ENVIRONMENT

AND
COMPETITION
FMCG SOAPS

AKSHAT VAID 91004 MARKETING MANAGEMENT I

CIJIL DICLAUSE 91014 GROUP PROJECT 2
GOURAB KUNDU 91020
HARSHDEEP 91023 FMG XVIII SEC A
SAMARTH GULATI 91047 FORE SCHOOL OF MANAGEMENT
 ENVIRONMENT AND COMPETITION FMCG SOAPS PAGE 2

INTRODUCTION

T
he “soap category” in the past was targeted at the mass market, i.e. a soap for all, but, today, the
category has been segmented creatively at different levels. All the major players have tried to create a
niche market within the mass market to grow profitably. Bath soap is a Fast Moving Consumer Good,
which forms a major part of the market. FMCG sector is the first segment to get affected, whenever
macroeconomic factors change. Brand loyalty has become irrelevant where many homogenous products are
flooded in the market. Informed customers are making rational purchasing decisions. Hence, marketing the
product with a prominently designed USP has gained huge importance. If market reports are to be believed,
after shampoos and oral care, fast-moving consumer goods (FMCG) companies are betting big on soaps. The
soaps segment is expected to grow by 15 per cent in 2009-10 even as companies introduce more and more
specialized products to create a differentiation in the market.
Soap market in India has evolved over the years from a purely cleansing product to a product that now offers
multiple benefits and functionality. Need to continuously differentiate and capture market in such highly price
sensitive segment had made soap manufactures to move from a traditional mass market position to a more
niche and specialized position. Current trend is introduction of soaps with various herbal and antibacterial
actives that can offer personal protection and hygiene along with skin care properties like moisturizing,
mildness, etc the demand for toilet soap is expected to grow at an annual rate of 4 per cent between2006-12
to 870,000 metric tones by 2011-12. Rapid urbanization is expected to propel the demand for cosmetics to
100,000 metric tones by 2011-12, with an annual growth rate of 10 per cent.

The present market state has a clear leader in Hindustan Unilever Limited, but the completion is getting real
intense as more and more manufacturers enter the market. To add to HUL’s concerns, the Indian Consumer
has become more discerning than ever before. Any fallacy is taken to task. Newer brands like Fiama Di Wills
have been able to enter the market and eat into HUL’s share in the premium soaps category. As of now,
Lifebuoy, an HUL product, rules the roost as the market leader.
MACRO ECONOMIC
ENVIRONMENT
At the macro-level, over the long term, the efforts on the infrastructure front (roads, rails, power, and river
linking) are likely to enhance the living standards across India. Till date, India's per capita consumption of most
FMCG products is much below world averages. This is the latent potential that most FMCG companies are
looking at. The companies are focusing on getting the consumer up the value chain. Going forward, much of
the battle will be fought on sophisticated distribution strengths. Now let us take a broader look into the
various macro-economic factors affecting the Indian Soap Industry.
DEMOGRAPHIC
ENVIRONMENT
India is a vast country with a population of 1,030 million people. Household penetration of soaps is in the
region of98%. People belonging to different income levels use different brands of soaps. These soaps which
fall under different segments (see table below), but all income levels use soaps, making it the second largest
category in India (detergents are number one). Rural consumers in India constitute 70% of the population.
Rural demand is growing, with more and more soap brands being launched in the discount segment targeting
the lower socio-economic strata of consumers.

MARKETING MANAGEMENT 1
GROUP PROJECT 2
 ENVIRONMENT AND COMPETITION FMCG SOAPS PAGE 3

URBANIZATION CURVE
Per Capita Income of Indians is on
a steady rise. The effects of the
same are felt on the steady rise in
demand for goods on the whole.

DEMOGRAPHIC
Affluent: Dove Fiama Di Wills, Pears SEGMENTATION
INDIA
Aspirers: Cinthol, Dettol, Lux, Lifebuoy

Strivers: Breeze, Santoor, Hamam, MARKET STRUCTURE

Indian Soap Industry Market Structure is gradually changing from a pyramid type to a diamond,
signifying the drastic effect that demographic factors like income and occupation have on the
industry.

MARKETING MANAGEMENT 1
GROUP PROJECT 2
 ENVIRONMENT AND COMPETITION FMCG SOAPS PAGE 4

SOCIO-CULTURAL
ENVIRONMENT

North India: Pink colored soaps,

which have floral profiles. Here the
fragrance preference is for more
sophisticated profiles reflecting
their lifestyles. Freshness soaps
with lime and citrus notes are also
popular preferences as the climate
in the North is very hot and
citrus/lime scented soaps are seen
to be refreshing.

Consumers in the West exhibit

preferences for strong, impactful
fragrances and somewhat
harsher profiles compared to
the North. Preferences are
more for the pink soaps with
The East is not a big soap
floral fragrances, primarily rose,
market; hence no particular
which are positioned on the
preference skews.
beauty platform.

In the South, the skew is towards

specific soap segments like the
Herbal/Ayurvedic profiles and also
the Sandal profiles. Consumers
here do not exhibit high brand
loyalty and are ready to
experiment and try out new
brands. Hence, most FMCG
companies tend to launch their
new brands in these markets,
which they call test launch market.

MARKETING MANAGEMENT 1
GROUP PROJECT 2
 ENVIRONMENT AND COMPETITION FMCG SOAPS PAGE 5

FOCUS ON
ENVIRONMENTAL
SAFETY

Reducing Water Consumption

Reducing Oil Dependency through

Bio Mass Boilers thereby reducing Carbon Credits are received for
energy consumption innovative manufacturing process.
Soap manufacturers are increasingly trying to care for the various environmental concerns. Fringe cases of
not adhering to the norms of production in terms of pollution have surfaced. With the Government
tightening the grip on such issues, focus on environmental safety has become higher than ever before.
LEGAL AND
GOVERNMENT
Various states governments like Himachal Pradesh, Uttaranchal and Jammu & Kashmir have encouraged
companies to set up manufacturing facilities in their regions through a package of fiscal incentives. Jammu and
Kashmir offers incentives such as allotment of land at concessional rates, 100 per cent subsidy on project
reports and 30 per cent capital investment subsidy on fixed capital investment up to US$ 63,000. The
Himachal Pradesh government offers sales tax and power concessions, capital subsidies and other incentives
for setting up a plant in its tax free zones. Five-year tax holiday for new food processing units in fruits and
vegetable processing have also been extended in the Union Budget 2004-05.Wide-ranging fiscal policy
changes have been introduced progressively. Excise and import duty rates have been reduced substantially.

FDI POLICY
Automatic investment approval (including foreign technology agreements within specified norms), up to 100
per cent foreign equity or 100 per cent for NRI and Overseas Corporate Bodies(OCBs) investment, is
allowed for most of the food processing sector except malted food, alcoholic beverages and those reserved
for small scale industries (SSI). 24 per cent foreign equity is permitted in the small-scale sector. Temporary
approvals for imports for test marketing can also be obtained from the Director General of Foreign Trade.

REMOVAL OF QUANTITATIVE RESTRICTIONS AND RESERVATION POLICY

The Indian government has abolished licensing for almost all food and agro-processing industries except for
some items like alcohol, cane sugar, hydrogenated animal fats and oils etc., and items reserved for the
exclusive manufacture in the small scale industry (SSI) sector. Quantitative restrictions were removed in 2001
and Union Budget 2004-05 further identified 85 items that would be taken out of the reserved list. This has
resulted in a boom in the FMCG market through market expansion and greater product opportunities.

MARKETING MANAGEMENT 1
GROUP PROJECT 2
 ENVIRONMENT AND COMPETITION FMCG SOAPS PAGE 6

OPPORTUNITIES
MARKET DEMAND FOR HUL FOR
Growth will come from increasing consumption and reach. SUCCESS
The opportunities for increasing consumption in India are large because its per capita consumption is much
lower than international levels. The scope to increase reach is huge. At least 50 per cent of India's population
is not directly covered since market reach is restricted to urban areas and those villages connected by motor
able roads. Here are some of the plausible strategies for HUL:
 Focusing on the low-income group of consumers. (Rural India to be precise). This will help in the growth
of current business(s), expansion into related businesses, and seeding options for future growth.
 The steps may include: increasing consumption, expanding infrastructure to reach new geographies, and
developing cost-effective business systems
 Use of various information systems can be employed. This will maximize the business potential.

CONSUMER
From the perspective of a consumer, a lot needs to be done. As already established, the consumer is the king
and with a low involvement product like soaps, the concern is even graver. Hence, HUL should seek to
develop its markets and meeting the evolving needs of our consumers. For most of consumers, product
choices hinge on affordability. Our approach therefore is to find out what the consumer can pay and then
tailor the supply chain to offer the product or service within that price.
Self-service stores and supermarkets, though small as a channel today, are fast emerging in metros and large
towns. This channel provides the company with a great opportunity for brand interaction with consumers.
Consumers are able to touch and feel the products, and thus make informed choices.

INDUSTRY
Rising standards of living in urban areas and better purchasing power of the masses from rural India together
have helped the industry grown in leaps and bounds. Price competitiveness and price reductions have lead to
low value realizations. These have contributed to the negative growth rate in addition to rising raw material
prices and huge market promotion expenses.
Markets today are highly fragmented with almost half of it comprising unbranded and unpackaged homemade
products. Another significant feature with profound impact on the FMCG industry has been offshoots and
mushrooming of regional companies, which are posing a threat to bigger FMCG companies.

SUPPLIER RELATED FACTORS

A critical task for HUL is to create a network that directly reaches the mass market in rural areas. Also to
develop appropriate channels to extend reach is important. The large population in small villages presents a
significant opportunity to HUL. Project Shakti is initiative that creates a win-win partnership for consumers,
rural women and Hindustan Lever. It has been initiated to spur growth and increase the penetration of its
products in rural India while changing lives and boosting incomes. Through a combination of micro-credit and
training in enterprise management, women from self-help groups turned direct-to home distributors of a
range of HLL products and helped the company test hither to unexplored rural hinterlands. The project was
piloted in Nalgonda district in Andhra Pradesh (AP) in 200; it has since been scaled up and extended to over
many districts in AP, Karnataka, Gujarat, Chattisgarh, Orissa and Madhya Pradesh with around 1,000 women
entrepreneurs in its fold.

MARKETING MANAGEMENT 1
GROUP PROJECT 2
 ENVIRONMENT AND COMPETITION FMCG SOAPS PAGE 7

MICRO ECONOMIC
ENVIRONMENT
Since, Hindustan Unilever Limited is the present market leader, let us look into its micro economic
environment. Marketing micro environment refers to all the internal factors close to the company that have a
direct impact on its strategy and its ability to serve its customers.
COMPETITION
The most important factor among all is competition. Dealing with FMCG products sets the manufacturer at
the back foot in the sense that it doesn’t take much for the consumer to shift from one brand to the other.
So, just being able to sell the products once doesn’t turn out to be enough. Company needs to generate a
brand loyalty strong enough to keep the consumer from shifting to the competitor’s product. In case of
soaps, competition is cut throat. Although HUL is firmly in the leading position in the personal wash category
of soaps [52.7% market share as compared to the 9.1% market share of its closest competitor], it still needs
to constantly revamp its existing products and launch new ones to remain in the position that it is in. It is not
that hard for a new entrant to make its presence felt as is clear with the way Fiama Di Wills emerged as a
major player in the niche segment it targeted. Also, in south India, HUL is far from leading position where
Santoor sandal soap is the biggest brand. HUL needs to constantly analyze the competitors’ namely P&G, ITC,
WCCL and a few others, thereby seeking a strategic advantage over the competitors.
CONSUMERS
As with any business, the centre of all the activities is the consumer and his needs. Same goes for soaps as
well. Owing to the vast demographical variations across the length and breadth of India, be it in terms of
culture and traditions, in terms of the prevalent habits or in terms of income levels, there is a very variety of
specific demands that needs to be met. HUL’s focus should be at developing the various sub brands under its
own umbrella which target each of these individual segments separately. In fact, HUL has done a
commendable job in this regard. It has provided a whole range of soaps that are priced differently, promoted
differently, and targeting segregated segments of consumers.
SUPPLIERS
HUL’s products are manufactured at 71 locations with more than 2000 suppliers and associates providing the
raw materials. But HUL needs to take care of relationships with its suppliers as it one way of assuring the
quality and prices of goods it produces. An increase in raw material prices will have a knock on effect on the
marketing mix strategy of an organization. This happened sometime back when the prices of vegetable oils, a
prime component that goes into the making of soaps, sky rocketed partly due to the diversion of oils into the
production of bio fuels. It had a direct impact on the cost of production of soaps in all the sub categories.
Margins had to be managed through a series of actions such as buying efficiencies, savings in supply chains and
selective price increases.
DISTRIBUTION
CHAIN
FMCG sector has another prime requirement in the form of a strong distribution chain as the goods need to
be made available in the farthest of the corners and replenished virtually within no time as slightest of delays
may lead to consumer dissatisfaction. HUL has a very strong distribution network which is evident from its
reach. 84% outlets in India sell HUL’s soaps and the shelf availability is close to 6.3 million. 80% of all the
Indian households get to use HUL’s products. Under a unique initiative called Project Shakti, HUL is enabling

MARKETING MANAGEMENT 1
GROUP PROJECT 2
 ENVIRONMENT AND COMPETITION FMCG SOAPS PAGE 8

under privileged women in far flung rural areas to work as door to door distributors. But still there is lot of
scope of improvement regarding distribution in the rural areas.
PUBLICS
In context of marketing microenvironment, publics refer to any group that has an interest in or impact on the
organization’s ability to meet its goals. For example, Media publics include newspapers and magazines that can
publish articles of interest regarding the company and editorials that may influence customers’ opinions.
Government publics can affect the company by passing legislation and laws that put restrictions on the
company’s actions. Citizen-action publics include environmental groups and minority groups and can question
the actions of a company and put them in the public spotlight. A company like HUL needs to be highly aware
of all the developments across these publics that may be of relevance. For example, the environmental
degradation that may be caused by soap production in terms of the toxic gases and wastes released may bring
the citizen action publics calling for an explanation. Any such incident may prove fatal for the brands
reputation. This has happened to P&G in the past.
THE COMPANY
Lastly the internal working of the company, the cohesion between the various departments, the fundamentals
that it runs on, the skill level of the employees, all have their impact on the kind of marketing decisions that
the company takes. HUL is highly organized and mature or all these counts. Also, it has a highly functional
R&D which constantly lets the company upgrade its product lineage with newer and better products that
gives it an edge over all its competitors.
FUTURE MARKET
TRENDS
The Fast Moving Consumer Goods (FMCG) are likely to make a major dent in Rural and Semi-Urban
Segments by 2012 with their demand growing @ of about 60% to carry forward its total market size to
around Rs.1,23,363 crore from present level of Rs.70,000 crore with a projected (cumulative aggregate
growth rate) CAGR of 12%. (Source: according to The Associated Chambers of Commerce and Industry of India)

Today, the urban pockets which currently are the biggest market size for FMCG products like soaps, in next
4-5 years will switch over their consumption patterns for organic products to keep better their health, thus
making erosion in their present consumption patterns for these products. In urban pockets, the current
demand for FMCG products may stagnant by 2012 and force the FMCG manufacturers to shift their supplies
with assured qualities towards rural and semi-urban folks.

Soaps which currently have less than 30% penetration out of 100 people in rural and semi-urban areas will
grow at least by 50% in next 5-7 years because of their demand on account of rising per capita income of
rural and semi-urban folks. The per capita income of rural and semi-urban populace will increase as the
economic activities will grow their due to government focus for their industrialization.

As per current estimates, while the per capita income of semi-urban folk is around Rs.14-15,000 per annum,
the per capita income of rural folk is measured at less than Rs.7000 per annum. As per reports, by 2012

MARKETING MANAGEMENT 1
GROUP PROJECT 2
 ENVIRONMENT AND COMPETITION FMCG SOAPS PAGE 9

while the per capita income of rural folk will double, the per capita income of semi-urban people will more
than double and the reflections of rising per capita income will also lead to hike in their consumption patterns
for FMCG products. Around 70% of the total households in India (188 million) reside in the rural areas. The
total number of rural households is expected to rise from 135 million in 2001-02 to 153 million in 2009-10.
This presence is the largest potential market in the world.

Though the rural and semi-urban demand of soaps will grow larger and higher, it will put a severe pressure
on the margins of manufacturers because of cut-throat competition. The branded companies in this sector
that will make killings will include a known number like Nirma, HUL, ITC, Godrej, etc.

The rising rural and semi-urban income levels coupled with massive advertisement of soaps in the electronic
media will spread so much of awakening in the rural and semi-urban folks towards fast moving consumer
goods products so much that these will enlarge their affordability for them.

Affordability of the product to rural consumer is of concern. With low disposable incomes, products need to
be affordable to the rural consumer. Therefore it can be suggested that to tap the rural and semi-urban
market, better infrastructure facilities like roads, better telecom connectivity to rural persons, proper
sanitation and healthcare facilities should be created. Pricing is also an imprortant issue to consider.

FUTURE: HUL

As per reports the market share of Hindustan Unilever Limited is constantly on the decline. Today its market
share is in the order of 38 per cent, which is a far cry from the 50 per cent a few years ago. Stung by falling
market share, Hindustan Unilever (HUL) is reworking the marketing strategy for some of its largest volume
brands Lux being one such brand.

For beauty soap Lux it is planning to alter packaging and communication strategy. It is scheduled for a
makeover in September. The details of the forthcoming plans are being kept under warps. But it is learnt that
HUL has already alerted distributors about the changes. It had undertaken renovation activities on Lifebuoy
earlier this year. The brand was re-launched with an improved formulation that reduces mush and signals
better consumer value.

The Rs 1,000-crore Lux brand is facing tough competition from rival brands such as ITC’s Vivel, Godrej No 1
and Anchor’s Dyna. Dealers say companies are bundling products and offering big discounts and dealer
margins to push volumes. The value market share of Lux eroded from 17.6% to 15.5% in the 12-month
period to June ’09, according to market researcher AC Nielsen.

MARKETING MANAGEMENT 1
GROUP PROJECT 2
 ENVIRONMENT AND COMPETITION FMCG SOAPS PAGE 10

TRENDS IN TV
ADVERISEMENTS
A good indicator of future trends is a peak into the advertisement features on the Indian television. Here are
some of the important inferences:

TV ad volumes of 'soaps*' category witnessed 43 per cent

growth during 2008 compared to 2007.

'Soaps*' under 'protection' segment were advertised the most on

TV during 2008.

'Lux Strawberry Cream' was the top new brand in 'soaps*'

category on TV during 2008.

67 per cent of 'soaps*' category were advertised on regional

channels during 2008.

During 2008, advertising of 'soaps*' under 'protection'

segment had maximum share of 42 per cent followed by
'hydration' and 'nourishing' segment with 22 per cent and
21 per cent share respectively.

'Hindustan Unilever Ltd', 'Reckitt Benckiser (India) Ltd' and

'ITC Ltd' were top three advertisers of 'soaps*' brands on
TV during 2008.

Top 10 advertisers
share aggregates to 96
per cent of overall
advertising of 'soaps'.

The paradigm shift in

the outlook of
marketers is to
advertise profoundly in
regional markets than in
the urban markets. In
the opinion of many this
is where the crux of the
present market for soaps lies.

MARKETING MANAGEMENT 1
GROUP PROJECT 2
 ENVIRONMENT AND COMPETITION FMCG SOAPS PAGE 11

THE MARKETING
STRUCTURE: SOAPS

The market structure given

alongside is done according to
the mode of usage. The other
ways of classifying the market
structure are as per:

Income (discussed earlier)

Gender (beauty for females)

Age (children soaps, general

utility soaps, etc)

Hindustan Unilever Lever Ltd has been already discussed at length, let us now look into the other key market
players in the soap industry:

MARKETING MANAGEMENT 1
GROUP PROJECT 2
 ENVIRONMENT AND COMPETITION FMCG SOAPS PAGE 12

UNDERSTANDING
COMPETITION
We now look into the various marketing strategies of various Indian Soap Brands.

CINTHOL: Godrej
 This product has a tagline '24 hour confidence’.
 It understands changing consumer needs.
 'Cinthol has always been associated with the alpha male
personality. With Hritik Roshan being the brand
ambassador, the brand has been revamped in a
contemporary manner.
 This reflects the change in product communication
(market segmentation) 'The new communication has a
masculine tonality, but it is targeted at young adults who
aspire to an active lifestyle.'
 Godrej has an exclusive website for Cinthol, used to interact with customers and creating tribes of
likeminded users.

LUX: HUL
 The brand is being positioned as the favorite soap of Film stars has been consistent in terms of
communication and positioning
 Lux has always changed with the current trends. Whether
it is in terms of the product or promotions, the brand seeks to
keep the consumers excited.
 The increasing competition in the soap category forced
Lux to rethink on its targeting strategy. The brand had a choice
either to compromise on market share and uphold the premium
positioning or to retain the market share and dilute the
positioning.
 Lux wanted to ensure that the brand be positioned as
premium but also did not wanted to compromise on the share.
The result was International Lux: the premium variant while Lux
Beauty soap was the affordable variant.
 Lux is a brand that appreciates beauty and glamour. Lux A delight to
the senses. Lux celebrates the indulgent ritual of beautification. Are
some of the taglines.

SANTOOR: Wipro
 The brand was positioned as the beauty + skin care at a
reasonable price and the brand derived strength from the efficacy of
the ingredients.

MARKETING MANAGEMENT 1
GROUP PROJECT 2
 ENVIRONMENT AND COMPETITION FMCG SOAPS PAGE 13

 Thus started the brain storming on getting the "wow" factor to build the brand. This came in the form
of the new positioning "For Younger Looking Skin". The positioning comes from the consumer insight
that ultimately the customers look for a younger skin which is another smart way of defining beauty.
 The focus on "Younger Skin" also acts as a powerful differentiator because other brands
were focusing on "beautiful skin" or "looking beautiful.
 The brand was the first one to use a Mother and her five year old daughter to endorse the brand.
 The campaigns showed Saif Ali Khan (in North) and Madhavan (in South) in the TV Commercials.
These show the celebrities along with the Mother and child in the usual mistaken identity theme

FIAMA DI WILLS: ITC

 Fiama Di Wills is a premium brand. It is trying to tap
into the growing popularity of Natural Extracts and
natural ingredients.
 Fiama Di Wills is promoted with the tagline "Beautiful
You Today, Tomorrow "; and is promoted heavily
through visual media.
 It is trying to differentiate itself on the basis of its
packaging designed by International experts.
 It tagline “gentle and effective care by combining
elements of nature and science”.

DOVE: HUL
 Dove has used magazines as a key partner in its marketing strategy, recognizing that consumer
magazines are themselves beauty power brands, with the ability to set the national
agenda and enrich the Dove brand.
 In the Dove campaign, featured regular women (non-models) who
were beautiful in their own way and did not fit in with the idealized images of
models were used.
 Unilever developed the CFRB (campaign for real beauty) campaign
based on a global study on the perceptions and
attitudes of women with regard to their
personal beauty and well-being.
 It uses the niche marketing strategy to
focus on their specific consumers.

REXONA
 It is positioned as natural skin care soap for a glowing skin.
 It is the only brand tailored to the need of individual needs of men
and women.

MARKETING MANAGEMENT 1
GROUP PROJECT 2