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

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

RSPL
2200

Colgate

Cadbury

Reckitt Benckiser

2150 1900 1813

Rs 45,000cr HPC (home & personal care)- detergents, soaps, oral care, skin care & hair care
Wheel Ghari Lifebuoy Lux Surf Colgate Nirma

2400 2500

2300 2083

1400

1400

1400

1250

800

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

Mass Premium

Mass

Rs 20-30/kg Customers up trade- brand

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 margin of 9%, rivals 6-7%, no customer promotion
Ghari cake Gm 350 220 160 Rs 15 10 7 Ghari Powder Gm 1000 525 255 Rs 36 20 10 MR2 Premium Detergent Gm 1000 500 75 Rs 80 40 5

110
65 43

5
3 2

110
17

5
1

22
12

2
1

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

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

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

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=5AEBCBF9A4AAF785A0A845 90472C7AA6D1F22B4A&first=0&FORM=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