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Market Leadership in the Fast Moving Consumer Goods Sector

BASANTI DEVI COLLEGE,UNIVERSITY OF CALCUTTA

REGISTRATION No. –041-1221-0337-13

ROLL No. – 3041-51-0020

DEGREE- B.Sc(H)

SESSION- 2015-16

SUBJECT-ECOA

PAPER-VIII B

02/03/2016

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Contents

SL NO. TITLE PAGE NOs.

1 Abstract 3

2 Introduction 3

3 Literature Survey 4

4 Methodology & Data Source

4

5 Analysis 4-22

6 Conclusion 23

7 References 24-25

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Abstract:Hindustan Unilever Limited (HUL) is the largest Fast Moving Consumer Goods (FMCG) Company with market leadership in the Soaps & Detergents Industry mainly, along with the other sectors like food, beverages and skin care cosmetics as well. Our major finding includes that HUL has a strong market base which is spread strategically in all the market segments under soaps and detergents due to so many brands presented by HUL. Also we see that there are a lot of emerging competition to the HUL's soaps and detergent market share and how HUL has and will continue to tackle this competition. Some other sectors as mentioned above has also been included in order to determine the competition of HUL in FMCG sector as a whole. Additionally we will observe the life cycle of individual HUL firms, along with an understanding of a monopolistic market. Furthermore we would see observe the downfall of one of the competitors in the soaps and detergent market.

In conclusion, this study shows HUL has a strong market share in the soaps and detergent sector.HUL, in the light of all the competition, is constantly innovating new products so as to dominate the market. Unlike other companies, HUL has its base under all the segments, thus targeting a wide range of consumers.

Introduction:

Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer Goods (FMCG) Company based in Mumbai, Maharashtra established on October 17,1933. The founders of HUL are  Lever Brothers,United Traders Limited, Hindustan Vanaspati Manufacturing Company Limited.The current CEO of HUL is Sanjiv Mehta.The mission statement of HUL is, "Add vitality to life".( Hindustan Unilever ,Wikipedia)

It is a subsidiary of Unilever, a British-Dutch company which controls 67.25% shareholdings in HUL as of March 2015.

(“Market Leader In Soaps And Detergents Industry Marketing Essay”,UK Essays on Marketing,March 23,2015)

Unilever is world's largest supplier of fast moving consumer goods across 100 countries in the world. In Home & Personal Care Products and Foods & Beverages, HUL's 47 power brands are spread across various categories of consumer goods such as detergents, shampoos, soaps, skin care cosmetics, toothpastes, coffee, tea, ice creams etc. The company aims to create a better future every day as it provides for nutrition, hygiene, and personal care that help people feel good and look good.(Hindustan Unilever Limited Official Website)

Research shows that HUL touches the lives of two out of every three Indian consumers.These brands are manufactured over 40 factories and operations consist of 2000 suppliers and associates. It covers 6.3 million retail outlets reaching the entire urban population and 250 million rural consumers.HUL has over 16000 employees and a Total Revenue of Rs.301.7 Billion( Hindustan Unilever Limited Annual Report 2014-15 Website).

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Literature Survey : Since the project is explanatory as well as analytical in nature,I have accumulated some data regarding the analysis of the question whether HUL is acting as the Market Leader in the FMCG Sector.

The concept of Market Leader as analysed in a Microeconomic Theory has been gathered from “Microeconomic Theory” by Ferguson and Gould, “Microeconomics” by Pindyck , Rubinfeld and Mehta. I have been able to accumulate the data relating to the activities of HUL from Wikipedia and HUL Official Website(www.hul.co.in) , HUL Annual Reports 2008-09,2011-12 and 2014-15, an article of UK Essays on Marketing ,Slide Share Website, a Blog by The Marketing Universe, e-book like “Mergers and Aquisition:Text and Cases” by Rajesh Kumar ,e-newspaper like Live Mint, and newspapers like The Business Standard and The Economic Times.

Methodology and Data Source : Throughout the project I have used Secondary data which has been gathered from different sources as mentioned in Literature Survey and References.

Other than that on the basis of the available information I have tried to draw an analysis on the performance of the firms with the help of some Statistical tools.I would like to admit that the present paper is principally descriptive in nature.The analytical aspect of the paper follows from very simple Microeconomic and Statistical tools.

In this project we have analyzed the life cycle of HUL, along with its strong presence in the market due to its highest shares in the FMCG market. Research in this project consist of analyzing the competitors with respect to HUL through reference book, internet research which gave a proper direction to our study. Throughout the project we would be trying to draw an analysis of HUL’s performance with respect to the other competitive firms in the FMCG industry.

Analysis : o HUL~Market Leader in a FMCG Market:

Among several leading national and global brands, HUL is the largest company in the FMCG Sector and it is the market leader with 46% share in the soaps and detergents industry. The underlying factor for its success is the strong customer base(“Market Leader In Soaps And Detergents Industry Marketing Essay”,UK Essays on Marketing, March 23,2015) .

It provides wide range of products, continuously innovates to respond to the competitive pressures by providing value additions to its existing products and has established its target to every segment: premium, mid-range and popular. (“Market Leader In Soaps And Detergents Industry Marketing Essay”,UK Essays on Marketing, March 23,2015 ).

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o Life Cycle of HUL :

Life Cycle can best be explained as the course of events that bring a new firm into existence and follows its growth into maturity to capture the mass consumers. The most common steps in the life cycle of a firm include the following phases:

Introduction Development Maturity Growth Sales volume

The first four phases are been discussed below:

Introduction Phase :

In 1931, Unilever set up its first Indian subsidiary, Hindustan Vanaspati Manufacturing Company, followed by Lever Brothers India Limited (1933) and United Traders Limited (1935). These three companies merged to form HUL in November 1956 (Hindustan Unilever Official Website).Today, the company has more than 3 Lakh resident shareholders. (“Market Leader In Soaps And Detergents Industry Marketing Essay”,UK Essays on Marketing, March 23,2015 )

Development Phase :

Firms in the development phase are likely to be characterized by small levels of sales and are more speculative in nature. The firms enter the market as they see a market opportunity. Lever Brothers ( a British Company), the parent company of HUL viewed the Indian market with tremendous potential. Thus, it launched "Sunlight Soap" in 1888. (“Market Leader In Soaps And Detergents Industry Marketing Essay”,UK Essays on Marketing, March 23,2015) It further introduced Lifebouy (1895)(Lifebuoy History,Lifebuoy Official Website) and other brands like Pears (1807)(Pears Soap,Wikipedia), Lux (1899)(Lux Soap,Wikipedia) and Vim(1885)(Hindustan Unilever Limited Official Website) came into market. Pond's (India) Limited had been present in India since 1947. It joined the Unilever fold through an international acquisition of Chesebrough Pond's USA in 1986 ( Hindustan Unilever Official Website).Vanaspati and Dalda were also launched in 1918 and 1937 respectively.(“Market Leader In Soaps And Detergents Industry Marketing Essay” ,UK Essays on Marketing, March 23,2015 )

Maturity Phase :

HUL entered the maturity stage in early 2000's. Since it reached upper bounds of its demands, it undertook various projects and initiatives to maintain its brand image. For instance,HUL undertook Project Shakti in 2001,a rural initiative which targeted small villages. Presently, 45,000 Shakti entrepreneurs are working,which covers over 100,000 villages across 15 states and reaching to over 3 million homes. (“Market Leader In Soaps And Detergents Industry Marketing Essay”,UK Essays on Marketing, March 23,2015 )

In 2002, HUL made its entry into Ayurvedic Health & Beauty Centre category with the Ayush range and Ayush Therapy Centers.In 2003,it launched Hindustan Unilever Network,

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Direct To Home Business , launching 'Pure It' water purifier in 2004.In 2007, the Company name was formally changed to Hindustan Unilever Limited.

Brooke Bond(since 1900) and Surf Excel(since 1959 in India) showed Rs.1000 Crore as a sales mark in 2007, followed by Wheel which crossed Rs.2000 Crore sales milestone in 2008.

HUL has completed more than 80 years of its corporate existence in India. (“Market Leader In Soaps And Detergents Industry Marketing Essay”, UK Essays on Marketing, March 23,2015)

Growth Phase :

In 1991, with the liberalization of the Indian economy a drastic change in growth curve of HUL was witnessed as the company explored every single opportunity in the product segment without any restriction in the production capacity. HUL and its largest competitor Tata Oil Mills Company (TOMOCO) merged together and the acquisition took place in 1993.(Hindustan Unilever Official Website )

In 1996, HUL and another Tata company, Lakmeꞌ Limited formed a 50:50 joint venture, Lakme’ Lever Limited, to market Lakme’s market leading cosmetics and other appropriate products of both companies.Subsequently, in 1998, Lakmeꞌ Limited sold its brands to HUL and disinvested its 50% from its joint venture with HUL. HUL formed a 50:50 joint venture with the US-based company Kimberly-Clark Corporation in 1994(The Economic Times,February 25,2016). Kimberly-Clark Lever Ltd. markets Huggies Diapers and Kotex Sanitary Napkins.HUL has set up a subsidiary at Nepal as Unilever Nepal Limited (UNL). The UNL factory manufactured HUL's products like Soaps, Detergents and Personal Products both for the domestic market and exports to India. The company witnessed crucial mergers, acquisitions and alliances after 1990's on the Foods and Beverages front (“Market Leader In Soaps And Detergents Industry Marketing Essay”,UK Essays on Marketing, March 23,2015).

On the other hand in 1992 the erstwhile Brooke Bond acquired Kothari General Foods, with significant interest in instant coffee. In 1993 Brooke Bond acquired the Kissan business from the UB Group and the Dollops Icecream business from Cadbury India. (R.Kumar,2011,pp:320-322)

Details of some Merger Companies are given below ( Post Globalization):

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Merging Company Merged With Share Ratio

Kothari General Food Corporation Ltd.

Brooke Bond India Ltd. 21:1

Tea Estates India Ltd. Brooke Bond India Ltd. 10:12

Doom Dooma India Ltd. Brooke Bond India Ltd. 10:11

Kissan Products Ltd. Brooke Bond India Ltd. 1:100

Lipton India Ltd. Brooke Bond India Ltd. 10:9

Tata Oil Mills Company Ltd.

Hindustan Lever Ltd. 15:2

BBLIL Hindustan Lever Ltd. 20:9

Pond’s India Ltd. Hindustan Lever Ltd. 4:3

Industrial Perfumes Ltd. Hindustan Lever Ltd. 5:2

International Best Foods (IBF)

Hindustan Lever Ltd. 3:2*

*( Swap based on Rs 10 share of IBF for Re 1 share of Hiindustan Lever Limited or HLL)

Following are the brands that HUL is operating as per 2014-15 Annual Report:

Table-1 Showing details of some Merger companies and the ratio of their shares

(Source: Mergers and Demergers,Hindustan Unilever,Annual Report- 2011-12,p:1)

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Product Type Brands

Food and Beverages

Home Care

Personal Care

Water Purifier

Table:2 Showing list of products that has been a part of the HUL family in the year 2014-15

o Monopolistic Competition :(Source: Hindustan Unilever Annual Reports 2014-15& Hindustan Unilever Official Website)

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Imperfect information, costly mobility of resources leads to the deviation of the market structure from the model of Perfect Competition. In addition, consumers have heterogeneous tastes, exhibiting preferences for a wide variety of goods & services with varying characteristics. Again, Pure Monopoly hardly exists because very few goods do not even have close substitutes. Hence two extreme models of Perfect Competition & Monopoly could not analyse the market structure which fall midway. E.L.Chamberlain proposed the model of Monopolistic Competition in 1933.( Pindyck ,Rubinfeld & Mehta,2014,pp:371-373)

o Nature of the Monopolistically Competitive Market:

Monopolistic Competition is a market structure in which there are many firms selling products which are close but imperfect substitute to each other. This type of market structure combines the structure of both the Perfect Competition & Monopoly. The Monopolistically Competitive market assumes that each firm has a product which is differentiated in the mind of a consumer .(Ferguson & Gould,1993,pp:352- 356)

The following are the distinguishing features of the market---

Product Differentiation :

It is regarded as the most important feature of monopolistic competition. A general class of products are differentiated on the basis of certain distinguishing features, by which the consumers can identify the goods & services produced by different producers. Such differentiation may be real or fancied. (Ferguson & Gould,1993,pp:352- 356)

Real product differentiation occurs when similar products differ as a result of actual characteristics, such as quality of inputs or location of the firm & the consequent availability of the product. But real or fancy distinction leads to a preference for one variety of products over another. Differentiation may be based on certain characteristics of the product like trade names, trademarks, chemical composition, advertising outlays, packaging, etc. The products do not have to be physically different but they must be somewhat perceived to be different by the consumers. (Ferguson & Gould,1993,pp:352- 356)

For instance, Ariel, the detergent laundry line for P&G, is available in a variety of forms. Ariel Colour is a detergent used mainly to protect colour of clothes, Ariel Stain Remover is a stain treatment product, Ariel Quickwash is used to wash clothes in the quick wash cycle and so on. Therefore, Ariel has been able to expand its laundry line depending on the use of the detergent. By adding various features to the existing product, Ariel has been able to distinguish itself from the competitor. (“Market Leader In Soaps And Detergents Industry Marketing Essay”,UK Essays on Marketing, March 23,2015)

Large number of Firms:

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Like Perfect Competition, in Monopolistic Competition also the number of firms is quite large. Each firm is small with respect to the entire market . Ferguson & Gould,1993,pp:352- 356)

As for example: The presence of large number of sellers is highlighted by the fact that the Indian Soap and Detergent market has 700 companies competing to sell their products. The major players across the globe are: ITC Limited, Procter & Gamble and Hindustan Unilever Limited.(“Market Leader In Soaps And Detergents Industry Marketing Essay”,UK Essays on Marketing, March 23,2015)

Freedom of Entry & Exit:

When the firms are producing a particular class of goods or services they earn profit but as new firms enter with slightly differentiated product,it drives the profit down. Similarly in case of Economic Loss existing firms exit & the profit level goes up. Thus in the long run no firm is able to make Super-Normal Profit. The resources are perfectly mobile. (Ferguson & Gould,1993,pp:352- 356)

If the profits are attractive in monopolistic competition, the new [producers can enter the industry. Increase in disposable income in hands of both rural and urban consumers, gave an opportunity to the rural consumers to shift from unbranded unorganized products to branded FMCG products. The increasing demands, leads new firms to enter the market. When the competition increases the existing firms are forced to reduce their price in order to meet the competition. Thus free entry and exit maintains normal profits in the market in the longer span of time. (“Market Leader In Soaps And Detergents Industry Marketing Essay”,UK Essays on Marketing,March 23,2015)

For instance, Nirma was launched in the detergent industry at a low price targeted to cater to the needs of middle-priced and popular segment. The success of Nirma forced HUL to launch an even lower priced product. Thus, Wheel and Rin were introduced by HUL to maintain its market share. (“Market Leader In Soaps And Detergents Industry Marketing Essay”, UK Essays on Marketing,March 23,2015)

Independent Behaviour :

Economic impact of one firm’s decision is spread sufficiently evenly across the entire group, so that, effect of any single competitor goes unnoticed. This implies that conscious rivalry is missing or that competition is impersonal. Each firm behave independently without any regard for the competitors’ behaviour or reaction to its decisions . (Ferguson & Gould,1993,pp:352- 356)

The term “Monopolistic” refers to the small Monopoly power that firms have by virtue of their differentiated product. On the other hand the term “Competition” refers to the large number of firms & the freedom of entry & exit. Because of the Monopolistic characteristic, the demand curve facing each firm is downward sloping. Each firm has some control over the price of its product. (Ferguson & Gould,1993,pp:352- 356)

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Industries & Product Groups:

Under Perfect Competition, an industry is defined as a collection of firms producing a homogeneous good. But when the products are differentiated, as under Monopolistic Competition, one cannot define an industry in such a narrow sense. Each firm having a distinct product, in a sense, is an industry in itself as under Pure Monopoly. However, one can usefully club together firms producing very close substitute & refers to them as product groups. Naturally enough, combining firms to make product groups is somewhat arbitrary. (Ferguson & Gould,1993,pp:352- 356)

Falling Demand Curve :

A firm in monopolistic competition has a downward sloping demand curve. This is mainly because the sellers are the price makers i.e. they are influential enough to affect the price of the product. The demand curve is highly elastic as substitutes are available.This means one can sell more at low prices and vice-versa. (“Market Leader In Soaps And Detergents Industry Marketing Essay”, UK Essays on Marketing,March 23,2015)

Selling Costs :

Due to product differentiation in monopolistic competition, firms are required to incur some additional costs such as advertising, sale promotions, salaries of marketing staff etc. to promote the product. The main aim is to inform, persuade and remind the buyers of the availability of the product. The strategy of aggressive advertising is adopted.

HUL and Procter & Gamble are two renowned companies for portrayal of advertisement war. Aggressive television commercials were shown targeting each other's brand. Even the prices of detergents such as Tide and Rin were compared to influence the customers buying habits. It is highly believed that advertisements are factual and helps the buyers to make an informed choice. (“Market Leader In Soaps And Detergents Industry Marketing Essay”,UK Essays on Marketing, March 23,2015)

Actively Price Competitive and Non-Price Competitive Market : 1. Active Price Competition:

The process of equilibrium adjustment under monopolistic competition has also been explained by an alternative approach put forward by Chamberlin. This alternative approach makes use of two types of demand curves, namely, the perceived demand curve and the proportional demand curve.

The proportional demand curve represents the amount of demand going to a typical producer when all members of the product group are charging the same price. It is represented by D.

On the other hand,there is another downward sloping demand curve,d,which implies that the individual producer can perceive of getting a higher share of market through price reduction.However this perception is dependent on an unrealistic assumption on the part of the producer that all his competitors would keep the price unchanged.

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In the Long Run since the new producers are free to enter the market and the existing producers can leave, the actively price competitive long run equilibrium will be at the tangency point between d and LAC corresponding to MR-MC equality.The proportional demand curve will move to intersect the perceived demand curve at the point of tangency between d and LAC. The economic profits are driven to zero.

(Ferguson & Gould,1993,pp:355- 358)

2. Non-Price Competition and Excess Capacity:

Since the products are slightly differentiated, different firms try to play up the differences in products in order to increase their demand. This can be done in a variety of ways such as through advertisement or by giving certain perks.

According to Chamberlin, long-run equilibrium under monopolistic competition does not give rise to excess capacity so long as the market is characterized by active price competition. In his view, excess capacity arises when free entry is coupled with the absence of price competition .(Ferguson and Gould,1993, pp:360-362).The brand of excess capacity is illustrated in Figure-1, as shown below.

LAC represents long-run average cost.If there is free entry and price competition,long-run equilibrium is attained at Ep, where the perceived demand curve dpdpꞌ is tangent to LAC.As noted, Ep must lie to the left of the competitive equilibrium Ec;but with active price competition it will tend tend to lie rather close to the competitive point.

Figure-1 Long-Run Equilibrium with Non-Price Competition and Excess Capacity

(Source: .(Ferguson and Gould,1993, Microeconomic Theory , Irwin Publisher,Delhi p:361)

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For many reasons, active price competition may not characterize certain markets. A “live and let live” outlook on the part of sellers, tacit agreements, open price associations, price maintenance, customary prices, and professional ethics are a few causes of nonaggressive price policies. If price competition is, in fact, lacking, individual entrepreneurs will have no regard for the existence of curves such as dPdPꞌ. They will be concerned only with the effects of a general price rise or decline, or with the DPDPꞌ curve.

With free entry in the absence of price competition, long-run equilibrium is attained (pure profit eliminated) only when enough firms have entered the industry to push the demand curve to DNDNꞌ . Equilibrium is attained at EN, with output OQN and price OPN per unit.In Chamberlin’s opinion QNQP represents excess capacity: it is the difference in output attribute to the absence of effective price competition. If the latter prevails, the firm attains a “sort of ideal” output.(Ferguson and Gould, 1993, pp:360-362)

o Competitor's analysis :

HUL has a large share of market in soaps and detergent segment, but it still faces a growing number of competitions from various Competitors in the market. In the detergent sector it faces competition from Procter and Gamble (P&G), Henkel, Rohit Surfactants Private Limited (RSPL) and Nirma (now out of the market). In the soap sector it faces competition from Godrej, P&G, Wipro, ITC and Nirma (now out of the market). HUL faces just one competition in the health care sector of the soap industry and that is from Reckitt Benckiser. (“Market Leader In Soaps And Detergents Industry Marketing Essay”, UK Essays on Marketing,March 23,2015)

HUL's beverage portfolio has been an outlier in a slowing market. Brands like Taaza, 3 Roses, Brooke Bond,Taj Mahal and Bru contributes nearly 12% of the company’s Rs 25,810 Crore revenue.While Bru, its brand of instant coffee, is estimated to be around Rs 400-500 Crore, most of its tea brands, comprising the rest 85%, have grown in double digits in a segment crowded with national and regional players. (The Business Standard,January 28,2014)

"The penetration of categories such as tea much like soaps and detergents is high, which is why topline growth has been in single-digits. But that in no way means that the brands haven't delivered. In tea, for instance, we have seen growth in the mass, mid and premium ends of the market", says R Sridhar, chief financial officer, HUL (The Business Standard ,January 28,2014). Analysts agree that the performance of beverages as a whole could have been worse if it was not for individual brands in HUL's portfolio.The Rs 2 lakh Crore FMCG market, according to industry estimates, grew in the region of about 5-6% only in the December, 2013 quarter. Categories such as coffee saw negative growth rate, while tea grew in single digits, says market experts.(The Business Standard ,January 28,2014)In the December, 2013 quarter, HUL's beverage brands cumulatively delivered a top-line growth of 7.2%.While this was lower than in the previous quarters (16.1% in Quarter-2 of Financial Year-14 and 15.8% in Quarter-1 of Financial Year-14) , the individual brands bucked their industry trends.

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Not just HUL's tea brands, Bru that competes with Nestle's Nescafe saw single digit growth. In the September and June quarters, growth was in double digits for Bru.Beverages have performed well because of HUL's drive to fend off competition - from Tata Global Beverages and Twinings - in tea who have stepped up their marketing.Tata, for instance, has also invested in the green tea segment appointing Bollywood Actors like Kareena Kapoor to endorse its Tetley range.HUL has used both Lipton and Taj Mahal to take on rivals Tetley and Twinings, especially in green tea, a segment that is rapidly growing in India.Lipton competes with Tetley and Twinings in many markets beyond India. The competition is fierce in the UK, where the three brands originate. The green tea range under Taj Mahal was first launched in 2011, which HUL has consistently built on over the years.At the same time, the country's largest FMCG Company has focused on identifying new trends in beverage consumption. One such has been its endeavour to build consumption of tea bags in a market that has been used to consuming tea loose.

(The Business Standard,January 28,2014)

In terms of product launches, HUL has consistently added to its portfolio in a bid to drive excitement. HUL has not been silent in the face of its coffee rival's heavy spending either. Nestle has been pushing its Nescafe brand endorser Deepika Padukone through high-decibel TV and multi-media campaigns for quite some time (The Business Standard,January 28,2014) . All in an effort to make coffee consumption look cool, aided in part by the cafe culture that is growing in India.Bru, as a result, has seen a refresh as well, with a new set of brand ambassadors endorsing its premium brand, Bru Gold. Beverage has grown for the FMCG company consistently in the last few quarters of 2013 even in segments such as soaps and detergents and personal care products (which give HUL nearly 50% & 30%of revenues, respectively) have been more volatile in the face of a consumer slowdown. Although later in December they fared better.

(The Business Standard,January 28,2014)

o HUL’s market share declines in competition, slow Economic Growth :

As revealed in the HUL Annual Report 2008-09, HUL saw the share of its soap brands such as Dove, Lux, Hamam and Breeze dip by value to 50.3% in the September quarter, from 53.2% a year earlier, according to market research firm AC Nielsen. Market share slipped from 52.7% at the end of June .

The soaps market recorded sales of Rs 1,989 crore in the second quarter this fiscal. Godrej Consumer Products Limited, or GCPL, whose soaps include Godrej No.1, Cinthol and Fair Glow, was stood second with a market share of 9.47%, followed by Wipro Consumer Care Limited’s 8.34%, according to AC Nielsen. (Live Mint e-newspaper,December 4, 2008)

In shampoo sectors, the market share of HUL brands like Clinic Plus, Sunsilk and Dove declined to 46.1% in the quarter that ended in September, from 47.7% a year earlier and 46.5% in June. (Live Mint e-newspaper,December 4, 2008)

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The shampoo market recorded sales of Rs650 Crores in the September quarter, AC Nielsen said (Live Mint e-newspaper,December 4, 2008). Procter and Gamble(P&G) Company brands such as Head &Shoulders and Pantene had a share of 23.86% followed by Chennai-based CavinKare Private Limited, maker of Chik, Chik Satin and Nyle Herbal shampoos, with 11.34% share.(Live Mint e-newspaper ,December 4, 2008)

In toothpastes, HUL’s share with brands such as Closeup and Pepsodent fell slightly to 29.6% as of September-end, from 30% a year earlier (which was unchanged at the end of June 2008).In this category, Colgate (Palmolive India Limited) was the leader with 48.7% of the total market share, while Dabur India Limited had a 9.19 % share with brands such as Babool, Meswak and Dabur Red.The toothpaste market had sales of Rs800 Crores in September quarter.

(Live Mint e-newspaper,December 4, 2008)

Besides market share, the company’s volume growth also declined by around 3% in the quarter ended in September, compared to the first quarter . “HUL’s volume growth slowed down from 10% in March quarter to 7% in September quarter in response to rising prices,” says the Merrill Lynch Report. (Live Mint e-newspaper,December 4, 2008)

In skin care cosmetics, HUL’s share with brands like Pond’s, Vaseline and Fair & Lovely dipped to 52.7% in the quarter ended September 2008 from 55% in 2007 and 53.4% in June 2008 . L’Oreal India Private Limited, Proctor & Gamble, Emami Limited and CavinKare are some of the competitors in the market.“The category is at a very nascent stage and unpenetrated,” said Pritesh Chheda, Analyst at Emkay Share and Stock Brokers Limited.He has also mentioned that there are some brands such as Nivea and Olay in skin care,which are picking up. Also, there are many imported brands which keep getting launched .(Live Mint e-newspaper, December 4, 2008)

HUL’s share has declined although the market itself is expanding in value terms, notwithstanding the economic slowdown. According to AC Nielsen, the toilet soaps market was estimated to be worth Rs7,258.17 Crores at the end of September, up by 12.8% from a year earlier.According to the Market Research ,the market for shampoos grew by 14.6% to Rs2,377.47 Crores, 14.1% to Rs3,018.46 Crores for toothpastes and 18% to Rs3,095.61 Crores for skin care cosmetics .(Live Mint e-newspaper,December 4, 2008)

HUL nowadays is facing increased competition with the entry of cigarette maker and hotel company ITC Limited into personal care products such as shampoos, conditioners, soaps and body washes with brands such as Vivel, Fiama Di Wills and Superia earlier this year.

Sources have said that HUL continues to be a market leader in most of the FMCG categories, but, yes in some categories the company’s share has been going down consistently such as soaps and shampoos, as ITC’s products are gaining market share.

“ITC’s entry has clearly impacted market shares of HUL,” said Emkay’s Chheda. “Currently, ITC must be having around 1.5-2% share and entry of a strong player definitely impacts the existing one. But still, ITC will take another two years to grab 5-7 % share of the soaps and shampoos category”.HUL posted a 19.7% increase in net sales during the quarter ended September to Rs 4,028 crore, from Rs3,365 crore a year earlier .The home and personal care division grew by 22.5% .( Live Mint e-newspaper,December 4, 2008)

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o Detergents Market:

Past : HUL captured the Indian detergent market in the year 1957 and maintained its superiority in terms of quality till 1980s with its product 'Surf'. However in 1969 a company named Nirma Chemicals brought out a detergent 'Nirma' which was priced much lower than HUL's 'Surf' with a very catchy advertisement on TV, claiming great quality at affordable rates. It soon became a very popular jingle, catching the imagination of the masses. By 1985, Nirma replaced Surf from the number one position in the detergent market . (“Market Leader In Soaps And Detergents Industry Marketing Essay”, UK Essays on Marketing,March 23,2015)

HUL then changed their strategy and introduced cheaper detergents named Wheel and Rin and managed to regain some of the lost ground in the detergent market. This shift ultimately resulted in HUL's Wheel replacing Nirma from the top position of the detergent market in early 2000.But soon there emerged a threat from a product named Ghari which was launched by Rohit Surfactants Private Limited (RSPL) Group in 1987.(“Market Leader In Soaps And Detergents Industry Marketing Essay”, UK Essays on Marketing,March 23,2015)

In late 2011 and early 2012, Ghari replaced Wheel and took the numero-uno position in the Indian detergent Industry. (“Detergent wars: Nirma, Wheel & Ghari”, The Marketing Universe,January 23,2012)

Present :

In the current market scenario, Ghari holds the number one position at 17.3%, followed closely by Wheel which holds 16.9% of the market share.Nirma on the other hand has witnessed a huge downfall and it now just commands a market share of less than 6% .(“Market Leader In Soaps And Detergents Industry Marketing Essay”, UK Essays on Marketing,March 23,2015)

Tide,launched by P&G is now at the third position in the market after Ghari and Wheel,with a share of 13.5%. (“Market Leader In Soaps And Detergents Industry Marketing Essay”, UK Essays on Marketing, March 23,2015)

The Indian detergent market is broadly classified into four different segments namely:-

Categories of Detergents

Detergent Brands Market Share

Premium Ariel and Surf 15%

Mid-price Henko, Rin and Tide 40%

Popular Wheel, Ghari, Nirma and Mr. White

45%

Table: 3 Showing Category-wise Detergent Brands and the Percentage of their Market Shares. (Source: Ankit , “ Detergent wars: Nirma, Wheel & Ghari”, a Blog by The Marketing Universe, January 23,2012 )

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All the above three segments combined form 60% of the market share, while the rest 40% share is held by the regional and small unorganized players in the market (“Detergent wars: Nirma, Wheel & Ghari”,The Marketing Universe,January 23,2012) .

HUL is still a major player in the market with its Wheel, Rin and Surf in all three main segments, but RSPL is now the overall leader due to Ghari.

17.3%

16.9%

13.5%

<6%

Market Share of Detergents

GhariWheelTideNirma

15%

40%

45%

Market Share of De-tergents as per cat-

egoriesPremiumMid-PricePopular

o Soaps Market :

The soap market in India is divided into various categories such as men's soaps, women’s soap and common soap. There is also a small share in the soap market which is held by the baby soaps. The market growth of the soap sector is estimated to be 7% p.a. and it is observed that rural market constitutes 60% of the soap sales.(“Market Leader In Soaps And Detergents Industry Marketing Essay”, UK Essays on Marketing, March 23,2015)

There are about 700 soap manufacturing companies in India. The Indian soap market's value is estimated to be around Rs 60000 Crores. In this huge market there are just a handful of key players who control the major chunk of the market share, these are HUL, Godrej, Wipro, P&G, Nirma and ITC.HUL enjoys over 54.3% of the market share with its brands such as Lux, Lifebuoy, Rexona, Breeze, Pears, Haman and Dove.

Godrej Consumer Product Limited (GCPL) is in the second position with 11% of the market share with its brands such as Cinthol, Fairglow, Nikhar and Allcare. GCPL is among the biggest manufacturer of toilet soaps and it launched FairGlow,which was the first fairness soap in India.

Figure : 2 Showing Market Share of 4 Detergent Brands, from both Mid-Priced and Popular Ranges.

(Source: Ankit, “ Detergent wars: Nirma, Wheel & Ghari”, a Blog by The Marketing Universe, ,January 23,2012 )

Figure: 3 Showing Market Share of detergent as per Categories. Diagrammatic Representation of Table: 3

(Source :Ankit , “ Detergent wars: Nirma, Wheel & Ghari”, a Blog by The Marketing Universe,January 23,2012 )

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Wipro with its brands such as Santoor and Chandrika has a strong base in the soap market sector.

Procter & Gamble (P&G) and Nirma are the other competitios with a strong presence in the market share.

ITC is a fairly new entry into the soap market with the launch of its brand named Vivel. According to AC Nielson a global marketing research firm, Vivel soaps have witnessed a growth rate of 70-80% within a short period of time. ITC is now the fastest growing company in soap the soap market.

(“Market Leader In Soaps And Detergents Industry Marketing Essay”, UK Essays on Marketing, March 23,2015)

The following table and diagram shows the Market Share of different soap brands in order to analyse how brands under HUL have performed.

Market Share Of Soap Brands ( in %)

Years Dettol Lifebuoy Lux Santoor Breeze Godrej No.1

Savlon

2004 2 21.8 14.2 4.1 11.5 5.5 0.2

2005 2.3 22.2 13.5 4.9 9.9 6.9 0.3

2006 2.6 21.6 15.5 5.4 9.5 7.8 0.4

2007 3 20.9 16.2 6.2 9.2 9.1 0.3

2004 2005 2006 20070

5

10

15

20

25

DettolLifebuoyLuxSantoorBreezeGodrej No.1Savlon

o Attractive Emerging Market’s Presence

Table: 4 Showing the Market Share of different soap brands ( in %) in order to derive that HUL brands are in the leading position from 2004 to 2007

(Source: “Lifebuoy”,Slide Share, March 24,2012)

Figure:4 Showing a line diagram on the Market Share of different Soap brands for four consecutive years(Diagrammatic Representation of Table: 4)

(Source: “Lifebuoy”,Slide Share, March 24,2012)

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Approximately 40% of P&G’s sales are from fast growing emerging markets. Only Colgate and Hindustan Unilever have a materially more attractive emerging market sales than P&G.

(Procter & Gamble Eyeing Opportunities in Emerging Markets-Market Realist, July 8,2015)

0%

10%

20%

30%

40%

50%

60% 55%50%

40%36%

Estimate per-centage of Sales from Emerging MarketsSeries2Series3

o Case Study: The Downfall of Nirma Detergent Powder :

The purpose of this case study is to highlight the factors that led to downfall of Nirma Detergent Powder. How ignorance of factors like consumer behavior,product innovation, product differentiation have immensely affected the existence of the firm in the cut-throat competitive market(i.e.,under monopolistic competition scenario).

Nirma detergent powder was launched in 1969 by Nirma Chemicals at a price far lower than the market leader-Surf. The aim of Nirma was to create a brand at affordable price. The strong popularity of Nirma among the cost conscious Indian consumers gave rise to the competition. No company can ever be interested in losing its market share.Thus, recognizing the threat, HUL, the undisputed leader in FMCG, launched Wheel detergent in order to try and be a part of the low-priced products in the market. Nevertheless, it forced Nirma to exit the market. (“Market Leader In Soaps And Detergents Industry Marketing Essay”, UK Essays on Marketing, March 23,2015)

A few of the principle reasons behind the downfall of Nirma are:

1. Lack of Innovation : With the increase in disposable income in the hands of the consumers, a shift was seen in the demand for consumer goods. Consumers started focusing more on the packaging, quality etc. Other than the affordability. Nirma suffered from the inability to innovate products to meet the new demands of the consumer. It failed to think beyond pricing.

On the other hand, HUL was able to establish products in all segments; Popular:Wheel , Mid-Priced: Rin and Premium:Surf.

Figure- 5 Showing Estimate Percentage of Sales from Emerging Markets

(Source: Procter & Gamble Eyeing Opportunities in Emerging Markets,Market Realist, July 8,2015)

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2. Lack of Advertising : Nirma did not have a strong brand promotional strategy. It failed to capitalize on the trademark jingle i.e. failed to convert its recognition earned into sales. With the increase in competition, Nirma did not introduce new and improved advertisements. Even the visibility on TV channels reduced.

3. Lack of Product Differentiation : On the one hand where the sales of HUL increased, there was evident decline in those of Nirma. HUL along the way changed its technology and added features to its existing products. Surf advanced from Surf to Super Surf to Surf Excel. Even though Nirma advanced to Nirma Blue, the differentiation was not visible.

4. Lack of Price Increase : Nirma locked itself into the conventional low price plank. Overtime with the increase in prices of LAB ( Linear Alkyl Benzene) and Palm Oil, both ingredients used for the making of detergents, Nirma did not increase the price of the detergent. Naturally the company faced complications in terms of revenue generation as the costs were higher than the profit derived from it.

(“Market Leader In Soaps And Detergents Industry Marketing Essay”, UK Essays on Marketing, March 23,2015)

o What Nirma could have done in order to prevent the downfall?

1. Compete on Quality : A company like Nirma can easily increase sales by highlighting improved quality in its product. It could emphasize on the performance risks in the low priced segment and mention the cost advantages.

2. Strategic Positioning : A company must position its product well. The target audience for Nirma was the low income group. It could have aimed at increasing sales in the rural markets by increasing availability in villages.

3. Attractive Advertising : Advertising plays an important role in creating consumer awareness. The way HUL changed the packaging of Lifebouy from a masculine product to a family product (as shown below),Nirma could have changed the conventional image of a Nirma dancing girl to something more appealing.

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4. Co-operating Contributors : The company could easily form strategic partnerships with dealers, suppliers and resellers by offering exclusive deals and offers.

5. Weightage in Packaging : Nirma could reduce the quantity of the product and sell it at the same price. Reduction in quantity generally remains unnoticed by the consumer. For example: Selling 750g detergent for Rs.37 instead of 1Kg.(“Market Leader In Soaps And Detergents Industry Marketing Essay”, UK Essays on Marketing, March 23,2015)

The actual price chart of Nirma detergent powder is shown below:

Quantity Maximum Retail Price( in Rs.)

250 gms. 10

500gms. 20

1Kg. 37

2Kg. 80 (Rs. 10 Super Nirma Soap free)

Figure: 6 Showing a comparison between Nirma soap/detergent power & Lifebuoy soaps regarding the change in packaging

(Source: “ Lifebuoy History”, Lifebuoy Official Website & Google Images on “Change in Packaging of Nirma”)

Table: 5 Showing the Maximum Retail Price(MRP) in Rs. Of Nirma Detergent power corresponding to the quantity it provides in that particular price.

(Source:Price Chart of Nirma Detergent Powder,Google Images)

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o of HUL in Soaps and Detergent Market:

Strengths:

Established target audience in various market segments. Largest company in FMCG sector. Top position in soap and detergent market share. Wide range of products. Continuous innovation. Global presence. Popular among the masses.

Weakness:

Few popular products appealing to the mass has been kept in premium pricing range, due to which people prefer cheaper products offered by the rival companies.

Opportunities:

As the masses are becoming more hygiene conscious, the sales are expected to rise. Rising demand of premium and mid-priced products in the rural areas. Downfall of Nirma will help them to regain the lost market shares. Soap sector's growth is expected to be at 7% Per Annum. (“Market Leader In Soaps

And Detergents Industry Marketing Essay”, UK Essays on Marketing, March 23,2015)

Threats:

Rising competition from other emerging Soap companies like Vivel and Fiama Di Wills etc. by ITC.

Losing top position in the market share of detergents due to sudden rise in demand for products of RSPL Group among the consumers. (“Market Leader In Soaps And Detergents Industry Marketing Essay”, UK Essays on Marketing, March 23,2015)

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Conclusion:

It can be more or less be observed that HUL is a market leader in the FMCG industry in soaps & detergents till date. Its evolution can be seen through various phases and it is currently operating in its Maturity phase (as the firm is operating in the Long Run). However, its evolution began in 1988 with launch of sunlight soap by Lever brothers and today it has a wide range of products starting from soaps and detergents to home & personal care and food & beverages as well. We can see how continuous innovation and close study of consumer behaviour has helped HUL exist in this competitive market as a leader in its field. Grabbing right opportunities at the right time and optimal utilization of available resources is also one of the key critical factors for any firm to be successful.

HUL has been able to capitalize on its products because of its approach towards target segmentation. HUL targeted the mass audience with products available in all income groups-low, medium & high level.HUL has managed to balance its marginal pressures in the detergents segment by a bit of product experimentation and well managing its brand portfolio.

o References :Books & Journals:

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Ferguson,C.E & Gould,J.P(1993), Microeconomic Theory(1st published in 1966),Irwin Publisher,Delhi.

E-book on Mergers and Aquisition ~ https://books.google.co.in/books?id=T05I94Yif0YC&pg=PA321&lpg=PA321&dq=acquisition+of+TOMOCO+and+Lakme&source=bl&ots=26HqJaroDN&sig=JOgCXDkffgZL36m79m0tYFOFzjI&hl=en&sa=X&ved=0CCsQ6AEwAmoVChMI0qfLzaf7yAIV4xamCh2cwQ_R#v=onepage&q=acquisition%20of%20TOMOCO%20and%20Lakme&f=false Kumar, R(2011) Mergers and Aquisition:Text and Cases( 1st Indian Edition:2011),Tata McGraw Hill Education Private Limited,New Delhi,

Accessed on 08/10/2015,Time:20:20.

Pindyck ,R S. , Rubinfeld ,D.L. & Mehta, P. L.(2014 ) Microeconomics (1st Indian Edition: 2009),Pearson Education Inc., New Delhi.

Newspapers & Reports:

Attractive Emerging Market’s Presence~ http://marketrealist.com/2015/07/porters-five-forces-procter-gambles-competitive-position/ (Penny Morgan ,Procter & Gamble Eyeing Opportunities in Emerging Markets,Market Realist, July 8,2015), Accessed on 26/02/2016,15:39.

Blog by “The Marketing Universe”~ http://ankitmarketing.blogspot.in/2012/01/detergent-wars-nirma-wheel-and-ghari.html (Ankit,“Detergent wars: Nirma, Wheel & Ghari”, a Blog by The Marketing Universe,January 23,2012),Accessed on 09/10/2015,11:45.

HUL Growth Phase~ http://economictimes.indiatimes.com/hindustan-unilever-ltd/infocompanyhistory/companyid-13616.cms (The Economic Times, February 25,2016),Accessed on 26/02/2016,03:25.

Hindustan Unilever Limited~https://www.google.co.in/webhp?sourceid=chrome-instant&ion=1&espv=2&ie=UTF-8#q=hindustan+unilever (Hindustan Unilever Official Website) ,Accessed on 10/02/2016,13:54.

HUL’s market share declines on competition ,slow economic growth by “live mint e-newspaper” ~ http://www.livemint.com/Companies/1rhSudjBHKsbmlz0o3PGVK/HUL8217s-market-share-declines-on-competition-slow-econo.html (Live Mint e-newspaper,December 4, 2008),Accessed on 09/10/2015,12:30.

Hindustan Unilever Limited Annual Reports as per finanacial year 2008-09~https://www. hul .co.in/Images/ annual _ report _ 2008 _tcm1255- 436191_en.pdf , Accessed on 10/02/2016,14:00.

Hindustan Unilever Limited Annual Reports 2014-15~ https://www.hul.co.in/Images/hulannualreport201415_tcm1255-436327_1_en.pdf,

Accessed on 10/02/2016,14:30.

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Images on Change in packaging of Nirma~

https://www.google.co.in/search?q=hindustan+lever+history&oq=hindustan+lever+history&aqs=chrome..69i57.13194j0j4&sourceid=chrome&es_sm=93&ie=UTF-8#q=change+in+packaging+of+Nirma+pictures,Accessed on 26/02/2016,23:59.

Lifebuoy History~ www. lifebuoy .com/about-us/history-of-health (Lifebuoy History,Lifebuoy Official Website)

Accessed on 26/02/2016, 2:45. Lux Soap History~ https://en.wikipedia.org/wiki/ Lux _(soap)) (Lux Soap,Wikipedia),

Accessed on 26/02/2016,11:30. Line Diagram on Market Share at Soap Industry ( Figure-4) ~

http://www.slideshare.net/PrajaktaMoon/lifebuoy (“Lifebuoy”,Slide Share, March 24,2012) , Accessed on 26/02/2016, 12:45.

Marketing Essay on HUL~ http://www.ukessays.com/essays/marketing/market-leader-in-soaps-and-detergents-industry-marketing-essay.php (“Market Leader In Soaps And Detergents Industry Marketing Essay”,UK Essays on Marketing, March 23,2015), Accessed on 08/10/2015,20:10.

Mergers and Demergers of HUL~ https://www.hul.co.in/Images/mergers-and- demergers_2011-12_tcm1255-436392_1_en.pdf,Accessed

( Mergers and Demergers,Hindustan Unilever,Annual Report : 2011- 12,pp:1),Accessed on 26/02/2016,20:05.

Pears Soap History~ https://en.wikipedia.org/wiki/Pears_(soap) (Pears Soap,Wikipedia), Accessed on 26/02/2016,11:30.

Price Chart of Nirma Detergent Powder~ https://www.google.co.in/search?q=super+surf&espv=2&biw=1366&bih=667&source=lnms&tbm=isch&sa=X&ved=0ahUKEwi_8vXokZ_LAhVBCI4KHWXQCf4Q_AUICCgD#tbm=isch&q=price+of+nirma&imgrc=_0-wEBjRLp54EM%3A (Google Images on Price Chart of Nirma Detergent Powder),Accessed on 01/03/2016,15:00.

Tea brands prop up HUL's beverage play,Business Standard~ http://www.business-standard.com/article/management/tea-brands-prop-up-hul-s-beverage-play-114012801068_1.html (The Business Standard,January,28,2014), Accessed on 08/10/2015,20:25.

Vim Soap History ~ https://www.hul.co.in/brands/our-brands/ vim .html (Hindustan Unilever Limited Official Website) Accessed on 10/02/2016,13:54.

Hindustan Unilever Wikipedia~ https://en.wikipedia.org/wiki/Hindustan_Unilever, Accessed on 10/02/2016,13:54.