hll and nirma
TRANSCRIPT
Case analysis – HLL: Levers for change
Rahul Kumar 09Saba Rais 59
Sunanda Mitra 149Siraj Siddiqui 151
11/04/2023 2
Flow of presentation• Recent Industry Brief • HLL Introduction• HLL HR Policy• History of Washing Powders• NSDs• Recent Comparisons• Mindset of HLL• Nirma• Model Nirma• Nirma SCM• Nirma Recievables• Nirma Advantages• The growth Story• The Market Shares• Volume Growth• BCG
• Ansoff• Why HLL?• Combating Nirma• STING Campaign• Distribution Strategy• Product Placement• Wheel Vs. Nirma• Relaunch Of Sunlight• Financial Imacts• Retained Earning• New Threats• HLL:Market Leaders• HLL Ladder• Tide• Tide of TIDE• IMC
Strategic Management/HLL Case/ Prof. Shaveta Kukreja
11/04/2023 Strategic Management/HLL Case/ Prof. Shaveta Kukreja
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Recent Industry Brief
• The Indian laundry market is Rs 5000 crore. Making India world’s third largest detergents market.
• HUL enjoying highest 38% of share, followed by others like P&G, Nirma, Ghari etc.
• Detergent bar comprises of 43% of market share and powder enjoying the rest 57%.
• The hot brands are Nirma, Ariel, Surf, Tide, Wheel, Surf Excel and leaving others as option.
• Competition in this market is really high with HUL, P&G, Nirma etc strategizing and innovating to capture the market.
11/04/2023 Strategic Management/HLL Case/ Prof. Shaveta Kukreja
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HLL Introduction
• Founded in 1956• Consolidation of 3 companies.• In chemicals, detergents, agriculture,
personal products.• A subsidiary of Uniliver.• 3rd largest business group .
• Source: HLL CASE STUDY PAGE 3-5
11/04/2023 Strategic Management/HLL Case/ Prof. Shaveta Kukreja
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HLL HR Policy
• Glocal policy• Recruit young bright Indians• To crate leaders• To follow the values of Honesty,
Integrity, Meritocracy & respect
11/04/2023 Strategic Management/HLL Case/ Prof. Shaveta Kukreja
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History of Washing Powders
Traditional bar • Hard yellow soap
Laundry soap• 1970’s – They governed 95% market share • Low priced products by local manufacturers• HLL’s sunlight
11/04/2023 Strategic Management/HLL Case/ Prof. Shaveta Kukreja
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NSDsDetergent powder• Lead by HLL’s Surf (1959) and Swastic’s Det.• 1965 – Market share – Surf(70%) vs Det(25%).• Showed promising growth• Rise in price of surf invited more players• Surf was the industry leader inspite of all the competition
• Detergent cake• Pioneered by TOMCO and followed by HLL• Cake segment caught up in pace with the powder segment• It was categorized into high, medium and low priced
11/04/2023 Strategic Management/HLL Case/ Prof. Shaveta Kukreja
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Recent Comparisons
11/04/2023 Strategic Management/HLL Case/ Prof. Shaveta Kukreja
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Mindset of HLL( Pre-Nirma)
• No aggressive competitor• Undisputed leader in the organized sector• Had all the knowledge about their rivals• Had the support of Unilever’s international
repute• Nothing could stop them from dictating the
market
11/04/2023 Strategic Management/HLL Case/ Prof. Shaveta Kukreja
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NIRMA
• Business principle – “Develop a good product and there will be market for it.”
• Did not follow any fixed business rules• Rules were flexible• Identified the gap in the business of the large
companies and leveraged on it
11/04/2023 Strategic Management/HLL Case/ Prof. Shaveta Kukreja
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Model which NIRMA followed
• Kept production costs low• Investment on maintenance was low• Contracted out business functions to keep
overheads low• Production was continuous• Employed unskilled labors• Paid laborers on the basis of work done
11/04/2023 Strategic Management/HLL Case/ Prof. Shaveta Kukreja
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Nirma SCM
• For distribution it operated on the principle of obtaining the lowest cost at any point of time
• Had a much simpler forward supply chain compared to HLL
• Stockists were appointed as commission agents
• Supplies were made at a predetermined rate
11/04/2023 Strategic Management/HLL Case/ Prof. Shaveta Kukreja
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Nirma Recievables
• Cancellation of order was not allowed• Payment had to be made in advance through
demand draft• Handling and delivery costs were borne by
stockists• Nirma ensured that its distributors were
satisfied
11/04/2023 Strategic Management/HLL Case/ Prof. Shaveta Kukreja
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Nirma Advantages
• Its greatest strength was low price which it has been able to maintain
• Packed in poly bags which resulted in low cost• Had its own printing and packaging unit• Spent heavily on advertisement and sales
promotion• Vertical integration in future helped maintain
low cost
11/04/2023 Strategic Management/HLL Case/ Prof. Shaveta Kukreja
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The growth story
• Slow, steady and methodical expansion • By 1977 became the second largest volume seller in
the country 12% market share compared to 30.6% of surf
• Between 1977 & 1985 sales grew at a compounded rate of 49%
• Market share almost trebled to that of surf in 1983-91• Launched detergent cake in 1977-79• Planned to attack the market of surf with super Nirma
11/04/2023 Strategic Management/HLL Case/ Prof. Shaveta Kukreja
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The Market share War
Y1977 Y1978 Y1979 Y1980 Y1981 Y1982 Y1983 Y1984 Y1985 Y1986 Y1987 Y1988 Y19890
10
20
30
40
50
60
70
80
Chart Title
MS(SURF) 40.8 38.2 MS(NIRMA) * *
11/04/2023 Strategic Management/HLL Case/ Prof. Shaveta Kukreja
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Volume Growth of Nirma
Y1976 Y1977 Y1978 Y1979 Y1980 Y1981 Y1982 Y1983 Y1984 Y1985 Y1986 Y1987 Y1988 Y19890
50
100
150
200
250
300
350
VOLUME OF Nirma (In 1000 tons)
VOLUME(In 1000 tons)
11/04/2023 Strategic Management/HLL Case/ Prof. Shaveta Kukreja
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NIRMA in the BCG matrix
11/04/2023 Strategic Management/HLL Case/ Prof. Shaveta Kukreja
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NIRMA on the Ansoff’s matrix
FROM PRICE POINT OF VEIW
11/04/2023 Strategic Management/HLL Case/ Prof. Shaveta Kukreja
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Why didn’t HLL react immediately?
• Focused on their premium brands• Rin was showing promising growth• It was difficult for HLL to duplicate NIRMA’s
product• Constrains on production• Failed to understand the business model and
product positioning of NIRMA
HLL Fights Back
11/04/2023 Strategic Management/HLL Case/ Prof. Shaveta Kukreja
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Combating Nirma: 1985-1991
• Switch from cartons to polybags• Improved formula and price discounts• New brand slogan ‘Surf washes whiter’• Introduction of Lalitaji – representative of a
sensible housewife• Introduction of ‘Sunlight’ positioned directly
against Nirma in terms of price
11/04/2023 Strategic Management/HLL Case/ Prof. Shaveta Kukreja
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STING Campaign: Wheel introduced
• Competitor’s meeting every week• Evolvement of a low priced detergent i.e.,
wheel without the high soda ash content of Nirma
• Alternative ways of marketing were developed• Selection of production sites to obtain raw
materials at low costs• Third party production units to get advantage of
small scale manufacturing
11/04/2023 Strategic Management/HLL Case/ Prof. Shaveta Kukreja
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Distribution Strategy: Wheel
• Use of existing distribution channel of HLL which provided a coverage area of 3200 towns and 6000 villages
• Switch over to a simpler system in 1990
HLL Factory
40 carrying and forwarding agents
4000 redistribution stockists
300000 retailers and wholesalers
HLL Factory
4000 redistribution stockists
300000 retailers and wholesalers
Before After
11/04/2023 Strategic Management/HLL Case/ Prof. Shaveta Kukreja
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Product Placement: Wheel
• Advertising expenditure amounting to Rs.50-60 mn per year in line with Nirma
• Advertising stressed on the tag line ‘safe on hands and clothes’
• Priced at Rs. 5.50 as against Rs. 5.25 for Nirma
Result: By 1990 HLL regained its leadership in the fabric wash market which it had lost in 1987
11/04/2023 Strategic Management/HLL Case/ Prof. Shaveta Kukreja
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Wheel vs. Nirma
• Cost Structure: Cost economy achieved on Raw Materials PBI Excise Sales Tax
• Continuous decline in sales of Nirma compared to continuous increase in sales of HLL in terms of both volume and value
• The gap in volume was greater than the gap in value
11/04/2023 Strategic Management/HLL Case/ Prof. Shaveta Kukreja
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Re-launch of Sunlight
• By 1991 sales had dropped from 30000 tons to 6000 tons
• Market share had dropped to less than 7%• Repacking higher quantity at the same price• By 1992 sales again surged to 15000 tons a
year
11/04/2023 Strategic Management/HLL Case/ Prof. Shaveta Kukreja
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Financial Impact: 1989-91
• Increase in fixed asset investment by 17%
• Increase in working capital by 37%
• Increase in sales by 46%
• Increase in profit by 66%
• 42% bonus declared in 1990 in addition to
bonus issue of 1:2
11/04/2023 Strategic Management/HLL Case/ Prof. Shaveta Kukreja
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Retained Earnings
Y1982 Y1983 Y1984 Y1985 Y1986 Y1987 Y1988 Y1989 Y1990 Y1991
1602
8631008
1151
1843
1442
2278
2749
3483
4610
RETAINED EARNING OF HLLRETAINED EARNING
11/04/2023 Strategic Management/HLL Case/ Prof. Shaveta Kukreja
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New Threat: P&G
• Ariel Microsystem launched in 1990 by P&G targeted at the premium segment
• Rin powder though superior to Nirma was lower in quality compared to Ariel
• By February 1992 HLL launched its ultra product based on cost effective indigenous technology
• It used a parallel production development plan instead of step by step approach
11/04/2023 Strategic Management/HLL Case/ Prof. Shaveta Kukreja
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HLL: Market Leader
• Elaborate segmentation and positioning• Targeting the vaccum in all segments• Emphasis on competitive pricing and cost
reductions• By 1998 HLL was the undisputed leader in
Indian market ready to face any challenge
Next Challenge: To augment its revenues in order to match value with volume
11/04/2023 Strategic Management/HLL Case/ Prof. Shaveta Kukreja
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HLL Ladder
11/04/2023 Strategic Management/HLL Case/ Prof. Shaveta Kukreja
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HLL Latest• The effect of the price war on HLL's bottomline
and product portfolio will take some time to figure out.
• HLL's portfolio presently looks skewed with a lot of its brands now competing in the same price range.
• Rin Shakti and Surf Excel Blue are now at the same price point of Rs 42 per kg.
• Surf Excel Blue had recently been re-launched, possibly to convert Rin Shakti users to Surf Excel Blue.
11/04/2023 Strategic Management/HLL Case/ Prof. Shaveta Kukreja
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Tide• Tide is the name of a popular laundry detergent in the market of
Canada, the United States and other countries.(by Procter & Gamble)• Tide is the World’s Oldest & Most Trusted Detergent brand and is the
Market Leader in 23 Countries around the world.• Launched in India in mid-2000• It gives outstanding whiteness due to its anti redeposition global
technology • Anti-redeposition Agents help keep soils from re-settling on clothes
after they have been removed during the wash itself• It offers solution to virtually any stain • Tide detergent is available in India in packs of 200 gm, 500 gm, 1 kg, 2
kg and 20 gm single use sachet.• Tide bar is available in 75gm,125gm,200gm bars.
11/04/2023 Strategic Management/HLL Case/ Prof. Shaveta Kukreja
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Tide of Tide
• The price cut by P&G has resulted in a repositioning of Tide in the popular segment.
• Consumers could well see a huge value-for-money proposition in Tide and downtrade to Tide from Rin Supreme.
• With the price cut, P&G has virtually killed the premium segment and reduced the detergent segment to the mid-price and popular segments.
11/04/2023 Strategic Management/HLL Case/ Prof. Shaveta Kukreja
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IMC
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Thank you