Shampoo Industry in India

Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers

Sunsilk, Dove, Clear, Clinic Plus, Tres Emme

Head & Shoulders, Pantene, Wella

Chik, Meera, Nyle, Karthika

Vatika, Total Protect

Growth Drivers Market features

• Heightened awareness about personal grooming • Rs4.5 Billion market in 2015
• Gender specific shampoo products are becoming increasingly popular • Rural penetration low at 12% only
• Increasingly diverse portfolio of shampoos • Urban penetration level is 36%
• Smaller SKUs/shampoo sachets at reduced prices increase new product trials • Urban areas contribute to 80% of shampoo sales
• Distribution networks to expand their reach in rural India • 40% of volumes are in sachets
• Increasing middle class in urban areas have higher disposable income and are • 50% of consumers use toilet soap for washing hair
willing to buy premium products
• Increasingly brand conscious and benefit-conscious consumers
Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers

Strengths Weaknesses

Low capital intensity Low export levels

Simple technology Me-too products
Indian demographics High excise duty

Opportunities Threats
Removal of import restrictions may flood
Low penetration of the industry in India
the Indian markets
Increasing disposable incomes of families
Slowdown in rural demand
Weakening rupee
Intensive competition
Increase in awareness about shampoos
Entry of spurious goods into the market
Untapped rural market
 Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers

• Bargaining power of customers Moderate

• Bargaining power of suppliers Low
• Threat of New entrants Low
• Threat of substitutes High
• Competitive Rivalry High
Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers

Political
• Government spending on infrastructure, power, and transportation infrastructure.
• Tax exclusion in sales and excise duty
• Restrictions on import policies
• Privatization is influenced by government which encourages free business
• Flexible regulations on international trade
• If GST bill is passed it is going to benefit FMCG sector with tax savings

Economic
• Reduction in industrial licensing, liberalization of foreign capital resulted in better economic environment
• Consistent growth of the industry with Indian economy.
• Increase in disposable income
• Urbanization in India has lead to people good exposure and knowledge of brands
• Poor diet and nutrition can not only slow the growth rate of the body’s hair, but can actually cause it to fall out. Here
arises a need for a hair fall control shampoo.

Social
• Due to urbanization changes in lifestyle,, social mobility, increasing per capita income has lead people to new
opportunities for business
• FMCG market also now focusing on rural areas for more penetration
• Literacy levels increased leading to awareness in safety issues related to products
• The increase in hair growth products and hair appliances purchase
• Due to increased hair issues, the demand for hair care products like regular and expert shampoos, conditioners, hair
colors and hair oils are increasing rapidly, thereby providing high growth to the Indian hair care market
Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers

Technological
• Technology enables the incorporation of new ingredients in shampoos, leaving hair cleaner and better conditioned
• Shampoo technology will also improve as new ingredients are developed by raw material suppliers. Some important
advances are being made in the development of compounds such as polymers, silicones, and surfactants. These
materials will be less irritating, less expensive, more environmentally friendly, and also provide greater functionality
and performance.
• Production optimization along with equipment standardization is helping to reduce investments in factories.
• Packaging innovation is ensuring lightweight bottles o as to reduce the quantities of plastics used
• The multi stage Viscoprop impellers are helping in mixing different densities of constituents decreasing mixing time
• Investment in IT is reducing costs in supply chain by easing information access

Environmental
• Dryness care & Heat defence emphasis due to climatic changes
• When there is very little humidity in the air and conditions are very dry breakage is common
• Desalinated water can cause harmful scalp build-up that leads to hair breaking off above the external root sheath.
• Other environmental factors such weather, climate changes affect industry
• Due to global warming environmental laws and regulations are getting tougher which affects firm’s production
procedures, steps taken for remedies
• Greenwashing is increasingly a common trend
• Shampoo bottles made from sugarcane are the newest development in sustainable packaging. It uses 70% less fossil
fuel in its production. P&G reports that using plant-based material for plastic bottles decreases greenhouse gas
output by 170%.

Legal
• Product Information Package is to be provided as per Law.
• Drug and Magic Remedies (Objectionable Advertisement) Act, 1954
Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers

Current Trends
Excessive fragmentation

New product development

Salon services

Demand for professional shampoos

Herbal shampoos

Penetrative pricing- value packs

Selling online

Digital marketing
Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers

P&G is headquartered in downtown Cincinnati, Ohio

Started n 1837 by William Procter and James Gamble

Markets 250+ brands to 5billion consumers in 140 countries

 Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers

Pantene’s
journey to Manufacturing Plant: Baddi, Solan, Himachal Pradesh
your
bathroom

Distribution Center: Mandideep, Bhopal

Distributor: Pride Distributor’s Mother Warehouse, Indore

Distributor’s Branch Warehouses in Ujjain, Jhabua, Dewas etc

14000 Wholesalers and large retailers in Western MP

Retailers and Point of Sales Across Western MP

Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers

Project Golden Eye

• After failing to challenge HUL, P&G changed its strategy. It found out that its current volumes did not
justify its large distributor network
• A large distributor network meant that no single distributor had large enough volumes to achieve an
attractive return on investment

• This resulted in each distributor trying to extend its reach to push up volumes
• With P&G's portfolio of high-margin, low volume products, merely extending reach only increased the
cost of servicing, not the purchases per outlet

• P&G reduced costs by knocking down direct coverage, cut down its number of distributors to about
one-tenth of the size that time
• With 1-3 distributors in 1 state P&G could then replenish its distributors more frequently and hence
reduce their average stock-level

• It used the money saved into advertising and brand building

• P&G also removed C&F agents. The distributors were expected to invest in storage and warehousing
space, so that the stock transfer from the company could take place as soon as the stocks were
shipped into the warehouse
 Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers

vs
Wholesalers and retailers pointed out that margins are same for products of both the companies. They also mentioned that frequency of
visits by sales people are also same

As HUL has higher number of products, it takes up a larger shelf space compared to P&G’s products

P&G pays higher slotting fee to give sufficient to its limited portfolio

Wholesalers mentioned that demand for HUL products are more as they have more products and variants within Shampoos

Undercutting is common for HUL products

There are only 2 promoters from P&G that are associated with a supermarket and are taking care of all product lines. HUL has 1 promoter
for each product line

P&G’s sales staff is on distributor’s payrolls unlike HUL

Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers

HUL Supply Chain

 Shampoo Industry
Pride Distributors is one
of P&G’s 3 distributors in
MP
Pride Distributor has
300 staff, with a sales
force of 150 people,
covering towns/cities
within 300km radius
around Indore
P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers
Distributor collects margin of 4% on the product
P&G uses a daily sales information reporting system to
track the movement of its goods across the geography
P&G designs incentives for every player in the value chain
maintaining control
Distributors are responsible for running marketing
schemes for products and handling local sales incentives
Transfer of goods from P&G warehouse to distributor and
from distributor to retailers takes place daily
 Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers

Sales Hierarchy

Monthly sales targets are set by P&G for each distributor who
Regional Sales
Manager (MP, CG, GJ) then divides it among the hierarchy

Sales men have a fixed component and a variable

Sales Managers component

Variable pay is based on an index decided on percentage

Sales Team Leaders of target achieved

Index is brand dependent (Eg. If a sales person is selling 3

Sales Executives brands, he will have 3 separate indices under variable pay
and will be compensated accordingly)

Distributor’s Sales
Staff (150) New sales person spends about 8-10 days in the warehouse gaining
product knowledge and interacting with experienced sales men. Next
Delivery & Collection
15-20 days, are spent in field training
Co-ordinators
Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers

They were delighted to meet Ronak and Abhinav

 Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers

Ali & Ali Brothers

12 Wholesaler areas in Indore

Ranipura is one such area with 30-40 FMCG wholesalers

Wholesalers get products from:

• P&G Authorised Distributor
• Wholesale supermarkets like Bestprice, Metro Cash & Carry, Reliance mart.
Wholesaler targets : Decided by the company and if achieved, 10% higher targets are set for the next month

Margin : 1.5% and Credit Period : 15 days

Salesman visit the area twice a week to take order of stock to be replenished

Stock outs are not very common. Urgent requirements are met by buying from wholesaler supermarkets
 Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers

Ali & Ali Brothers

Volume wise sales
• Sachets : 70%
• Bottles :30%
Typical customers for wholesalers
• Local kirana stores
• Medical stores
Typical customer buys about 10 -15 sachets of Pantene and Head& Shoulders

Wholesalers pass on parts of discounts/incentives to retailers

Quantity based incentive schemes are run by P&G to encourage wholesalers to meet targets
 Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers

Modern Trade/Supermarkets M&P/ Kirana Stores

Stores Visited : Shiv Kirana Store -Vijay Nagar ;
Stores Visited : MORE Mega Store , Big Bazaar – C21 Mall Asha general Store, Varlakshmi General Store- Rau;
Pi-Shop , KK Traders – IIM Campus
Margins : 20-25 %
Margins : 6- 7 % for 5ml, 7.5 ml and 80 ml packs
 Order :Directly places order to the company and Distributor supplies 8-10 % for > 100 ml bottles
the products
 Order: Either buys from the wholesale market directly or the
 Store Visits by Salesperson: Weekly salespeople come and provide products every 15 days

Inventory replenishment interval :1 month  Store Visits by Salesperson: every 15 days in Rau , varies from 10-
15 days in Indore stores.
 Stock-outs :occur only a few times in a year - New stock arrives in
2-3 days. Inventory replenishment interval :1 – 2 weeks

 Discounts :
• Primary Schemes - negotiated with the company while placing
orders
•. Secondary Schemes - some % amount is reimbursed when
huge amount is sold during festive periods
 Stock-outs :generally do not occur as sales are low in Rau and in
Indore products are procured from wholesale market easily
 Discounts : Wholesalers provide discounts based on the amount
bought by the retailer
Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers
Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers

Recommendations
HUL has one promoter per product line while P&G has one
promoter for all products. Promoters need to be increased
P&G should introduce more product lines and variants in the
herbal segment
Tres Emme overtook Pantene in Modern Trade(P&G’s strength)
in 2015. P&G needs to re-evaluate its strategy
P&G needs to introduce formal training for its salesmen to
make them more effective
P&G would have to find a cost effective way to reach out to
rural markets sooner or later
Shampoo Industry P&G’s Distribution Network Competitor Analysis Distributors Wholesalers Retailers