lever brothers internship report

8/13/2019 Lever Brothers Internship Report

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Internship Report On

Competitive Strategy AnalysisAnd

Strategic ResponseFor Detergent Brands At

Lever Brothers Bangladesh Limited

Submitted To

Mr. Shama E Zaheer

Lecturer

Institute of Business Administration

Submitted By

Sami Ashraf

ZR 46BBA 8

thBatch

June 5, 2004


University of Dhaka


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June 5, 2004

Mr. Shama E Zaheer

Lecturer


University of Dhaka

Dhaka

Subject: Letter of Transmittal.

Dear Sir,

I, Sami Ashraf am hereby submitting my internship report. The last 10 weeks has been the

most fabulous learning experience for me. Without your guidance and help this learning

experience would not have been the way it has been.

I have tried my level best to come up with as well written and informative report as possible.

However, because of the confidentiality policy of Lever Brothers Bangladesh Limited it has

not been possible to put as many data and information as I would have liked to.

Hope you enjoy reading the report just as much I enjoyed writing and working for the

report.

With Regards

Sami Ashraf

ZR46

BBA 8thBatch


University of Dhaka


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Acknowledgements

This report would never have been the way it is without the help and guidance of thefollowing people.

I thank Mr. Shama E Zaheer for all his help, guidance and suggestions and above all the

precious time that he spared for me on a regular basis.

I also thank Mr. Ahmed Zakaria Baig, my supervisor in Lever Brothers Bangladesh Limted

for guiding me all the way till the end.

A special thanks goes to Mr. Sharaman Jha for providing me with invaluable insights about

P&G.

I also thank all the countless others who helped me with data, information and analyzing

them properly.


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I

Executive Summary

Lever Brothers Bangladesh Limited is a dominant name in the Household and PersonnelCare products market of Bangladesh. It is said that to go to the top is tough but to stay there

is even tougher and Lever Brothers Bangladesh Limited has been successfully doing that

extremely tough job of staying at the top for a long time now. They always work very hard to

identify any threat in the market and find a way to neutralize that threat before it is too late.

Recently in the premium segment of detergent powder arch rival of Unilever, Proctor &

Gamble has been posing a great threat with their brand Ariel and is expected to come to

Bangladesh market with as much as 25% reduced price. This is learning that Lever Brothers

Bangladesh Limited has learned from P&Gs strategies in India and other emerging markets.

This will predominantly be a fight between Ariel of P&G and Surf Excel of Unilever.

However, logically it will not be easy for P&G to come to this market with such a reduced

price as they do not have any production facilities in Bangladesh. If they are to import the

detergent from India, which they have been doing, then after paying import tax the margin

left with them will be simply too less. If they still come with a discounted price then they willhave to rationalize their advertisement and other promotional expenses, which will make it

tough for them to, sell a detergent, which is not very well known in the market. Also, P&G

is currently not being able to supply enough of their flagship detergent brand, Ariel in India

because of lack of production facilities. In a situation like this, it will be next to impossible

for them to export detergent in Bangladesh before they expand their production facility.

However, currently they are setting up new production facility in India and is expected to

complete work by July after which they might come to Bangladesh with a price cut.

Lever Brothers Bangladesh Limited will on the other hand take all necessary steps to if not

prevent P&G from coming into Bangladesh at least make it a little tough for them to come

in. It is suggested that as a pre-emptive measure, Lever Brothers Bangladesh Limited should

cut down the cost of Surf Excel and at the same time do some heavy conventional and un-


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II

conventional media advertising. Also as and when P&G comes in with Ariel, Surf Excel

should do certain activities like line filling and other temporary promotional activities which

will make it little more difficult for P&G to get a foothold in Bangladesh.

Surf Excel also has a high brand equity on the other hand Ariel is a detergent which is

almost unknown to the Bangladesh market. This advantage if utilized properly can work for

Surf Excel and Ariel can be made to look like a copy Surf Excel brand.

Many information used to work out the strategies discussed in this report are highly

confidential and hence could not be used in the report. Also some data used in this repot are

not actual and have been fabricated intentionally to maintain confidentiality.


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III

Table of Contents

Description Page Number

Report Preliminaries

Executive Summary I

Table of Contents III

List of Figures VI

Introduction VII

Background of the Report VIII

Area of the Project VIII

Scope IX

Objective IX

Methodology X

Limitation XI

1. Organization Part 1

1.1 Overview of LBBL 1

1.2 History 2

1.2.1 Unilever 2

1.2.2 LBBL 4

1.3 LBBL at a Glance 71.4 LBBL Credo 8

1.5 Unilever/LBBL Corporate Purpose 9

1.6 LBBL Mission 10

1.7 LBBL Goals 10

1.8 LBBL Code of Business Principles 11

1.8.1 Standard of Conduct 11

1.8.2 Obeying the Law 11

1.8.3 Employees 11

1.8.4 Consumers 111.8.5 Shareholders 12

1.8.6 Business Partners 12

1.8.7 Community Investment 12

1.8.8 Public Activities 12

1.8.9 The Environment 12


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IV

1.8.10 Innovation 12

1.8.11 Competition 13

1.8.12 Business Integrity 13

1.8.13 Conflict of Interests 13

1.9 Current Operations 14

1.10 Markets served by LBBL 16

1.11 Distribution Network 18

1.12 Strategies 21

1.12.1 Functional Level Strategy 21

1.12.2 Business Level Strategy 21

1.12.3 Strategy in Global Level 22

1.12.4 Corporate Strategy 23

1.13 Organogram 24

2. Detergent Market 26

2.1 Fabric Wash Market 27

2.1.1 Soap Market 29

2.1.1.1 Ball Soap Market 29

2.1.1.2 Mechanized Laundry Soap Market 29

2.1.2 Detergent Market 30

2.1.2.1 Mass Market 30

2.1.2.2 The Mid Tier Market 31

2.1.2.3 Premium Tier 32

2.2 Target Demographics 33

2.3 Form Competition 35

2.4 Existing Strategy 36

3. Competitor Analysis 38

3.1 Categories & Brands 39

3.2 P&G Billion Dollar Brands 40

3.3 P&G Strategic Choices 41

3.4 P&G Core Strategies 42

3.5 P&G India 43

3.6 P&G Bangladesh 44

3.7 Roll Out 45

3.7.1 Strategy 45

3.7.1.1P&G Global Strategy 45

3.7.1.2 P&G Strategy in Emerging Markets 46


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V

3.7.1.3 P&G Strategy in India 48

3.7.2 Timing 53

3.7.3 Possible Cost After Price Cut 55

4. Lever Brothers Bangladesh Limited Response 57

4.1 Pre-emptive Strategy 58

4.1.1 Price Cut 58

4.1.1.1 Timing of the Price Cut 59

4.1.1.2 Surf Excel Cost Post Price Cut 60

4.1.2 Heavy Mass Media Advertising 61

4.1.3 Below The Line Campaign 62

4.1.4 Move into District Towns 63

4.1.5 The Mass Segment?? 64

4.2 Pro-active 65

4.3 Reactive 66

4.4 Brand Equity 67

4.4.1 Wheel 67

4.4.2 Surf Excel 67

4.4.3 Ariel 67

4.4.4 Tide 67

5. Recommendations 68

6. Conclusion 70


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VI

List of Figures

Description Page

Number

Figure 1: Distribution Chain of Command 18

Figure 2: Organogram Up to Director Level 24

Figure 3: Organogram Brands & Development Function 25

Figure 4: Fabric Wash Market 26

Figure 5: Three Tiers of Detergent Market 28

Figure 6: P&G Price Cut 49


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VII

Introduction

Everyday just like we brush our teeth and take a bath, we wash our clothes as well. LeverBrothers Bangladesh Limited has been providing the nation with quality fabric wash

products for almost 40 years now. However, high quality products cost higher than ordinary

products and with the kind of limited income our mass people has, it has not always been

possible for them to use these products. Still the effort goes on to provide mass people with

quality fabric wash products at a reasonable price.

The latest technology in Fabric Wash is the Enzymatic Detergent Powders from Unilever

and Proctor & Gamble. They call this category of detergents, Top Clean category.

Unilever has a strong presence in Bangladesh with their Top Clean brand Surf Excel where

as P&G presence with their Top Clean brand Ariel is not very significant. As one would

guess, Top Clean category detergents comes with a Top Price as well which makes it even

less accessible to the mass. Recently, both Unilever and P&G has decided not to charge a

premium any longer on this category of detergents in the emerging markets of Asia which

they used to do to offset the huge R&D costs incurred in developing these detergents. This

recent strategic shift has made this market highly competitive and in some regions of AsiaUnilever and P&G are having street fights after they both slashed their prices by as much as

25%. It is expected that the fight will very soon hit the Bangladesh market. Although in

paper it seems unlikely that the fight will be an even one (Due to nominal presence of P&G

in Bangladesh market) still Lever Brothers Bangladesh Limited will not take any chance with

P&G.

In this paper P&G strategies in different parts of the world are analyzed with special

emphasis on their strategy in India. Based on the learnings from these strategies and counter

strategies, a detail strategy for Lever Brothers Bangladesh Limited will be suggested.


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VIII

Background of the Internship Program

As part of Internship requirements, ten weeks organizational attachment with an

organization is required. After joining Lever Brothers Bangladesh Limited as a Management

Trainee in the Brands and Development function I was assigned to the Fabric Wash Team

with particular focus on the premium category detergent which is Surf Excel. My first

assignment was to investigate the strategies of P&G globally, in emerging markets and

particularly in India. Based on the findings, future strategy of P&G in Bangladesh was

sketched out a possible response by Lever Brothers Bangladesh Limited was suggested.

This was a very extensive study and this is what this report is on.

It may be mentioned here that, the data and other information used in this study are

confidential and hence a lot of them could not be used in this report. Some data used in this

report are not actual and have been intentionally fabricated to maintain confidentiality as per

the policy of Lever Brothers Bangladesh Limited.

Area of the Project

The area of the project has been confined to the Fabric Wash market only with special

emphasis on the premium segment.

The whole project is on what the strategy of P&G will be regarding their premium brandAriel which belongs to the premium detergent segment and the response of Lever Brothers

Bangladesh Limited with their premium brand Surf Excel. However, the mass detergent

market have not been ignored while working out the strategies which will be evident in the

report.


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IX

Scope

The scope of the report is limited to the Fabric Wash market only. While doing the

competitor analysis, only Proctor & Gamble have been analyzed with special emphasis on

their premium category brand, Ariel.

While formulating the response strategies of Lever Brothers Bangladesh Limited, strategies

have been worked out only for their premium category brand, Surf Excel. However, their

mass-market brand Wheel has not been ignored while formulating the response strategy or

while analyzing the market.

Objectives

The objectives of the report are as follows:

1. Analyze P&G strategies in their detergent category Globally.2. Analyze P&G strategies in their detergent category in the Emerging Markets of Asia.3. Analyze P&G strategies in their detergent category in India.4. Predict future P&G strategy in their detergent category in Bangladesh.5. Formulate Lever Brothers Bangladesh Limited response to these strategies.


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X

Methodology

All the analyses are done based on secondary information. The sources of information used

to analyze P&G strategies are:

1. Unilever archive2. Lever Brothers Bangladesh Limited Archive.3. Market Research Information from Bangladesh.4. Market Research Information from India.5. Market Intelligence from Bangladesh.6. Market Intelligence from India.7. The Internet.8. Past experience of Unilever.

The sources of information used to formulate strategies for Lever Brothers Bangladesh are:

1. Past strategies from Unilever archive.2. Past strategies from Lever Brothers Bangladesh Limited archive.3. Market Research Information.4. Market Intelligence Information.5. Production information of Surf Excel.6. Sales information of Surf Excel.


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XI

Limitations

The only limitation faced is, Lever Brothers Bangladesh Limited is not a listed company in

any stock market of Bangladesh as a result of which, they do not disclose ANY financial

information to the public. This has compelled to exclude the financial analysis section from

this report.

Also this being a conservative organization, do not allow any other information or data

belonging to Lever Brothers Bangladesh Limited to be disclosed to anyone outside this

organization.

By policy, Lever Brothers Bangladesh Limited do not disclose any financial, research,

production or sales data to anyone outside the organization or even inside the organization

who do not have proper authorization. Because of this policy it has not been possible to

include the data and other information used to analyze different strategies and work out

strategies for Surf Excel and Lever Brothers Bangladesh Limited in this report. Most of the

data used in the report are not actual and have been fabricated to maintain confidentiality as

per the policy of Lever Brothers Bangladesh Limited. Any inconvenience is regretted.


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1. Organization PartPage 12of 84

1. Organization Part

1.1 Overview of Lever Brothers Bangladesh Limited

Lever Brothers Bangladesh Limited is a subsidiary of Unilever, worlds one of the largest

Household and Personnel Care and Foods Manufacturer with an annul turnover of 47Billion

Euro or approximately 3,20,000 Crore Taka. Lever Brothers Bangladesh Limited is the

leading Household and Personnel Care producer in Bangladesh with 15 brands and

numerous sub-brands. They have been here in this country for the last forty years and have a

huge manufacturing facility in Kalurghat, Chittagong aside from six other third party

production facilities.

Its offices are located in:

Registered Office Lever Brothers Bangladesh Limited

51 Kalurghat Heavy Industrial Area

P. O. Box # 125

Chittagong 4000

Bangladesh

Corporate Office Lever Brothers Bangladesh Limited

ZN Tower

Plot No. 2, SW (1)

Road No. 8

Gulshan 1

Dhaka 1212

Bangladesh


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1.2 History

1.2.1 Unilever

Unilever is one of the largest fast moving consumer goods companies in the world. Its roots

go back more than a century!

Margarine was first produced commercially in the Netherlands in the 1870s and by 1927 two

early manufacturers, Jurgens and Van den Bergh, decided to merge their operations to form

Margarine Unie. Meanwhile, in the UK, William Hesketh Lever founded his company, Lever

Brothers, in 1885 and soon established soap factories around the world. In 1917, he began to

diversify into foods, ice cream, acquiring fish, and canned food businesses. The Unilever

Group came together in 1930 through the merger of Margarine Unie and Lever Brothers.

Since then Unilever has operated as one.

With a portfolio comprising of Home and Personal Care and Foods products, Unilever

today operates in more than 100 countries across the world. Unilever is, in every sense, a

truly multi-local multinational company. With deep roots into the local cultures in which it

operates. Unilever offers brands suited to local tastes. Every day 150 million people choose

our brands to feed their families, groom themselves and clean their homes!

Some Facts about Unilever

Worldwide turnover in 2003 was 47,700 million Euros

Employed 247,000 people, with 90% of managers locally recruited and trained. Over half of Unilever's sales are generated by its foods division brands.

In many parts of the world Unilever leads the home care market with brands such as

Brilhante, Comfort, Skip and Omo.


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Unilever's top personal care brands include Lux, Ponds, Sunsilk, Rexona, Axe, and

Dove

In 2002 Unilever spent 1,166 million Euros on research and development - about 2.4%

of its turnover.

Unilever spent 69 million Euros on community programs in 2002.

Unilever aims to source all fish from certified, sustainable fisheries by 2005.

Unilever has 111 sites certified to the international environmental management standard

ISO 14001.


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In the early 90's Lever Brothers entered the tea-based beverage market introducing Lipton

Taaza, Lever's flagship packet tea brand, with the objective to be the most preferred tea of

the Bangladeshi consumers.

The appetite to innovate and grow was insatiable. New products such as fabric washing

powders were manufactured for the first time with formulations technically suitable for

conditions in Bangladesh at an affordable price. Such washing powders led the country to

witnessing a revolutionary change in washing habits moving from direct application to

significantly convenient solution wash.

Product formulations were of international standard and by tapping into the vast know-how

base of the parent Company - Unilever, Lever Brothers was able to make the productsavailable to the consumers at an affordable price. The growth of the company provided

ample employment opportunities both direct and secondary with attendant fillip to the

economy of the country.

Focused on meeting and responding to the needs of our consumers in Bangladesh, the

journey to grow and the quest for excellence continue unabated!

Brief History of Brand Launches by Year:

1964 Lifebuoy

1964 Lux

1972 Wheel Laundry Soap

1982 Sunsilk

1987 Close Up1987 Vim

1989 Clear

1988 Fair & Lovely

1990 Lipton Yellow Label

1991 Ponds'


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1991 Pepsodent

1992 Taaza

1993 Surf Excel

1997 Wheel Washing Powder

2002 Clinic

2002 Rexona


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1.3 Lever Brothers Bangladesh Limited at a Glance

Constitution : Unilever - 60.75% shares, Government ofBangladesh - 39.25%

Operations : Home and Personal Care, Foods

Product Categories : Household Care, Fabric Cleaning, Skin Cleansing,

Skin Care, Oral Care, Hair Care, Personal

Grooming, Tea based Beverages

Top Brands : Wheel, Lux, Lifebuoy, Fair & Lovely, Pond's,

Close Up, Sunsilk, Lipton Taaza

Manufacturing Facility : We have a Soap Manufacturing factory and a

Personal Products Factory located in Chittagong.

Besides these, there is a tea packaging operation in

Chittagong and five manufacturing units in Dhaka,

which are exclusively dedicated to Lever Brothers.

Employees : Over 4000 people are provided direct employment

through our factories, distributors, and exclusive

manufacturers.


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1.4Lever Brothers Bangladesh Limited Credo

Several product categories.Various brands. Numerous variants and pack sizes

The choices are endless.

We provide wide ranging options to fulfill diverse

aspirations and tastes.

We tailor our products to satisfy our consumers with

different needs and means.

We span the country covering hundreds of thousands

of outlets.

The wide range of products and brands we offer are a

realization of the simple universal fact different

individuals have different needs.


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1.5 Unilever/ Lever Brothers Bangladesh Limited Corporate Purpose:

Unilevers purpose is to meet the everyday needs of people everywhere. To anticipate the

aspirations of their consumers and customers and to respond creatively and competitivelywith branded products and services which raise the quality of life.

Their deep roots in local cultures and markets around the world are their unparalleled

inheritance and the foundation of their future growth. They bring their wealth of knowledge

and international expertise to the service of local customers a truly multi-local

multinational.

Their long-term success requires a total commitment to exceptional standards of

performance and productivity, to working together effectively and to a willingness to

embrace new ideas and learn continuously.

They believe that to succeed requires the highest standards of corporate behavior towards

their employees, consumers and the societies and world in which we live.

This is Unilevers road to sustainable, profitable, growth for their business and long-term

value creation for their shareholders and employees.


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1.6 Lever Brothers Bangladesh Limited Mission

The mission of Lever Brothers Bangladesh Limited is:

Continuous effort to meet the everyday needs of people everywhere

1.7 Lever Brothers Bangladesh Limited Goals:

1. To manufacture high-standard products.2. Promoting products to the highest extent3. Producing large volume to achieve production cost economies.4. Enabling quality products to be sold out at obtainable prices.


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1.8 Code of Business Principles

The following Unilevers business principals are also applicable for Lever BrothersBangladesh Limited.

1.8.1 Standard Of Conduct

They conduct their operations with honesty, integrity and openness, and with respect for the

human rights and interests for their employees. They will similarly respect the legitimate

interests of those with whom they have relationships.

1.8.2 Obeying The Law:

Unilever companies and their employees are required to comply with the laws and

regulations of the countries in which they operate.

1.8.3 Employees:

Unilever is committed to diversity in a working environment where there is mutual trust and

respect and where everyone feels responsible for the performance and reputation of their

company. They will recruit, employ and promote employees on the sole basis of the

qualifications and abilities needed for the work to be performed. They are committed to safe

and healthy working conditions for all employees. They will not use any form of forced,

compulsory or child labor. They are committed to working with employees to develop and

enhance each individuals skills and capabilities. They respect the dignity of the individual

and the right of employees to freedom of association. They maintain good communications

with employees through company based information and consultation procedures.

1.8.4 Consumers:

Unilever is committed to providing branded products and services which consistently offer

value in terms of price and quality, and which are safe for their intended use. Products and

services are accurately and properly labeled, advertised, and communicated.


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1.8.5 Shareholders:

Unilever conducts its operations in accordance with internationally accepted principles of

good corporate governance. They provide timely, regular and reliable information on our

activities, structure, financial situation and performance to all shareholders.

1.8.6 Business Partners:

Unilever is committed to establishing mutually beneficial relations with our suppliers,

customers and business partners. In their business dealings they expect their business

partners to adhere to business principles consistent with their own.

1.8.7 Community Involvement:

Unilever strives to be a trusted corporate citizen and, as an integral part of society, to fulfillour responsibilities to the societies and communities in which they operate.

1.8.8 Public Activities:

Unilever companies are encouraged to promote and defend their legitimate business

interests. They co-operate with governments and other organizations, both directly and

through bodies such as trade associations, in the development of proposed legislation and

other regulations, which may affect legitimate business interests. They neither support

political parties nor contribute to the funds of groups whose activities are calculated to

promote party interests.

1.8.9 The Environment:

Unilever is committed to making continuous improvements in the management of their

environmental impact and to the longer-term goal of developing a sustainable business. They

work in partnership with others to promote environmental care, increase understanding of

environmental issues and disseminate good practice.

1.8.10 Innovation:

In their scientific innovation to meet consumer needs they respect the concerns of their

consumers and society. They work on the basis of sound science applying rigorous standards

of product safety.


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1.8.11 Competition:

Unilever believes in vigorous yet fair competition and supports the development of

appropriate competition laws. They conduct their operations in accordance with the

principals of fair competition and all applicable regulations.

1.8.12 Business Integrity:

Unilever does not give or receive whether directly or indirectly bribes or other improper

advantages for business or financial gain. No employee may offer give or receive any gift or

payment, which is, or maybe construed as being, a bribe. Any demand for, or offer of, a

bribe must be rejected immediately and reported to management. Their accounting records

and supporting documents must accurately describe and reflect the nature of the underlyingtransactions. No undisclosed or unrecorded account, fund or asset will be established or

maintained.

1.8.13 Conflicts Of Interests:

All Unilever employees are expected to avoid personal activities and financial interests,

which could conflict with their responsibilities to the company. They must not seek gain for

themselves or others through misuse of their positions.


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1.9 Current Operations:

Existing Products

Home Care

Laundry

1. Wheel Laundry Soap

2. Wheel Washing Powder

3. Surf Excel

Household care

1. Vim Scourer

2. Vim Bar

3. Vim Liquid

Personal Care

Skin Cleansing

1. New International Lux

2. Lux Body Wash

3. Life Buoy Extra Strong

4. Life Buoy Neem

5. Life Buoy Gold

6. Life Buoy Liquid Gold

Skin Care

1. Fair & Lovely

2. Fair & Lovely Body Fairness Milk

3. Fair & Lovely Ayurvedic

4. Fair & Lovely Cold Cream

5. Ponds Snow


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6. Ponds Cold Cream

7. Ponds Vanishing Cream

8. Ponds Dream Flower Lotion

9. Ponds Dream Flower Talc

Hair Care

1. New Sun Silk Shampoo

2. All Clear Shampoo

3. Clinic Plus Shampoo

Oral Care

1. Close-up Gel Toothpaste2. Pepsodent Toothpaste

3. Pepsodent Toothpowder

Deo

1. Rexona Deo Spray

2. Rexona Roll-on.

3. Rexona Tube Deo

Foods

1. Lipton Yellow Label Tea Bag

2. Lipton Taaza

3. Lipton Taaza Tea Bag


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1.10 Markets Served by Lever Brothers Bangladesh Limited

Lever Brothers Bangladesh Limited serves all kinds of markets. Its product mix actuallycaters for almost all types of markets. Following is a detail of the types of markets served.

Broadly speaking, the distribution network of Lever Brothers Bangladesh Limited is vast and

reaches all sorts of markets on at least twice a week basis. They serve markets in:

1. Urban areas.

2. Sub-urban areas (small towns).

3. Rural markets.

Out of the total number of retailers in Bangladesh (the total number has been provided by

AcNielsen Bangladesh Limited by a census conducted last year) Lever Brothers Bangladesh

Limited reaches more than one third of them directly at least twice a week. The other half

that is not covered directly are predominantly, small tea shops, small retailers in the deep

rural areas like Chittagong hill tracks and unrelated retail outlets like clothes stores etc. So it

is evident that there is not much scope for Lever Brothers Bangladesh Limited to expand its

direct coverage as almost all related and economically viable outlets are already covered.

The types of outlets that are covered directly are:

1. Grocer stores.

2. Wholesalers.

3. General stores.

4. Tea stalls.

5. Cosmetic stores.

6. Super stores.


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The few retailers who sell Lever Brothers Bangladesh Limited products but are not served

directly are served by the wholesalers which make this channel very important. The company

also gives considerable importance to the wholesalers and from time to time special trade

promotional activities are done specifically for the wholesalers. One suck kind of activity is

known as Dosti Program. However, the detail of Dosti program is outside the scope of

this report and hence is not elaborated further. This is basically a summary of the markets

served by Lever Brothers Bangladesh Limited.


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1.11 Distribution Network

Distribution of Lever Brothers Bangladesh Limited products is done by the Customer

Management Department. It is a huge network with thousands of field workers working sixdays a week. It is through their relentless effort that the goods reach the end consumers. The

basic structure of distribution is as follows:

Figure 1:Distribution Chain of Command

DirectorCustomer Management

Regional Manager

Area Manager

Territory Manager

Distributor

Sales Supervisor

Delivery ManDistributors Sales

Representative Cashier


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The Customer Management Director is the head of the sales or Customer Management

team. Apart from others, the regional managers reports directly to him. The whole of

Bangladesh has been divided into five regions based on geography and sales volume. The

regions are,

1. Central Metro Region (Dhaka).

2. Central Outer Region (Dhaka).

3. Eastern Region (Chittagong and Sylhet division).

4. Northern Region (Rajshahi Division).

5. Southern Region (Khulna and Barisal Division).

Each or these regions have two or more areas headed by the area manager who reports tothe regional manager. Each area has three or more territories which are headed by the

territory manager who reports to the area manager. The territory manager has his office in

the distribution house of the area (in case of multiple distribution house in one territory he

usually sits in a central location) and mans an army of sales supervisors, distributors sales

representatives, cashiers and delivery men.

The Territory Manager is an employee of Lever Brothers Bangladesh Limited but below him

the distributor and others are simply distributors employees. When a company becomes

distributor of a certain territory, it has to sign a contract where it says that the distributor will

have to employ certain number of people in each trade (i.e. cashier, supervisor etc.) and the

number of people in each trade will be advised by the territory manager of that particular

territory. The day to day work plan of these people will also be set by the territory manager

although they will be supervised by the sales supervisor who will report to the distributor

and Territory manager.

This contract also says that there will be a room in the distribution house to be used by

Lever Brothers Bangladesh Limited employees, primarily by the Territory Manager. In every

distribution house there is an issue of dual authority. The problem is the distributors sales

representatives, cashiers and delivery men reports to both the distributor and territory

manager which can potentially create problems. However, Lever Brothers Bangladesh


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Limited do not consider their distributors as just a company or person working for them

rather they consider the distributors as partners in business where both have the same goal;

achieving greater sales volume. By doing this, now there are no issues regarding dual

authority and all the territories are running smoothly.

It may be mentioned here that, the distributors sales representative (DSR), cashier and

delivery man is one group. The DSR takes the orders from the markets, the cashiers collect

the payment as per order and based on orders and payment, the delivery man delivers the

goods to the intended retailers.

This distribution network is very vast and can reach literally any corner of the country any

day of the week.


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1.12 Strategies

1.12.1 Functional Level Strategies:Lever Brothers Bangladesh Ltd follows different functional level strategies to gain

competitive advantages and sustain it in the long run in the matured industries.

They increase their efficiency through exploiting economies of scale and learning

effects. For example, 808,720 bars of soaps, 1,023,810 packets of detergent powders, 154,

430 toothpaste tubes and sachets, 329, 530 bottles and sachets of shampoo, 156, 910 tubes,

jars, bottles and sachets of creams and lotions, and 35, 000 packets of tea are produced in

one day in Bangladesh by Lever Brothers.

They adopt flexible manufacturing technologies, upgrade the skills of employees

through training and perform research and development function to design products that are

easy to manufacture. As a result, they can provide quality products at cheaper rate.

They have higher customer responsiveness rate. They carry out extensive research to

innovate new products and modify the existing products to better satisfy the consumers.

They continuously innovate products, promotional activities, packaging and

distribution. This way they can respond quickly to customer demands.

1.12.2 Business-Level Strategies:

Lever Brothers strategic managers adopt different business level strategies to use the

companies resources and distinctive competencies to gain competitive advantage over its

rivals. These are discussed below:

They follow cost-leadership strategy as they have intermittent over capacity and the

ability to gain economies of scale. This way they can produce cost effective products and yet

be profitable. Moreover, most of the LBBL products are designed for the mass. For


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example, Wheel, Vim. As a result they go for mass production and marketing, therefore

achieve cost leadership.

They also follow differentiation strategy for some products to meet the needs of the

consumers in a unique way. For example, for Sun Silk Shampoo they have different

ingredients for different hair types.

They also target different market segments with different products to have broad

product line. By product proliferation they reduce the threat of entry and expand the range

of products they make to fill a wide variety of niches. For example, the Ponds brand has

snow, cold cream, vanishing cream, dream flower lotion, daily face wash and dream flower

magic talc and classic talc.

1.12.3 Strategy In The Global Environment:

Lever Brothers Bangladesh Ltd. is a multi national company. The main company is Unilever.

However, in Bangladesh it is named Lever Brothers Bangladesh Ltd. as the home and

personal care items are mainly sold in Bangladesh market. It follows some generalized

strategies and principals of Unilever. However, they also modify different strategies based on

the national conditions. The different strategies that they follow in the global environment

are stated below:

Unilever is a world wide famous company comprising internationally renowned

brands. They have unique strengths that allow a company to achieve superior efficiency,

quality, innovation, or customer responsiveness. Moreover, they have long-term experience

for running this business. The different policies and strategies Unilever follows and their

experience is transferred to Lever Brothers Bangladesh Ltd. For example, Unilevers

worldwide supply chain network helps LBBL to get supplies at cheaper rate as most of theraw materials are bought from foreign countries. These transferred distinctive competencies

gain LBBL competitive advantage.


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They import the raw materials from the places where it is less costly, thus achieve

location economy. For example, they import the Fair & Lovely Fairness body milks cap

from France because it is cost effective.

They are locally responsive. They are always ready to improve and modify their

products to meet the needs of the local customers. For example, Sun Silk Mehendi is

especially designed for the local consumers, as there is demand for it.

LBBL follows a multi domestic strategy where the companies extensively customize

both their product offering and marketing strategy to different national conditions.

1.12.4 Corporate Strategy:

LBBL carries out the following corporate level strategies:

They involve in short term contracts and competitive bidding for the supply of raw

materials. For example, a French supplier on contract basis supplies the Fair & Lovely body

milk lotions cap. The similar case happens for distributors as well.

They have a diversified business. LBBL has both related and unrelated diversification.

They compete in nine different industries with various products from home care, personal

care and even food products. They have economies of scope as most of the products can

share the same manufacturing facilities, inputs and specially the distribution channels.


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1.13 Organogram

Figure 2:Organogram upto director level

Chairman & Managing Director

Director

Brands & Development

Director

Customer Management

Director

Supply Chain

Director

Finance

Director

Human Resources


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Figure 3: Organogram Brands & Development Function

Director Brands & Development

Development

Manager

Activation Manager Marketing Manager(Body & Fabric

Wash)

Media Manager

Market Research Manager

Asst. Market Research

Manager

SBM Lifebuoy & Vim

SBM Wheel & SXL

Management Trainee SXL

SBM Hair Care

SBM Rexona

SBM Fair & Lovely

SBM Ponds

SBM Tea

SBM Oral Care

Product

Development

Manager

Packaging

Development

Manager

Asst. Pkg.

Development

Manager

Rural

Activation

Manager

Outdoor

Activation

Manager

Events

Activation

Manager

Dental

Services

Manager


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2. Detergent Market

There has been a market for detergent in Bangladesh for decades but it is only recently

that this market has started to evolve towards a mature and prospective market. The

whole market is called fabric wash market which has two major divisions in it; the soap

market and the detergent market. The diagram below will explain it better.

Figure 4:The Fabric Wash Market

Fabric Wash Market

Soap Market Detergent Market

Ball Soap

Market

Mechanized

Laundry Soap(MLS) Market

Mass

DetergentMarket

Premium

DetergentMarket


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2.1 Fabric Wash Market

It is needless to say that this market has been there since the dawn of times. History sayspeople used to wash their clothes using certain home made detergents which changed

with new innovations and with time. Not too long ago the only thing people used to use

to wash their clothes is Ball Soaps. This was easy to make, a low technology product

which many people were able to make in their backyards and it was cheap. The raw

materials required to make this product was also readily available in the nature. It was

only in the mid 60s that a Mechanized Laundry Soap was first introduced in Bangladesh

in a mass scale. This was called Wheel and the first major challenger of the

predominant Ball Soap market. Then with time many other MLSs came into the market

and posed a challenge to the ball soaps. During this period another new form of fabric

wash product hit the market called Jet Detergent Powder. This was a government

owned venture which did not do much marketing activities and still was able to capture a

decent amount of the market primarily because it was something different and the

market looked at it as a up-market product. However till 1997 this was the only detergent

in the market but things were about to change very soon.

Lever Brothers Bangladesh Limited after doing some test marketing with a few

detergents decided to enter the detergent in grand style. A factory was established in

Tongi and the primary target was to become the number one detergent in the market.

The only major competitor for Wheel Washing Powder was the heritage brand Jet

Detergent Powder. Wheel became the number one detergent in the market surpassing

the decades old heritage brand Jet in just less than a year (in terms of volume). And there

started a fairytale journey for Wheel Washing Powder (WWP). Today WWP is more thanten times bigger than its nearest competitor, Jet. In the mean time seeing fairytale success

of WWP numerous other detergent brands entered into the market which are yet to

topple Jet Detergent Powder let alone WWP.

A few years later inspired by the success of Wheel Washing Powder, Lever Brothers

Bangladesh Limited decided to create a new category in the detergent segment mainly to

counter the imported detergent powders. There Lever Brothers Bangladesh Limited

introduced Surf Excel, its premium washing powder with break through formulation in a


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new platform; stain removal. Shortly after Surf Excel was introduced it also became the

leader in its category. This category was clearly distinguished from the existing other

categories in terms of pricing and the benefits offered. However, in terms of pricing the

current detergent market can be divided into three categories as follows:

Figure 5:Three tires of Detergent Market

From this diagram one would assume Jet is not a competitor of Wheel or Surf Excel but

in reality it is predominantly competing with Wheel Washing Powder.

Premium Segment

Mid-price Segment

Mass Market

Segment

Tk. 160+/Kg(Surf Excel)

Tk. 60-80/Kg(Primarily only Jet)

Tk. 35-45/Kg(Wheel, Square, Keya, Aromatic etc.)


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2.1.1 Soap Market

The soap market is the bigger market of the two ie. soap and detergent market. The soap

market have been there for ages and people are habituated in washing their clothes by

scrubbing it with soap. People have a common perception that the clothes do not clean

unless soap is scrubbed with considerable physical power and then the cloth is rinsed

against something hard. This is the main reason why still today there is such a big market

for soap. Another perception people have is that after soaking the cloth in detergent

solution extra soap needs to be put as top-ups in areas of tough stain such as the collar of

the shirt.

2.1.1.1 Ball soap market

More than two third of the soap market is ball soap market. Ball soaps are easy to make

and cheap. Also as they are very hard compared to their counterpart, Mechanized

Laundry Soaps, people have a perception that this soap cleans tougher stains better. In

the market there is no single dominant ball soap producer. Ball soaps are mainly

produced locally and sold at a very cheap price without much packaging. These soaps do

not have much perfume in them and have some basic detergency properties. They are

without any doubt much inferior to the mechanized Laundry Soaps but as they are

cheap, they sell a lot. Their volume share and value share are significantlydisproportionate to one another. The volume share is more than two third of the market

and value share is less than half the market. One kg of ball soap can cost as less as Tk.15

where as one 140gm wheel laundry soap costs Tk.9 or Tk. 64/kg.

2.1.1.2 Mechanized Laundry Soap Market

Mechanized laundry soap or MLS is a superior product than ball soaps. These soaps are

costly, have much higher detergency properties which means less soap is required, does

significantly less harm to clothes and hands than ball soaps, and as they are produced

mechanically, they are consistent in quality. These soaps also has perfume in them, nice

attractive packaging, most significantly, they come from known producers which assures

high quality products. The main draw back of these soaps is the price of the soap. As

mentioned earlier, MLSs costs around Tk. 55-65/kg as opposed to Tk. 15-20/kg for ball

soaps. People in general know that MLS is a superior quality product than ball soaps but

in most cases cannot afford MLS. When a person cannot eat twice a day, quality clean for

their clothes is never a priority.


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2.1.2 Detergent Market

The detergent market is very big in Bangladesh although smaller than the ball soap

market. As mentioned earlier, this is a three tier market with the lowest tier known as the

mass market tier being the biggest and the top tier being the smallest in terms of volume.

However in terms of value, the middle tier is the smallest. Below is a more detail look

into the three tiers.

2.1.2.1 The Mass Market

Wheel Washing Powder is the dominant leader in this market with market shares more

than all the other players combined. The total market size in terms of volume is

extraordinary and over the last few years the volume growth in this market has platued.

The rise of this market is a fairytale story which started in the mid nineties. For ages in

the markets of Bangladesh a single detergent powder had monopoly business. The

detergent powder is called Jet Powder. Jet almost became a generic name for detergent

powder. Very few others ever ventured into this market. It seemed like a market with no

future in it.

During the early nineties, Lever Brothers Bangladesh Limited started marketing theirpremium brand Surf on a test basis. After carefully evaluating the market, Lever

Brothers Bangladesh Limited finally decided to launch a mass market detergent powder

priced at half of what Jet Powder costs, and they named their detergent powder, Wheel

Washing Powder. The name Wheel was used to leverage from the already well

established Wheel Laundry Soap.

The initial target was to sell more than Jet Powder in three years time and to do so, the

people needs to be educated first. So they launched their new detergent powder and at

the same time spent humongous amount to educate the market or what is known as

market development. The result was mind boggling. In the very first year Wheel sold

more that Jet Powder in terms of volume and for six consecutive years Wheel grew at

more than 100%. Today, if Wheel is a hay stack then Jet is a pin in the hay stack. What

happened at the same time is seeing the incredible growth of Wheel, numerous other

detergent brands came into the market. Making detergent powder is not a very

complicated technology and it seemed like everyone was now making detergent


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everywhere. These brands became Me Too brands beside Wheel. None of them could

till date pose any significant challenge to Wheel although, all these brands combined

takes up a big chunk of the detergent market which is a concern for Wheel today.

This market is extremely price sensitive and most of the people are not soles detergent

powder users. They use either ball soap or laundry soap as a top-up on detergent. This

means, they first soak the clothes in detergent solution and while washing, they scrub

some parts of the clothes with a ball soap or a laundry soap and finally rinse the clothes.

Many of these people would like to upgrade to a better detergent like Surf Excel but due

to their monitory constrains they refrain from upgrading. However, occasionally some of

these consumers buy sachet of Surf Excel to be used on special clothes or during special

occasion.

2.1.2.2 The Mid Tier Market

This market predominantly belongs to Jet Powder, the heritage detergent brand of

Bangladesh. The market size of Jet has shrunk significantly and is today barely surviving.

However, Jet has a small but very loyal consumer group who are mostly using jet for

decades now and as they do not have too many complains, they are extremely reluctantto tryout other brands. Nevertheless, even then, there are some people who can be

intimidated into trying something better provided they are not required to pay too much

premium.

The main problem for Jet is, as they are increasingly becoming a smaller brand with

everyday passing, their visibility in the market place is also decreasing. There will be a day

when that loyal consumer group to Jet will find it difficult to find Jet in the marketplace.

This will ultimately lead to these people trying out other brands and this is a fact that,

there are better brands than Jet Powder in the market. Also, the bigger competitors of Jet

from other categories will one day squeeze Jet Powder out of the market. What happens

to Jet in the future is yet to be seen but this is certain that future do not look very rosy

for Jet Powder.


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2.1.2.3 Premium Tier

The premium tier is the smallest tier in terms of volume but the second biggest in terms

of value. This is the tier which has premium and state of the art technology detergents

like Surf Excel and Ariel. Detergents in this tier costs Tk160 per kg and above. This tier

is dominated by Surf Excel with only a nominal share going to Ariel and the other

imported detergent brands.

Without a doubt the best detergents belongs to this category. The problem is, good

things do not come cheap and these detergents costs four times or more than the mass

market detergents. This tier is mostly un-accessible by the mass people although

everyone is aware of Surf Excel if not the other brands. People aspire to buy these

detergents but price has always been the main barrier. However, with Surf Excel sachet

priced at Tk. 3, many people can now buy these detergents although at a smaller scale.

The beauty of these detergents is the quality of clean they give. Unilever and P&G

brands in this tier are Enzymatic detergents which removes stains without harming the

color of the cloth. Also with new innovations these detergents are getting better

everyday.


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2.2 Target Demographics

Everyone washes their clothes and hence everyone needs detergent of some form or theother. The only difference is in the form of detergent people uses ie. Ball soaps,

Mechanized Laundry soaps, mass market detergents or premium detergents. The type of

detergent selection usually has a relationship with, habits, perceived cleaning capability

and income to say the least. The target demographics if the two Lever Brothers

Bangladesh Limited detergent brands are described below.

a. Wheel:Wheel has perhaps one of the biggest consumer base in the country

among all known brands irrelevant of category. This also means that people

belonging to all Socio-Economic Class (SEC) in all geographic locations of

Bangladesh use Wheel. However when we talk about Wheel users we will

primarily mean people belonging to SEC B & C.

In Bangladesh not long ago the only form of detergent was Ball soap with a

very in-significant market for detergent powder. Over the years Wheel has

mainly developed the market for detergents by educating the people about

detergent powder and eventually upgrading them to detergent from ball soap

and mechanized laundry soap. The more educated and economically more

sound people upgraded quicker than the rest but eventually a substantial

number of people upgraded to washing powders although most people are

dual users of detergent powder and some form of soap (ball soap or MLS).

They prefer using soap on top of detergent to get the best clean although

scientifically this is not the best practice.

Most of the Wheel users are habituated to cleaning clothes using their muscle

power and have a perception of getting good clean only when the cloth is

scrubbed with soap. Not to forget, these people not long ago solely used ball

soap or MLS to clean their clothes. These people belong to SEC B & C and

have limited family income. Family size is around 4.5 members per household

and the husband makes the buying decision more than the wife does it.

Family income has a great influence on the type of detergent to be bought.


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Many of these consumers during days of economic hardship switches to ball

soap and use detergent powders only on special occasions. They perceive

detergent powder to be something modern and premium hence have a high

level of aspiration to use detergent powder.

Awareness level of detergent powder among SEC D is low and their main

constrain is ability to spend for detergent.

b. SXL:Priced four times higher than Wheel Detergent, Surf Excel is definitely

not for everyone. This powder is for only the very evolved detergent users

who can afford to spend such premium. Surf Excel is the latest technology in

detergent having Enzymes in it and definitely good things does not come

cheap. The regular users of Surf Excel belongs to SEC A & B with

substantial family income. However, occasional users of Surf Excel can be

found in other SECs as well and does not necessarily have a very high family

income. They buy Surf Excel Sachets priced at Tk.3 (Pack size 20gm) and

uses it on occasion and when there is a tough stain.

Surf Excel users are predominantly urban people with bulk belonging to thedivisional headquarters.


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2.4 Existing Strategy

In this section scope of discussion will be limited to Surf Excel as that is the main focusof this paper. Lever Brothers Bangladesh Limited in general markets only mass market

brands. However Surf Excel might look to be an exception but at a closer look it is

actually not. The formulation of Surf Excel is state of the art and it is promoted as the

detergent of tomorrow. This is the future of detergents but high costs are currently the

barrier to making it affordable to the mass. Unilever and its major competitor P&G is

however now working on cutting down the costs and making this formulation affordable

for the mass. It may be mentioned here that this type of formulation is only available

with two companies in the world currently, Unilever and P&G. Hence the major

competitor of Surf Excel is premium detergent brands from P&G.

Surf Excel Strategy:The different marketing strategies of Surf Excel are described in

detail below.

Product Strategy:The product has to out-perform all the existing detergents in

the market, the strategy is as simple as that. Surf Excel is a detergent having a

breakthrough state of the art technology and new technology is in general

suppose to be better in terms of performance than the earlier technologies. When

talking about the competition with the same technology (Premium detergent

brands of P&G), Surf Excel has to be at least at parity in terms of performance.

Currently Surf Excel and Ariel from P&G are the two detergents in this category

with performance being at parity and the only differentiating factor being the

perfume.

Place Strategy: Surf Excel is distributed through the normal distribution

channels of Leer Brothers Bangladesh Limited, which means it, can be

distributed directly to literally any part of the country. Even if any remote rural

pocket of the country has demand for Surf Excel, that demand will be met. In

general however, major distribution emphasis is given in the urban areas.


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Promotion Strategy:Surf Excel does both above the line (ATL) and below the

line (BTL) promotional activities. In ATL the use all conventional media with the

main strategy being increasing consumption and also brand maintenance. With

BTL activities Surf Excel mainly drives penetration. In ATL the main focus is on

the value that Surf Excel gives to the consumers. For example, it cleans better

than any other detergent and it costs reasonable as the quantity of Surf Excel

needed to clean clothes is half the amount needed by ordinary detergent. In BTL

activities the current theme is Dirt is Good. The modality if this proposition is

no matter how much dirty your children make their clothes, there is nothing to

worry, as Surf Excel will take care of the cleaning part. Last year Surf Excel did a

massive painting carnival through out the country where the proposition was, if

children are to learn painting, they will get their clothes dirty. And no matter how

dirty the clothes become, Surf Excel will take care of the dirt.

Pricing Strategy:Currently Surf Excel has a premium pricing strategy as has its

competitors. The idea is to get enough profit while Surf Excel is still in its early

days to justify the huge Research & Development Investment that has gone into

developing this breakthrough formulation. However, at the same time

consumers perceived price for Surf Excel has been tried to keep at par with itsactual price. Market Research shows, people actually perceive Surf Excel as a

premium product priced the way it is expected to be. So the pricing strategy is

premium pricing in line with perceived value of the brand.


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3. Competitor Analysis

As mentioned earlier the only competition for Surf Excel comes from P&G i.e. Ariel.

However, Unilever has multiple brands in their premium category globally although in

one country not more than one of these premium brands is present. In case of

Bangladesh and this Sub-continent it is Surf Excel. In the proceeding parts of the report

scope of discussion will be limited mainly within Surf Excel and Ariel. By competitor it

will mean Ariel of P&G.

Before knowing about Ariel it is necessary to know about its company, P&G.

P&G:P&G is the worlds largest household and personal care manufacturer with annual

sales amounting to a staggering 35 billion Euro and Net profit of 4.15 billion Euro in

2003. Their turnover has been grew at 8% and net profit grew by 19% last year. P&Gs

earning per share grew by 14% and gave a dividend of 11% for the 48thconsecutive year.

P&G is also into food business with brands like Pringles but that accounts for less than

10% of their sales. The mission statement of P&G tells a lot about them in a nutshell.

The mission statement is:

Two billion times a day, P&G Brands touch the lives of people around the world. We have one of

the largest and strongest portfolios of trusted quality brands including Pampers, Tide, Ariel,

Always, Whisper, Pantene, Bounty, Pringles, Folgers, Lenor, Lams, Crest, Clairol, Nice n Easy,

Actonel, Olay. Nearly 98000 people, working in almost 80 countries world wide, make sure that

P&G Brands live upto their promise to make everyday life just a little better.

TOUCHING LIVES, IMPROVING LIFE


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3.2 P&G Billion Dollar Brands

P&G has 12 billion dollar brands which forms the heart of their business. These Brands are:

.Olay

Folgers

Pringles

Dawry

IAMS

Tide

Crest

.Pampers

Pantene

Always/Whisper

Bounty

Ariel

A total of 12 Billion dollar brands

These 12 brands account for

$24 Billion in Revenues

A company with these 12 brands

could be in Fortune 70 by itself


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3.3 P&G Strategic Choices

P&G strategies (Global Strategies) are as follows:

1. Build existing core business and leading brands into stronger leaders. (4 Key

Categories) Fabric Care, Hair Care, Baby Care, Feminine Care. 50% Sales

from these categories and greater profits.

2. Grow faster with leading customers

In 5 years, share in US 30% - 55%

Higher in Europe,

Understanding of the shoppers and partnering with retailers.

Joint business plan with key customers.

Grow via leading portfolios and new innovations.

3. Grow in Big Countries

80% of the sales coming from 10 countries, 11% Growth

P & G, in US, is a leader in 23 categories.

4. Develop and Invest in faster moving, higher margin business.

Strengthening P&G leadership into health care and beauty care.

Expecting higher growth in these two categories.

5. Build P&G leadership in fast growing developing countries.

Emphasis in China,

Growth in cons prod business = Fx((population growth, household

formation, household income growth)


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3.4 P&G Core Strengths

The core strengths of P&G are as follows:

1. Branding:

3 off top 10 new non food product introduced in US, are from P&G.

In past 8 yrs P&G has had #1or #2 positions in non food products.

7,500 Ph. D. / 20 Technical Centers / 4 continents

2. Global Scale:

Resources to interact with retailers on finance, logistics, marketing and

shopper study.

Create greater value through total supply chain.

Roll out new products in 18 months, globally.

In a glimpse that was P&G globally. However, for Surf Excel it is more important to look into P&G

India as they do not have any major operation in Bangladesh and controls this market from India. The

production facilities are in India and the marketing is also done from India. However, how P&G works

in Bangladesh will be discussed a little later.


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3.5 P&G India

P&G have a strong presence in India although one would guess, they would have likedthe presence to be stronger. Below is P&G India at a glance:

A history spanning from 1951, Vicks Launched in 1952

Chairman: Bharat V Patel

Sales: Rs. 438.2 Crore

Growth: 7%

Operating Profit: 89.3 Crore

Growth: 11%

2003:P&G rated the best employer in India by Hewitt Associates + Business

Today. (Was No.2 in 2001 & 2002)

Vicks Action 500+ :

Cold Tablets,

R&D in India, Launched in 1978,

SOM 44.7 %

Vicks Started in 1952 (Vicks VapoRub)

Completed 50 years in India.

Exports of VapoRub to ASEAN, Australia & Japan

Whisper Ultra: Rs 550 million

Menezes Cosmetics:

Licensed in Dec 1, 2002 to manufacture,

Distribute & market Old Spice in India Bangladesh &

Sri Lanka


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3.6 P&G Bangladesh

P&G do not have any operation as such in Bangladesh. They have only one Marketing Manager who is

the sole employee of P&G in this country and distributes their products through MGH, a local business

group. MGH is the sole distributor for Kodak and Gillette apart from all P&G products in Bangladesh.

However, their main business is shipping in terms of revenue generation. For P&G India, the Indian

market gets the priority and not Bangladesh because of the small size of the market and the fact that

they are not directly present in this market. Another fact for P&G to not come into Bangladesh in a big

scale as yet is the fact that Unilever/ Lever Brothers Bangladesh Limited has a very strong presence in

this country and for a long time. Also the brands of P&G are not affordable by the mass market of

Bangladesh. It may be worthwhile mentioning here that, Unilever has two types of brands in countries

like Bangladesh. One type is not affordable by all but the other type is. For example, Surf Excel is not

affordable by the mass market but Wheel is. In case of P&G, their lower detergent, Tide is twice as

costly as Wheel making it less affordable for the mass market. This means, P&Gs product range is not

always the most ideal for markets like Bangladesh.

P&G presence in Bangladesh is very insignificant till date. Their presence in India even is

not the strongest with sales of only over 800 crore Ruees where as Unilever in India has

business over 15 times bigger than that. In Bangladesh P&G has around 1% market

share in the detergent market and again a single digit market share in the hair care

market. Never the less, this is no ordinary company being talked about this is P&G,

worlds largest household and personnel care products manufacturer and they are capable

of coming from behind and give Unilever a run for their money. P&G is not the

competitor to be taken lightly under any circumstances. They are always a very serious

threat even if they are not currently present in the market.


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3.7 Roll Out

First it is needed to understand thoroughly as for how P&G works and what their

strategies have been globally and in the regions around Bangladesh. by understanding

that it will be easier to understand how and when they are likely to come to Bangladesh.

3.7.1 Strategy

P&G strategy will be discussed in a few segments. First P&G Global strategy.

3.7.1.1 P&G Global Strategy

Globally P&G is known to be a company which produces and markets quality products

at not the cheapest of prices. They do not have too many brands which are affordable by

the mass people in the developing countries although they might be in the developed

countries. Brands like Penteen, Head & Shoulder, Whisper, Old Spice, Hugo Boss etc.

are there in all the markets but not necessarily the most affordable of brands. Recently

the CEO of P&G changed and their new CEO Mr. A G Lafley brought in some policy

changes. It may be mentioned here that under Mr. A G Lafleys predecessor P&G did

not have the best of times. They actually had negative growth. Among the major

strategies they had strategies like building their key markets and earn the most revenue

from those markets. And also they were putting more and more emphasis on the key

brands that contributes the most of their business (it has previously been mentioned

about their billion dollar brands). Also now P&G was desperately trying to find a

foothold in the emerging markets of South and South East Asia where their presence was

minimal.


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3.7.1.2 P&G Strategy in Emerging Markets

The markets of the Western and European countries have opportunity to grow but no

booming opportunity is there. The booming opportunities lie in the countries of South

and South East Asia apart from in Africa and South America. The problem in these

markets with P&G was that the mass cannot afford their brands unlike the brands of

Unilever, Colgate or Nestle. So they had to reduce their prices if they were to put up any

fight in these markets. The other problem was that the three global giants, Unilever,

Colgate and Nestle have a very strong presence in these markets for a long time.

P&G can reduce the prices of their products temporarily but to sustain with that kind of

reduced prices they needed to reduce their production and raw material prices as well

which was not the easiest of tasks on hand. However, they have some competitive edge

by having the same kind of packaging and formulation Globally but even that was not

enough. P&G has been looking for cheaper sources of raw materials (which includes

substitute products) so has been their competitors but it is not known if they actually

found one or not. People suspects they have and if they did then it is still a very tight

P&G secret and secrecy has been maintained P&G Style.

P&G now did a small calculation. Their operations in these countries are very limited.They do not have too many managers or other facilities in here and they were selling very

little amount of everything but making very handsome profit in percentage. One of the

reason for this high profit margin was to offset the huge R&D costs they incur in

developing these products. First P&G decided they do not need any R&D return form

these emerging markets as the return they were getting inn absolute terms was very

nominal in any case.

Next they thought, rather than making Tk. 30 profit per unit and selling only 1000 units

it is better to make a profit of Tk. 10 per unit and selling 3000 units.

The next strategy was not to increase the number of P&G managers in these countries

with the increase in their volume. This way they would be making more net profit in

percentage terms. For example, currently if their salaries and wages accounts for 15% of

revenue which comes to 120 crore Taka then it should not increase proportionately with

revenue increase. It should stay at 120 crore Taka even if the revenue doubles which will


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lead to salaries and wages becoming only 7.5% of revenue in other terms what this

means is huge cost savings. This strategy was basically all about cutting down the costs in

percentage terms which will lead to more net profit in percentage terms and if they could

gain their desired volume then with this policy it will mean making more profit in

absolute terms as well. The following table will explain this strategy a little better.

Current Situation New Strategy

Taka % of

Revenue

Taka % of

Revenue

Sales Volume 1000 Units 3000 Units

Unit price 70.00 50.00

Total revenue 70,000.00 150,000.00

RM Costs 20,000.00 28.57% 60,000.00 40%

Advertising Costs 10,000.00 14.2% 21,300.00 14.2%

Salaries & Wages 5,000.00 7.14% 5,000.00 3.33%

Other Expenditures 5,000.00 7.14% 10,710.00 7.14%

Net Profit 30,000.00 42.85% 52,990.00 35.33%

1 2

This calculation looks like a good enough reason for any company to cut their prices but

no matter how flowery they look, there is a devil hidden inside. One will have to actually

increase their sales volume three times which is not a matter to be taken lightly.

Considering the image, perceived value and brand equity of P&G brands like Panteen

and Ariel, a cost cut like this might automatically double their volume but the challenge is

how to increase the volume one more fold and triple it?

The P&G managers took the challenge and they focused on their Hair care andDetergent categories to implement this price cut strategy. They first went on with a

massive price cut strategy in these two categories in China followed by Philippines and

finally India. Their India strategy is elaborated further as India is the country from where

P&G controls their Bangladesh operations.

1

All the numbers in the table are fictitious and do not necessarily have any resemblance with theactual numbers of P&G.2 However simple the calculations looks like in the table, the actual calculations are way complicated.


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3.7.1.3 P&G Strategy in India

P&G strategy in India is very closely monitored by Bangladesh as they run their show in

Bangladesh from India. In this part of the report only the detergent strategy of P&G in

India will be discussed. It may be mentioned that in India they had the same sort of

strategy for their detergent and hair care categories.

Their strategy was the same as in China and Philippines, massive price cut and making

their expensive brands affordable to the mass people or at the least making it more

affordable. After getting reasonably satisfactory results from price cut strategy in these

two countries it was time to roll it out in India. India had a three tire detergent market

which after price cut became a two tire market. The market before and after the price cut

looked like this:

Before Price Cut After Price Cut

Rs. 140+/kg

(Surf Excel, Ariel etc.)

Rs. 100+/kg

(Surf Excel, Ariel etc.)

Price Cut

Rs. 70-80/kg

(Rin, Tide etc) Rs. 30-45/kg

(Rin, Tide, Wheel etc.)Rs. 30-40/kg

(Wheel etc.)

Ariel and Tide are P&G brands while the others mentioned in the table above are

Unilever brands. What the price cut effectively attempted to do was upgraded the mid

segment detergent users to the upper segment and at the same time made the midsegment detergents available to the mass market. One reason was that, the mass market

was almost 20 times bigger than the two upper segment markets combined and P&G

was not present in that market. Unilever was doing huge business with Wheel.

Both Ariel and Tide has high perceived value and by cutting down the costs they were

now available at a lower price which means it was offering more value to the consumers.

In theory mostly Wheel users were now expected to upgrade to tide and Rin and on the

other hand Rin and Tide users were expected to upgrade to Surf Excel and Ariel. The


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theoretical number of consumers expected to upgrade was extraordinary. In reality what

happened was as follows:

Error!

Figure 6:P&G Price Cut

What effectively happened is the post price cut premium segment is more or less the size

of the pre price cut mid segment. A huge loyal customer base of Tide and Rin actually

did not upgrade to Ariel and Surf Excel rather they are still using Tide and Rin spending

less than what they used to. In terms of total volume of the market the current scenario

is like this:

Premium

Segment

Mid

Segment

Mass

Segment

Premium

Segment

Mass

Segment

Pre-Price Cut Post-Price Cut


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Pre-Price Cut (Tons) Post-Price Cut (Tons)

Premium Segment 15

Mid Segment 30 Premium Segment 30

Mass Segment 400 Mass Segment 410

Total 445 Total 440

3

The actual total detergent market size has shrunk primarily because many people

upgraded from the previous mass market detergents to Tide and Rin. Please note that to

wash the same quantity of clothes the amount of Tide, Rin, Ariel or Surf Excel needed is

half of that of Wheel. However, a better picture can be obtained by looking at the total

value of the market. The total value of the market is as follows:

Pre-Price Cut (Rs.) Post-Price Cut (Rs.)

Premium Segment 2,100

Mid Segment 2,100 Premium Segment 3,000

Mass Segment 16,000 Mass Segment 16,400

Total 20,200 Total 19,400

4

The total value of the market have actually gone down although not very significantly.

However insignificant the total difference looks like, Wheel and the other mass marketdetergents took a major hit. The following table will give a better understanding in terms

of what happened to different brands.

3These are not the actual numbers and are intended to only show the direction in which the market is

going.4These are not the actual numbers and are intended to only show the direction in which the market is

going.


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Pre-Price Cut Post-Price Cut

Volume Value Volume Value

Value

Gain

Surf

Excel 13 1820

Surf

Excel 20 2000 10%

Ariel 1 140 Ariel 2.5 250 79%

Others 1 140 Others 7.5 750 436%

Rin 20 1400

Tide 5 350 Rin 50 2000 43%

Others 5 350 Tide 12 480 37%

Wheel 260 10400 -13%

Wheel 300 12000 Others 88 3520 -12%

Others 100 4000

Total 445 20200 Total 440 19400 -4%

Unilever 333 15220 Unilever 330 14400 -5%

P&G 6 490 P&G 14.5 730 49%

Others 106 4490 Others 95.5 4270 -5%

5

This clearly shows how badly Wheel and the other mass market detergents were hit.

Unilever as a whole also was hit and loosing 5% value share is much bigger than what it

looks like. On the other hand P&G did not as yet been able to gain their intended market

share in terms of value or volume although they have seen an extraordinary growth.

It is now time to see the supply situation of P&G. Their sales volume has grown to such

an extent that they are finding it very difficult to keep up their supplies with the demand.

The P&G factories are working overtime and yet not being able to meet the demands.

5

5These are not the actual numbers and are intended to only show the direction in which the market is

going.


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On the other hand, Unilever factories are being able to keep up with the demand as their

total volume has actually declined although very insignificantly.

Media Expenditure of P&G is also on the rise alongside their volume. According to MR

findings, their media expenditure has doubled over the last few months. Till date the only

real cost savings that P&G has been able to do is by not increasing their size of the

operation in terms of manpower. However, it is to be seen if they can actually sustain

with their current manpower in the long run.


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3.7.2 Timing

The question is not IF P&G will come to Bangladesh or not rather WHEN will they

come. There are a few things that will be under consideration before P&G comes in.

These are as follows:

1.P&G do not send supplies to Bangladesh regularly rather they send stocks in

bulks and the last bulk was sent just before they went for the price cut in India.

This last bulk was a reasonably big one and the next supply will not come before

this bulk is exhausted as it is obvious that the next bulk will come with a price

cut. According to Lever Brothers Bangladesh Limited analysis, it will not be

before July this year if not later. This has been calculated considering their sales,

usual bulk size and market reports.

2.They cannot re-price their current stocks as they have paid higher taxes and

due to some legal complications like price declaration. However, reports suggests,

their cost of the current bulk is not permitting them to cut the rice immediately

which means they are waiting the lot to get exhausted and get a new bulk supply

from India with which they will cut the price.

3.The other problem is with the supply. As said earlier, P&G is right now not

being able to meet their demands in India so it will be a little on the tough side to

send some supplies to Bangladesh. Also at the same time if they send supplies to

Bangladesh at a reduced rate then they will have to ensure adequate

replenishment supplies for the future otherwise all the demand created by P&G

will ultimately be taken away by Lever Brothers Bangladesh Limited. So here they

have two problems as follows:

a. Initial Supply

b. Future Replenishment

a. Initial Supply:The initial supply that P&G will be looking forward to send to

Bangladesh will have to be at least a 50 tons bulk otherwise it will not be possible

to create any impact in the market. It is estimated that to produce 50tons of Ariel

alone will take P&G about 15 days which means they will not have enough

supplies for India for those 15 days. This is true irrelevant of whether they


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produce these 50 tons in one go or build up their stocks over a period of may be

2 months or so. Also if they build up their stocks over 2 months then their

inventory costs will go up tremendously which they can ill afford at this point

after price cut. Also by selling 50 tons of Ariel in India they will be able to make

more profit than by selling it in Bangladesh as there is an import tax involved for

Bangladesh. This means in simple terms, the opportunity cost of selling 50 tons

of Ariel in Bangladesh is very high.

Reports suggest, P&G is setting-up a new factory in India and after it is

commissioned they will be able to easily supply to Bangladesh.

b. Future Replenishment: Some experts suggests, the only reason P&G has not

yet come to Bangladesh with a price cut is not because of their previ

lever brothers internship report

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