 9/18 manufacturing units
Secured large home base, then spread out

National expansion
Adjacent expansion- Bihar, MP, Punjab- 16% AI FMCG
2007- Ghari 10% NMS, now 17%
2008- 10 new states, total19, 2/3rd sales from UP, MP, Maharashtra
N3Y national footprint, 21 plants, 15 in L5Y, 10 new in N3Y
North- penetration, South- expansion
Key markets- small units / large depots every 200 km
Distribution- 3500 dealers, 1 million outlets
BIMARU belt- Ghari strongest in highest zone, deep reach

Major Detergents Players

Marketing strategy
Targeted segment- mass + mass premium
Positioning- VFM
Target audience- Housewife- decision maker, buys weekly or
monthly, extremely value-conscious, willing to switch brands
Insight- Small towns/ village buyers seek cheaper options in
staples (soap, detergent, toothpaste) so as to spend more on
discretionary items like mobiles, TV, automobiles. They inevitably
choose detergents that give maximum results at lowest price
Belief- Customers should use and then trust the brand

Detergents Market Segmentation 2010

Promotion
Out of the box thinking to break the clutter, desi common sense
Promotion to sales, under 2% (12-14% spent by MNC peers)
Popular tagline Pehle istamal kare, fir vishwas kare
No celebrity endorsers, OOH- 30 company-owned vehicles
Rural- roadside shows, exhibitions , melas- customers unlikely to
see other brands at these places
Magic shows- high visibility-Jaipur, Indore, Kota, Alwar, Kanpur
3 National TVCs, sponsored Rakt Sambandh, on NDTV Imagine
Media out reach compelled fence sitters to shift

Ads- Quality focus

Ghari Express
Insight- Train is a medium that masses interact with
2008 Ghari Detergent Express, train painted with Ghari branding
Lucknow-Guwahati (summer), Pushpak Express- Lucknow-Mumbai
Swarna Jayanti Express (Trivandrum to Delhi)- captive bogey ads
Trains connecting north to west-east-south, aligned to geo-expansion
Brand ads on railway crossings in WB / UP

Consumer segment shifts


Rs 90-100/kg
Rs 70/kg slashed
to Rs 50/kg
Customers
down trade- value
Rs 30-36/kg
Customers
Switch- quality
Rs 20-30/kg
Customers
up trade- brand

Mass
Premium
Mass

Regional

Pricing
Value pricing, not penetrative pricing (Nirma)
Price 10-20% above mass brands, (Wheel & Nirma)- quality
30% below mass premium brands Price (Tide and Surf)- economy
Higher
dealer marginGhari
of 9%,
rivals 6-7%, no
customer promotion
Ghari cake
Powder
MR2 Premium Detergent
Gm

Rs

Gm

Rs

Gm

Rs

350

15

1000

36

1000

80

220

10

525

20

500

40

160

255

10

75

110

110

22

65

17

12

43

Competition
HUL, leader, reach, straddles all price points- Surf, Rin, Wheelprotects franchise, flanked Nirma with wheel, regained leadership
P&G- no presence in mass segment, strong in other 2 (Tide, Ariel)
Nirma backward integration- key RM- cost leader, never upscaled
2007- Nirma 13% NMS, Ghari 10%, 2010 Ghari 13% Nirma 8%
Rin slashed prices, Tide upsized, HUL-P&G rivalry bridged mass
and mass premium- price gap, Nirma lost focus
Ghari held on, benefited from recession / inflation as mass
premium down traded and mass uptraded, gained
HUL fought P&G, Wheel fought Nirma, Ghari won

Taking on local/regional competition


Regional brands growing fastest (penetration) 41% v national 7%
Local price warriors- XXX, T-Series, Vidsha, Tran Keri, Power
Low production, transportation, quality, margins, promotion- local
2010 >1000+ local brands, combined MS slid from 13% to 3%
Rising inputs, locals increased price, Wheel & Nirma held on

Ghari cut/held, aggressively priced regional brands off the market

Insight- laundry consumers trade up if price differential narrows


Ghari favourable price-quality ratio

Cost leadership
Keep costs tight, keep prices low, low 9% margins v 12-13% MNC
Volumes- economies
Globally firms use this penetrative pricing, then raise prices
Tight wage bills- no high-profile marketers on sky-high salaries
Shoestring marketing budget<2%/Rs 50cr, National brands 13-15%
Focus on BTL activities, low ATL
Marketers- hire smart people from 20+ local business / engineering
schools in Kanpur, Lucknow, train in-house

Pre-emptive Marketing strategy


Rural area- offensive strategy, urban- defensive strategy
Nirma- urban focus
Rural- more caustic soda, more lather- perceived better detergent
Urban- reach, value
Doubled reach in 2 years, kept prices unchanged
Target regional + mass brands, mass premium down trade

Key challenges- South


More brand loyal consumers, switch not easy
Typical Hindi name, difficult to connect down South
Strong regional brands- Power, Arasin and Ponwandu
New brand offered at a discount, considered low-quality product
South- SCM close to markets, low transportation costs

Key challenges- Regional to National footprint

Firm unknown

Attracting & regaining top talent

Brand known, but mass image, build awareness / image

Managing diverse markets and new customers

Aurangabad- only manufacturing outside cow belt, South critical

Wheel- rural initiative Shaktiman driving deep rural penetration

Consumer aspirations shift from bucket-wash brand (Ghari) to more


urban- washing machine product

Future Plans

Valuation Rs 7000 cr (>Gillette, Britannia, Emami)

IPO planned for Rs 1,000 cr- expansion, factories, competition

Additional

NPL mid-premium laundry brand UniWash, mid 2012

Mid-priced segment, Rs 50/kg, few brands, potential, high margin

Target- P&G Tide 13.7% MS, HUL Rin 6%

Laundry segment- HUL & P&G 25%+ sales, will retaliate

Limited pricing power, new entrant can affect margins

Challenge- establishing UniWash brand

Mass segment- No 1, but margin pressure, RM costs, competition

Ghari No 1 in 2011, Rs 2400 cr

Additional

We already have a solid platform now, which we can leverage


for the new brand to push it Gyanchandani
Distribution network in 19 states, 3500 dealers, 21 manufacturing
units
New plants in - Bihar, Raipur and Karnataka
Input costs- Key RM LAB 19% price increase, soda ash 4%
HUL, high inputs- moderating ad spends to protect margins
P&G, expand production capacity, produce cheaper locally

GHARIS SUCCES S AGAINS T HUL AND P&G

http://op epiimraip ur.blogs pot.in/2012/02/gharis-success-against-hul-and-p.html

Ghari detergent, a product of Rohit Surfactants Private Limited (RSPL) has overtaken all the biggest multinational brands to become the second largest selling detergent in the Rs 45000-crore home and personal care (HPC) market in India.

In December 2010 there was only HULs Wheel detergent ahead of Ghari as the latter doubled its market share to 13.5% entering the Rs. 12000 crore market segment. The gap between both the detergents market shares was narrowing very fast. How could a small company like RSPL have achieved such a success beating all the brands that existed in the Indian market? I have done a small study on the strategies that RSPL imp lemented to gain the competitive advantage over other its comp etitors.

Ghari has been positioned at the bottom of the market in the economy segment and its main competitors are Wheel, Nirma and Fena. The market segmentation is shown below.

Ghari detergent has grabbed a market share of 17% which is second to the leading HUL 37% which includes Rin, Surf and Wheel. T hird is P&G with 16% through its brands T ide and Ariel and fourth is Nirma with 8% of the market share.

T he different strategies used by RSPL for this phenomenal success are:

1.

Achieve higher market pene tration in existing markets and simultane ously exploring new markets

M ost of the Ghari detergent sales come from Uttar Pradesh, which is also its birth place, M adhya Pradesh and M aharashtra. Recently it has started distribution in 8 more states, thus making its presence in a total of 20 states across the country. Entering new markets doesnt mean that the existing markets are saturated as far as Ghari detergent is concerned. Even in the existing markets, the market share of the competitors was decreasing while the industry as a whole was growing.

2.

Providing Incentives to the De ale rs

Ghari detergent p rovides a profit margin of 9% to its dealers, which is substantially lower than the standard 12-13% for premium brands, and at the same time, higher than the 6-7% being offered by the comp etitors in the same segment. T hus the comp any has been working towards creating a strong dealer base while keeping its prices low.

3.

Advertising Strategy

Ghari detergent has been very innovative in reaching the customers. With only 35 crores allotted for marketing and p romotional activities it has used trains for initial campaigns to p romote the product. T heir hoardings were visible at all the railway crossings in Uttar Pradesh and West Bengal. RSPL has even promoted Ghari in roadside shows and magic shows in smaller towns where people are unlikely to see other brands. Recently it has sponsored a show Rakt Sambandh on NDTV Imagine. Also, instead of going with celebrity endorsement, the brand has left it on the consumers to try the p roduct and decide if they like it, just as it claims in its camp aign.

4.

S egmentation S trategy

For any successful marketing plan segmentation is the first key step. The organization must carefully craft its strategy to exploit the market potential. RSPL being a small firm could not afford exp ensive marketing strategy so it has segmented according to it. Generally market is segmented on the basis of demograp hic, geographic and psychograp hic variables but RSPL has mainly concentrated on geographic variable. T he geographical sp lit of Ghari detergent is shown below.

5.

5. Pricing S trategy

Keeping in mind its target market, i.e. the lower end of economy , the comp any has, as far as possible, avoided pas sing on the burden of rising raw material costs on to the customers.

6.

Citigroup Venture Cap ital India (CVCI) ap proached RSPL in 2006 to buy around 14% stakes but the deal did not succeed due to valuation differences. T his proved to be an ey e-opener for RSPL as it immediately decided to go for introspection, restructured its business and op timiz ed its resources.

7.

Due to its financial inability to compete with HUL and P&G in other states, RSPL had launched Ghari detergent in Uttar Pradesh. It focused on developing an intense distribution network to reach the customers effectively . This is evident from the fact that out of 3000 dealers in India Ghari has 900 dealers in UP and 25 of them are in Kanp ur alone. It also has 9 out of its 18 manufacturing units in UP.

T hese effective strategies imp lemented by RSPL for Ghari has made it to the second largest selling detergent in India. In the las t fiscal, it has enjoyed a profit after tax of Rs. 190 Cr, more than many of its M NC peers. Further to overtake Wheel the challenge that RSPL should now be concentrating is on the sp read in South and Western p arts of India and build a distribution network as strong as HULs .

Restructuring and Optimization of Resource s

Regional Focus

The writer of this article, T V Dheeraj Vishnu is a PGP student of Indian Institute of Management, Raipur. He has done his B.Tech in Electrical and Electronics Engineering from Nalla Malla Reddy Enginee ring College, Hyderabad and can be reache d at pgp11039.dheeraj@iimraipur.ac.in or at +91-7587208639.

Ghari Website Interview

FREQUENTLY ASKED QUES TIONS

1. How has been the journey of the brand Ghari? What was your vision for the company when you started it?

T he detergent brand Ghari was founded by M urlidhar & Bimal Kumar Gyanchandani in 1987. T he comp any has crossed the 2000 crore mark in sales at the end of fiscal 2011. T he company has expanded into Bihar, M P & Punjab alongwith UP which accounts for a third of the total consumer p roducts market and in the past 3 y ears Ghari has added 10 states to its distribution. The brand is now p res ent in 19 states and from regional brand has gone national.

2. What is your success mantra?

We alway s strive to provide our consumers best of product experience at an appropriate price thereby providing them best value for money and we are alway s in process of improving the p erformance of our p roducts to ensure that each day the value of cons umers money increases

3. Region-wise, which are markets are you very strong in?

We are p resently strong in North and Western India

4. What is your marketing and advertising strategy? What are the ke y me dia you rely on and why?

On the advertising and p romotion front, RSPL Limited has attempted to prove that you can be innovative without sp lurging. T he company sp ends 2% of sales and participate in almost all media from exhibitions, melas to p rint & tv commercials to reach masses of all income groups.

5. Your take on the Indian consumer mindset? How has you imple me nted that insight into your brand?

We believe that Indian consumers are one of the discernity buyers in the world. They exp ect p erformance without a doubt but at the prices where it shall give value for money.

6. What related busine sses have you got into over these years? And which ne w categorie s you want to get into and why?

T he company has diversified into dishwash s egment with Xpert dishwash bar and toilet soap with a Venus brand. However the promoter group have interests in real estate , leather and dairy business through other corporate entities namely Nimmi Buildtech , Leayan Global and Namaste India.

References

Wheel Comes a Full Circle as Ghari Tops the Laundry Charts- SAGAR MALVIYA MUMBAI ET
Jan12

BIOLOGY OR BUY-LOGY?David Vs Goliath-Who will be the winner?


http://www.indianmba.com/Faculty_Column/FC84/fc84.html

How Brand Ghari Cleaned Up Rivals in Quick Time ET 6May11, SAGAR MALVIYA & PRAMUGDHA
MAMGAIN

Watch out for Ghari express, Arunima Mishra / New Delhi November 1, 2010, 1:09 IST Business Stadard

http://www.bing.com/images/search?
q=ghari+detergent&view=detail&id=5AEBCBF9A4AAF785A0A84590472C7AA6D1F22B4A&first=0&F
ORM=IDFRIR

Price war between MNCs, growth of Ghari threatens small detergent with washout ET Bureau, Apr 22,
2011, 03.17am IST

Citigroup in talks to buy 14% in Ghari detergent maker Chaitali Chakravarty and Bhanu Pande, TNN, Aug
1, 2006, 02.57am IST

References

Detergent war: Ghari gains at Nirma's expense Viveat Susan Pinto/11 Sep 10 |

Big Business Small Towns Enterprise / Business / Cover Stories Outlook Business MAGAZINE |
OCT 17, 2009

Small detergent cos eat into biggies pie Namrata Singh, TNN, Sep 15, 2009,

Washing Powder Up 13% Surina Sayal, afaqs!, 9 Feb 2011

After Wheel, Ghari Maker to Take on Rin & Tide ET 18Apr12 SAGAR MALVIYA
MUMBAI

http://www.afaqs.com/news/story.html?sid=29403_Washing+Powder+%28Up+13+Per+Cent%29