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Home / Strategy / Feature /The soap opera begins | JUN 26 , 2015

Feature

TheSoapOpera
Begins
GodrejNo.1becamea1,000
crorebrandinFY15.Sowhat?
Andwhatnext?
Krishna Gopalan

Photograph: Shutterstock; Illustration: Manish Marwah

AdiGodrejtakesamomenttogatherhisthoughtsbeforeanswering.Thequestionisabouta
1997researchfindingontheopportunityinthetoiletsoapsmarket.Ithadbeenlessthana
yearsincethejointventurebetweenGodrejSoapsandtheCincinnatiheadquartered
Procter&Gamblehadbeencalledoff.HindustanLever,asthecompanywasknownthen,
hadovera70%shareofthetoiletsoapsmarketandoverthepastfiveyears,hadbeenfacing
heatfromNirma,itsoldnemesisfromthedetergentindustry.Atthatpoint,Godrejsbiggest
soapbrandwasCinthol.Researchindicatedthatpeoplelikedthequalityofoursoap.We
realisedtherewasanopportunityforagoodsoapatanaffordableprice,saysGodrej,who
isthechairmanoftheeponymousgroup.Atthatpoint,Lifebuoywasstillthelargestselling
soapinIndiaandwithotherbrandslikeLuxandRexona,Leverwassittingverypretty.

Topofthepack
HindustanUnilevercontinuestoholdswaywithtwotopsellingbrands

Achallenge
fromNirma,
whichhad
enteredthis
segmentin
1992,was
brewing.Nirma
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Bathwasin
direct
competition
withLifebuoy.
Godrejneeded
togetafoothold
inthismarket
andtheanswer
wasintheform
ofGodrejNo.1,
asoapthathad
beenaroundfor

Note: Total size of the toilet soaps market is 13,200 crore. Source: Industry

manyyears(it
goesbacktothe1920swhenitwascalledGodrejNo2beforeitwasrenamed)buthaddone
verylittle.Eveninthemid1980s,itwaspricedat6.5fora100gmbar,whichwas50paise
morethanCinthol.AdecisiontorelaunchNo.1wastakenin1997andthebrandwasin
retailoutletsthefollowingyear.About17yearslater,thesoapbrandhasfinallybrokeninto
the1,000croreclub.InFY15,salesofthebrandtouched1,000crore,an40foldjump
from25crorein2001andatwofoldjumpfrom500crorein2009.Withamarketshare
of10%,itisthethirdlargestbrandbyvolume(afterLifebuoyandLux)andthefifthby
value,whereithasa7%share.
Inthisintensivelycompetitive13,200
croretoiletsoapsmarketthatgrowsby
barely3%eachyear,No.1hasmanagedto
striketherightpricevaluecombination.
Thishasbeenaccompaniedbyminimal
advertisingandpromotionspendin
additiontoinnovativepackagingand
keepingthetradehappy.
People liked our quality. We realised there was an

Gettingthebasicsright

opportunity for a good soap at an affordable price Adi

In2001,threeyearsafterNo.1was

Godrej, chairman, Godrej group

relaunched,thebrandwasslowlymoving
butitneededthatbigpush.SunilKataria,

businesshead(IndiaandSAARC),GodrejConsumerProducts(GCPL),saystheobjective
wastoincreaseconsumption.The3+1ideacamefromthere,hepointsout.Theofferwas
tobuythreebarsat75gmeachfor18withonecomingfree.Forthe125gmversion,the
consumerhadtoshellout30.Othersoapbrandshad,inthepast,givenawayonebarfree,
thoughitwasalwaysatemporarymovetojustboostsales.InthecaseofNo.1,therewas
somethinkingthatwentintoit.
AccordingtoKataria,ahousehold
typicallyusestwothreesoapbrands,
whichincreasestheriskofanotherbrand
beingconsidered.Thebundlepack
meantwehadalargershareofthe
householdandalsoreducedtheriskofthe
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consumermovingtoanotherbrand,he
says.Intheruralmarket,thisbundle
(nowpricedat68forfourbarsof100gm
each)oftengetsbrokenandissoldat17
apiece.
Today,No.1andthebundlepackare
synonymous,with95%ofitsvolume
comingfromthissegment.No.1was
No.1 could become a large personal care brand. If we had it

initiallylaunchedinarosevariant,

done well in soaps, the equity could be extended Sunil

followedupbysandalandturmericthe

Kataria, business head (India & SAARC), GCPL

followingyeartoofferanotheroptionto
consumers.Today,ithaseightvariants.

Katariamaintainsthatthis,too,wasdonetogetalargershareofthehouse.Consumers
shiftbetweentwothreevariants.Itisimportanttokeepthestorysimpleatthemassendof
themarket,headds.
Thatwasthecasewiththecommunicationaswell.Intheearlydays,No.1spentaminiscule
1%ofitsturnoveronadvertisingandpromotion(A&P),whenthenormwasatleast78%.
Godrejinsiststhatthebrandbenefitedfromwordofmouthinitskeymarketssuchas
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PunjabandHaryana.ThatmadeadifferenceinnorthIndiasinceconsumersdotalk

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amongstthemselvesaboutwhattheyuse.Thesouthisbigonbrandloyalty,hesays.Today,
70%ofNo.1sbusinesscomesfromnorthandwestIndia.
Thatsaid,therewasverylittlemoneyavailableforadvertising.Wecouldnotaffordit.We
couldwellhavephasedoutthebrandifitdidnotdowell,explainsGodrej.Cintholtoday
spendsover10%ofitsturnoveronA&P,whileitisestimatedthatNo.1spendsaround4%.
AccordingtoKataria,theinvestmentinadvertisingstartedin2011.Thatwastheyearthe
brandstartedbeingadvertisedonnationalTV.Itwasonentertainmentchannelsasthatis
whatpeopleinourmarketswatch,headds.
Washingoutcompetition
Animportantdevelopmentinthetoiletsoapsmarketwasin1992,whenNirmadecidedto
enterit.NirmasfirsttoiletsoapwasNirmaBath,amilddisinfectantproductcontaining
carbolicacid,indirectcompetitiontoHindustanUnileversLifebuoy.Thesameyearsaw
thelaunchofNirmaBeautyandoverthenextfiveyears,thecompanyintroducedmore
versions.Insixyearssinceitslaunch,Nirmahadcorneredamarketshareof16%.Itwas
clearthatthebattleinthepopularsegmentwasgettinghotterandHUL,withbrandslike
Lifebuoy,JaiandBreeze,wastakingontheNirmaonslaught.
Bythistime,Nirmawasalreadymanufacturinglinearalkylbenzene,akeyrawmaterialin
detergentmanufacturing.TroublecamefromWheel,abrandthatwasgrowing
impressively.Nirmasnumerounostatuswasnowvulnerableandthecompanytookitseyes
offthetoiletsoapsbusinesstofocusondetergents.AccordingtoGodrej,Nirmagot
distracted.Bygettingintothemanufactureofrawmaterial,itwasnowmovingfrom
consumerproductstoaplayincommodities.Theydidnotpayenoughattentiontosoaps,
hesays.VishwadeepKuila,founderofBrandVectors,amarketingconsultancy,thinks
NirmasdetergentsbusinesstookaseriousturnafterWheelbeganconsolidating.More
importantly,thecompanycouldnotarmtwistthedistributorsanymoreonthesoap

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business.Nirmasfocuswasnowbacktodetergentsanditssoapbusinesssuffered,he
explains.
Thedynamicsofthesoapbusinesswere
alsochangingandthatwasnomore
evidentthanwhenthecarbolicversion,
stilldominatedbyLifebuoy,facedvolume
pressure.Thiswasinlinewiththeshiftin
consumerpreferenceandthedesiretouse
abetterproduct.Lifebuoywasmovingto
adifferentformat.Frombeingacarbolic

The upper middle class consumer doesnt look at the price.

It wont be easy for No.1 to draw that consumer
Vishwadeep Kuila, founder, Brand Vectors

soapwith51%TFM(totalfattymatter,
withahigherproportionbeingbetterfor
theskin),theattemptwastopositionitas
asoapwith80%TFM,saysaformer

HULexecutivefromthesoapsbusiness.GodrejNo.1hashad76%TFMsinceitsrelaunch.
LifebuoysTFMinitiative,whichstartedinlate1998,alsohadbrandslikeJaiandBreeze
notgettingenoughattention.BoththesebrandswereinthesamepricerangeasNo.1and
mostofNirmasportfoliorange(6for75gmand10for125gm).Abigspaceinthesoaps
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businesswashastilyvacatedandthatopenedupthemarket,addstheformerHUL

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executive.
ItwasherewhereNo.1gotachancetoshine.Atthatpoint,JaiandBreezeweretogethera
400crorebusinessforHUL,withLifebuoyclocking700crore.WithLuxat600crore,
thesebigbrandsaccountedforaround1,700crore.Today,LifebuoyandLuxarestillthe
largestbyvolume,thoughNo.1,inthirdplace,sellsmorethantheminkeymarkets.We
havea25%sharebyvolumeinPunjabandaround23%inHaryana.UPisourbiggest
market,wherewehavea17%share,saysGodrej.
PrateekSrivastava,cofounder,ChapterFiveBrandSolutions,abrandconsultancy,says,
BeautyisalargesegmentinthenorthandLuxwasthegoldstandard.Consumers,though,
werealwayslookingforanaffordableoption.
Gettingitrightondistributionwascritical,thoughitwasntgoingtobeeasy.GCPLwasnot
anoviceinthesoapsbusiness,butthehitchwasthatNo.1wastakingtheruralroute,where
competitionwasintense.AstheformerHULexecutiveputsit,Itwasverydifficulttogeta
retailerinruralIndiatostockmorethantwobrands.Managingwholesalewastheonly
way.
Thefocusforthefirstdecadeincludedofferingretailersincentivesandcreatingloyalty
clubs,whichinvolvedoverseastripsandgiftsinkind.Theobjectivewastogobeyond
money,Katariasays.Thatsaid,GCPLensuredthatthewholesalemarginwasalso
enhanced.Retailerswouldgetadiscountonpickingupmorequantitiesofthesoapandthat
discountwouldnormallynotbepassedontotheconsumer.Muchofthiscoincidedwith
HULnotalwaysbeingwillingtoofferahighmargintothetrade.
RespondingtoaqueryfromOutlookBusinessatarecentpressconference,SanjivMehta,
MDandCEO,HUL,saidthecompanyhastheadvantageofalargeportfolio.Wedoalotof
instoreactivitieswithretailers.Itsimportanttonotbejusttransactionalbuttotakea
longertermapproach,headded.

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Facingforward
In2011,astheadvertisingforNo.1wentnational,aninterestingthoughtprocessemerged.
Itwasnowclearthattherewasanopportunityforittobecomealargepersonalcarebrand.
Ifwehaddonewellinsoaps,theequitycouldbeextended,recallsKataria.Therewere
somebabystepstakenbytestmarketingNo.1shampooin2007,thoughitendedthere.
Latelastyear,No.1wasextendedtothe1,600crorefacewashbusiness.Therationalewas
simple.Thepenetrationlevelsinthisbusinessarejust1314%,saysKataria.Comparethis
tosoaps,detergentsandmatchsticks,whereitisalmost100%.Thestrategyhasbeento
launchitintwoformatstubesandsachetsandpriceitcompetitively.The50mltube
costs35whileotherplayerschargearound50.Inthecaseofa15mlsachet,itcosts10,
whichtoKatariaisamagicalpricepoint.Thecheapestofferingbeforewecameinwas15,

hesays.ThelargestbrandisHimalaya,withamarketshareofover20%.
ThetargetgroupforthiswillbethosewhoalreadyuseNo.1soap.AccordingtoKataria,
withinthisaudience,facewashusageisquitelow.Ourfocuswillbeonthemarketsinthe
northandwest,whicharethebiggestforNo.1,saysKataria.StartingMaythisyear,the
facewashsachetisbeingofferedfreewithabundleofNo.1soap.
Thebigchallengecouldbeingettingnewusers.Themiddleanduppermiddleclass
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consumerdoesnotlookattheprice.ItwillnotbeeasyforNo.1togetthatclassof

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consumers,addsKuila.

Inthetimetocome,thebrandwantsagreaterpartofthenationalmarket,especiallythe
south,knowntobeaverydifficultmarket.The40bundledpackoffoursoapsat100gm,
launchedin2008,hastakenoff.Itcoincidedwiththeslowdownandbenefitedfrom
consumersdowngradingacrosscategories.Obviously,wewouldlikemorepeopletouse
No.1overtime,sumsupGodrej.Themovetofacewashprovesthatthecompanysgotits
gamefaceon,butwillitglidethrough?
Here'syourchancetoreadthelatestissueofOutlookBusinessforfree!Downloadthe
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ADI GODREJ
LIFEBUOY

PROCTER & GAMBLE

HINDUSTAN LEVER

GODREJ CONSUMER PRODUCTS

WHEEL

CINTHOL

LUX

REXONA

BRAND VECTORS

CHAPTER FIVE BRAND SOLUTIONS

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