Nirma Karishma

8/12/2019 Nirma Karishma

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PRESENTATION ON

NIRMA & HLL

MOTHER OF ALL BATTLES

SUBMITTED BY:

Karishma desai

Div-F


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INTRODUCTION

In 1969 Karsan K Patel started Nirma and went on to create a whole new

segment in the Indian domestic detergent market. He has came up with Nirma

detergent which was a result of innovative combination of the important

ingredients and the detergent was more environment friendly. In 1989, Nirma

became the largest selling detergent powder in the country, which was priced

at the one third that of the nearest competitor.


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HLL

Hindustan lever limited which is now became Hindustan unilever limited

was founded in 1930 is Indias largest consumer product sellingcompany with an annual sales turn over of Rs. 13000 crores (2007)

across the world in 89 countries. Before the launching of Nirma, HLL

was the only giant in detergent industry but as soon as Nirma took its

step into the Indian market, HLL started realizing the biggest danger as

fought back against it.


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THE FABRIC WASH MARKET IN INDIA

With a population of over 800 million people, India represented one of

the largest fabric wash markets in the world.In the two decades since 1980 , the sales of non-soap detergent (NSDS) had

soared, largely through Nirma & HLL .

To the original washing soap market, two or new segments were added :

NSD powders and NSD bars.


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LAUNDRY SOAP

The highly fragmented laundry soap market was dominated by low-

priced products made by small-scale local manufacturers in differentparts of the country.

In 1991, the ten largest competitors in this segment collectively accounted

for less than 5 per cent of the national demand.

The key challenge in the manufacturing process lay in producing a

consistent-quality product over large volumes and long time periods.


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DETERGENT POWDER

The first companies to begin manufacturing detergent in India were a local

private sector firm, Swastik, and HLL.Surf, manufactured by HLL quickly became the national market leader with

dominant positions in the West, North and South.

In 1977, when the world-wide rise in the price of crude oil, the price of raw

material cot of detergent got increased and, consequently, the selling

price of HLLs Surf got doubled which created an opportunity for local

producers of crude detergentslow price, low-quality products basedon cheap raw materialsto increase their market share.


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DETERGENT BARS

TOMCO and HLL had expanded the market further byintroducing detergent cakes and bars into India. In 1968,

TOMCO converted one of its washing soaps, Bonus into

a detergent cake and in reply HLL launched Rin a year

later. Price categories in the quality bars and cakes segment

were comparable to those of the powder segment. Rin

and Det were priced about 10 per cent below the highest

priced powders like Surf.

In developed countries, by comparison, detergent

penetration at this time was 90 per cent. By 1989, the

NSD (bars and powders) share had grown to 55 per cent

as against 45 per cent for laundry soap.


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THE NIRMA ASSAULT

Karsanbhai Patel registered his company in the name of Nirma Chemical Works.

Production of Nirma began in December 1969 in a small shed in Saraspur, a

suburb of Ahmedabad, Gujarat.

just over a decade this small company become one of the largest in the world.

During the next decade, Patel created his Nirma empire brick by brick barely

diverged from this simple approach to production, packaging and promotion,pricing and distribution.


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THE PRODUCT

HLLs carefully developed lore, `a well formulated detergent was a

composite of several carefully selected ingredients such as Ad (ActiveDetergent), builder, buffer, anti-redisposition agent, etc.

Nirma powder conformed to none of HLLscarefully developed formulae. It

contained no ingredient to improve the whiteness of the fabric and the

level of Ad was half that of Surf.


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DISTRIBUTION

With transport, Initially Nirma operated on the philosophy of obtaining the

lowest cost at any point in time. Patel negotiated a daily price basis withthe truck suppliers, so gaining significant cost advantages when market

prices were low.

To avoid central sales tax (CST) charges in other states, the stockists were

appointed as commission agents. To qualify as a Nirma stockist,

minimum sales of 80-100 tons per month was demanded which was a

biggest threat to HLL.


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PRICE

The consequence of this low cost operation was Nirmas greatest strength

its price. In 1977, at a third of the price of Surf at Rs 4.35 per kg, Nirmawas price substantially lower than any of the quality detergents.

Over the years, Patel's strategy was to maintain this low unit price. From a

low base, it was increased by only 40 per cent in seven years. Only after

1985 did the need to pay excise tax lead to a 15 per cent increase.


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PACKAGING AND ADVERTISING

Nirma was sold in polybags, in contrast to Surf,

which was sold in cartons, manufactured at 50

per cent more cost.

Over the next few years, advertising expenditure

grew from Rs 2 mn in 1980 to Rs 4.5 mn in 1983and to an estimated Rs 20 mn (2 per cent of net

sales value) in 1985.

Among consumers, Nirma went from nowhere to

having the highest top-of-the-mind recall (55 percent) and the highest unaided recall (69 per

cent) of all soap powders in 1986.


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Sales of Nirma grew steadily as Patel slowly butmethodically extended his operationfirst to threeand then eight surrounding districts ofAhmedabad, then to the whole state of Gujarat,next to adjoining states, and finally to the whole of

northern and western India.By 1977, Nirma was the second largest volume seller

in the country with a market share of 12 per cent ofSurf's 30.6 per cent.

Between 1977 and 1985 Nirma sales grew from 15,000ton to 200,000 ton at a compound rate of 49 percent as it extended throughout India. By 1980,Nirma was outselling Surf by three to one. Between1983 and 1984, Nirma spread further into southern

and then eastern India and as a consequence, by

NIRMAS GROWTH


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OTHER PRODU TSIn 1970, Patel introduced a second washing

powder, Milan. Sales of Milan were at firstrestricted, but in 1986 sales wereextended into all parts of Gujarat.

In 1977-79, Patel went on to launch a Nirmadetergent bar. This was blue in color and150 g in weight.

Patel also planned to attack the premium

market of Surf with super Nirma, a bluepowder, to be marketed at a premium ofRe 1 per kg over the original Nirmapowder.


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By 1989, the NSD (bars and powders) share hadgrown to 55 per cent as against 45 per cent forlaundry soap. Nirma's greatest success was inconverting the unorganized laundry soap marketin urban areas and also, more importantly, inrural India, to detergent powders.

For a long while HLL and its fellow high qualitymanufacturers failed to offer any significantcompetition to Nirma.

By 1984, Nirma occupied the position of No. 1brand in Asia leaving Surf far behind. Everybodywas shocked, most of all HLL.

THE NIRMA EFFECT


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LLS RESPONSEfirst response was to begin selling Surf in polybags

rather than the more expensive cartons.

In addition, Surf's formula was slightly improved,thereby reducing costs, and discounts were offered

to reduce the price.Surf's established campaign used the slogan `Surfwashes whiter and the advertisements showed asmall boy getting his clothes dirty and then theclothes being cleaned by Surf.

HLL then turned to its most urgent concernthesevere competitive threat to Rin posed by the Nirmadetergent bar, then being tested by Patel as aconsumer promotion on purchase of two packs ofNirma washing powder.


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PRODUCTION METHOD

One of Nirma's key advantages had been easy access to raw materials. On

the basis of an optimization model matching raw material availability

and sales potential throughout the country, HLL selected certain

regions where new plants could be set up to maximum advantage.

HLL set up Stepan Chemicals in Punjab as a wholly-owned subsidiary of

HLL, which eventually took over all marketing and distribution activity

for Wheel. Its turnover was kept separate from that of HLL and so did

not increase HLLs export commitment under FERA


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DISTRIBUTION

To distribute the product to its 300,000 units, HLLinitially used its existing system, which the company

considered one of its greatest strengths.

Between 1976 and 1991, the RSs had considerably

strengthened their presence in rural areas. From havingabout forty rural vans, by 1990 they ran about 1,200

Indirect Coverage (IC) and Operation Harvest Vans.

HLL was able to distribute throughout the country in

over 3,200 towns and almost 60,000 villages, ensuring

all shops a regular service. However, this structure was

expensive and so in 1990 distribution too was given to

Stepan Chemicals who evolved a simpler system.


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ADVERTISING

HLL stepped up its advertising for Wheel, spending the same sum of Rs 50-

60 mn per year that Mr. Patel was investing in Nirma.

The advertising strategy was to `create dissonance among Nirma users on

safety, and provide reasons to switch to Wheel. Thus, the campaigns

emphasized that Wheel provided extra power, extra lather and was safe

on hands and clothes.


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THE CHANGING DYNAMICS OF COMPETITION

During the early nineties, the detergent market was

growing fast at about 20 per cent a year. The

structure of the industry was changed completely

with HLL and Nirma had split the fabric wash marketbetween them leaving other organized players high

and dry.

In urban areas where the growing middle class was

found, HLL knew that this message would holdgreater appeal.

HLL had been the first to open up the concentrate

sector in India by launching Rin Powder as a

concentrate in some areas of the country.


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CONT..

HLLs parent company, Unilever, did of course have an enzyme-

based technology and HLLs management had repeatedly

discussed whether or not to launch an `ultra product in India.

But the proposal had been rejected on the grounds that Indian

consumers would not pay for the advanced technology of latest

western products.

HLL compressed its conventional method for the development

and launch of a new product. Instead of its traditional step-by-

step approach, which meant waiting for results before

proceeding with the next stage, HLL carried out every stage in

parallel.

In the 1990s the detergent battle seemed to be interestingly

poised. The detergent market was growing fast at about 20 per

cent, especially in the rural areas, which by then accounted for

nearly half the total demand in detergent.


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CONT

While HLL regained its position as a low cost and highest quality detergent producer

in India, first time in two decades Nirma was struggling to maintain themomentum of heady growth. Doubts were raised on sustainability of the business

model that Karsanbhai had developed and followed so assiduously, adapted and

refined according to the changing demands of the environment since inception.

Questions were raised whether Nirma had a robust enough organization and

managerial resources, which could help it survive beyond the founder. Nirma was

clearly at a cross road!


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Nirma Karishma