Hll and Nirma

Case analysis – HLL: Levers for change

Rahul Kumar 09Saba Rais 59

Sunanda Mitra 149Siraj Siddiqui 151

11/04/2023 2

Flow of presentation• Recent Industry Brief • HLL Introduction• HLL HR Policy• History of Washing Powders• NSDs• Recent Comparisons• Mindset of HLL• Nirma• Model Nirma• Nirma SCM• Nirma Recievables• Nirma Advantages• The growth Story• The Market Shares• Volume Growth• BCG

• Ansoff• Why HLL?• Combating Nirma• STING Campaign• Distribution Strategy• Product Placement• Wheel Vs. Nirma• Relaunch Of Sunlight• Financial Imacts• Retained Earning• New Threats• HLL:Market Leaders• HLL Ladder• Tide• Tide of TIDE• IMC

Strategic Management/HLL Case/ Prof. Shaveta Kukreja

11/04/2023 Strategic Management/HLL Case/ Prof. Shaveta Kukreja

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Recent Industry Brief

• The Indian laundry market is Rs 5000 crore. Making India world’s third largest detergents market.

• HUL enjoying highest 38% of share, followed by others like P&G, Nirma, Ghari etc.

• Detergent bar comprises of 43% of market share and powder enjoying the rest 57%.

• The hot brands are Nirma, Ariel, Surf, Tide, Wheel, Surf Excel and leaving others as option.

• Competition in this market is really high with HUL, P&G, Nirma etc strategizing and innovating to capture the market.


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HLL Introduction

• Founded in 1956• Consolidation of 3 companies.• In chemicals, detergents, agriculture,

personal products.• A subsidiary of Uniliver.• 3rd largest business group .

• Source: HLL CASE STUDY PAGE 3-5


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HLL HR Policy

• Glocal policy• Recruit young bright Indians• To crate leaders• To follow the values of Honesty,

Integrity, Meritocracy & respect


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History of Washing Powders

Traditional bar • Hard yellow soap

Laundry soap• 1970’s – They governed 95% market share • Low priced products by local manufacturers• HLL’s sunlight


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NSDsDetergent powder• Lead by HLL’s Surf (1959) and Swastic’s Det.• 1965 – Market share – Surf(70%) vs Det(25%).• Showed promising growth• Rise in price of surf invited more players• Surf was the industry leader inspite of all the competition

• Detergent cake• Pioneered by TOMCO and followed by HLL• Cake segment caught up in pace with the powder segment• It was categorized into high, medium and low priced


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Recent Comparisons


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Mindset of HLL( Pre-Nirma)

• No aggressive competitor• Undisputed leader in the organized sector• Had all the knowledge about their rivals• Had the support of Unilever’s international

repute• Nothing could stop them from dictating the

market


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NIRMA

• Business principle – “Develop a good product and there will be market for it.”

• Did not follow any fixed business rules• Rules were flexible• Identified the gap in the business of the large

companies and leveraged on it


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Model which NIRMA followed

• Kept production costs low• Investment on maintenance was low• Contracted out business functions to keep

overheads low• Production was continuous• Employed unskilled labors• Paid laborers on the basis of work done


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Nirma SCM

• For distribution it operated on the principle of obtaining the lowest cost at any point of time

• Had a much simpler forward supply chain compared to HLL

• Stockists were appointed as commission agents

• Supplies were made at a predetermined rate


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Nirma Recievables

• Cancellation of order was not allowed• Payment had to be made in advance through

demand draft• Handling and delivery costs were borne by

stockists• Nirma ensured that its distributors were

satisfied


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Nirma Advantages

• Its greatest strength was low price which it has been able to maintain

• Packed in poly bags which resulted in low cost• Had its own printing and packaging unit• Spent heavily on advertisement and sales

promotion• Vertical integration in future helped maintain

low cost


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The growth story

• Slow, steady and methodical expansion • By 1977 became the second largest volume seller in

the country 12% market share compared to 30.6% of surf

• Between 1977 & 1985 sales grew at a compounded rate of 49%

• Market share almost trebled to that of surf in 1983-91• Launched detergent cake in 1977-79• Planned to attack the market of surf with super Nirma


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The Market share War

Y1977 Y1978 Y1979 Y1980 Y1981 Y1982 Y1983 Y1984 Y1985 Y1986 Y1987 Y1988 Y19890

10

20

30

40

50

60

70

80

Chart Title

MS(SURF) 40.8 38.2 MS(NIRMA) * *


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Volume Growth of Nirma

Y1976 Y1977 Y1978 Y1979 Y1980 Y1981 Y1982 Y1983 Y1984 Y1985 Y1986 Y1987 Y1988 Y19890

50

100

150

200

250

300

350

VOLUME OF Nirma (In 1000 tons)

VOLUME(In 1000 tons)


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NIRMA in the BCG matrix


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NIRMA on the Ansoff’s matrix

FROM PRICE POINT OF VEIW


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Why didn’t HLL react immediately?

• Focused on their premium brands• Rin was showing promising growth• It was difficult for HLL to duplicate NIRMA’s

product• Constrains on production• Failed to understand the business model and

product positioning of NIRMA

HLL Fights Back


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Combating Nirma: 1985-1991

• Switch from cartons to polybags• Improved formula and price discounts• New brand slogan ‘Surf washes whiter’• Introduction of Lalitaji – representative of a

sensible housewife• Introduction of ‘Sunlight’ positioned directly

against Nirma in terms of price


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STING Campaign: Wheel introduced

• Competitor’s meeting every week• Evolvement of a low priced detergent i.e.,

wheel without the high soda ash content of Nirma

• Alternative ways of marketing were developed• Selection of production sites to obtain raw

materials at low costs• Third party production units to get advantage of

small scale manufacturing


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Distribution Strategy: Wheel

• Use of existing distribution channel of HLL which provided a coverage area of 3200 towns and 6000 villages

• Switch over to a simpler system in 1990

HLL Factory

40 carrying and forwarding agents

4000 redistribution stockists

300000 retailers and wholesalers

HLL Factory

4000 redistribution stockists

300000 retailers and wholesalers

Before After


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Product Placement: Wheel

• Advertising expenditure amounting to Rs.50-60 mn per year in line with Nirma

• Advertising stressed on the tag line ‘safe on hands and clothes’

• Priced at Rs. 5.50 as against Rs. 5.25 for Nirma

Result: By 1990 HLL regained its leadership in the fabric wash market which it had lost in 1987


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Wheel vs. Nirma

• Cost Structure: Cost economy achieved on Raw Materials PBI Excise Sales Tax

• Continuous decline in sales of Nirma compared to continuous increase in sales of HLL in terms of both volume and value

• The gap in volume was greater than the gap in value


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Re-launch of Sunlight

• By 1991 sales had dropped from 30000 tons to 6000 tons

• Market share had dropped to less than 7%• Repacking higher quantity at the same price• By 1992 sales again surged to 15000 tons a

year


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Financial Impact: 1989-91

• Increase in fixed asset investment by 17%

• Increase in working capital by 37%

• Increase in sales by 46%

• Increase in profit by 66%

• 42% bonus declared in 1990 in addition to

bonus issue of 1:2


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Retained Earnings

Y1982 Y1983 Y1984 Y1985 Y1986 Y1987 Y1988 Y1989 Y1990 Y1991

1602

8631008

1151

1843

1442

2278

2749

3483

4610

RETAINED EARNING OF HLLRETAINED EARNING


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New Threat: P&G

• Ariel Microsystem launched in 1990 by P&G targeted at the premium segment

• Rin powder though superior to Nirma was lower in quality compared to Ariel

• By February 1992 HLL launched its ultra product based on cost effective indigenous technology

• It used a parallel production development plan instead of step by step approach


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HLL: Market Leader

• Elaborate segmentation and positioning• Targeting the vaccum in all segments• Emphasis on competitive pricing and cost

reductions• By 1998 HLL was the undisputed leader in

Indian market ready to face any challenge

Next Challenge: To augment its revenues in order to match value with volume


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HLL Ladder


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HLL Latest• The effect of the price war on HLL's bottomline

and product portfolio will take some time to figure out.

• HLL's portfolio presently looks skewed with a lot of its brands now competing in the same price range.

• Rin Shakti and Surf Excel Blue are now at the same price point of Rs 42 per kg.

• Surf Excel Blue had recently been re-launched, possibly to convert Rin Shakti users to Surf Excel Blue.


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Tide• Tide is the name of a popular laundry detergent in the market of

Canada, the United States and other countries.(by Procter & Gamble)• Tide is the World’s Oldest & Most Trusted Detergent brand and is the

Market Leader in 23 Countries around the world.• Launched in India in mid-2000• It gives outstanding whiteness due to its anti redeposition global

technology • Anti-redeposition Agents help keep soils from re-settling on clothes

after they have been removed during the wash itself• It offers solution to virtually any stain • Tide detergent is available in India in packs of 200 gm, 500 gm, 1 kg, 2

kg and 20 gm single use sachet.• Tide bar is available in 75gm,125gm,200gm bars.


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Tide of Tide

• The price cut by P&G has resulted in a repositioning of Tide in the popular segment.

• Consumers could well see a huge value-for-money proposition in Tide and downtrade to Tide from Rin Supreme.

• With the price cut, P&G has virtually killed the premium segment and reduced the detergent segment to the mid-price and popular segments.


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IMC


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Thank you

Documents

Hll and Nirma