A Project Report

On

Submitted To:
DR. KANIKA
Assistant Professor

Submitted By:
ADAMYA GUPTA(40220688817)

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TABLE
OF CONTENTS
TOPIC

 EXECUTIVE SUMMARY
 INRODUCTION
 INDUSTRY PROFILE
 SWOT ANALYSIS
 FMCG INTRODUCTION
 BCG MATRIX
 COMPANY’S PROFILE
 SWOT OF NIRMA
 RESEARCH METHODOLOGY
 FIVE FORCES ANALYSIS
 SWAOT OF HLL
 SWOT OF GODREJ
 FINDINGS & SUGGESTIONS
 CONCLUSIONS
 BIBLIOGRAPHY

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EXECUTIVE
SUMMARY
FMCG industry is the most emerging industry nowadays in Indian as well
as global market. In India it is the 4 th largest market, which shows that how
important the industry is and how much it contributes towards our
economy.

FMCG includes the personal care products also like soaps, shampoos, etc.
so our project mainly focuses on the market and study of BATH SOAPS
IN INDIA. It consists various multi national and domestic companies.
Major players are Unilever(HLL), Nirma, Godrej, Johnson & Johnson,
colgate-palmolive, etc.

Our main focus is on Hindustan lever ltd, Nirma, and Godrej. HLL is
having largest market share within our country which gives tough
competition to other local and domestic companies also. Bath soap market
is gradually developing very fast and day by day many new varieties,
flavours, and fragrances, are added in it by various companies to exist in
the market.

Our project consists study of 3 major players of bath soap market and their
SWOT analysis, BCG Matrix, 5 forces model of the industry and the
companies. Various suggestions and recommendations are also been given
to the FMCG sector bath soap segment. HLL is the most dominating
company across the world in FMCG sector due to its vertical and
horizontal integration. Then also Nirma and Godrej are trying to give tough
fight to it.

Main mantra for success of the companies is the diversification of their

business and their products. Thus the study provides detailed study of
FMCG sector with focus on bath soap industry.

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 Chapter 1
INTRODUCTION
History of Bath-soap

Soap has been with us in one form or another for thousands of years.
The story goes that in Rome in around 1,000 B.C. at a place called Sapo
Hill, the women were washing their clothes in a small tributary of the river
Tiber, below a religious site where animal sacrifice took place. They
noticed that the clothes became clean upon contact with the soapy clay
which was dripping down the hill and into the water. It was noticed later
that this cleansing agent was formed by the animal fat soaking through the
wood ashes and into the clay soil.

Strangely, in the first century A.D., the Romans are credited with the
making of a soap-like substance using urine. The ammonium carbonate in
the urine was reacted with oils and fat in wool to form this 'soap'.

During the Eighth Century the Spanish and Italians began making
what was more like modern soap from Beech Tree ash and Goat fat, whilst
the French are credited with replacing the animal fat with Olive oil.

In England during the 17th century under King James I, soap makers
were given 'special privileges' and the soap industry started developing
more rapidly, although soaps were generally still made using caustic
alkalies such as potash, leached from wood ashes and from carbonates
from the ashes of plants or seaweed. The soaps made in this way were
harsh and often rather unpleasant.

Soap as we know it today did not come about until the 18th century,
when Nicholas Le Blanc, a Frenchman, discovered a reliable and
inexpensive way of making sodium hydroxide (caustic soda), or lye as it is
known to the soap maker, which forms the base with which soaps are made
to this day.

Further developments in soap making were pioneered in Britain

during the late 18th century with the invention of 'Transparent' soap by
Andrew Pears, the son of a Cornish farmer. This refined soap was known
then as it is now as Pears Transparent Soap.

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 Over the years and to the present day, opaque soaps have remained
the favourite, mainly because transparent soaps tend to be more expensive
and also don't last as long.

Factors likely to encourage soap marketing and consumption in

developing countries in the future include:
 More discriminating educated and aware consumers.
 Growth of the media, especially TV
 Improvements in transportation and communication networks.
 Innovative R&D for raw materials and finished products.
 Growth of supermarkets and retail outlets.
 High speed packaging machines and attractive packaging materials.
 State of the art technology to enhance productivity and reduce cost.
 Increasingly talented advertising and market research agencies.
 Liberalisation of markets and growth in free trade.

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 INDUSTRY
PROFILE
The Fast Moving Consumer Goods (FMCG) sector is the fourth
largest sector in the economy with a total market size in excess of Rs
60,000 crore. This industry essentially comprises Consumer Non Durable
(CND) products and caters to the everyday need of the population.

Product Characteristics

Products belonging to the FMCG segment generally have the following

characteristics:

 They are used at least once a month

 They are used directly by the end-consumer
 They are non-durable
 They are sold in packaged form
 They are branded

Industry Segments

The main segments of the FMCG sector are:

 Personal Care: oral care; hair care; skin care; personal wash
(soaps); cosmetics and toiletries; deodorants; perfumes; paper
products (tissues, diapers, sanitary); shoe care.

Major companies active in this segment include Hindustan Lever; Godrej

Soaps, Colgate-Palmolive, Marico, Dabur and Procter & Gamble.

 Household Care: fabric wash (laundry soaps and synthetic

detergents); household cleaners (dish/utensil cleaners, floor cleaners,
toilet cleaners, air fresheners, insecticides and mosquito repellants,
metal polish and furniture polish).

Major companies active in this segment include Hindustan Lever,

Nirma and Reckitt & Colman.

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  Branded and Packaged Food and Beverages: health beverages;
soft drinks; staples/cereals; bakery products (biscuits, bread, cakes);
snack food; chocolates; ice cream; tea; coffee; processed fruits,
vegetables and meat; dairy products; bottled water; branded flour;
branded rice; branded sugar; juices etc.

Major companies active in this segment include Hindustan Lever,

Nestle, Cadbury and Dabur.

 Spirits and Tobacc Major companies active in this segment include

ITC, Godfrey Philips, UB and Shaw Wallace.

An exact product-wise sales break up for each of the items is

difficult.

The size of the fabric wash market is estimated to be Rs 4500 crore;

of household cleaners to be Rs 1100 crore; of personal wash products to be
Rs 4000 crore; of hair care products to be Rs 2600 crore; of oral care
products to be Rs 2600 crore; of health beverages to be Rs 1100 crore; of
bread and biscuits to be Rs 8000 crore ; of chocolates to be Rs 350 crore
and of ice cream to be Rs 900 crore.

In volume terms, the production of toilet soap is estimated to have

grown by four per cent in 1999-2000 from 5,30.000 tonnes from 5,10,000
tonnes in 1998-99. The production of synthetic detergents has grown by
eight per cent in 1999-2000 to 2.6 million tonnes. The cosmetics and
toiletries segment has registered a 15 per cent growth in 1999-2000 as
against an annual growth of 30 per cent recorded during the period 1992-
93 to 1997-98.

In the packaged food and beverage segment, ice cream has

registered a negligible growth and the soft drink industry has registered a
six per cent growth in 1999-2000.

Toilet Soap Industry in India:

Today, the FMCG sector is the fourth-largest sector in the Indian

economy, with an estimated total market size of around Rs 450 bn. Further,
the growth potential for all the FMCG companies is huge, as the per capita
consumption of almost all products in the country is amongst the lowest in
the world. Further, if these companies can change consumer's mindset and

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offer new generation products, they would be able to generate higher
growth. For example, Indian consumers used to wear non-branded clothes
for years, but today, clothes of different brands are available and the same
consumers are willing to pay almost 5 times more for branded quality
clothes. It is the quality and innovation of products, which is really driving
many sectors. Thus, FMCG companies should use their imagination and
respect the tastes of Indian consumers by offering quality products.
Toilet soap industry is one of the oldest Fast Moving Consumer
Goods (FMCG) industry in India. It is among the highest penetrated
category within FMCG sector reaching an estimated 95% urban and 87%
of the rural households. In value terms the industry is worth
Rs.45000million and in volume terms it is worth .53 million . The main
characteristic of the industry was severe competition and high level of
brand proliferation. Toilet soaps account for more than 50% of the
Consumer

After expanding at a snail's pace, the market for personal wash

products appears to have come to grinding halt in 2001.

After posting a modest single digit growth in 1997-2000, figures for

the first seven months of this year suggest that the market for toilet soaps
has actually shrunk.

Estimates about the extent of the decline of market size vary.

Hindustan Lever, which straddles the category with a 59.9 per cent market
share by value, says the market shrank by 4.4 per cent in value terms in the
first half of 2001.

The Indian Soaps and Toiletries Manufacturers Association, puts the

decline at 1 per cent. Other industry sources suggest that the extent of `de-
growth' in the first eight months of 2001 could be as high as 7 per cent.

This is despite the fact that this usually sleepy category has seen a
spate of new players debut new offerings in recent times. Over the past
couple of years, Nirma has launched a slew of low-priced soaps under the
banner of Nima and Nirma Beauty. Godrej Consumer, a long-standing
player, has relaunched old brands such as Cinthol, apart from new ones
such as FairGlow, Allcare, and Nikhar.

Henkel SPIC has made a maiden foray into the market with the Fa
range of soaps. Colgate Palmolive has pepped up its soap range with
extensions such as Palmolive Naturals and Palmolive Extra Care. The
market leader HLL, has relaunched Breeze, apart from launching Skin
Care and Sunscreen variants of its premium soap -- Lux International.

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 If the shrinking market size suggests that Indian consumers have
actually been cutting back on their use of toilet soaps, this is not really the
case. In volume terms, the market for toilet soaps has continued to show a
growth of 6 per cent in the first eight months of 2001.

The major players have certainly managed to sell more toilet soaps
by volume. But price competition in the segment and a slew of
promotional campaigns have reduced the effective realisations per unit
sold. This has probably neutralised the gains from volume expansion.
Theories about the reasons for the shrinking the market size vary.

Low-priced brands

Industry players commonly attribute the `de-growth' in the soap market to

downtrading. Toilet soaps are among the highest penetrated products
within the FMCG market, reaching an estimated 95 per cent of the urban
and 87 per cent of the rural households. The fairly high contribution from
the rural market makes this category sensitive to the fortunes of the
agricultural economy.

The prolonged drought in the North and West of the country (until
2000) and the sharp fall in farm disposable incomes (brought on by falling
farm product prices) has probably persuaded low-income households to
downtrade, that is, switch from high- to low-priced brands.

This is indeed supported by the fact that within toilet soaps, it is the
discount segment (soaps that cost between Rs 5 and Rs 8 per 75 grams)
that has registered the highest growth rates over the past year.

HLL, too appears to endorse the phenomenon of downtrading.

``There has been an inter-sectoral shift in the soap market, with consumers
downtrading from premium and popular to discount soaps'', explains the
company's spokesperson.

However, Mr Hoshedar K. Press, Godrej Consumer Care, begs to

differ. ``We think consumers have already pre-committed their incomes for
instalments on durables. The substitution of soap with shampoos for hair
wash has also impacted growth'', he said.

Better quality

The crowded market place has also brought a few benefits to the
consumer as marketers of soap have tried to woo consumers through
upgraded offerings and better quality soaps. Aided by low input prices, the

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marketers of toilet soaps have increased the TFM (total fatty matter)
content in their brands, to offer better quality soaps at a lower price.
Industry watchers say that the TFM content on some brands has moved up
from the 50-60 per cent earlier to over 70 per cent of late.

Therefore, per unit realisations on soaps have declined, the

marketers of soaps have actually sacrificed a part of their margins on
hiking the TFM content.

Tough times ahead

With competitive pressures on the rise and a larger number of brands

jostling for consumer attention in a sluggish market, the soap market is
likely to remain a difficult one for most players. Smaller players such as
Godrej Consumer and Henkel SPIC have been in a position to report
robust sales growth in the category over the past year despite the bruising
competition.

However, this is partly due to a relatively small base of comparison.

Unless the market expands, the frenetic promotional activity may soon tell
on the growth rate of the players. And when it comes to sustaining a high
decibel promotional campaign, HLL's size certainly gives it the
wherewithal to do it.

Rural revival -- A wild card

It appears that a genuine boost to the market size for toilet soaps will
still have to come from a revival in rural demand. Evidence from the past
does appear to suggest that a sharp rise in rural incomes would have a
cascading effect on FMCG demand. The pick-up in volume growth in the
soap market in 1999, after a year of sluggish growth in 1998, demonstrated
that a recovery in agricultural output does have an indirect impact on sales
volumes of FMCG products.

This year, reports of a good monsoon in the northern and western

parts of the country have sparked off speculation about a revival in FMCG
growth rates. The fact these two regions account for 55 per cent of the
demand for FMCG products strengthens this argument. However, it
appears to be a bit early in the day to call it a revival. For one, while the
northern and western regions have received satisfactory rains, southern
India has been the victim of a very erratic monsoon. Second, given that the
good monsoon in the current year succeeds two or three consecutive years
of drought in some regions, there could be a substantial time lag before
higher rural incomes translate into better FMCG demand

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 Third, the key crisis in agriculture over the past year has been that
farm product prices have dropped sharply in response to a build up of
surplus foodgrain stocks. Therefore, even if a good monsoon translates into
a higher agricultural output, there is the question of whether this will
actually expand or shrink farm incomes.

These factors suggest that it may be premature to take investment

exposures in companies focussed on toilet soaps in the hope of a revival. It
may be better to wait for concrete signs of a pick-up in rural demand,
which is certainly some way off.

Nature of the global Industry

The global soap market is dominated by a small number of

multinational companies. Soap is only one sector of their product ranges.
In multinational companies such as Unilever and Procter & Gamble, soap
and detergent ranges typically account for less
than 20% of group turnover (in 1999).

The largest toilet soaps and detergents only company, by volume

sales, is the Unilever Group, which has strong presence in all regional
markets in the world. The top ten leading manufacturers and distributors of
soap worldwide account for more than 55% of total sales by value in 1999,
totalling in excess of US$80
billion.

Position Company % Value of World

1 Unilever 10.07
2 Procter & Gamble 7.41
3 Gillette Group 7.66
4 Colgate Palmolive 4.5

Promotion and branding

Soap manufacturers start their marketing strategy by first identifying

whether a marketing opportunity exists. They proceed to determine
whether to target the mass market or a niche market, and subsequently
position their products. Very often, “metoo” looking products, despite their
superior performance, fail to break the barrier of routine buyer behaviour.

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Where the market is crowded, companies try to differentiate their products
by new forms or new packaging concepts.

With the increase in both domestic and global competition, companies are
having to deal with and reconcile two conflicting elements in marketing
strategy – namely
profitability and market share. Greater market share involves higher
marketing costs and lower profitability. In India, Hindustan Lever's share
of the soap and detergent market was dented severely by the Nirma (an
Indian national, privately owned company) strategy of developing a
product especially for the poor, until Lever managed to develop its own
product.

A teaser ad on Lux soap recently unleashed by FMCG-major

Hindustan Lever (HLL) gives an indication that the company is planning to
launch a soap which protects fairness -- in evident competition to Godrej's
FairGlow fairness soap.

The Lux commercial was kicked off almost in tandem with the
launch of FairGlow, which is touted as India's first fairness soap. FairGlow
has marked a breakthrough in the stagnant toilet soaps market and has
kindled hopes of fuelling growth with the creation of a new category.

The industry was rife with speculation that market leader HLL
would follow in the footsteps of Godrej Soaps to launch a soap product on
the same USP. While details of the proposed Lux soap are not available,
the product is expected to be launched in the next fortnight.

The ad depicts how, by using the soap, one can block the sun rays
from tanning the skin surface. However, the ad does not reveal the name of
the product. But it clearly signals that a new product offering from the Lux
stable, albeit on the fairness plank, is in the pipeline. It has been a couple
of weeks since the teaser ad was launched on select channels.

The move is seen by industry observers as a knee-jerk reaction to

combat the launch of FairGlow. The only catch here is that while Godrej
Soaps directly claims delivering fairness through FairGlow, the proposed
Lux product talks about protecting fairness by offering sunscreen benefits.
FairGlow is being promoted as a beauty and complexion soap which
contains a bio-extract called natural Oxy-G which is said to make skin
fairer naturally.

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 For Levers, point out industry analyst, it is crucial to defend any
market share erosion at a time when the industry is strutting at growth
levels of 2-3 per cent per annum. Given that the Rs 2,900 crore industry
has reached saturation levels in penetration in both urban and rural
markets, it is becoming increasingly challenging for marketers to develop
value-added soap products in the market.

Industry analysts point out that manufacturers will have to design

products which offer unique benefits so as to stoke volumes growth. It is
not surprising then that FairGlow is targeted at both men and women.
There were 45 leading national brands. None of the national brands had
more than 5% market share and many more regional and unorganised
sector/local brands. 9Hindustan Lever was the market leader with about 30
(number) of toilet soap brands with a total market share of 67% in 1998-99
in organised sector as seen from Table-1 below, which gives the lead
players and their respective market share.

Table-1: The Lead Players and their Market Share

Percentage of Market
Company
Share
HLL 67
Godrej 10
Nirma 8
Colgate Palmolive 1
Others 14
Source: Vanscom Database

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 The leading brands in the market are Dove, Pears, Lux, Dettol, Liril,
Rexona, Lifebuoy, Nirma, Palmolive and Hamam. A survey reported in
Vanscom, which was conducted in Ahmedabad,
showed that 103 toilets soap brands were available in this city alone.

The industry had witnessed many innovative sales promotion

activities in the recent past. Numerous factors were responsible for such a
phenomenon. One of the reasons being that the market being sluggish,
companies were trying to increase market share in stagnant to declining
(volume terms) market in order to retain consumers, to encourage
switching, to induce trials and liquidate excessive inventories. Another
reason possible was that with the presence of so many brands the
competition had increased severally leading to fight for market share and
shelf space. Inflationary trend had made both the consumer as well as trade
deal prone.

Due to such a dense market like India big companies adopt different
strategies and coming up with various sales promotion schemes
continuously.

Today big players in Indian bath-soap market are…

1. HLL (Hindustan lever limited –a subsidiary of Unilever)

2. Godrej
3. Nirma
4. P&g (Procter and gamble)

Among these players HLL is the biggest player with around 67% of
market share. For HLL most of the soap has become a brand they have
their own identity.LUX is the most recalled soap in the mind of the
consumers.

For these main four players , each soap is described in brief as an

introduction about which soap belongs to which company.

There is a strong MNC presence in the Indian FMCG market and out of
the top 10 FMCG companies, four are multinationals while two others
have significant MNC shareholdings. Unlike several other sectors where
multinationals have entered after 1991, MNCs have been active in India
for a long time. Among the major companies, Hindustan Lever has a strong
presence in the food, personal care and household care (detergents) sectors;
ITC is the market leader in cigarettes; Nirma has a strong presence in the

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detergent market; Nestle and Britannia are active in the food sector and
Colgate has a strong presence in the oral care segment.

Exports
India is one of the world’s largest producer for a number of FMCG
products but its FMCG exports are languishing at around Rs 1,000 crore
only. There is significant potential for increasing exports but there are
certain factors inhibiting this. Small-scale sector reservations limit ability
to invest in technology and quality upgradation to achieve economies of
scale. Moreover, lower volume of higher value added products reduce
scope for export to developing countries.

INDUSTRY SWOT
ANALYSIS
Strengths:

 Well-established distribution network extending to rural areas.

 Strong brands in the FMCG sector.
 Low cost operations

Weaknesses:

 Low export levels.

 Small scale sector reservations limit ability to invest in
technology and achieve economies of scale.
 Several "me-too’’ products.

Opportunities:

 Large domestic market.

 Export potential
 Increasing income levels will result in faster revenue growth.

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Threats:

 Imports
 Tax and regulatory structure
 Slowdown in rural demand

FMCG Introduction
The Fast Moving Consumer Goods (FMCG) sector is the fourth
largest sector in the economy with a total market size in excess of Rs
60,000 crore. This industry essentially comprises Consumer Non Durable
(CND) products and caters to the everyday need of the population.

Product Characteristics

Products belonging to the FMCG segment generally have the following

characteristics:

 They are used at least once a month

 They are used directly by the end-consumer
 They are non-durable
 They are sold in packaged form
 They are branded

Industry Segments

The main segments of the FMCG sector are:

 Personal Care: oral care; hair care; skin care; personal wash
(soaps); cosmetics and toiletries; deodorants; perfumes; paper
products (tissues, diapers, sanitary); shoe care.
 Major companies active in this segment include Hindustan Lever;
Godrej Soaps, Colgate-Palmolive, Marico, Dabur and Procter &
Gamble.

 Household Care: fabric wash (laundry soaps and synthetic

detergents); household cleaners (dish/utensil cleaners, floor
cleaners, toilet cleaners, air fresheners, insecticides and mosquito
repellants, metal polish and furniture polish).

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  Major companies active in this segment include Hindustan Lever,
Nirma and Reckitt & Colman.

 Branded and Packaged Food and Beverages: health beverages;

soft drinks; staples/cereals; bakery products (biscuits, bread,
cakes); snack food; chocolates; ice cream; tea; coffee; processed
fruits, vegetables and meat; dairy products; bottled water;
branded flour; branded rice; branded sugar; juices etc.
 Major companies active in this segment include Hindustan Lever,
Nestle, Cadbury and Dabur.

 Spirits and Tobacc Major companies active in this segment

include ITC, Godfrey Philips, UB and Shaw Wallace.

An exact product-wise sales break up for each of the items is

difficult.

The size of the fabric wash market is estimated to be Rs 4500 crore;

of household cleaners to be Rs 1100 crore; of personal wash products to be
Rs 4000 crore; of hair care products to be Rs 2600 crore; of oral care
products to be Rs 2600 crore; of health beverages to be Rs 1100 crore; of
bread and biscuits to be Rs 8000 crore ; of chocolates to be Rs 350 crore
and of ice cream to be Rs 900 crore.

In volume terms, the production of toilet soap is estimated to have

grown by four per cent in 1999-2000 from 5,30.000 tonnes from 5,10,000
tonnes in 1998-99. The production of synthetic detergents has grown by
eight per cent in 1999-2000 to 2.6 million tonnes. The cosmetics and
toiletries segment has registered a 15 per cent growth in 1999-2000 as
against an annual growth of 30 per cent recorded during the period 1992-
93 to 1997-98.

In the packaged food and beverage segment, ice cream has

registered a negligible growth and the soft drink industry has registered a
six per cent growth in 1999-2000.

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 BCG MATRIX
The BCG matrix method can help understand a frequently made strategy
mistake: having a one-size -fits-all-approach to strategy, such as a generic
growth target.

In such a scenario:

A. Cash cows business units will beat their profit target easily; their
management has an easy job and is often praised anyhow. Even, worse
they are often allowed to reinvest substantial cash amounts in their
businesses, which are mature, and not growing anymore.

B. Dogs business units fight an impossible battle and, even worse,

investments are made now and then in hopeless attempts to ‘turn the
business around’.

C. As a result (all)question marks and stars business units get mediocre

size investment funds. In this way they are unable to ever become cash
cows. These inadequate invested sums of money are a waste of money.
Either these SBUS should receive enough investment funds to achieve a
real market dominance and become a cash cow(or star), or otherwise
companies are advised to disinvest and try to get whatever possible cash
out of the question marks that were not selected.

Limitations of BCG matrix:

Some limitations of Boston consulting group matrix include:

 High market share is not only success factor.

 Market growth is not the only indicator for attractiveness of a
market.
 Sometimes dogs can even more cash as cash cows.

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BCG MATRIX..

HLL: lifebuoy +,
?
HLL Santur
Rexona , Pears ,Lifebuoy, Nirma – nirma bath soap
breeze - nirma lime soap
Johnson & Johnson - camay,
-Savlon,Dettol, breeze, Godrej- Fairglow
Maisur Sandal soap,
Godrej-shikakai ,

HLL-Lux, Hamam, Colgate pamolive

Dove,Liril Godrej-Ganga, Godrej
NIRMA-beauty soap No.1
Johnson & Johnson baby breeze
soap
Godrej-Cinthol, Godrej
no.

Cash cow -
A business unit has a large market share in a mature, slow
growing industry. Cash cows require little investment and
generate cash that can be used to invest in other business units.

Star -
A business unit that has a large market share in a fast growing
Industry. Stars may generate cash, but because the market is
growing rapidly they require investment to maintain their lead. If

19
 successful, star will become a cash cow when its industry
matures.

Question mark (problem child) -

A business unit that has a small market share in a high growth
market. These business units require resources to grow market
share, but weather they will succeed and become stars is
unknown.

Dog -
A business unit that has a small market share in a mature industry.
A dog may not require substantial cash, but it ties up capital that
could better be deployed elsewhere. Unless a dog has some other
strategic purpose, it should be liquidated if there is little prospect
for it to gain market share.

20
 COMPANY
PROFILE

Toilet soaps recorded a strong 40% plus volume and value growth driven
by the success of the nIma launch. Besides the Rose variant, Nirma
launched several fragrance variants such as Nima Lime and Nima
Sandal during the year. Other toilet soap brands Nirma Bath , Nirma
Beauty, Nirma Lime and Nirma Premium positioned at various price
points also continued to grow. Toilet soap volumes grew from 75,450
tons in FY99 to 106,626 tons in FY00. Toilet soap manufacture
capacity at Mandali was increased from 90000 to 110000 tons pa in
FY00

Nirma Bath Soap

Toilet soap market in India was dominated by a very few

MNCs which could monopolistically price their product. In 1992,
sensing a strong need to expand the market through Penetrative
Pricing, Nirma entered this market with the launch of ‘Nirma Bath
Soap’, which is a carbolic (Red) soap. Although the carbolic soap
segment is on decline, Nirma Bath has generated larger volumes

21
 each year. Packed in a red colour wrapper and available in 75 gram
and 150 gram pack sizes, this soap has a Total Fatty Matter (TFM)
of 60 %.

Nirma Beauty Soap

With its market promise to offer “Better Products, Better

Value, Better Living,” Nirma introduced ‘Nirma Beauty Soap’ in the
year 1992. Available in three different variants and pack sizes, this
soap has a TFM content of 70%. Due to its admirable perfume and a
higher TFM content, this brand, within a short span of five years,
had achieved the status of the third largest selling toilet soap brand
and still continues its outstanding performance.

Nirma Lime Fresh Soap

This product had created a sensational marketing history in the Indian

Toilet soaps market, when it was launched in 1997. Seventeen million
packs of Nirma Lime Fresh soap were sold in the very first month of its
soft launch. Packed in a poly coated 75 gm carton, which is printed on the
world’s best Cerruti 8-colour printing machine, this soap is available in
green colour. With a lime aroma that tingles in one’s sensory buds for a
long time, this soap contains 80% TFM. The product launch of Nirma
Lime Fresh had been extremely successful, being ranked as the Seventh
Most Successful Brand Launch for the year 1998, as ranked by the
Business Standard Marketing Derby, 1998. (as featured in The Strategist
Quarterly, July-September 1998).

Strategy

22
Nirma's large capex backward integration projects had been undertaken
with a strategy to become the lowest cost detergent manufacturer in the
world. Self sufficiency in key raw materials will give protection against
commodity cycles besides yielding substantial savings in raw material
cost. The company estimates a total cost saving of 25% in material and
handling costs due to the backward integration projects. The LAB plant has
yielded about 12% cost savings and the company expects a similar cost
saving of about 12-15% once the soda ash plant stabilizes. Overall the
backward integration has yielded a cost saving of Rs0.8-1bn last year. Post
completion of backward integration the company now plans to focus on
building large volumes and gain from economies of scale. The company
plans to tap export markets and is alos looking at acquisition opportunities
or distribution tie up arrangements in other FMCG categories. Branded salt
will be launched by the end of the year. The company is also considering
other categories such as shampoo, toothpaste and fabric whiteners.

Earnings sensitivity factors:

 Stabilization of backward integration projects

 Volume growth in detergents as well as toilet soaps and
utilization of expanded capacity

 Toilet soap market share : Success of new launches, market

share growth will drive profitability.

 Commodity price movement of LAB and Soda ash will have

significant impact on company’s competitive position, as
Nirma will be the only company to have its own raw material
production facility.

The Consumer products division continued to grow at a healthy pace

of 26% yoy, driven by the success of the Nima launch. Nirma has for the
first time diverted from its strategy of umbrella branding and has launched
Nima as a 'fighter brand' - to fight competition and the unorganized sector.
And the company has achieved tremendous success. In a scenario where
the average industry has been growing at a poor 2-3%, the company has
managed to almost achieve double digit volume growth.

23
 1. HINDUSTAN LEVER LIMITED

Mission

Unilever's mission is to add Vitality to life. We meet everyday needs for

nutrition, hygiene, and personal care with brands that help people feel
good, look good and get more out of life.

Hindustan Lever (HLL), India's largest fast-moving consumer goods

company is also the country's largest company in terms of market
capitalisation. It leads in home and personal care products, and foods and
beverages with over 110 brands. The Far Eastern Economic Review rates
HLL as the best Indian company and recognises it as one which all others
want to emulate. Its market capitalisation went up 18% to Rs 324351 mln
(taking it to the first position from last year's third) when the total market
capitalisation of the Top 500 companies was down 22%. It now accounts
for almost 8.4% of the total market capitalisation of the Top 500. HLL's
rank on other parameters are - capital employed: 87, gross block: 59, sales:
8, net profit: 12, net forex earnings: 6 and trading value: 8.

24
Products :

Lux
Rexona
Pears
Dove
Breeze
Hamam
Liril
Lifebuoy

Lux
Lux stands for the promise of beauty and glamour as one of India's most
trusted personal care brands. Lux continues to be a favorite with
generations of users for the experience of a sensuous and luxurious bath.
Since its launch in India in the year 1929, Lux has offered a range of soaps
in different sensuous colors and world class fragrances. 2003 saw one of
the biggest milestones in the history of Lux. From being just a beauty soap
of film stars, Lux recognized the need for a compelling message about
beauty that would resonate with women of today.
Lux is available in four different variants – Exotic flower petals and Jojoba
Oil, Almond Oil and Milk Cream, Fruit Extracts and Honey in Milk Cream
and Sandal Saffron in Milk Cream.

Rexona
Rexona is one of India's pioneer brands in family soaps. Launched in 1947,
it was positioned as a natural skin care soap to give silky, glowing skin.
Since then the product has been constantly improved to keep up with the
expectations of the consumers.
In 1989 coconut was introduced in Rexona for the first time to strengthen
the overall skincare appeal of the brand. Rexona has now been relaunched
with cucumber extracts, in addition to coconut oil and moisturising milk
cream. Its creamy lather purifies the skin, leaving it clear and flawless. It
has also been enhanced with a perfume that lingers well after a bath.

25
Pears
Introduced in India in 1902, Pears soap has no equal. It is gentle enough,
even for baby's skin.
Pears is manufactured like any other soap, but unlike in conventional
soaps, the glycerine is retained within the soap. That is the cause if its
unique transparency. After manufacturing, the soap is mellowed under
controlled conditions over weeks. At the end of this maturing process, it is
individually polished and packed in cartons.
Today Pears is available in three variants - the traditional amber variant, a
green variant for oil control and a blue variant for germ protection.

Dove

Dove soap, which was launched by Unilever in 1957, has been available in
India since 1995. It provides a refreshingly real alternative for women who
recognise that beauty is not simply about how you look, it is about how
you feel.
The skin's natural pH is slightly acidic 5.5-6. Ordinary soaps tend to be
alkaline, with pH higher than 9. Dove is formulated to be pH neutral (pH
between 6.5 and 7.5) and to be mild on skin. This makes it suitable for all
skin types for all seasons. While Dove soap bar is widely available across
the country, Dove Body Wash is available in select outlets.
Globally, Dove has been extended to many other countries. Since the
1980s, for example, Unilever has launched a moisturising body-wash,
deodorants, body lotions, facial cleansers and shampoos and conditioners,
providing a comprehensive range of solutions to bring out true inner
beauty.

26
Breeze

Breeze Scent Magic is the soap which fulfills the aspirations of women of
rural India. Breeze has offered them 'beauty at an affordable price', making
them look and feel beautiful.
Research and consumer visits have shown that the desire for great
fragrance featured highest in the daily beauty regime of discount-soap
users. Breeze explores this through the proposition of 'scent in a soap-
Scent ka kamaal, ab sabun mein' and explicitly propagates the brand
promise of the "Hameshaa kuchh extra". It delivers all this and still
matches consumer's needs in terms of price and quantity offered, staying
true to its word.
Breeze has been enriched with 19 special scent oils, which ensure that one
smells good for a long time through the day. Introduced in variants like
Scent Magic, Scent Magic Lime, and Scent Magic Sandal, Breeze strives
towards fulfilling the company's mission of being inventive in creating
value.

Hamam

When it comes to soaps, Hamam is considered to be the most reliable

option. Launched in 1934, Hamam has traditionally been a soap that takes
care of your skin in a natural way.
According to a research conducted By Indica Research in May 2003, 78%
of Doctors in Tamil Nadu recommend Hamam.
Besides being a perfectly balanced soap, Hamam takes on a very modern
and trendy look. Hamam's enhanced fragrance now provides a longer
lasting freshness. The new attractive oval shaped Hamam comes in an
attractive and modern packaging. The ingredients that are used in Hamam -
Neem, Tulsi and Aloe Vera - by themselves have great therapeutic values.
Hamam, the brand is very true to its tagline that says, "Everything in life
is about balance".

27
Liril

For 28 years, freshness has been clearly identified with one name – Liril

Liril expressions have always set trends whether it is a bathing beauty in a

waterfall or "Oof Yu Maa!" The energy and excitement levels associated
with the brand have to be experienced to be believed with changing times.
Liril has donned many avatars; Presently, Liril Soft Aloe Vera & Lime,
Liril Icy Cool and Liril Orange splash are making waves.
What's next? Wait and Watch! The show has just begun...

Lifebuoy

Making a billion Indians feel safe and secure by meeting their health and
hygiene needs is the mission of Lifebuoy.
The world's largest selling soap offers a compelling health benefit to the
entire family. Launched in 1895, Lifebuoy, for over a 100 years, has been
synonymous with health and value. The brick red soap, with its perfume
and popular Lifebuoy jingle, has carried the Lifebuoy message of health
across the length and breadth of the country.
The 2002 and 2004 relaunches have been turning points in its history. The
new mix includes a new formulation and a repositioning to make it more
relevant to both new and existing consumers.
At the upper end of the market, Lifebuoy offers specific health benefits
through Lifebuoy Gold and Plus. Lifebuoy Gold (also called Care) helps
protect against germs which cause skin blemishes, while Lifebuoy Plus
offers protection against germs which cause body odour.

Hindustan Lever’s SWOT analysis

28
Strengths:
With identified strengths including a

strong brand portfolio;

consumer understanding;

R&D ability;

distribution reach(networking) and high quality manpower

Strong media personalities

As the production is on large scale it has the benefit of economies of scale.

Being very old and reputed company, the company and its brands achieves
highest trust of the consumers.

Weaknesses:
The company's weaknesses spotted thereby include

29
 Increased consumer spends on education, consumer durable,
entertainment, travel, etc resulting in lower share of wallet for FMCG;

Complex supply chain configuration and unwieldy number of stock

keeping units (SKUs) with dispersed manufacturing locations;

Price positioning in some categories that allows for low price competition
and high social costs in the plantation business.

Opportunities:
HLL sees its opportunities as

market and brand growth through increased penetration especially in rural

areas;

brand growth through increased consumption depth and frequency of usage

across all categories;

upgrading consumers through innovation to new levels of quality and

performance;

emerging modern trade to be effectively used for introduction of more

upscale personal care products;

growing consumption in out of home categories;

positioning HLL as a sourcing hub for Unilever companies elsewhere and

leveraging the latest IT technologies.

Threats:

Perceived threats

span low-priced competition now being present in all categories;

grey imports

spurious/counterfeit products in rural areas and small towns;

changes in fiscal benefits.

30
3. GODREJ

VISION:

Godrej in every home and work place.

MISSION:

Enriching quality of life everyday everywhere.

We will provide branded products and services of superior quality and
value that improve the lives of the world's consumers. As a result,
consumers will reward us with leadership sales, profit, and value creation,
allowing our people, our shareholders, and the communities in which we
live and work to prosper.

VALUES:

Integrity, Trust, To serve respect, Environment.

Company Overview
Godrej Industries Limited, formally Godrej Soaps, is India's large
manufacturer of oleochemicals. As well as the chemicals industry, Godrej
also operates in the food and medical diagnostics markets. The company is
part of the Godrej Group conglomerate. Godrej Industries is headquartered
in Mumbai, India

For the fiscal year ended March 2004, the company generated revenues of
$417.34 million (Rs18.23 billion), an increase of 9.7% on the previous
year. The company saw a net income of $13.14 million (Rs573.8 million)
during fiscal 2004, an increase of 72.5% on fiscal 2003.

Godrej Consumer Prodiucts Ltd (GCPL) was formed wef April1, 2001
with the demerger of the consumer business of the erstwhile Godrej Soaps
Ltd. GCPL has emerged as a focussed FMCG company. Its main product

31
lines now consist of toilet soaps, liquid detergent, cosmetics such as hair
care, fairness creams, etc and men’s toiletries. The company also
undertakes contract manufacturing of toilet soap for third parties. All
interests of the erstwhile Godrej Soaps in other businesses such as
industrial chemicals, medical diagnostics and financial investments
continued to remain in the existing entity, post demerger and the company
has been renamed Godrej Industries Ltd (GIL)

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. In
the early 90’s Godrej had created strong brand equities for its leading
brands Cinthol, Ganga, Marvel, Evita etc. In 1994, Godrej entered into a
strategic alliance with P&G for inter alia toilet soap business, under which
Godrej used to manufacture soaps, which were marketed by a joint venture
company. However post marketing alliance with P&G, the company lost
significant part of its market share and subsequently the arrangement was
discontinued. Godrej’s entire distribution network was then taken over by
P&G. Godrej reestablished a distribution network by utilizing the network
of group company Godrej Hicare for marketing of its brands and in FY00
took over the entire distribution network from them.

Toilet soaps – Godrej brands (53% of turnover)

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. In
the early 90’s Godrej had created strong brand equities for its leading
brands Cinthol, Ganga, Marvel, Evita etc. In 1994, Godrej entered into a
strategic alliance with P&G for inter alia toilet soap business, under which
Godrej used to manufacture soaps, which were marketed by a joint venture
company. However post marketing alliance with P&G, the company lost
significant part of its market share and subsequently the arrangement was
discontinued. Godrej’s entire distribution network was then taken over by
P&G. Godrej reestablished a distribution network by utilizing the network
of group company Godrej Hicare for marketing of its brands and in FY00
took over the entire distribution network from them.

The company has been very aggressive during the year in the toilet soap
business and has launched a number of new products in the market in the
last two years. It pioneered the concept of a fairness soap through launch
of Fairglow soap. New variants like Sandal and Natural in the Godrej No.1
brand also aided high growth. Toilet soap volumes of Godrej brands grew
by 30% yoy in FY01. In value terms sales grew by 17% yoy to Rs2.5bn.
The company also launched new brands like Godrej Nikhar during the

32
year. The company’s market share in toilet soaps improved marginally to
5.6% during FY01. The company’s oldest and well know brand Cinthol is
proposed to be repositioned and relaunched during FY02.

Cinthol

Cinthol is the flagship brand of Godrej Consumer Products Limited. The

brand was launched in 1952 as the first Deodorant Soap in the country.
In 1960 Cinthol Deodorant Talc was launched. It continued to sell as a
freshness talc thereafter. The brand, over the first three decades of its
existence, took the platform of protection from body odor.

In 1986 , in an attempt to modernize the image "New Cinthol " soap was
launched with new look packaging , shape and advertising using celebrities
like Vinod Khanna and Imran Khan . This communication campaign
developed strong "confident" , "active" associations with Cinthol which
became a part of the essence of the brand

Godrej FairGlow

The Godrej FairGlow fairness soap contains a powerful fairness ingredient

' Natural Oxy-G ', which makes you fairer by reducing the dark melanin
without changing the skin's natural balance. In addition, it also removes
blemishes to give you a clear, glowing complexion.

Godrej FairGlow Soap was India's first and is the largest selling fairness
soap. It helps you become fairer in a convenient way, simply through a
daily bath. It is a quality Grade 1 fairness product having 76% TFM (Total
Fatty Matter). It has a pleasant fragrance and is white in colour.

Godrej no1

Godrej no.1 is another popular soap from godrej product line , it is proved
popular in the rural market due to the affordable price and the quality
offered.it comes in three colours and flavour, it is giving good fight to the
leading brands too.

Godrej Shikakai soap

33
This is also one of the popular soap of the godrej product line. This soap is
used to wash hairs. Many people believes shikakai as a best thing to wash
the hair . black ,long and silki hairs are result of utilization of the soap.
This soap is giving fight to all the shampoo for washing the hairs. It is
proved very popular among women.

All of these soaps can be further classify in to three basic segments

Price Segments of Bath Soaps

Segment Price Weight

Premium > Rs.15 75 gm.
Popular Rs.8-15 75 gm.
Economy < Rs.8 75 gm.

Godrej refreshes itself

Godrej Consumer Products has beaten the stagnation in the FMCG
segment through a host of initiatives that saw it introducing new price
points, enter new territory and strengthen its brands.

FORTIFYING its soap brands, introducing new price points, entering new
categories such as babycare and hand sanitisers ... it has been a busy year
at Godrej Consumer Products Ltd (GCPL). While FMCG categories such
as toiletries, hair care and soaps have been under pressure, the company
has outperformed the still sluggish FMCG industry primarily because it
has been operating on a relatively smaller base compared to the biggies,
and also because of the urban-centric nature of its brands.

Focusing on its stronger and faster growing brands, the Rs 550-crore

Godrej Consumer Products began the year by extending Godrej No.1

34
ayurvedic soap to more markets and at an attractive price. At the same time
it also decided to capitalise on the success of its FairGlow soap, instead of
trying to push the languishing cream, to take on Hindustan Lever Ltd
(HLL) in the fairness segment.

In fact, Godrej is almost consciously targeting the fairness cream users

through its newly relaunched fairness soap. `The cool way to fairness and
freedom from oily skin' is the message the company wants to convey to all
its prospective users. Launching the All New FairGlow soap, Hoshedar K.
Press, Executive Director & President, Godrej Consumer Products, said,
"There is an increasing demand among Indian women for convenient and
inexpensive solutions to skincare and a need to look good naturally. The
soap keeps this need in mind."FairGlow soap, a pioneer in its category
which managed to find a niche in the fairness market in spite of the
looming presence of HLL's mega brand Fair & Lovely, has intentions of
doubling its turnover from Rs 60 crore to Rs 120 crore within the first year
of the relaunch. The brand was relaunched last month.

According to industry observers, HLL is not in a position to push its Fair &
Lovely soap for fear of losing its share in the fairness cream market.

This situation gives Godrej an opportunity to strengthen its position in the

fairness soaps category while phasing out its cream, which in any case did
not manage to register any significant volumes.

In fact, the company suffered a loss in sales for its toiletries division
primarily due to the failure of its FairGlow cream. Admits Press,
"FairGlow cream did badly, leading us to withdraw the product. Our
toiletries margins have been affected by its failure." Besides, Godrej Shave
Gel for men has also failed to register any significant volumes.

The relaunch of FairGlow soap is expected to add weight to Godrej's soap

portfolio. Says Anand Shah, FMCG Analyst at ICICI Securities, "FairGlow
has been registering declining sales over the past two years. The All New
Godrej FairGlow is aimed at female teenage college students instead of the
previous positioning of that for women in their early 20s. This move could
help GCPL build a younger clientele and broaden its target base."

Besides, the largest soap brand in Godrej's kitty, Godrej No. 1, managed to
maintain robust growth and today accounts for nearly 60 per cent of
GCPL's toilet soap volumes. Its low pricing and value-for-money
proposition has worked for the company and it has been steadily increasing
its variants with an ayurvedic offering.

35
Observes Shah, "Toilet soaps are likely to maintain robust growth of 15-20
per cent on the back of FairGlow's relaunch and the continuing growth of
Godrej No.1." The new unit for toilet soaps in Himachal Pradesh would
also lead to an improvement in profitability, as it is located in a tax-free
zone. The unit would provide income-tax relief and exemption from excise
duty, which is likely to improve the company's soap margins.

Meanwhile, its Cinthol soap franchise has taken a backseat, primarily due
to lack of proper positioning. "Cinthol as a brand has been over-extended
and we are in the process of redefining the positioning," says Press. This is
being done through a new campaign and positioning statement which is
likely to be unveiled soon through its advertising agency, Orchard.

Last year, Godrej decided to stretch the Cinthol brand to a hand sanitiser.
"There is heightened hygiene consciousness emerging among consumers
and we realised it would be ideal to introduce the hand sanitiser, a
revolutionary concept for germ-free hands," says Press. Godrej already
supplies hand sanitisers under the Cinthol brand to West Asia. The SARS
epidemic did help in gaining sales for the product.

Beefing up its rural initiatives to accelerate sales growth, Godrej also

decided to increase its rural penetration by introducing small unit packs of
its soap brands in the Bimaru States of Bihar, Madhya Pradesh and Uttar
Pradesh. By introducing its three power soap brands - Cinthol, FairGlow
and Godrej No.1 - in 50gm SKUs (stock keeping units), the prices of these
respective brands have been pegged between Rs 4 and Rs 5.

"We have decided to target these States with low per capita incomes
through our small unit packs. This will be a great opportunity to grow since
consumption levels of soap are still low in these parts. These small pack
sizes will not be made available nationally and are meant specifically for
these three States," says Press.

36
 Chapter 2
Research
methodology
Need for study

Fmcg sector is very vast and 4th largest sector in Indian economy in which
different marketer use different strategies for the survival and make profit
from their products or brands. In this sector there is very tough competition
between players.they are using large number of advertising,sales
promotions, positioning, and pricing strategies.

Research design

We have used secondary data as a source of this research.

Data sources
Secondary data:

37
Web sites,
Magazines,
Newspapers

Limitations of study
Lack of sufficient material.
Lack of time.

Chapter 3
Data Analysis &
Interpretation

Five forces analysis

of bath soap
industry
SUPPLY

38
Abundant supply in metros
Competition is beefing up their distribution network to penetrate the rural
areas.

DEMAND

At an average GDP growth of 5.5% until February 2007, and the present
consumer demand is set to boom by almost 60% over this period.
Most fmcg companies are awaiting to tap this latent.

BARRIERS TO ENTRY

Huge investment in promoting brands, setting of distribution network and

intense competition.

BARGAINING POWER OF SUPPLIERS

Many established players have a slight edge in bargaining power giving the
competition among suppliers.
Some of the companies have backward integration, which reduces the
suppliers clout.

BARGAINING POWER OF CUSTOMERS

Due to increase in branded products, there is less chance that the

consumer can influence, but intense competition within fmcg companies
result in value for money deals for consumers.(eg getting one soap free
with one unit of soap)

COMPETITION

In bath soap industry there are low profit margins about 5 – 10% but they
are selling in huge volumes.
To beat the competition companies mainly use various strategies like
discounts and freebies.
Unbranded players are size of Rs.1-3 billion and they are growing at the
rate of 10%.
Local players have no large distribution network so they are giving fight to
the branded products by giving huge margins to retailers which is an
important part of supply chain.

39
Hindustan Lever’s SWOT analysis

Strengths:

40
  With identified strengths including a
 strong brand portfolio;

 consumer understanding;

 R&D ability;

 distribution reach(networking) and high quality manpower

 Strong media personalities

 As the production is on large scale it has the benefit of economies of

scale.

 Being very old and reputed company, the company and its brands
achieves highest trust of the consumers.

Weaknesses:
 The company's weaknesses spotted thereby include
 Increased consumer spends on education, consumer durable,
entertainment, travel, etc resulting in lower share of wallet for
FMCG;

 Complex supply chain configuration and unwieldy number of stock

keeping units (SKUs) with dispersed manufacturing locations;

 Price positioning in some categories that allows for low price

competition and high social costs in the plantation business.

Opportunities:
 HLL sees its opportunities as
 market and brand growth through increased penetration especially in
rural areas;

41
  brand growth through increased consumption depth and frequency
of usage across all categories;

 upgrading consumers through innovation to new levels of quality

and performance;

 emerging modern trade to be effectively used for introduction of

more upscale personal care products;

 growing consumption in out of home categories;

 positioning HLL as a sourcing hub for Unilever companies

elsewhere and leveraging the latest IT technologies.

Threats:
 Perceived threats
 span low-priced competition now being present in all categories;

 grey imports

 spurious/counterfeit products in rural areas and small towns;

 changes in fiscal benefits.

Personal wash market: While the growth rate for the overall personal wash
market is only 1 per cent compared to average growth rate of 5 per cent,
premium and middle-end soaps are growing at a rate of 10 per cent. The
leading players in this market are HLL (Lux, Lifebuoy, Breeze, Rexona),
Nirma (Nima), Godrej Soaps (Cinthol, FairGlow, Shikakai, Nikhar), and
Reckitt & Colman (Dettol).

Growth in production of FMCG

Production (market Unit 2002- % Est EST %

size) 2003 growth 2003- growth

42
 2004
FMCG (overall) Rs billion 600 2% 609 1.5%
Soap & Toiletries
Rs billion 90 -5% 90.9 1%
(overall)
Soap & Toiletries
Mn tonn 60 4% 60.09 1.50%
(overall)
Fabric wash market MN tonn 50 4% 50.25 0.50%
Laundry soaps/bars Rs billion 53.3 -6.5% 50.64 -5%
Personal wash market Rs billion 45 5% 45.45 1%
Toilet soap Rs billion 42 -3.2% 40.11 -4.5%

Projected Growth in Production of FMCG Sector

First two First two

quarters quarters
SECTOR UNIT (Apr-Sept (Apr-Sept 2004-
2003-04) 05) Projected
Actual
FMCG (overall) Rs billion 1.50% 2%

43
Soap & Toiletries
Rs billion -4% 1.50%
(overall)
Soap & Toiletries
MN tonn 2% 4%
(overall)
Fabric wash market
Laundry soaps/bars Rs billion -8% 0%
Laundry soaps/bars MN Tonn -5% 1%
Personal wash market Rs billion 7% 1.5%
Toilet Soap Rs billion -5% 1.5%

SWOT ANALYSIS OF
GODREJ
Strengths
 Very old and trusted domestic company in India.

44
  Good distribution network across the country.
 Cinthol is one of the popular and strongest brand of the company.
 Diversification of the products and deepens each product vertically.
 Economical products with wide product line.

Weaknesses
 Medium focus on advertising as compared to other competitors.
 Focused attention on cinthol brand.
 Less focus on product variety.
 Lack of promotion of its products by influential celebrities.
 Lack of concentration on bath soap segment after diversification.

Opportunities
 Penetration in rural market area.
 More brand loyalty of customers towards some of the brands.
 Focusing more on its innovations and product variety it can become
a global player.
 Low market share, to be focused by aggressive marketing.

Threats
 Trust factor and emotions attached to it due to the domestic
company towards localites.
 Due to successful backward integration it has a benefit of low cost
production.
 Major focus on effective advertising.
 Best infrastructure.

Growth and expansion strategies in global

scenario

Market segmentation

Most multinationals are active in almost all the regions profiled in this
report. Their global reach has been facilitated in part by the increas ingly
open economic policies that were being implemented by developing

45
countries such as India and China during the 1990s. Corporate market
expansion strategy by the multinational organizations has involved
increased market segmentation to create a wide range of products
especially in the toilet and laundry soap categories. The main
developments during the 1990s has thus been the growth of task specific
products. The market for bath products in particular, has shifted toward
body cleansing, as well as moisturising, as brands become more
specialised. Traditional soaps are fighting back with a move toward
nostalgia, and seem to be attracting consumers back to the products they
know best.

Mergers and acquisitions

Production of soaps for distribution on the international market takes place

as near to national markets as possible. The distance of many of the
emerging markets from major industrial nations, and the sheer bulk of the
bar soap and liquid soaps combine to make import uneconomical in most
instances. While domestic manufacturers traditionally tend to concentrate
in their countries of origin, they are increasingly seeking to increase
revenues by venturing into neighbouring countries. This situation is most
common in Asia and Latin America.

The main strategy used by companies wishing to enter other markets is a

series of mergers and acquisitions. In addition, they acquire manufacturing
facilities and set up distribution agreements with local companies.

With the exception of East and Central Europe, m ost soap and other
toiletry markets are becoming increasingly foreign. In Latin America,
Brazil stands out as an exception to this trend, having a high presence of
domestic companies.

In Asia,domestic manufacturers such as Nirma and Godrej are gradually

increasing their
domestic market share, particularly at the lower end of their markets.

The acquisition of regional players represents a clear means of establishing

or strengthening a position in a region. Acquisition is also being used as a
means of balancing the geography of a portfolio where a large player is
weak in a particular country. This seems to have been a major factor in
Unilever’s acquisition of Helen
Curtis. The alternative to acquisition or creation of a manufacturing
operation in the target country, is to set up a licensing agreement with a
local manufacturer.

46
How local companies are responding to
multinational strategies
Many national soap manufacturers are matching the big player’s expansion
strategies by expanding into niche markets where brand loyalties are yet
to form. They are becoming successful by quickly identifying and meeting
consumer needs,
and by offering more competitively priced products than the
multinationals. Another strategy involves offering products at low retail
prices and with small value shares in several sectors without occupying
leading positions in any of them.

While new product development will be important in the strategy of niche

players, it is unlikely that it will be as innovative as that achieved by the
global players. This is because investment funds are not readily available
in the same way, and new product development will therefore tend to take
the form of brand and line
extensions. Nonetheless, many local manufacturers are identifying and
exploiting pockets of innovation in niche markets especially, where global
players do not have dominant positions. In any case, the findings of this
research indicate that many sectors of the global market for soap are not
yet saturated. It is believed that additional sales growth can be generated
by targeting specific consumer groups, for example, consumers in
provincial and rural regions, health conscious consumers, mothers,
children and teenagers.

Threats

Without exception, all the major players and other manufacturers in the
industry list the following issues as threats to the uninhibited growth of
theindustry:
High government custom duties on essential imported raw materials; High
production excise taxes which in some cases are higher than the import
duty on raw materials; High local energy costs including electricity and
fuel; Increasing cost of policing their products against local artisanal soap
producers. This takes the form of increasing research and development, as

47
well as advertising and promotional expenditure to differentiate their
products in the mass or lower market segment from local ones.

Loopholes in government customs machinery have led to the influx of

grey imports, i.e. unofficially imported products in the local market. In
addition, official relaxation of trade barriers in all regional markets has
increased the entry of imported soap into most regional markets that were
fairly stagnant in terms of new product d evelopment and launches.

Competition has intensified significantly over the last five years and has
resulted in heavy corporate investment in a wider range of technologically
advanced products and new product development in general. This
coincides with th e emergence of a more sophisticated consumer base,
much greater segmentation in markets, and increased demand for value
added products.

Basic products like bar soaps remain dominant in Asia, as the bulk of
consumers in most markets earn low incomes and only buy low cost items.
However, this situation showed signs of change over the last three years
with bar soap increasing in value shire from 68.2% to 72.1%. This was due
to consumers at the lower end of the market trading up to more expensive
types of soaps as their average incomes increased. Liquid soaps became
increasingly popular until the 1997 economic crisis caused consumers to
economize. The popularity of liquid soaps and shower gels is due to their
hygienic packaging which makes them popular to use because, unlike bar
soaps, it cannot be shared by members of the family for body cleansing.

The regional market presents tremendous opportunities to the soap

manufacturer in terms of the share size of the formed population. With
India’s population officially exceeding one billion at the end of the last
century and China’s over 1.5 billion, the majority of them living under the
poverty line, appropriate marketing strategies are needed to turn this region
into an area of advantage for the industry.
Unilever is the most dominant player in the region with Japanese
companies,

48
Unilever
Countries of origin and bases: UK/ Netherlands
Unilever, the Anglo-Dutch consumer goods company is among the world’s
largest soap manufacturers. It is unusual in its structure, which involves
two parent companies; Unilever NV and Unilever PLC. This structure
relates back to the 1930s merger of the Lever Soap Company with the
Dutch edible (oil) fats company NV
Margarine Unie. Unilever started its involvement in the soap market with
the manufacturers of Pearls toilet soap, a major force in the soap industry.
Since the mid 1980s Unilever Has further developed strong position in the
soap sector through acquisition of various established brand names.
Unilever has been building its soap (skincare) activities in the developing
regions through acquisition. In Eastern Europe, it acquired PTZ, the Czech
state-owned producer of toilet soaps and skincare products in 1992. In
1995 the Singapore based Haze Line Company was acquired from Glaxo
for US$150 million. This has strengthened Unilever’s skincare position in
China and South East
Asia.

Operating structure

Unilever has operations in more than 90 countries which provide it with a

presence in every continent. Apart from direct presence, Unilever’s brands
are on sale in a further 90 countries through import arrangements and
agreements with local companies. Europe accounted for over half of the
company’s turnover and operating profit in 2000. When sales from
European markets and North America are combined, they account for 2/3
of global turnover

49
The business coordinates its activities through divisions, These are (i)
foods (which accounts for 50% of Group turnover in 2000) (ii) detergents,
(iii) personal products including soap (accounting for 14% of Group
turnover in 2000) (iv) specialty chemicals (v) other products

Corporate strategy

The broad ranging interests of Unilever are underpinned by a strong

corporate strategy which focuses on the core activities and brands.
The company has pursued a selective acquisition and disposal strategy
with net expenditures on disposals and acquisitions amounting to over US$
1billion in 1999.
The company is also involved in Joint Ventures (JV) where this method is
proved to be the most effective means of entering a new market For
example, in Vietnam the company operates through two JV agreements.
Unilever also seeks to expand through organic market development where
appropriate.
The key to the company’s strategy is the importance of product innovation.
A world wide network of innovation centres is in place which allows rapid
transfer of ideas and the identification of tailoring required for local or
regional markets. While the company enjoys the benefit of owning a
number of global brands, its strategy emphasizes the importance of local
requirements. The company is keen to position itself as the “Multi-local
Multinational”

Leading brands

Unilever has significant involvement in the global soap market through a

portfolio of strong consumer brands marketed primarily through selective
mass outlets. In the detergent market, the most established brand is Omo in
the fabric detergent sector. Omo is sold in over 50 countries with a wide
number of formulations to reflect local washing preferences. Its Lux,
Rexon, Dove, Ponds and Lifebuoy brands are present
in virtually every market around the world. Other leading brands include
Hellmann’s', Liptons, Knorr and Ponds.

Future strategy

Unilever is likely to continue to strengthen its presence in and further

develop its soaps and bath /shower product lines. The company will

50
continue to use the Dove and Lux brands to expand into new skincare
related categories. These brands have strong consumer loyalty which will
allow the brands to cross sector barriers with relative ease.

Nirma Ltd

Nirma is a private family firm, which dominates the Indian rural market.
Largest national detergent maker and second largest selling soap
manufacturer. Success due to undercutting multinational rivals eg. Surf.
Production facilities at 6 places in India. It was able to cut costs with a
model focused on the poor. Using a lower fat-towater ratio and indigenous
oils in the formulation of the soap, the company was able to cut production
costs dramatically, and produce a more environmentally sound product. It
produces a range of industrial chemical products which primarily serve as
raw material or intermediates for soap and detergent business.
Nirma has cut the cost of distribution by doing away with intermediaries.
The product travels from the factory to the d istributor's doorstep. Though
the distributors have slender margins, they make money from sheer volume
sold. The company makes extensive use of wallpaintings for advertising.

Chapter 4

51
 FINDINGS
&
SUGGESTIONS
Tax reforms

The government has gradually removed the restrictions on imports of

consumer goods in the country and also significantly reduced custom
duties. The domestic tax structure of these products, however, has not been
rationalised to provide level playing field for competition. This is
adversely affecting the growth of the FMCG industry and could have far
reaching adverse impact. The following taxation issues need urgent
attention of the government:

1) Extremely high incidence of tax on certain product categories

Some FMCG products such as shampoos, processed food, soft drinks and
toiletries containing alcohol attract high rates of excise duty and sales tax.
The total tax incidence in some cases is more than 60 per cent of the cost
or more than 30 per cent of MRP. Such high tax incidence hampers growth
of these product categories besides encouraging manufacture of spurious
products and smuggling.

It is recommended that the total excise incidence of FMCG products

should not exceed 16 per cent in the case of non food items and eight per
cent in the case of processed foods. Similarly, the marginal rates of sales
tax, which is currently in the range of 10 to 25 per cent, should not exceed
12 per cent.

2) Irrational domestic tax structure encouraging imports

Significant reduction in custom duty rates of consumer goods has made

imported product cheaper as compared to indigenously manufactured
products, due to irrational domestic tax structure. For instance, goods
manufactured in India suffer from cascading effects of taxes on inputs as
additional cost compared to imports.

The cascading effect of sales tax and local levies on inputs used in
domestic manufacture should be eliminated by providing either MODVAT

52
credit or by introducing notional VAT covering both central and state taxes
on an urgent basis. Moreover, MRP-based excise duty is levied on a large
number of FMCG products. Countervailing duty on the same product when
imported is charged on CIF value. The MRP based assessable value for
excise duty does not allow abatement for post manufacturing costs such as
advertising and selling expenses whereas CIF value considered for the
purpose of import duty does not include costs of these elements incurred
subsequently by importers.

This differential basis creates unfair competition as tax incidence on

domestic manufacture could be considerably higher in case of those
products which incur significant marketing and distribution cost. There is a
need to bring parity in tax incidence between domestic manufacture and
imports by including all such elements of post manufacturing costs while
deciding the abatement percentage of MRP based duty.

3) Inverted Duty structure for selected inputs

Duty on certain raw materials is higher or the same as compared to

finished products in which these materials are used. Such raw materials
include oils and chemicals like Soda ash, caustic soda and LAB. In
addition to customs duty, raw materials are also subject to SAD/sales tax
and octroi and therefore total tax incidence and cost of indigenous
manufacture goes up. The import duty on raw materials needs to be
rationalised so that it does not exceed 60 to 70 per cent of the duty on
finished goods.

4) Need for rationalisation of taxes on processed foods

Processed food industry, with its vertical integration with the agricultural
sector has significant potential for employment generation and economic
growth. The existing tax structure and its high overall incidence, however,
has been hampering the growth of the processed industry. The increase in
excise duty in last year’s budget from eight per cent to 16 per cent has
adversely affected the growth of processed foods industry. It is
recommended that marginal rate of excise duty on processed foods should
not be more than eight per cent and the sales tax should be levied at four
per cent.

5) Cascading effect of Special Excise Duty

53
The special excise duty introduced last year is not "cenvatable’’ except in
the case of selected products. Most FMCG products covered by tariff
chapter 33 such as shampoos, ice creams and cosmetics are subject to
SED. This tariff chapter also contains very wide definition of the term
"manufacture’’ which includes labeling, relabeling or conversion of large
packs into small packs. The levy of SED on such products therefore leads
to double taxation when goods are labeled or converted into small packs
after manufacture. It is recommended that SED should be made
"cenvatable’’; alternatively the term "manufacture’’ needs modification ,
atleast for the purpose of SED by excluding labeling, relabeling or
conversion into small packs.

54
Other suggestions
1. A joint industry –government initiative for building a "Made in India’’
brand for FMCG products is required. With many multinationals moving
into the Indian FMCG market, a concerted marketing strategy which
creates strong brands will be needed for Indian FMCGs to gain recognition
in the market.

2. Better packaging materials are necessary as a large number of FMCG

products are perishable . The government must facilitate more R&D in
packaging materials as this will help in cutting wastes and costs in the
sector. The possibility of a longer shelf life will encourage production of
goods of higher value addition by companies in the sector.

3. While import of most items has been allowed, the government is not
geared to prevent import of spurious products. In other countries, FMCG
goods have to be cleared by regulatory authorities before they are allowed
to enter domestic shores. This is not happening in India and the
government needs to undertake a comprehensive crackdown on these
products.

4. The small-scale reservation policy should be reviewed as it hampers the

growth of this sector. Many reserved products, including several FMCG
products can be freely imported. Under the current policy, not only are
Indian producers of many FMCG products restricted from attaining
economies of scale, they also have to compete against import that do not
face constraints on small scale reservations.

5. Food laws such as the PFA Act should be amended and be made
contemporary.

55
 CONCLUSION
From the above detailed study of the FMCG industry with the focus on
bath soap segment we can make out that FMCG is the most emerging
sector and industry not only in India but all over the world.

The main leaders of the bath soap segment like HLL, NIRMA. AND
GODREJ are focused in the study which shows that HLL is the leader in
FMCG industry and has a large amount of market share about 67% and
even the growth rate. The main reason for the success of some companies
is their strategy and distribution networks.

HLL is dominating due to its diversification, vertical and horizontal

integration, breadth and depth product line and innovative and customer
oriented product introduction. Thus the company needs to focus on its
distribution channels, networking, marketing strategies, sales promotion
etc to succeed in the market.

From the study we can make out that nirma and godrej still needs a lot
market penetration in the urban market also with focus on the premium
class.

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BIBLIOGRAPHY
Websites :
www.infoline.com
www.nirma.co.in
www.hll.com
www.godrej.com
www.thehindubusinessline.com
www.google.com

Newspapers:

Business Standard
Economic Times

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