Marketing Management Project _Godrej Cinthol

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A Project Report on CINTHOL soap

)

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Executive Summary

Objective The purpose of doing this project is to give an overview of soap industry in India. And then focus of soaps/brands/companies dealing with “freshness” soaps. The company which we have focused upon is GODREJ. We have compared growth trends in soap industry vis-à-vis Godrej’s soaps (Cinthol in particular). The company financials along with financials of two of its major competitors, HLL and Nirma is provided. Major soap brands of HLL and Nirma which are competitors of Cinthol are also analyzed. General market trends in Orissa market is observed and results of customer survey is analyzed in general. Company Background Godrej is the largest engineering and consumer products company in India. Godrej group of companies consists of twenty companies with interests as varied as furniture, real estates, consumer care, agriculture, investments, infotech and engineering. Most of these companies are generating profits and are contributing to Godrej’s success. It is also one of the most respected corporate houses known for its philanthropy and initiation of labour reforms besides being recognized for its values of fair, transparent and ethical dealings. Financials During FY 05, Godrej Consumer Products Limited registered a double digit growth in its top line of 14.4% YoY to 5.63 billion rupees and an equally strong growth in bottom-line which grew by 38.2% YoY to 0.9 billion rupees. The toilet soaps contributed to 59.4 % of the total turnover of GCPL and 63.2 % of the branded sales. The soap category grew by 16.4 % YoY compared to 2004. Godrej sells soaps under mainly 3 brands namely Godrej Fair glow, Godrej No 1 and Cinthol. Godrej No1 contributed to 35% of the turnover. After the demerger of the Godrej Soaps in the year 2000, into Godrej Consumer Products and Godrej Industries, the performance of GCPL has been outperforming the FMCG Index in terms of both performance and valuation. Godrej has a highly efficient utilization of assets and capital and it maintains triple digit Return on Capital Employed (RoCE) and Return on Net worth (RoNW) both of which are amongst the highest in the Indian industry. They also work with negative net working capital and this puts a lesser strain on their resources.

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Competitors Soap industry in India is highly competitive. New brands and their variants are launched frequently. Strong campaigning and promotions have influenced consumers and today they don’t hesitate in changing brands. Godrej is facing stiff competition from HLL and Nirma in the “freshness” soap category. HLL’s Liril and Nirma’s “Nirma Lime Fresh” are posing great threat to Cinthol which is a “superbrand” in India. Other competitors include Wipro, P&G, etc. Though HLL’s soap’s sale is decreasing every year Nirma has shown increase in sales in the last 2 years. In the highly saturated soap industry a slight increase in market share speaks a volume about the company’s product performance. Market Survey We did a market survey for 50 respondents. Survey consisted of healthy mix of people from all age groups. Questions were asked about the choice of soap, decision maker, important attributes of soaps, choice of brand, brand loyalty, price considerations, freshness quotient and buying patterns. Results from this survey has been analyzed and represented in graphical form. Conclusion This project was not about interpretations but about inferences. We have tried to present data and information in elaborate manner. Most of the information comprising of data have been represented in the form of graphs and charts. In general, we have tried to understand the soap industry, with due considerations to “freshness soaps”. The Personal care industry Personal Care products were once considered as luxury items, but today with the availability of a wide range of products and increasing competition, personal care products have become items of daily use considered mandatory for a healthy life style. As personal care manufacturers and retailers continue to search for growth in a difficult market, innovation in every respect will remain important. Product concept, delivery methods and packaging are each as important as ever. Tuning into exactly what each consumer wants and is likely to need, based on day-to-day lifestyles, pressures and aspirations is the mantra of success in today’s market. The Indian FMCG sector as a whole began to take shape only during the last fifty-odd years. From 1950’s to 80’s investments in the FMCG sector as a whole was very limited due to low purchasing power and the government’s favoring of the small-scale sector. Till the early 90s, the Indian personal care industry was reeling under a closed economy where a few multinationals like Hindustan Lever, Ponds and Colgate competed with domestic players like Godrej and Balsara . Post-liberalization, the scene has changed. The industry has seen the entry of a

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number of multinationals like Henkel, Revlon and Gillette and also some new domestic players like Marico and Cavin Kare, leading to increased competition. The global marketers saw 1 billion target consumers and India saw a slew of international brands hitting the market. The lowering of the trade barriers encouraged MNC’s to come and invest in India to cater to one billion Indians’ needs. Today the organized Indian personal care industry, estimated to be around INR 170 billion, is divided into the segments of 1)soaps and detergents 2) skin care 3) hair care 4) oral care 5)colored cosmetics 6) fragrances 7) men's toiletries.

Distribution of the personal Care Industry In India

Segments Constituents Sales in Billion Rupees Soaps Toilet Soaps detergent bars powders 91 Hair care Coconut oil, shampoo, hair dyes 28.6 skin care fairness creams 7 oral Toothpaste, tooth powder , toothbrush 31.8 colored cosmetics lipstick , nail enamels 2.46 men’s toiletries shaving cream and shaving systems 6 fragrances Perfumes and deodorants 2.7

In terms of growth potential, the Indian market is a great horse to bet on. The industry offers tremendous growth prospects due to the growing population, progressive fall in the percentage of population below the poverty line, rising levels of literacy and changing lifestyles. Highlights Ø As India is slowly becoming a mature market, price competition would intensify

due to the growing importance of retailers like super markets, hyper markets etc. Ø The Industry is characterized by low margins and is driven by volumes. Ø The product categories in the soaps can be classified into three segments; premium

(Lux, Dove), popular (Nirma, Cinthol), and economy (Nirma Bath, Lifebuoy). The price differential between the premium and economy segments is about 2X. The popular and economy segments account for about 4/5ths of the entire market for soaps. Market comprises of two distinct segments – Premium and Popular.

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Source: Economic Times Ø The penetration of toilet soaps is high at 88.6%. (97% in urban

market and 87.6% in rural market). However per capita consumption levels remain low India's per capita consumption of soap at 460 Gms per annum is lower than that of Brazil at 1,100 Gms per annum.

Ø The increase of a 100 basis points of the buying power in the

rural households contributes to a mind boggling 10,000 crores. Ø With industry's distribution focus becoming rural-centric, there is a growing trend

whereby a number of companies like P&G Hygiene and Healthcare have disbanded their entire distribution team and decided to piggyback on another company's (Marico) retail reach.

The Indian Soap& Detergent Industry The INR 91-billion soap and detergents' market has reached a reasonable degree of maturity. It has witnessed the presence of a large number of brands each positioned separately. A feature of this market has been the significant presence of smaller players. India, the largest producer of detergent bars, is also the third largest consumer of fabric-wash products. The market is valued at INR 36 billion. The rest of the market consists of the Toilet Soap Industry and is valued at INR 45 billion (Source Economic Times) and has 3 distinct categories, namely the premium, popular and the economy segment. Apart from these categories, there is also a niche segment which consists of the baby soaps. The soap industry can be broadly classified as shown in the diagram below.

Categories Urban Rural Toilet Soaps 97.1 87.6 Detergents 95 85 Hair color 20 10 Skin Care 40 10 Tooth brush 70 35 Oral Care 70 35

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Composition of the Toilet Soap in India

Beauty, 35

Health Care, 20

Skin Care, 20

Fairness, 3

Others, 22 Beauty

Health Care

Skin Care

Fairness

Others

Source: Business Standard

The market has mostly organized players, HLL being the biggest with over 60% share with brands such as Lux, Hamam, Rexona, Liril and Dove. Others in the fray are P&G (Camay), Colgate-Palmolive (Palmolive) and Godrej (Cinthol and Ganga). Premium brands, priced in the INR 12-30 range (for a 75gm cake), are the ones for which people are willing to pay a little more. Most of these brands have a special relationship with people and the consumer prefers a brand that fits ones personality and taste. Thus, Reckitt and Coleman's Dettol (keeping germs away), HLL's Lifebuoy Gold (hygiene and clear skin), Lux International (glowing skin like a film star), Liril (outdoor liberty) and the super premium `unsoap' Dove (skin as moist as ever) assures different propositions for the buyer. The mid priced segment is the most popular segment with brands such as Lux, Jai, Breeze and Santoor (priced at INR 8-12 for a 75gm cake). Brands like OK, Nirma Bath and Lifebuoy from the economy segment account for nearly a third of the market. These red carbolic cakes are low-priced germ-killers. Then there are niche segments like baby soaps which is INR 2.4 billion mark et virtually monopolized by Johnson & Johnson accounting for more than 92 per cent of the market. Karnataka Soaps and Detergents is also planning to enter this market. The MARKET DYNAMICS of the Personal Care Industry and the FMCG market in General

Ø Industry moving from being Monsoon Critical to being Monsoon Sensitive The Indian FMCG industry or the Personal care Industry in specific which was notoriously famous for it s monsoon dependent fortunes, is slowly changing to an industry which is less dependent of monsoons. There are 2 reasons for this A) Due to the better water storage and a deeper water table, the agriculture is no longer adversely

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impacted by the effect of monsoon. B) Also an increasing proportion of agricultural income has begun to come from non-crop activity like animal husbandry, farm management, etc.- pursuits that are economically viable while at the same time not influenced by the vagaries of the monsoon. Ø Price Cuts and Give Away’s To Tackle Slowdown Players in the industry responded to the slowdown by re-allocating their ad spending on brand-building to below-the-line promotional efforts. The trend started with give-aways such as the "buy two, get one free" offers on soaps and has culminated in discounted combo-packs on soaps, toothpastes and ilk. But such offers have been supplemented of late, with discounts on selling prices on carefully chosen products and pack sizes. These were intended to prompt consumer up gradation or pep up the quantity of products bought. Ø Smart Companies Target Niche Markets The maturity in large Personal Care segments such as soaps, detergents and toothpastes made some companies focus their attention on just evolving and are not too competitive segments. This was mainly due to the fact that milking large categories, such as soaps, detergents or toothpastes, for further growth calls for investments in distribution and sacrifices on the price front. For instance, Godrej Consumer's focus on hair colors, a market with robust growth rates, has helped it ward off the slowdown in the soaps business over the past couple of years. Ø Industry is not immune to Slowdown Gone were the days when the FMCG industry was a recession proof industry. The slowdown in demand growth has been under way for some time. But there are a couple of new facets to it. One, it is no longer restricted to rural demand growth rates have also been flagging for companies which target only urban and semi-urban consumers. Two, it is not restricted to the supposedly `mature' categories such as soaps and detergents. Over the past years growth rates have dwindled even for low-penetration categories, such as toothpastes, shampoos and skin products, with some of these actually shrinking in value.

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Comaprison of the growth rates of the personal products

-15

-10

-5

0

5

10

15

20

25

2000 2001 2002 2003

Year

An

nu

al

gro

wth

ra

te Personal Wash 6.1 (9.9) (6.1) 0.48

Fabric Wash 5.7 (2.9) (2.1) (3.6)

Dishwash 19.2 11.1 (1.8) (4.55)

Toothpaste 10 2 (5.5) 1-2

Shampoo 12.5 10.7 7.8 11.7

Skin Products 12.9 2.6 0.8 4.7

Demand Slowdown – An Analysis Personal Care Sector growth tapered in 2000 after the boom in the late nineties. The growth rates dwindled further in 2001, 2002 and 2003. Key segments such as soaps, detergents, toothpastes and skin products shrank in value in the recent years. The tapering off of sales is due to two factors. In high penetration categories, such as toilet soaps, detergents and toothpastes, the markets have either plateaued or shrunk. In low penetration categories, such as shampoos and cosmetic products, volume growth has decelerated. Since it is difficult to believe that Indian consumers cut back on their usage of soaps, detergents or toothpaste because of an economic downturn, a host of other reasons have been put forward by industry watchers to explain the slowdown. Some of the reasons for this Down trading This is one of the most favorite explanations for the slowdown. The reasoning is that as disposable income shrunk, consumers shifted from products at the higher end of the price spectrum to those at the lower end. For instance, a Pears user may switch to Cinthol or a Dove user to the Pears Soap. This explanation is supported by the fact that some of the fastest growing brands in 2004 have been mass market, or "popular", brands at the lower end of the price spectrum. But while this explains shrinkage in value, it does not explain why volumes dropped.

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Grey Market Threat Industry intelligence indicates that the reported numbers may not capture the activity in a significant section of the market. With the removal of restrictions on import of consumer products, quite a few imported (Chinese and Malaysian) soaps, shampoos and cosmetic products have made it to the retail shelves. "Me-too" products also account for a significant chunk of the rural and semi-urban market for Personal Care products. It is estimated that unfair competition (pass-offs) would easily account for about 5-10 per cent of the market. Promotional Excesses Promotional excesses in the FMCG sector in the recent years may also have led to the shrinkage in some categories. For example, a consumer will stock up his favorite brand when a promotional offer is running and naturally postpone his next purchase. This explains the reason for the shrinkage of soaps and toothpaste in the first few months of 2004 when the consumer promotional activities were at its peak. Consumer Credit Boom The consumer credit boom is another explanation for the FMCG slowdown. While the demand for consumer goods has been shrinking over the past couple of years, the demand for retail loan products (be it housing loans, car loans, durable loans, or credit cards) has been booming. It is quite believable that an average salaried consumer now sets apart a larger portion of his disposable income to repaying his housing, car and durable loans. Therefore, he is left with a smaller surplus for his monthly toiletry budget.

GODREJ CONSUMER PRODUCTS LTD. (GCPL)

HISTORY The Company celebrated its centenary in 1997. In 1897 a young man named Ardeshir Godrej gave up law and turned to lock-making. Ardeshir went on to make safes and security equipment of the highest order, and then stunned the world by creating toilet soap from vegetable oil. The story of Ardeshir Burjorji Godrej, founder-pioneer of the Godrej enterprise, is rich and varied. Deeply influenced by the nationalist Dadabhai Naoroji, he believed – like Gandhi later – that the struggle for freedom was both political and economic. Swadeshi became the breath of Swaraj or self-rule for Ardeshir. But he realized that mere boycott of British goods wasn’t good enough:

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they had to be substituted by Indian goods of equal, if not superior quality. Self-respect through self-reliance became his motto. The successful patenting of locks and safes, surpassing in quality even imported goods, followed by soap manufacture were steps in fulfilling this mission. All of these would make Godrej a household name for nearly seven decades thereafter. Ardeshir's brother Pirojsha Godrej carried his dream forward, leading Godrej towards becoming a vibrant, multi-business enterprise. Pirojsha laid the foundation for the sprawling industrial garden township (ISO 14001- certified) now called Pirojshanagar in the suburbs of Mumbai. Godrej touches the lives of millions of Indians every day. To them, it is a symbol of enduring ideals in a changing world. INCORPORATION Established in 1897, the Company was incorporated with limited liability on March 3, 1932, under the Indian Companies Act, 1913. Godrej Consumer Products (GCPL) is a focused FMCG entity and a flagship Company of the over Rs. 40 billion (US$ 800 million) 106-year-old Godrej Group of companies. The Company is one of the fastest growing entities in its sector. The Consumer Products business of the over 75 year-old erstwhile Godrej Soaps Ltd. (GSL) was transferred to the newly incepted Godrej Consumer Products in April 2001, pursuant to a scheme of demerger. As envisaged in the scheme of demerger, the name of Godrej Soaps Ltd. (GSL) was changed to Godrej Industries Ltd. (GIL) with effect from April 2, 2001. GIL retained the business comprising industrial chemicals, medical diagnostics and estate operations. With effect from April 1, 2001 the capital of GSL was reorganized from shares of Rs.10/- each to shares of Rs. 6/- each. Each equity shareholder of GSL was issued and allotted one share of the face value of Rs. 4/- in GCPL for every one share of the face value of Rs.10/- held in GSL. The record date for the above issue was May 3, 2001. Thus while Godrej Consumer Products Ltd. was established in its current form in 2001, with a single minded FMCG focus, the Company enjoys more than 75 years of experience in the manufacture of soaps and personal care products. GCPL is acknowledged as an innovator across the soap and personal care segments and has demonstrated consistent superior growth since inception.

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BOARD OF DIRECTORS

GCPL possesses an independent and highly respectable Board.

Adi Godrej Chairman and Managing Director Mr. Adi Godrej is also the Chairman of the Godrej Group. He graduated with a BS and MS (Management) from MIT. Besides serving as a Director on the boards of a number of other companies, Mr. Godrej is a member of the National Council of the Confederation of Indian Industry and the Governing Board of the Indian School of Business. He was the President of the Indian Soap and Toiletries Makers’ Association and The Central Organisation for Oil Industry and Trade, among many other positions. Jamshyd Godrej Mr. Jamshyd N. Godrej graduated from the Illinois Institute of Technology, USA. He joined the Board of Management of Godrej & Boyce Mfg. Co. Ltd., as Director in 1974, became Managing Director in 1991 and Chairman of the Board in 2000.Mr. Godrej is the President of World Wide Fund for Nature - India, Past President of Confederation of Indian Industry and Past President of the Indian Machine Tool Manufacturers' Association. Nadir Godrej Mr. Nadir Godrej has completed his B.S. (Chem. Engg.) from the Massachusetts Institute of Technology, USA, M.S.(Chem. Engg.) from Stanford University, USA and his M.B.A. at Harvard Business School in1976.Nadir Godrej is the Chairman of Godrej Agrovet Ltd. and the Managing Director of Godrej Industries Ltd. He was the President of the Oil Technologists' Association of India, The Compound Livestock Feed Manufacturers' Assn. of India and Protein Food & Nutrition Development Assn. Mr. Godrej is also on the Advisory Committees of the Indian Chemical Manufacturers' Assn. He is active in research and has several patents in the field of agricultural chemicals and surfactants.

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CORE MANAGEMENT TEAM § Dr. Bala Balachandran § Rama Bijapurkar § Anupam Puri § Hoshedar K Press § A Rangarajan § Sunil S Sapre § Dr. Rakesh Sinha § Pradip K Roy § Bhupinder Singh Sodhi THE GODREJ GROUP The Godrej Group has interests in a range of businesses. In addition to GCPL, the larger Companies that comprise the Group include: § Godrej & Boyce Manufacturing Co. Ltd Leading manufacturer of office and home equipment including appliances, furniture, locks, copiers, storage solutions and precision equipment.

§ Godrej Industries Ltd. Leading manufacturer of oleo chemicals which are used in more than two dozen industries. The Company also has a major presence in food

§ Godrej Agrovet Ltd. Market leaders in animal feeds and innovative agricultural products in India. TheCompany also has a strong presence in the branded poultry business

§ Godrej International Ltd. Engaged in international trading

§ Godrej Sara Lee Ltd. Joint venture with Sara Lee Corporation, USA and a leading manufacturer of household insecticides.

§ Geometric Software Solutions Co. Ltd. Specialist in Product Life cycle management software solutions for the mechanical design, manufacture and industrial markets.

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GCPL MANUFACTURING UNITS The company employs 950 people and has three state-of-the-art manufacturing facilities at

• Malanpur (M.P.) • Guwahati (Assam) • Silvassa (U.T.)

GCPL’s business is structured into two distinct segments § Personal Care - Includes hair colour, toiletries and liquid detergents.

GCPL is a leader in this segment and the thrust is on expanding the segment through consumer centric innovations and identifying opportunities in related segments

§ Soap - Comprises toilet soaps. In this segment the focus is on increasing

margin and marketshare.

GCPL BUSINESS STRUCTURE

GCPL PRODUCT LINE

BABY CARE HOUSEHOLD CARE FABRIC CARE TOILETRIES SOAPS HAIR CARE

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PRODUCT LINE v SOAPS

• Cinthol • Fair glow • Godrej shikakai • Godrej No. 1 • Godrej Nimin

v TOILETRIES

• Cinthol deo talc • Godrej shaving cream • Godrej hair dyes • Godrej deodrants • Godrej cinthol hand sanitizer

v HAIR CARE • Godrej colour soft • Godrej Renew • Godrej liquid hair dye • Godrej power hair dye • Godrej fashion • Kesh kala • Kali mehendi • Nupur

v HOUSEHOLD CARE

• Godrej liquid cleanser v FABRIC CARE

• Ezee v BABY CARE

• Godrej liquid cleanser Marketing principles of cinthol as per the history of the product :

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Time line of the product can be given as under : 1952

Birth and launch of Cinthol Deodorant and complexion soap.

1960

Cinthol Deo Talc was introduced.

1986

Attempt to modernize the image of the soap. 'New Cinthol' soap was launched with a new-look packaging, shape and advertising,. Celebrities like Vinod Khanna and Imran Khan were signed up. The campaign was a resounding success as it helped in making strong association with the brand.

1989

An attempt to capture a share of the lime soap market, Cinthol Lime was launched. Grabbed 8% market share in six months.

1992

Cinthol Cologne was launched to extend the brand into a modern and new fragrance.

1993

In order to carry out a complete overhaul of the positioning, three variants that had been launched post 1986 were brought under the Cinthol International umbrella – Cinthol International Spice, Cinthol International Lime and Cinthol International Cologne.

1993-95

Shah Rukh Khan was signed up to give the image a new reenergizing and revitalizing look.

1995

The brand was extended into the popular segment as the first popular segment lime soap.

2000

Redefined as a family soap with the famous 'Tan taaza, man taaza' campaign.

2002

Cinthol international Perfumed Deodorant launched in the market. Thus the product line extension has been carried out.

2003

Company launches Cinthol hand sanitizer which is a liquid gel used in cleansing hands.

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2005 Cinthol Deo Soap – Sport is launched. This is a new product which offers premium benefit at a popular price.

Today, despite the presence of global corporations, the Cinthol brand has carved out a consumer base of more than 17 million users .The soap market in India is determined to be of the order of Rs. 41.75 billion and Cinthol commands a turnover of Rs 1.05 billion (2003/04) with a market share of 2.5% by value (Source: ACNielsen - RSA 2003).It is the largest soap marketer in India after HLL and NIRMA. Explanation of the 4 Ps of marketing: These are:

• Product, • Price, • Place and • Promotion.

Now we can analyze how the company has been applying the above mentioned 4 Ps , in its marketing strategy. Product :

• Current scenario :

o The company has extended the brand cinthol into the following products:

§ Bathing soaps, § Deodorants, § Body talc and § Cleansing gel.

o Current product lines that the company is having under the same flagship are Cinthol fresh soaps, Cinthol Deo- Sport soaps, Cinthol Deo-soaps, Cinthol deo talc, Cinthol Deo sprays and Cinthol hand sanitizer.

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• Evolution of the products : § The company had initially started with a deodorant soap,

which was quite a premium product in its time. It pursued the typical product for the next 3 decades without applying any product innovations. This initial product had a lot of influence on the brand image. This product is still being marketed in India, called cinthol regular, making it the oldest soap in Indian market. This says a lot about the brand loyalty for the soap.

§ The first product variant exercise was carried out in 1989,

when Cinthol Lime was introduced in the market. At this time, the other lime soap that was prevalent was Liril, launched by HLL in 1975. Thus, the product variation did take a long time for the company to come up with. But, this new product did cover a nice market share in just a matter of months, also it got positioned in the premium soap segment.

§ The company then marketed newer product variations at

an improved rate, coming up with Cinthol Cologne, Cinthol international,cinthol fresh etc categories.

§ Current product portfolio is :

§ Cinthol Regular, § Cinthol International Lime, § Cinthol International Spice, § Cinthol International Cologne, § Cinthol Skin Fresh, § Cinthol Lime Fresh, § Cinthol Skin Stimulating Deo Soap § Cinthol deo-sport soaps which are of 3

types, themselves.

§ The evolution of the products had been carried out on the basis of the attributes of the soap. Initially, Cinthol was just a deodorant soap but later effort to made to inculcate fragrance. This was also due to the effort in positioning the brand from a just-for-males brand to a family soap.

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§ After this, company made a conscious effort to position the products in two different categories :

o Premium soap category which included

cinthol international soaps which was the umbrella brand with 3 variants : § Spice, § Lime and § Cologne.

o Population soap category wherein the

cinthol regular soaps, cinthol deo soaps, cinthol fresh soaps which in turn where made up variants like § lime fresh and § scent fresh.

§ Product line extensions have been carried out by the company as early as 1960 wherein it launched the deo-talc category under the same flagship brand. Later on, this was carried out in liquid soaps and deo-sprays. The extension has been made mainly keeping in mind,

o Associated features of the new products.

§ Deo talcs and deo sprays go along very well with the cinthol soaps because of the fact that the soaps had been targeted to the same set of consumers.

§ Liquid soaps were having the similar feature of containing effective anti-germs formulations.

§ Each product is being marketed into two types of stock keeping untis. One of 75 gms and other of 125 gms. Cinthol lime fresh is also marketed in a variant with 50 gms. While Cinthol regular comes only in one variant and that is of 100 gms, it has been such, since its launch in 1952.

§ Innovations : o The company was the first one to introduce

the use of vegetable oils in the production of soaps, whereas other competitors had been

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using animal fats. This helped to appeal to a large number of customers.

• Thus, we can say that the company, over a period of time, has grown very conscious of its own products and continuous variations has been made to cater to the market.

Price : The pricing strategy of cinthol has been very specific. It has been marketed since the start as a very premium product and this is reflected in its pricing. The current prices of the soap-variants are as under : Name of the soap Stock keeping units

(SKUs in gms) Price (in INR)

Cinthol regular

100

19

Cinthol Deo

75 125

13 20

Cinthol Lime fresh

50 75 125

5 13 20

Other prices are : Name of the product Quantity (in gms) Price (in INR)

Cinthol international perfumed deodorant

150 ml

125

Cinthol hand sanitizer

100 ml

85

Cinthol deo

100 300

30 70

Cinthol freshness talc

100 300

30 70

20

FMCG market of toiletries is increasing at the rate of 11 to 15% annually and this market is highly price-driven. So, the pricing strategy plays a very vital role in marketing here. Cinthol lime fresh was introduced in the market at a price of Rs 6.50 which was offering the do-good qualities of a lime soap at a popular price. Against conventional wisdom, the marketing strategy about highlighting the price of a popular product when coming from a flagship of a premium brand, was a success. Current pricing strategy

• Of Godrej Consumer Products ltd is to cater to various pricing points. For this, the company has differentiated the soaps into various categories.

• Cinthol in this case has been targeted to the premium or upmarket category as against to Godrej No. 1 soaps which have been marketed to the population or mid-rung category.

• The price band that has been used for the brand is between 13 to 20

wherein the price band that is being used to target the population is between 8 to 13. Hence, clear effort is being made to provide soaps around each price.

• Also, the Cinthol Lime Fresh has a 50 gm variant, which is available at the

price of Rs. 5. The main aims of the pricing strategy that is being designed are as under:

o To concentrate on the increase in the volume growth in the mid-rung or discount , soap sector. § Herein, cinthol does not come. Cinthol is mainly a premium

soap, but a downward extension is being thought of in the form of cinthol fresh, which helps to gain a better foot-hold in the market.

§ This has been an industry phenomenon and has let to drop in the per unit realizations.

o To induce a trial of the products. Company here in believes that if a consumer tests a products by , say in case of Cinthol Lime Fresh

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by buying a 50 gm soap, then it is possible to sustain the consumer to the typical brand.

Regional consumption of soaps

East19%

North30%

South26%

West25%

West East North South

Size of the individual segments

Discount1 Lakh tonnes

Popular2.2 Lakh Tonnes

Economy1.3 Lakh Tonnes

Premium0.8 Lakh Tonnes

Premium Popular Discount Economy

Here in the market size is about 5.3 lakh tones.

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• We can see in the above chart that large variation in the market can be based on the prices and cinthol is currently catering to the premium and high-end economy segment.

Place : Now, let us concentrate on the strategic places wherein marketing of cinthol has been done in order to maximize the sales and profits. Herein place has been taken as the market-place and the areas wherein cinthol is being sold. History:

• Godrej had a well organized distribution network since it has been in the market since more than 50 years and it has a very loyal set of intermediaries.

• In 1994, Godrej entered into a strategic alliance with P&G for toilet soap business, under which Godrej used to manufacture soaps, which were marketed by a joint venture company. However, post marketing alliance with P&G, the company lost significant part of its market share and subsequently the arrangement was discontinued.

• Godrej’s entire distribution network was then taken over by P&G. Godrej lost a great deal in the deal.

• Godrej reestablished a distribution network by utilizing the network of group company Godrej Hicare for marketing of its brands and in year 2000 took over the entire distribution network from them.

Current scenario :

• GCPL possesses a well entrenched and established distribution network • Consistent focus on enhancing reach and presence especially in growing

domestic non urban regions as well as international market. • In case of cinthol, the current sales indicate that there is not much

difference between the market share in the urban and the non-urban market.

• Company mentions its distribution net work as a key growth driver, in its report.

Analysis of the distribution network :

• A three level sales force comprising over 250-field staff is spread

across the

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country. Inventory levels are managed through the Sales and Operations Planning (S&OP) process that forecasts retailing for the next 12 rolling months and decides production and shipment accordingly. The Company has a well defined strategy to enhance its presence penetration in the rural markets and augmenting its distribution efficiencies. • A two tier distribution network – the first comprising the Company,

C&F agents, distributors and retailers and the second encompassing the Company, super stockists, sub stockists and retailers allows for deeper penetration into the Indian market .32 C&F agents and 2000 distributors support the sales force. Further, over 500,000 retailers are directly covered by GCPL distributors and sub stockists.

• Supply chain management:

§ The Company possesses an efficient supply chain

management system. § Sales, marketing and distribution teams meet on a monthly

basis to make rolling demand and supply forecasts for the upcoming 12 months. Based on these forecasts, which are revised at every subsequent meeting, raw material procurement and production plans are defined.

§ The forecasts also serve to efficiently plan shipment schedules. Continuous communication and data sharing with raw material suppliers, third party manufacturers and C& F agents ensures minimal finished product inventory levels and adequate marketplace availability.

§ Efficient distribution and supply chain management and an efficient collection mechanism have contributed to low inventory to sales ratio of 29 days and low debtors of 17 days.

• Debtors (in days) 17 days • Creditors (in days) 56 days • Inventory (in days) 29 days • Net working capital/ sales 5%

• GCPL has in place a robust IT infrastructure that significantly supports

and strengthens its operations. The Company has implemented MFG/PRO, an ERP software designed to integrate manufacturing,

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financial and distribution activities across locations. This has contributed to lower inventory levels and improved customer service.

• In an effort to further streamline its supply chain, GCPL has actioned a

Collaborative Planning, Forecasting and Replenishment (CPFaR) model. This contributes to controlling inventory levels and ensuring consistent availability of all products. The introduction of data warehousing products has also improved the interpretation of sales data and the comprehension of market dynamics.

• Thus, we can say that the company has a very well-organized

distribution network and its main aim now should be to penetrate deeper into the rural market and increase volumes.

Promotion :

• FMCG sector is highly becoming a very promotion-based industry. • This is due to the changing market scenario. Due to economic

liberalization, media explosion, high consumer aspirations and a cut in the excise duties resulting in the decrease of the real price, the market was booming. Then suddenly, there was a market slow down which was thought of as temporary.

• Now, declining growth rates could be circumvented through promotions

that would increase trade inventory, consumer upstocking and market share. And hence, the companies in this sector resorted to heavy promotions.

Current scenario :

• Neglecting the fundamental problem of economic slow down and being too much dependent on promotions to increase the sales, over a period of time, promotions have become a zero sum game.

• Initially, they were directed to the consumers as having to provide them

more value but after a long run, they have become more directed to the competitors.

• This has resulted in the commoditization of the brands.

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• This has resulted in no increase of the trade but has increased trade and consumer inventory.

Current brand strategy :

• The company is currently following a push marketing right now. It has

started a lot of promotions on each of the products. The company is currently applying the following strategies :

• Customized Product Offerings:

§ In line with its objective of building long-term consumer

relationships and adapting to various customer needs, GCPL introduces customized products based on specific market requirements.

§ The company has been doing a frequent market analysis

which is helping the company to come up with new product variants which are helping in promoting to new segments and helps in catering to the varied needs of the consumers.

o The brand has made a conscious image over a period of time to

shift its focus from being a masculine to a family-soap. This has been done due to the fact that when market survey was carried out, it was found that the consumers buy an assortment of soaps which had a mix of both masculine and family soaps.

o The company is also making conscious effort to enhance the

participation of females in the brand building because it has been found that females play a vital role in the purchase of the product, herein the soap. This is to give the soap a very soft image.

§ Despite being a major contributor to the Godrej coffers,

Cinthol had a 2 per cent market share of the soap market only when it was marketed as a masculine product. And the sales were remaining stagnant. To counter this, the image had to be remodeled.

§ The campaign - for Cinthol Fresh and Cinthol International -

focuses on femininity, coinfidence and protagonist

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approach. The commercial for the Cinthol Fresh shows how a lady manager seizes the opportunity when the boss is delayed for the presentation, and takes up the responsibility of conducting the presentation on her own, only to be lauded by the boss who walks in later. Leo Burnett has created the new ads. The Cinthol account was earlier handled by Ambience D' Arcy. Now the account is being handled by Samsika ad agency.

§ The target audience has been defined to personify a young

Indian woman who is modern, dynamic, vibrant, active and confident. As an introductory offer, the deodorant pack carries a ‘Scratch Card’ with attractive prizes and the new soap variant offers one soap free on the purchase of three.

o VFM model :

• Herein the company is trying to base its image as a Value for Money company. In such a case, cinthol due to its high TFM content provides improved lather and reduced ‘wear off’ which means greater bathing per unit. TFM is also the distinguishing factor between a product being categorized as a soap or a bathing bar.

• In this case the company is providing 3 + 1 offer,

wherein the consumer gets 1 soap free for a purchase of 3 soaps. The soaps are available without this offer also. The soaps on which this benefit is offered at Cinthol Lime fresh and Cinthol deo- soaps.

• In case of cinthol deo sprays, each spray is being

given with 33% extra quantity.

• For deo talcs, the company is following 1 + 1 policy wherein the buyer gets one talc bottle container free with the purchase of another.

§ Idea behind the strategy :

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• To make increase in customer inventory which leads to change in the consumer preferences, hence forth making repeat purchase of the brand more possible.

§ Result : • The promotion strategies that have been selected in a

very thoughtful manner enabling the company to have the highest RoCE, and RoNW ratios in the sector.

Competitor Analysis The Indian soap market is now saturated with too many players. Hence a logical step for companies is to lure consumer to switch brands. Today, the soap industry in India is facing the problem of diminishing “brand loyalty”. Consumers are willing to switch brands in search of quality product at an affordable price. The “premium segment” has taken most of the beating while “sub popular” segment has seen steady growth. It has been observed that although packaging and marketing of soaps have improved, the overall “value addition” to the soap has diminished. For e.g., TFM (total fatty matter) has been reduced in soaps from 68%-70% to “below 60%”. And Indian customers are very price-sensitive. They are getting smarter. They have started questioning the price-value equation. They are not willing to pay for products where incremental value is zilch. In short, Indian consumer is learning the art of putting right premium to value.

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In order to achieve higher growth rates in soap, penetration levels and per capita consumption has to be increased. The penetration level in urban market is at a high of around 98% whereas in rural market the level is low at 70%. It is evident that until and unless per capita consumption of soap increases, growth in the urban market would be very slow. But the rural market shows some potential. The high cost of raw materials (which is usually imported), higher import duties and higher indirect taxes has curtailed the growth rate. Moreover, with an increase in disposable income of families in rural India, popularity and sales of “popular and sub-popular brands” can be increased. With this perception, most of the soap manufacturers are shifting their target from urban to rural consumers. But, with existing prices, it’ll be difficult for soap manufacturers to penetrate the rural market. The constraints mentioned above holds good for all soap manufacturers and hence, if one company can survive and grow under these circumstances then other companies can also do it. Therefore it makes sense to compare Cinthol with few of its competitors. Cinthol is placed in “popular” category and some of its closest competitors are Liril, Lux, Breeze and Nirma Lime Fresh. There are much other soap like Lifebuoy, Santoor, Dettol etc which are not categorized as “freshness” soaps but pose a great threat to Cinthol. Hence, a complete discussion on Cinthol’s competitors would have been incomplete without their inclusion. We shall start the discussion with HLL, followed by Nirma and then few other soaps.

Hindustan Lever Limited (HLL) Overview Ø Parent company – UNILEVER (Anglo Dutch company). At present

Unilever holds 51% stake in HLL Ø In November 1956 Unilever merged 3 of its Indian subsidiaries and

formed Hindustan Lever Limited (HLL) Ø Person’s holding key positions in HLL

Chairman: Harish Manwani Finance Director: D. Sundaram New Ventures and Marketing Services Director: Dalip Sehgal

Ø In the same year HLL offered 10% of its equity to Indian public Ø Today, HLL is the largest FMCG (fast moving consumer goods) in India

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Ø Turnover of more than 10,000 crores

Ø Till 2001 HLL had 110 brands which has been consolidated to 35 brands at

present Ø HLL products are sold at more than 1 million retail outlets throughout

India Ø HLL and group companies have around 36000 employees including 1350

managers Ø Sector wise market holdings of HLL

o 63% market share in toilet soaps o 38% share in detergent powders o 48% in detergent bars o 60% share in dish cleaning segment o 72% share in shampoo o 60% share in skin care o 37% share in oral care o Market share figures for major foods businesses are:

§ Packet Tea (41%) § Coffee (45%) § Jams (75%) § Ketchup (38%) § Vanaspati (28%) § Staple foods (20%)

Ø HLL business is primarily divided into 4 groups:

i) Home & Personal Care • Personal Wash • Fabric Wash • Home Care • Oral Care • Skin Care • Hair Care • Deodorants & Talc • Colour Cosmetics

ii) Foods

• Tea

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• Coffee • Branded Staples • Culinary Products • Ice Creams • Modern Foods ranges

iii) New Ventures

• Hindustan Lever Network • Ayush ayurvedic products & services • Sangam • Pureit water purifiers

iv) Exports

• HPC • Beverages • Marine Products • Rice • Castor

soap production

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Personal Wash Category

In the personal wash category HLL has 8 products Lux, Lifebuoy, Liril, Hamam, Breeze, Dove, Pears, and Rexona. While Lifebuoy is its flagship brand, Lux, Pears and Dove are in premium category, Liril, Breeze and Rexona are in popular category and Hamam is in sub-popular category. The growth in this category in the last financial year was 6%.

LIRIL

Product: Liril was introduced in India in 1974 and it immediately clicked with Indian masses as “freshness soap”. For about 25 yrs since its launch no new variant of Liril was introduced in the market, but lately, with declining growth and increasing competition, many new variants of Liril like Liril Soft Aloe Vera and Lime, Liril Icy Cool and Liril Orange Splash are available in the market. Initially, when Liril was launched it was “green” in colour but its variants (as the names suggest) came in different colours. Place: Most of the HLL products including Liril are manufactured in backward areas. It helps in cutting cost on infrastructure and getting cheap labour. Liril is manufactured at Khamgaon soap plant situated in central India (Maharashtra). It is recognized as one of the best plants by Unilever. TPM (total productive maintenance) have been maintained at all manufacturing units. HLL’s distribution network is considered as its key strengths. Liril is distributed through a network of about 7,000 redistribution stockiest covering about one million retail outlets. The distribution network directly covers the entire urban population. Large scale of the company helps in reducing inventory. Liril is being introduced directly to the consumers in this retail environment through specially designed communication and promotions. HLL is also using information technology to develop a robust supply chain management system.

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Price: HLL has always priced Liril very competitively. Liril’s oldest flavour “Liril Lime Fresh” is available at Rs.15 for 75gm bar. Later on Liril launched “Liril Orange” with the same price tag. This was followed by Liril Ice Cool which is pegged at Rs.15 for a 75gm pack. And now, the latest product “Liril Aloe Vera and Lime” is being sold at Rs.16 for 75gm pack and Rs.26 for 125gm pack. Hence, we can observe that HLL hasn’t increased the price of Liril in the past few years. This could be contributed to standardization in the soap industry, highly competitive environment and squeezing profits. Pricing strategy of Liril has been fairly simple. It does not give sales promotions but keeps the price fairly low in the segment. Promotion: Ever since its inception, Liril has been branded as freshness soap and till date it stands by the same theme. Liril doesn’t offer sale promotions like discounts, price-offs but its marketing strategy specially advertisements have been very effective. People still remember Liril’s first ad where it showed a girl taking bath under a water fall. Over the years it has stuck to the same theme. But now, with its latest flavour, Liril Aloe Vera and Lime, the advertising strategy has changed. Instead of a girl, a couple is featured and the waterfall is replaced with a room. Instead of the girl enjoying nature’s beauty, focus has shifted to a couple who tease each other. Somehow, the freshness quotient of the product is missing in the television ad and it is to be seen how HLL further takes this image. Target segment for Liril is already identified. It’s the younger generation which is being focused upon. All forms of advertisements cater to the thoughts of younger generation. And now HLL is trying to shift from teen segment to young couples and thus want to increase the customer base.

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NIRMA

Overview Nirma is one of the few names - which is instantly recognized as a true Indian brand, which took on mighty multinationals and rewrote the marketing rules to win the heart of princess, i.e. the consumer. Nirma, the proverbial ‘Rags to Riches’ saga of Dr. Karsanbhai Patel, is a classic example of the success of Indian entrepreneurship in the face of stiff competition. Starting as a one-man operation in 1969, today, it has about 14, 000 employee-base and annual turnover is above Rs. 25, 00 crores. India is a one of the largest consumer economy, with burgeoning middle class pie. In such a widespread, diverse marketplace, Nirma aptly concentrated all its efforts towards creating and building a strong consumer preference towards its ‘value-for-money’ products. It was way back in ‘60s and ‘70s, where the domestic detergent market had only premium segment, with very few players and was dominated by MNCs. It was 1969, when Karsanbhai Patel started door-to-door selling of his detergent powder,priced at an astonishing Rs. 3 per kg, when the available cheapest brand in the market was Rs. 13 per kg. It was really an innovative, quality product – with indigenous process, packaging and low-profiled marketing, which changed the habit of Indian housewives’ for washing their clothes. In a short span, Nirma created an entirely new market segment in domestic marketplace, which is, eventually the largest consumer pocket and quickly emerged as dominating market player – a position it has never since relinquished. Rewriting the marketing rules, Nirma became a one of the widely discussed success stories between the four-walls of the B-school classrooms across the world. It has been persistent effort of Nirma to make consumer products available to masses at an affordable price. Hence, it takes utmost care to provide finest products at the most affordable prices. To leverage this effort, Nirma has gone for massive backward integration along with expansion and modernization of the manufacturing facilities. The focal objective behind modernisation plan is of up gradation with resource-savvy technology to optimise capabilities. Nirma’s six production facilities, located at different places, are well equipped with state-of-art technologies. To ensure regular supply of major raw materials, Nirma had opted for backward

35

integration strategies. These strategic moves allowed Nirma to manage effective and efficient supply-chain. Nirma has always been practiced ‘value-for-money’ plank. Nirma plans to extend the same philosophy in categories as commodity food products, personal care products and packaged food. Distinct market vision and robust infrastructure allowed Nirma to have cost leadership. Apart from this, lean distribution network, umbrella branding and low profile media promotions allowed it to offer quality products, at affordable prices. Important Information Soap: Ø Investment of Rs. 200 Crores Ø 30,00,000 Soap pieces sold per day Ø Annual sales of Rs. 500 crore Ø 20% market share Ø Second largest soap manufacturer in India Ø Four lines of 500 soaps per minute

Detergents: Ø 50,00,000 pieces sold per day Ø 38% market share Ø Largest Detergent manufacturer of India

Salt: Ø Asia’s largest salt works Ø Spread over 30,000 acres Ø Edible salt capacity of 288,000 tpa Ø Edible vacuum evaporated salt plant with § Technology from akzo nobel, netherlands § Tripple effect monel cladded evaporator

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§ Fluidized bed dryer Ø Human contact free process from water to packaging

Industrial Salt: Ø Asia’s largest salt works Ø Spread over 30,000 acres Ø Industrial salt capacity of 15,00,000 tpa

Production Trends (soaps)

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Nirma Lime Fresh Soap

Product: Nirma launched “Nirma Lime Fresh Soap” in the year 1997 to take over Liril Lime Fresh of HLL. This product had created a sensational marketing history in the Indian Toilet soaps market. Seventeen million packs of Nirma Lime Fresh soap were sold in the very first month of its soft launch. Packed in a poly coated 75 gm carton, which is printed on the world’s best Cerruti 8-colour printing machine, this soap is available in green colour. The soap contains 80% TFM. HLL retaliated with Jai Lime brand of soap but it could not dismantle Nirma Lime Fresh. Place: All Nirma products are manufactured in Gujrat. Nirma markets its products through its fully owned subsidiary Nirma Consumer Care Limited (NCCL), which was incepted in 1985. NCCL in turn resells these products in the market under the umbrella brands “NIRMA” and “NIMA” along with extensions. Nirma pioneered the concept of flat distribution network. Nirma Consumer Care Limited operates with two parallel distribution networks. The NIRMA brand is marketed through the first network, which consists of about 450 exclusive distributors. It is one of the lowest cost FMCG distribution channels of the country. All NIRMA range of products have a retail reach of over two million retail outlets and more than 40 million loyal consumers spread all over the country. The robust network ensures the availability of various products at different retail outlets across the nation. Price: Nirma Lime Fresh was competitively priced at Rs. 8 when Liril Lime Fresh was sold at Rs. 12.50. It was clearly a penetration technique and Nirma was quite successful in its attempt. However, there was no volume discount or sale promotion. Low margin and competitive pricing did not leave much scope for further discounts. There were no seasonal pricings. Moreover, Nirma did not bundle it with any other product (co-branding) and relied heavily upon its wide

39

spread distribution and retail channel. Price of Nirma Lime Fresh was same throughout the country. Promotion: Nirma’s promotion strategy has been unique and very successful. Nirma has always believed in “umbrella branding” i.e. all Nirma products’ name starts with “Nirma” or “Nima” based on chairman and patriarch Karsanbhai Patel’s daughters’ name. Such branding strategy helps in instant recall of the company and hence reduces promotional expenses. Thus, Nirma followed a strategy of “no advertising” before the product is launched. Once the product reached the shelves of retailers Nirma starts advertising. In the case of Nirma Lime Fresh, Riya Sen, daughter of a famous actress was shown taking bath in the fresh waters. The ad was very similar to Liril’s ad and emphasized on freshness quotients. Nirma has always stood for price-sensitive and value-for-money products. And all its advertisements highlight simplicity and cater to middle-class mentality.

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GCPL BUSINESS ANALYSIS The Godrej Consumer Care Products Limited (GCPL’s) business structure is divided into two segments, namely soap and personal care. The former consists of toilet soaps while the latter consists of hair color, toiletries, liquid detergents The focus of soap division is to increase margin and market share while the focus of personal segment is expanding the segment through customer centric innovations and identifying opportunities in related segments. During FY 05, GCPL registered a double digit growth in its top line of 14.4% YoY to 5.63 billion rupees and an equally strong growth in bottom-line which grew by 38.2% YoY to 0.9 billion rupees.

Below is the sales mix for the year 2004-05.

The toilet soaps contributed to 59.4 % of the total turnover of GCPL and 63.2 % of the branded sales. The soap category grew by 16.4 % YoY compared to 2003-04. Godrej sells soaps under mainly 3 brands namely Godrej Fair glow, Godrej No 1 and Cinthol. Godrej No1 contributed to 35% of the turnover.

Hair color segment contributed to 25% of GCPL’s sales and was one of the fastest growing segments next to contract manufacturing. GCPL is the market share in the liquid detergent segment and it contributed to 7% of GCPL’s sales and grew by 3% last year. GCPL Financial Trends After the demerger of the Godrej Soaps in the year 2000, into Godrej Consumer Products and Godrej Industries, the performance of GCPL has been outperforming the FMCG Index in terms of both performance and valuation.

GCPL's 2004-05 sales mix

334.1133.6

36.524.520 14

Toilet soaps(334.1)

hair color( 133.6)

liquiddetergents(36.5)

toileteries (24.5)

contractmanafacturing(20)

by products(14)

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2000-01

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2003-04

2004-05

Sales 8348 4649 4760 4916 5626

EBIDTA 1251 755 803 834 1000 Net profit 714 420 536 649 895 OPM 15 16.2 16.9 17 17.8 RoNW 36.2 79 119 140 191 RoCE ( PBIT) 194 111.11 132 173.67

Godrej has a highly efficient utilization of assets and capital and it maintains triple digit Return on Capital Employed (RoCE) and Return on Net worth (RoNW) both of which are amongst the highest in the Indian industry. They also work with negative net working capital and this puts a lesser strain on their resources. (Rs. Crore) 2000-01 2001-02 2002-03 2003-04 2004-05 Current assets 0.1 79.39 78.9 84.66 103.11 Current liabilities 0 105.41 100.49 123.86 146.17 Working capital 0.1 -26.02 -21.59 -39.2 -43.06 Net worth -0.2 53.18 45.56 42.36 49.85 Reserves & surplus -0.2 29.53 22.5 19.62 27.21 If you consider RoNW= Net profit/total assets X total assets/Networth (Return of Assets) X (Financial Leverage) Then Godrej is a highly Leveraged Company as compared to other FMCG companies. Liquidity Ratios Liquidity ratios (times) 2001-02 2002-03 2003-04 2004-05 Long term debt / equity 0.315 0.352 0.351 0.011 Total debt / equity 0.423 0.392 0.572 0.123 Current ratio 0.753 0.785 0.684 0.705 Interest cover 13.65 23.64 30.63 30.15 Gross working capital cycle (days)

31 64 69 68

Net working capital cycle (days)

-1 -3 -5 -4

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Avg. days of debtors 7 14 11 5 Avg. days of creditors 33 68 74 73 It has reduced the long term debt by clearing the loans and also through the issue of fresh equity shares offering which was well received.

Growth of Godrej

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OPM comparison with other FMCG companies Godrej is one of most efficient companies in terms of operations in the FMCG market, though it has an OPM of less than Nirma, it has an OPM greater than most other companies.

Operating Profit margin comparison

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Nirma an Over View Years 2000-01 2001-02 2002-03 2003-04 2004-05 Net sales 1430.05 2008.8 1896.62 2046.5 2213.36

PAT (NNRT) 235.35 248.95 185.9 308.89 248.55 Growth in Gross sales in % 17.03 19.01 -1.7 8.88 8.06 PAT (NNRT) / net worth 56.66 52.63 49.7 57.89 51.8 Long term debt / equity 1.32 0.66 0.533 0.715 0.357

Total debt / equity 1.357 0.844 0.624 0.73 0.415 Avg. days of debtors 29 28 32 30 28 Avg. days of creditors 71 54 33 21 22 Hindustan Lever – An Overview Years 2000-01 2001-02 2002-03 2003-04 2004-05

Gross sales 11458.3 11861.79 11211.92 11222.16 11009.73 Net sales 10588.18 10637.51 10148.5 10145.97 9938.19

PAT (NNRT) 1300.28 1455.4 1665.35 1677.69 1095.67 Gross sales 4.37 3.52 -6.79 1.5 -1.89 PBDIT (NNRT) / net sales 16.99 18.9 22.55 23.24 16.78 PAT (NNRT) / capital employed 55.18 51.56 48.9 46.74 31.82 Total debt / equity 0.045 0.028 0.016 0.797 0.703 Avg. days of debtors 7 10 13 13 15 Avg. days of creditors 89 97 111 115 113

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POSITION IN THE INDIAN MARKET

Pricing:

Cinthol has been positioned as a premium brand in the product mix. The prices range form Rs. 13 to Rs. 20 for its standard 75gm. offer. Pricing strategy has always been consistent even in the face of stiff competition and is not price driven. There is a more promotion driven approach which involves the family packs of “ 3+1”. This is also consistent with the efforts of the company to change the image of the brand form a masculine image to one catering to the family as a whole. Although GPCL lacks the product mix as rich as that of HLL , but the company has managed to leverage its strengths in quality and hygiene. Cinthol has been positioned as premium and Godrej No.1 caters to the popular segment. Similarly HLL has priced its soaps in the range of Rs.15-26 while Nirma has it’s Nirma Limefresh is priced at Rs. 8. we see that there is no differentiation among the prices except for Nirma which was a penetrative strategy. To combat this Cinthol Limefresh was launched in a 50gm. pack. costing Rs.5.

Product Mix: In line with its consumer centric approach, GCPL believes in intensively studying and deeply analyzing consumer behaviour and requirements. The knowledge and information is then drawn upon and translated to research and create ingredients, formulations and processes to develop suitable products that enhance the quality of life of consumers. All activities undertaken at GCPL are reflective of and focus on: o Consumer need o Development of superior quality products complemented by best pricing o EVA enhancement

Comparison of the RONW

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Despite having only 8.5% market share in toilet soaps in India, GCPL is the

largest company selling ‘Grade I’ soaps in India. ‘Grade I’ is the top-most category specified by the Bureau of Indian Standards (BIS). The total fatty matter (TFM) content in ‘Grade I’) soaps has to be 76% (minimum) with the least number of additives, thus making it a pure soap. The ‘Grade I’ rating conveys better quality to the consumers. This combination of low price and better quality makes it a tremendous value proposition for the consumers and could prove to become a big winner for the company.

With this value proposition at the heart of its product mix, GPCL has 5 variants of CINTHOL soap. § Cinthol Deodorant and Complexion Soap is a soap trusted even by doctors for

skincare. It assures overall skin health by removing blemishes and improving skin complexion. Active ingredient TCC kills bacteria and gives protection from body odour. It's non-soggy and long lasting. It has an excellent unique perfume too that keeps you fresh all day long. It is a Grade 1 soap with 79% TFM and is available in 100g pack.

§ Cinthol lime fresh with the extracts of real lime, Cinthol Lime Fresh provides deep cleansing along with active freshness and vitality. This makes for an invigorating bath that kick starts and gets you ready for the day. The soap has an excellent long-lasting lime fragrance that keeps you feeling fresh throughout the day. With TFM 76% this Grade1 soap is available in 50g, 75g and 125g.

§ Cinthol deo soaps: there are three variants of this soap. These soaps have been specifically made to combat body odour. It is targeted at the young, fun-loving people who are on the go.

1. Cinthol Deo Soap Cologne 2. Cinthol Deo Soap Spice 3. Cinthol Deo Soap Sport

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Recently the company ahs been stressing the promotion of the larger packs. In all the company has 87 Stock Keeping Units (SKUs) including all it’s brands. Cinthol Limefresh maintains an exclusive image due to its 125gm. pack. There is relatively less competition in the large SKU segment and this is an attempt to meet the gap. Ever since the launch of the deo soaps , the market share of Cinthol has increased considerably. Cinthol Limefresh- the erstwhile largest seller has been passed by these three deo variants taken together Distribution channels: Indian urban population centers are widely dispersed and nationwide distribution is imperative for many classes of consumer products. Rural India constitutes approximately 70 percent of the country’s population. Although in terms of buying power urban India would rate higher, the rural market has been showing rapid growth in recent years. The main reason for such growth, apart from awareness created by various media, has been the increased availability of products in rural areas. The adaptation of distribution channels to the needs of the rural market has been the major factor contributing to the growth of the rural market. The company has manufacturing plants at Baddi (Solan, HP), Gujarat (Assam, ASS), Malanpur (Madhya Pradesh, MP), Silvassa (Dadra & Nagar Haveli, DNH). The strategic location of these plants entails tax exemptions under Section 80IB because of its plant at guwahati. These exemptions are handy in dealing with the fall in revenues due to the growth of only the low end soaps. Most Indian manufacturers use a three-tier selling and distribution structure that has evolved over the years: distributor, wholesaler and retailer. Wholesaling is profitable by maintaining low costs and high turnover. In recent years, there has been an increased interest by companies to improve their distribution logistics in their effort to address a fiercely competitive market. Most fast moving consumer goods (FMCG) and pharmaceutical companies use Clearing and Forwarding (C&F) agents for their distribution and each C&F agent services stockists in an area, typically a state. With the cost of establishing warehouses becoming prohibitive C&F agents are fast becoming the norm. Godrej Consumer Products Ltd. possesses a Two-Tier distribution network, comprising of :

1. The Company, C&F agents, Distributors and Retailers. 2. The Company, Super stockists, Sub stockists and Retailers allows for

deeper penetration into the Indian market. The second system helps us to push our products deep into rural areas.

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India Soap Distribution: %share by value.

32 C&F agents and close to 2500 distributors, super stockists and sub stockists

support the sales force. Further, over 550,000 retailers are directly covered by GCPL distributors and sub stockists. Cutting edge IT and systems infrastructure is designed to optimize marketing and sales reach. Inventory levels are managed through the S&OP process that forecasts sales for the next 12 rolling months. SAMPARK, the supply chain management initiative of the Company demonstrated its ability to meet business objectives and increased levels of visibility at both the distributor and retailer levels. It has enabled a virtual 'information exchange and sharing platform' equipped to connect distributors to track stocks so as to ensure minimal inventories, timely delivery and efficient planning. Retailers are the crux of the distribution network. The GCPL distribution network comprises of around 17000 retail outlets in the whole of Orissa and 800 retail units in Bhubaneswar. Godrej Industries is all set to open agristores across the rural India under the “AADHAR” brand name. The company has test launched the concept in Maharashtra where it has opened three stores. They are selling farm inputs like animal feed and fertilizers from Godrej Agrovert free of charge, and plan to extend its consumer products through these outlets. PROMOTION STRATEGY: The Cinthol brand enjoys a very high perceived value among the customers and has presence in about 80% of the retail outlets covered by GPCL. Although the brand has got a very strong brand image predominantly in Southern India, but even in Orissa the brand holds a very healthy position. Godrej Consumer Products is undertaking numerous initiatives to further strengthen its marketing and sales functions.

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• Value for Money: All GCPL products possess a distinct ‘value for money’ proposition. Across the entire soap and personal care range, GCPL offers superior quality products at the most competitive prices. For example, the TFM content in soaps, which is regarded as a key differentiator globally, is amongst the highest in the Godrej FairGlow, Cinthol and Godrej No. 1 ranges. Higher TFM percentage results in improved lather and reduced ‘wear off’ which means greater bathing per unit. TFM is also the distinguishing factor between a product being categorized as a soap or a bathing bar. The quality proposition of GCPL’s product portfolio is further reinforced by the fact that all, the power brands of GCPL in the Toilet Soaps category continue to be of Grade-1 quality, which is the most stringent specification by the BIS (Bureau of Indian Standards). Also in continuing with its customer centric focus the Company has introduced the Cinthol soap brand in smaller 50 gm packs to enable strengthening acceptance in the rural segments. • Brand Teams: Key-marketing managers have been appointed to drive marketing and brand building initiatives for each product as well as imbibe new market trends and variations. This enables GCPL to better anticipate and service its main customers and nurture a stronger relationship with them. The Marketing team is responsible for marketing, advertising, promotions, consumer research and other disciplines that are key to developing an FMCG brand.

• Customized Product Offerings: In line with its objective of building long-term consumer relationships and adapting to various customer needs, GCPL introduces customized products based on specific market requirements. For

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instance, Godrej Colour Soft formulated by the Godrej Hair Care Institute is customized to suit Indian hair.

• Communication Strategy: The Company has devised an optimal brand communication strategy by a judicious mix of both electronic and print media, as well as through various competitions and partnerships to strengthen brand pull and identity. • Power brand strategy: Pioneered by HLL, this strategy has been embraced by GCPL as well. The brands have been selected on a number of criteria. While sales figures play the vital role, the selection process is also more intuitive as each company has an idea of which are its power brands. Godrej identified Cinthol, FairGlow and Godrej No.1 in soaps, Godrej Hair Dye and liquid detergent Ezee as its five power brands. These brands are considered to have a competitive edge by way of the product, technology, price, etc., and which can pave the way for future growth in sales and profits. There is a conscious de-focusing on other brands where the company is either only maintaining or winding down. Thus the potential to grow and the segment targeted also are of paramount importance while choosing a power brand. • Advertising Strategy: The Company has a focused approach to advertising and communication, choosing appropriate channels and strategies to communicate the considerable benefits the product offers. A Joint Media Buying approach within the Godrej Group enables GCPL to efficiently utilize its media spend and achieve optimal results. The advertising strategy has changed form the normal media centric approach to a more promotional role, again in line with the “value For Money” proposition. The earlier advertisements featured Imran Khan, Kapil Dev and Vinod Khana and was an attempt to attract the young Indian male and had a very masculine image. This approach has been discontinued and a more family-centric approach has been sought.

Most of the Cinthol brands, except Cinthol regular and Shikakai are now in the promotional packs of “buy 3 get 1 free”. GCPL is also pursuing the push strategy wherein various incentives have been given to the dealers in various promotional schemes.

ü Temporary Price Reduction: these incentives are followed from time to time and the reduced prices are given as discounts to the dealer as incentive.

ü Agreed Released Fund : these incentives are given to the retailers as a plan from the company.

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Besides these there are a number of promotional schemes like scratch cards and lottery schemes to promote the brand. These not only induce sales but also build the perceived value of the brand. Orchard Advertising is taking care of the advertising of GPCL. The new launch of the Cinthol Deo soaps has been accompanied with heavy advertisement which emphasizes the USP of the brands- freedom from body odour and Hygiene. These deo soaps are also on offer in family packs of three. Cinthol Deo soap Sport comes in a three pack whereas Cinthol Deo Soap Cologne and Spice come in a Combo-pack with one bar of Spice and two bars of Cologne. Since its lauch the sales of Cinthol brand has shot up by a considerable margin. The GPCL soap division has witnessed a phenomenal growth of 16.4% year on year.

Analysis of consumer behavior Consumers are the most important aspect of an consumer goods industry, because , if a producer is able to understand what exactly does his customer wants or is able to create a demand of the goods that he produces then the chances of the producer gaining a respectable market share increases manifolds. For this purpose, we surveyed around 50 people in Bhubaneswar to enable us to predict the behavior of all the consumers regarding many decisions that a company may take to further increase its market share by increasing sales and thereby increasing profit margins. We surveyed consumers at:- Big bazaar Local grocery shops Super bazaar We tried to take survey of as diverse a sample as possible to take into consideration the sample’s ability to capture the responses of actual population. The following graph shows the demographic distribution of the sample. Age distribution of sample

6

2

3

9

4

3

12

2

300

1

7

1

6

0

2

4

6

8

10

12

14

16

18

20

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The above graph shows the distribution of males and females within different age groups and the number of cinthol users within them. The following group shows the distribution of sample data within different household income groups and the number of cinthol users amongst them. Income distribution of sample These graphs help us to analyze the rationality of different consumers depending upon the demographic group. The consumer decision making process is a 5 stage process involving:- 1... Problem Identification In this stage consumers try to identify their needs and wants based on certain attributes and depending upon their demographics, he comes out with the total set. For eg: if an individual has more weightage for medicinal property then his need structure is well defined and accordingly he can go ahead with other steps.

2

68

9

7

14

13

0

5

10

15

20

25

50000-100000

100000-200000

200000-300000

300000+

no. of people not using cinthol

no. of people using cinthol

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The following graph shows the preferences of consumers according to the different attributes of soaps which they look in for before purchasing a particular brand. Attributes of soaps (on a scale of 1 to 5) 2... Information Search A consumer, after identifying his needs, would start to look for information that could help in satisfying his needs. For an FMCG sector, the sources of information about a brand or a product which were evident during the survey were: Advertisements (Packaging, Displays, etc.) Word of mouth like promotion of product or brand by retailers. Existing brand knowledge This will help the consumer to reach at the awareness set out of the total set. 3... Evaluation of Alternatives Based on the attributes as well as information gathered, consumers would evaluate all the alternatives and then upon the criterion set by him/her, they would evaluate all the alternatives on the basis of weightages given to all the attributes, and this will help them to find out the consideration set.

12

8

18

75

9

18

12

83

8

100

12

10

10

13

9

8

10

6

21

16

70

11

16

10

67

0

10

20

30

40

50

Price MedicinalValue

CosmeticProperty

Freshness HerbalProperty

Skin Care

5 points 4 points 3 points 2 points 1 point

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In order to test if there is any association between the income level and the brand

preference, we conducted a CHI – SQUARE test, which is given below.

The hypotheses taken are:

Null Hypothesis – There is no association between income level and brand

preferences.

Alternate Hypothesis – There is association between income level and brand

preferences.

Observed Frequencies (O)

Income level / Brand

preferred

Cinthol Lifebuoy Margo Liril Nima Fresh Lux Dove Pears Total

50,000-100,000 2 2 2 2 0 0 0 0 8

100,0000-200,0000 8 4 3 0 2 0 0 0 17

200,000-300,000 7 0 0 0 0 4 7 3 21

300,0000+ 1 0 0 0 0 2 1 0 4

Total 18 6 5 2 2 6 8 3 50

The value of Chi Square obtained was 47.67678

The critical value obtained for 21 degrees of freedom at 5% level of significance is

32.67 Thus we reject the null hypothesis and see that there is a relation between

the income level of consumers and the brand preferences.

4... Purchase Decision Soaps being a low involvement product category that’s why the purchase decision is mostly influenced by the point of purchase promotion. As well the survey conducted brought to our notice that mostly parents or elderly people are the ones who purchases the groceries for their families Thus the consumers reach

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at the choice set and then finally take a decision regarding purchase of a particular brands The following graph shows the reasons why consumers buy cinthol soap based on certain most important attributes.(on a scale of 1 to 5) Reasons why consumers buy CINTHOL.

0

2

4

6

8

10

12

14

5 points 4 points 3 points 2points 1 point

freshness

fragrance

price

skin care

5... Post Purchase Decision Brand loyalty in case of cinthol soaps is very much evident from the survey. The advertisements of cinthol were not recognized among the first three advertisements of soaps but still, year on year, godrej has been adding to its annual sales. So in case of godrej it’s a matter of repeat sales and brand image.

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Synopsis

Cinthol as a brand is perceived to be a masculine brand and target customers are people in the young age groups(15-35yrs) as well as the middle income group (Rs.100,000-300,000 as the average yearly household income).People perceives Cinthol to be fairly priced , that is, it provides value for money. The major attributes due to which customers prefer Cinthol over it competitors are freshness, value for money, fragrance, and skin care. All the variants of Cinthol are readily available at almost every grocery shop. So the place of purchase is scattered over small grocery shops to big malls. The purchasing decision is influenced by word of mouth publicity and point of purchase promotions. The purchasing habits of the customers involve purchases for the whole month together. Though the advertisements (promotions) are not very effective vis-à-vis other competitors but the sales growth is a result of repeat purchases as well as brand loyalty.

Recommendations

1. Cinthol is still perceived as a masculine brand and all rhe advertising strategies have still to change that perception. Although GPCL has changed the packaging and the advertisements to fall in line with the family centric approach but still more has to be done. The sales promotions done are more on the value concept but have neglected the perception of the consumers. A new promotional scheme could be launched which would give freebies to the family such as vacations for the family by a scratch card or lottery scheme

2. The advertisements in the past have always tried to build a macho image

by featuring male icons like Kapil Dev, Imran Khan etc. to change this perception to cater to the family as a whole the brand ambassadors have to be changed. The Company ca hire some celebrity couple or a celebrity family like the Bachan family to endorse the brand.

3. Distribution network is still urban in approach and the rural market still

holds much potential. The distribution network can have better rural penetration via a programme similar to the operation SHAKTI that HLL

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has done. By this approach the company can involve the rural population in the distribution network and also be cost effective.

Annexures

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figure3: Revenue breakup’05

source-GPCL

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APPENDIX

Click to view Findings of Survey (Sheet - 1) and MASTER DATA SHEET (Sheet - 2)

Questionnaire

1) Age Category: 2) Sex (M/F) 15-25 25-35 35-45 45+ 3) Household income of the Family: 50,000-100,000 100,000-200,000 200,000-300,000 300,000+ 4) Number of persons in the house: 2-3 4-5 above 5 5) Who is the main purchaser of Groceries (including Soaps) at home? 6) What soap are you and your family (the number of persons) using right now? 7) When have you last changed your soap? a) Within last one month b) Within last 3 months c) Within last 6 months d) within last 12 months 8) If yes to question 7, how often do you change soap during that period?

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9) What are the factors that make you to change the soap? (On a scale of 1-5) a) Price of the soap (1-5) b) free complimentary offers by the soap c) Advertising strategy of the competitor (inspired by the advertisement) d) Trying out new /innovative products (out of curiosity) 10) How often do you buy soaps and how many do you buy during each purchase? a) Once in a month b) Twice a month c) After each use 11) What are factors you look for in buying soap? ( on a scale of 1-5 for each category)

a) Price of the soap b) Medicinal value of the Soap (like dettol) c) Cosmetic property of the soap (like dove) d) Freshness of the Soap f) Herbal property of the soap (Eg. Margo, neem) h) Skin types j) Rich Lather k ) or a case of Repeat Purchase 12) What is one word which comes to mind when you hear of the word

“Cinthol”? 13) Why do you buy Cinthol? (On a scale of 1-5) a) Freshness b) Acts a long lasting deodorant c) For its fragrance d) Skin Care e) Rich Lather 14) What is your perceived value of Cinthol? (Do you think it is correctly priced, priced little lower compared to other soaps, priced higher than other soaps?)

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15) What is your impression of the Advertisements of Cinthol? What are your most favorite advertisements of Soaps (top 3)? 16) How do perceive the brand Cinthol? a) Masculine b) Feminine c) Unisex

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