-

PREFACE
This study gives the comprehensive view of the Indian FMCG Sector. The FMCG
sector being the fourth largest sector in the economy has the total market size of US$
13.1 billion. It is set to treble from US$ 11.6 billion in 2003 to US$ 33.4 billion in
2015. This sector is characterized by products of day-to-day use, products which are
generally treated as low involvement products but still they attract high advertising
spend because of the kind of intense competition among the industry players.
The Indian FMCG industry has experienced a major slowdown and has been on a
recovery path since the past couple of years. This study explains the changing
dynamics in the FMCG sector, which has forced the FMCG majors like HUL to
revamp their product, marketing, distribution formats to meet the changing customer
requirements or preferences.
The recovery in the FMCG sector in India is quite broad-based, covering most
product categories and companies, although the degree of recovery differs.
Importantly, most companies are also demonstrating renewed optimism in the sector
by increasing ad spend and investment in new initiatives. The market is not fully
appreciative of the sustainability of the recovery and hence will likely be positively
surprised.
The Toilet soap industry, which is one of the oldest Fast Moving Consumer Goods
(FMCG) industries in India, is among the highest penetrated category within FMCG
sector reaching an estimated 95% urban and 87% of the rural households. Apart from
that, this segment has witnessed an outburst of sales promotion scheme and the
tremendous Ad spends as compared to other segments of the FMCG industry. This
study also accesses the perceptions of the consumers on these new strategies adopted
by various FMCG companies.

ACKNOWLEDGEMENT

Through this report, I take the opportunity to express my sincere gratitude and
thankfulness to all those who have helped me in making my dissertation report.
First of all I would like to thank J.I.E.I, for having such a system in place, where
students are given opportunities to learn about their areas of interest.
I would like to thank Mr. Prashant Tiwari (Faculty) for providing with his able
guidance and visionary support to me without which this project would not been
possible.

(RAJAT SINGH TOMAR)

TABLE OF CONTENTS

Chapter - 1
Introduction
Objective
Scope
Research Methodology
Limitations
Chapter - 2
Company Profile
Data Analysis
Conclusion
Chapter -3
Recommendations
Bibliography
Appendix

CHAPTER - 1
INTRODUCTION
OBJECTIVE
SCOPE
RESEARCH METHODOLOGY
LIMITATIONS

INTRODUCTION
MARKET OVERVIEW

The overall picture of the corporate sector emerging after the first quarter result shows
that the tempo of the Indian economys integrating into the global economy is
gathering momentum at a rapid pace. This can be seen from the rise in outsourcing in
the Information Technology (IT) and IT-based service sectors, growth in exportimport trade and in global acquisitions.
Rapid urbanization, increased literacy and rising per capita income, have all caused
rapid growth and change in demand patterns, leading to an explosion of new
opportunities. Consumption demand for consumer is increasing which can be seen
from the improvement in the performance of the fast moving consumer goods
(FMCG) companies.

FMCG INDUSTRY TRENDS AND PLAYERS

TRENDS:
Estimated at around US$ 14.5 billion (approximately Rs.65, 000 crores) in 2005,
Indias fast moving consumer goods (FMCG) sector is the fourth largest industrial
sector in the countrys expanding economy. It has a strong MNC presence and is
characterised by a well established distribution network, intense competition between
the organised and unorganised segments and low operational cost. Availability of key
raw materials, cheaper labour costs and presence across the entire value chain gives
India a competitive advantage.

The FMCG market is set to treble from US$ 11.6 billion in 2003 to US$ 33.4 billion
in 2015. Penetration level as well as per capita consumption in most product
categories like jams, toothpaste, skin care, hair wash etc in India is low indicating the
untapped market potential. Burgeoning Indian population, particularly the middle
class and the rural segments, presents an opportunity to makers of branded products to
convert consumers to branded products. Growth is also likely to come from consumer
'upgrading' in the matured product categories.
Another is the striking contrast between the rural and urban segments - the average
consumption by rural households is much lower than their urban counterparts. Low
penetration indicates the existence of unsaturated markets, which are likely to expand
as the income levels rise. This provides an excellent opportunity for the industry
players in the form of a vastly untapped market. Moreover, per capita consumption in
most of the FMCG categories (including the high penetration categories) in India is
low as compared to both the developed markets and other emerging economies. A rise
in per capita consumption, with improvement in incomes and affordability and change
in tastes and preferences, is further expected to boost FMCG demand. Growth is also
likely to come from consumer "upgrading", especially in the matured product
categories. Most Indian FMCG companies focus on urban markets for value and rural
markets for volumes. The total market has expanded from US$ 17.6 billion in 199293 to US$ 22 billion in 1998-99 at current prices. Rural demand constituted around
52.5 per cent of the total demand in 1998-99. Hence, rural marketing has become a
critical factor in boosting bottomlines. As a result, most companies' have offered low
price products in convenient packaging. These contribute the majority of the sales
volume. In comparison, the urban elite consume a proportionately higher value of
FMCGs, but not volume.

PLAYERS:
A distinct feature of the FMCG industry in India is the presence of domestic as well as
global players through their subsidiaries (HUL, P&G, and Nestle).
Domestic Players
Britannia India Ltd (BIL)
Britannia India Ltd was incorporated in 1918 as Britannia Biscuit Co Ltd and
currently the Groupe Danone (GD) of France (a global major in the food processing
business) and the Nusli Wadia Group hold a 45.3 per cent equity stake in BIL through
AIBH Ltd (a 50:50 joint venture). BIL is a dominant player in the Indian biscuit
industry, with major brands such as Tiger glucose, Marie gold, Fifty-Fifty, Good Day,
Pure Magic, Bourbon etc. The company holds a 40 per cent market share in the
overall organized biscuit market and has a capacity of 300,000 tonne per annum.
Currently, the bakery product business accounts for 99.1 per cent of BIL's turnover.
The company reported net sales of US$ 280 million in 2002-03. Britannia Industries
Ltd (BIL) plans to increase its manufacturing capacity through outsourced contract
manufacturing and a Greenfield plant in Uttaranchal to expand its share in the
domestic biscuit and confectionery market.
Dabur India Ltd
Established in 1884, Dabur India Ltd is the largest Indian FMCG and ayurvedic
products company. The group comprises Dabur Finance, Dabur Nepal Pvt Ltd, Dabur
Egypt Ltd, Dabur Overseas Ltd and Dabur International Ltd. The product portfolio of
the company includes health care, food products, natural gums & allied chemicals,
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pharma, and veterinary products. Some of its leading brands are Dabur Amla, Dabur
Chyawanprash, Vatika, Hajmola, Lal Dant Manjan, Pudin Hara and the Real range of
fruit juices. The company reported net sales of US$ 218 million in 2003-04. Dabur
has firmed up plans to restructure its sales and distribution structure and focus on its
core businesses of fast-moving consumer good products and over-the-counter drugs.
Under the restructured set-up, the company plans to increase direct coverage to gap
outlets and gap towns where Dabur is not present. A roadmap is also being prepared to
rationalise the stockists' network in different regions between various products and
divisions.
Indian Tobacco Corporation Ltd (ITCL)
Indian Tobacco Corporation Ltd is an associate of British American Tobacco with a
37 per cent stake. In 1910 the company's operations were restricted to trading in
imported cigarettes. The company changed its name to ITC Limited in the mid
seventies when it diversified into other businesses. ITC is one of India's foremost
private sector companies with a turnover of US$ 2.6 billion. While ITC is an
outstanding market leader in its traditional
businesses of cigarettes, hotels, paperboards, packaging and agriexports, it is rapidly
gaining market share even in its nascent businesses of branded apparel, greeting cards
and packaged foods and confectionary. After the merger of ITC Hotels with ITC Ltd,
the company will ramp up its growth plans by strengthening its alliance with Sheraton
and through focus on international projects in Dubai and the Far East. ITC's
subsidiary, International Travel House (ITH) also aims to launch new products and
services by way of boutiques that will provide complete travel services.
Marico

Marico is a leading Indian Group incorporated in 1990 and operating in consumer

products, aesthetics services and global ayurvedic businesses. The company also
markets food products and distributes third party products. Marico owns well-known
brands such as Parachute, Saffola, Sweekar, Shanti Amla, Hair & Care, Revive,
Mediker, Oil of Malabar and the Sil range of processed foods. It has six factories, and
sub-contract facilities for production. In 2003-04, the company reported a turnover of
US$ 200 million. The overseas sales franchise of Marico's branded FMCG products is
one of the largest amongst Indian companies. It is also the largest Indian FMCG
company in Bangladesh. The company plans to capture growth through constant
realignment of portfolio along higher margin lines and focus on volume growth,
consolidation of market shares, strengthening flagship brands and new product
offerings (2-3 new product launches are expected in 2004-05). It also plans to expand
its international business to Pakistan.

Nirma Limited
Nirma Ltd, promoted by Karsanbhai Patel, is a homegrown FMCG major with a
presence in the detergent and soap markets. It was incorporated in 1980 as a private
company and was listed in fiscal 1994. Associate companies' Nirma Detergents, Shiva
Soaps and Detergents, Nirma Soaps and Detergents and Nilnita Chemicals were
merged with Nirma in 1996-1997. The company has also set up a wholly owned
subsidiary Nirma Consumer Care Ltd, which is the sole marketing licensee of the
Nirma brand in India. Nirma also makes alfa olefin, fatty acid and glycerine. Nirma is
one of the most successful brands in the rural markets with extremely low priced
offerings. Nirma has plants located in Gujarat, Madhya Pradesh and Uttar Pradesh. Its
new LAB plant is located in Baroda and the soda ash complex is located in Gujarat.

Nirma has strong distributor strength of 400 and a retail reach of over 1 million
outlets. The company reported gross sales of US$ 561 million in 2003-04. It plans to
continue to target the mid and mass segments for future growth.
Foreign players
Cadbury India Ltd (CIL)
Cadbury Indian Ltd is a 93.5 per cent subsidiary of Cadbury Schweppes Plc, UK, a
global major in the chocolate and sugar confectionery industry. CIL was set up as a
trading concern in 1947 and subsequently began its operations with the small scale
processing of imported chocolates and food drinks. CIL is currently the largest player
in the chocolate industry in India with a 70 per cent market share. The company is
also a key player in the malted foods, cocoa powder, drinking chocolate, malt extract
food and sugar confectionery segment. The company had also entered the soft drinks
market with brands like 'Canada Dry' and 'Crush', which were subsequently sold to
Coca Cola in 1999. Established brands include Dairy Milk, Perk, Crackle, 5 Star,
clairs, Gems, Fructus, Bournvita etc. The company reported net sales of US$ 160
million in 2003. The company plans to increase the number of retail outlets for future
growth and market expansion.

Cargill
Cargill Inc is one of the world's leading agri-business companies with a strong
presence in processing and merchandising, industrial production and financial
services. Its products and geographic diversity (over 40 product lines with a direct
presence in over 65 countries and business activities in about 130 countries) as well as
its vast communication and transportation network help optimize commodity

10

movements and provide competitive advantage. Cargill India was incorporated in

April 1996 as a 100 per cent subsidiary of Cargill Inc of the US. It is engaged in
trading in soyabean meals, wheat, edible oils, fertilisers and other agricultural
commodities besides marketing branded packaged foods. It has also set up its own
anchorage facilities at Rosy near Jamnagar in Gujarat for efficient handling of its
import and export consignments.

11

Coca Cola
Coca-Cola started its India operations in 1993. The Coca-Cola system in India
comprises 27 wholly company-owned bottling operations and another 17 franchiseeowned bottling operations. A network of 29 contract-packers also manufacture a range
of products for the company. Leading Indian brands Thums Up, Limca, Maaza, Citra
and Gold Spot exist in the Company's international family of brands along with CocaCola, Diet Coke, Kinley, Sprite and Fanta, plus the Schweppes product range. During
the past decade, the Coca-Cola system has invested more than US$ 1 billion in India.
In 2003, Coca-Cola India pledged to invest a further US$ 100 million in its
operations. Colgate-Palmolive India Colgate Palmolive India is a 51 per cent
subsidiary of Colgate Palmolive Company, USA. It is the market leader in the Indian
oral care market, with a 51 per cent market share in the toothpaste segment, 48 per
cent market share in the toothpowder market and a 30 per cent share in the toothbrush
market. The company also has a presence in the premium toilet soap segment and in
shaving products, which are sold under the Palmolive brand. Other wellknown
consumer brands include Charmis skin cream and Axion dish wash. The company
reported sales of US$ 226 million in 2003-04. The company's strategy is to focus on
growing volumes by improving penetration through aggressive campaigning and
consumer promotions. The company plans to launch new products in oral and
personal care segments and is prepared to continue spending on advertising and
marketing to gain market share. Margin gains are being targeted through efficient
supply chain management and bringing down cost of operations.

12

H J Heinz Co
A US$ 8.4 billion American food major, H J Heinz Co comprises 4,000 strong brand
buffet in infant food, sauces and condiments. The company was the first to commence
manufacturing and bottling of tomato ketchup in 1876. In India, Heinz has a presence
through its 100 per cent subsidiary Heinz India Pvt Ltd. Heinz acquired the consumer
products division of pharmaceutical major Glaxo in 1994. Heinz's product range in
India consists of Complan milk beverage, health drink Glucon-D, infant food Farex
and Nycil prickly heat powder, besides the Heinz ketchup range.

13

Hindustan Unilever Ltd (HUL)

Hindustan Unilever Ltd is a 51 per cent owned subsidiary of the Anglo-Dutch giant
Unilever, which has been expanding the scope of its operations in India since 1888. It
is the country's biggest consumer goods company with net sales of US$ 2.4 billion in
2003. HUL is amongst the top five exporters of the country and also the biggest
exporter of tea and castor oil. The product portfolio of the company includes
household and personal care products like soaps,
detergents, shampoos, skin care products, colour cosmetics, deodorants and
fragrances. It is also the market leader in tea, processed coffee, branded wheat flour,
tomato products, ice cream, jams and squashes. HUL enjoys a formidable distribution
network covering over 3,400 distributors and 16 million outlets. In the future, the
company plans to concentrate on its herbal health care portfolio (Ayush) and
confectionary business (Max). Its strategy to grow
includes focussing on the power brands' growth through consumer relevant
information, cross category extensions, leveraging channel opportunities and
increased focus on rural growth.

Nestle India Ltd (NIL)

Nestle India Ltd a 59.8 per cent subsidiary of Nestle SA, Switzerland, is a leading
manufacturer of food products in India. Its products include soluble coffee, coffee
blends and teas, condensed milk, noodles (81 per cent market share), infant milk
powders (75 per cent market share) and cereals (80 per cent market share). Nestle has
also established its presence in chocolates, confectioneries and other processed foods.
Soluble beverages and

14

milk products are the major contributors to Nestle's total sales. Some of Nestle's
popular brands are Nescafe, Milkmaid, Maggi and Cerelac. The company has entered
the chilled dairy segment with the launch of Nestle Dahi and Nestle Butter. Nestle has
also made a
foray in non-carbonated cold beverages segment through placement of Nestea iced tea
and Nescafe Frappe vending machines. Exports contribute to 23 per cent of its
turnover and the company reported net sales of US$ 440 million in 2003.

PepsiCo
PepsiCo is a world leader in convenient foods and beverages, with revenues of about
US$ 27 billion. PepsiCo brands are available in nearly 200 markets across the world.
The company has an extremely positive outlook for India. "Outside North America
two of our largest and fastest growing businesses are in India and China, which
include more than a third of the world's population" (Pepsico's annual report).
PepsiCo entered India in 1989 and is concentrating on three focus areas - soft drink
concentrate, snack foods and vegetable and food processing. PepsiCo's success is the
result of superior products, high standards of performance and distinctive competitive
strategies.

Procter & Gamble Hygiene and Health Care Limited

Richardson Hindustan Limited (RHL), manufacturer of the Vicks range of products,
was rechristened 'Procter & Gamble India' in October 1985, following its affiliation to
the 'Procter & Gamble Company', USA. Procter & Gamble Hygiene and Health Care
Limited (PGHHCL) acquired its current name in 1998, reflecting the two key
segments of its business. P&G, USA has a 65 per cent stake in PGHHCL. The parent
also has a 100 per cent subsidiary, Procter & Gamble Home Products (PGHP). The
overall portfolio of the company includes healthcare; feminine-care; hair care and
fabric care businesses. PGHH operates in just two business segments Vicks range of
cough & cold remedies and Whisper range of feminine

15

hygiene. The detergent and shampoo business has been relocated globally to Vietnam.
The company imports and markets most of the products from South East Asian
countries and China, while manufacturing, marketing and export of Vicks and sanitary
napkins has been retained in India. The company reported sales of US$ 91 million in
2002-03. The parent company has announced its plan to explore further external
collaborations in India to meet its global innovation and knowledge needs.

16

PEST ANALYSIS OF FMCG SECTOR

17

1.2
1.1

Political
ecological/environmental issues

Economic
home economy situation
home economy trends

current legislation home market

overseas economies and trends

future legislation

general taxation issues

European/international legislation
regulatory bodies and processes

taxation
specific
product/services

government policies

seasonality/weather issues

government term and change

market and trade cycles

trading policies

specific industry factors

funding, grants and initiatives

market routes and distribution

trends

home market lobbying/pressure groups

to

customer/end-user drivers

international pressure groups

interest and exchange rates

1.3

Social
lifestyle trends

1.4

demographics

Technological
competing
development

technology

research funding

consumer attitudes and opinions

associated/dependent
technologies

media views
law changes affecting social factors

replacement
technology/solutions

brand, company, technology image

maturity of technology

consumer buying patterns

manufacturing
capacity

fashion and role models

major events and influences

maturity

information
communications

buying access and trends

and
and

consumer
buying
mechanisms/technology

ethnic/religious factors
advertising and publicity

technology legislation

18

innovation potential
technology access, licencing.

19

DEMAND ANALYSIS
The Indian FMCG sector is the fourth largest sector in the economy and the demand
for FMCG products is set to boom by almost 60 per cent by 2007 and more than 100
per cent by 2015.
Rapid urbanization, increased literacy and rising per capita income, have all caused
rapid growth and change in demand patterns, leading to an explosion of new
opportunities. This will be driven by the rise in share of middle class (defined as the
climbers and consuming class) from 67 per cent in 2003 to 88 per cent in 2015. The
boom in various consumer categories, further, indicates a latent demand for various
product segments. For example, the upper end of very rich and a part of the
consuming class indicate a small but rapidly growing segment for branded products.
The middle segment, on the other hand, indicates a large market for the mass end
products. India's per capita disposable income, currently at US$ 556 per annum, will
raise to US$ 1150 by 2015 - another FMCG demand driver.
Demand Analysis of various segments of the FMCG industry is done below:
The personal care and detergents segment in India has grown at a CAGR of 7-8 per
cent in the past 3 years. While the premium products of the industry, consisting of
cosmetics, skin care products, fragrances, deodorants and antiperspirants, and shaving
products, are growing at above 10 per cent due to low penetration levels, the mass
market segments like detergents, oral care products, hair care products and toilet
soaps have already achieved high penetration levels and are registering a slowdown in
demand growth. The latter segments also compete with the price- competitive
unorganised segment, which also restricts value growth.

20

The oral care market, which grew by 10 per cent in the past, has slowed down in
recent years, due to high penetration levels. Demand in this segment is expected to
grow at about 8 per cent, driven by rural demand. Value growth is likely to be under
pressure due to penetrative pricing for the rural market and slow growth in urban
demand.
The hair care industry, which was growing at 8-9 percent, is also expected to register
a slower growth of 6-7 per cent in future, due to high penetration levels and
competition from unbranded hair oils. Value growth in the segment is expected to be
derived largely through the sale of value-added products.
The demand for toilet soaps will be restricted to 5 per cent over the medium term, as
current penetration levels are already high. However, since the growth will occur on a
higher base, the quantum of increase will remain stable. Value growth in the industry
is likely to be driven by the migration of consumers from low-end products to upper
segments.
The demand growth for detergents has slowed down in the past few years from
historic levels of 7-8 per cent, due to high penetration rate. Future demand growth is
estimated at 4-5 per cent. However, since the growth would occur on a higher base,
the quantum of increase would remain stable. Value growth is likely to be driven by
the migration of consumers from lower-end products to the upper segments.
The Chairman of Hindustan Unilever, after the results announcement for F12/00,
outlined to the investment community his plans for the company and the path for
sustainable profitable growth. Two things clearly emerged from his talk:
1. A greater focus on existing businesses rather than new businesses
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2. Profit growth rather than top line growth is likely to drive future management
action

A change in Strategy
The last few years of HULs growth was driven inorganically through acquisitions and
venture into new businesses. The much harped about Millennium Growth Plan of the
company was also based on the same path of growth through expansion. But in sharp
contrast to his predecessor Dadiseth, Bangas growth plan appears to be based on
Contraction rather than Expansion. For once there was no mention of new brand
launches.

Thrust on a few brands will mean better growth and higher

profitability
The 30 brands have that been identified cover all key categories and all segments in
each category. The selected brands account for more than 2/3rd of total FMCG brand
sales of the company. And what is more important is that the profit contribution of
these brands is even greater.
So a scenario is created where one will see a greater resource allocation be it
marketing, innovation or people support towards these 30 brands. The advertising and
marketing support spread over fewer brands is likely to be more efficient, and will
drive volume growth. And stronger growth in the more profitable brand portfolio will
aid margin expansion.

22

More efficient utilization of resources

Besides rationalization, a few brands would be migrated, i.e. these brands would
receive a regional rather than a national support, in its specific region of strength.
Where the brands can neither be milked nor migrated, the company is also open at the
option of divesting the same. So, Hindustan Unilever is talking of divesting rather
than acquiring brands!

New product initiatives put on the backburner

The management did not even discuss, until asked, the status on the nine growth
engines that had been previously identified as growth drivers. Already the
management has brought down to five the viable options from the nine identified
earlier. These are in the areas of Confectionery, Consumer Healthcare, Mineral Water,
Direct-To-Home (DTH) distribution and a unique distribution model for rural
markets. But the management is still testing and is going rather slow on the new
initiatives. The final decision on the entry into these categories will be taken only after
rigorous testing of waters throughout the current year. This essentially means that one
is unlikely to see the company venturing into these areas in the very immediate term.
To sum up Bangas words, the focus will be on "To do what you know best". And that
probably is what is required for the company in the current scenario, where
competition is at its heels in every segment of operation. Rather than divert resources
towards new areas, it makes sense to focus on existing businesses, grow them and
make them profitable. And that is what is going to be HULs three pronged thrust in
the coming year.

23

Grow the FMCG business - by expanding the market itself, by growing the companys
share in the market, by generating demand though innovating new channels of
consumption, by leverage on existing brand equity by offering services to the
customer.
Work towards making the foods business profitable - Huge investments have been
made in developing new food categories and setting up a distribution infrastructure in
place for the foods business. Now that the base for the business has been laid, the
company expects to drive the profitability of these businesses. Besides the traditional
beverages and oils and fats business, the new categories of staple foods, culinary
products and bakery products (acquired through Modern Foods) are likely to
contribute to the growth.
Strengthen the non-FMCG business by acquiring technology support -The nonFMCG product categories include chemicals, fragrances & flavours, specialty
chemicals, thermometers, etc The company is taking steps to secure world class
technology support in these areas for future growth. This could mean a divestment of
these businesses to a separate joint venture in the long term.

ANALYSIS 0F THE STRATEGY:

Will this strategy work?
The outlined strategy is a significant deviation from the path followed by the
company in the past. Rather than grow in breadth at a fast pace, the new strategy
appears to be focusing on consolidation of the already expanded businesses, before
moving on. And this appears appropriate given the current economic and competitive
environment. The overall market demand growth is likely to be constrained by

24

adverse economic factors such as poor agricultural and industrial growth. On the other
hand, HUL faces stiff competition from both MNCs at the premium end and the local
low cost producers at the popular end. The proposed measures are likely to lead to the
following gains:
1. A greater marketing and management focus on rationalized product portfolio would
lead to better growth rates for those brands
2. The contribution to profit of the 30 brands being higher, overall profitability would
rise, as these brands grow at a faster pace.
3. While the overall expenditure on branding and sales promotions be lower as the
number of brands supported decline; also more efficient brands would receive greater
support
4. Cost cutting initiatives extended across the supply chain as well as a conscious
effort towards lowering fixed overheads would aid margin expansion.
5. A slowdown in investments in new businesses, and improved profitability in
existing businesses would mean that ROCE growth would be faster.
We feel that given the economic and competitive environment. HUL stands a much
better chance of improving its operating and financial performance with the outlined
strategy. At the current price of Rs216, the stock trades at 36x F12/00 earnings. A 25%
growth in profitability appears achievable as the portfolio rationalization will drive
margin expansion. Lower restructuring costs would also aid higher net profit growth.
On an estimated F12/01 EPS of Rs7.4, we set a one-year price target of Rs296, which
would yield a 37% return.

25

DEMAND PROJECTION
Fast Moving Consumer Goods (FMCG) sector will witness more than 50 per cent
growth in rural and semi-urban India by 2010, according to an analysis carried out by
the Associated Chambers of Commerce and Industry of India.
In totality, it is projected to grow at a CAGR (compounded annual growth rate) of 10
per cent and increase its market size to Rs 100,000 crore from the present level of Rs
48,000 crore.
The growing penchant of rural and semi-urban folks for FMCG products will be
mainly responsible for this development, as manufacturers will have to deepen their
concentration for higher sales volumes.
In the rural and semi-urban areas, FMCG market penetration is currently less than 1
per cent in general as against its total growth rate of about 6.2 per cent.
The analysis is based on the feedback obtained from various district industry centres
all over the country on the future demand-supply situation of FMCG products.
Indian rural market with its vast size and demand base offered a huge opportunity that
FMCG companies cannot afford to ignore. With 128 million households, the rural
population is nearly three times the urban. Though the rural and semi-urban demand
of FMCG products will grow, it will put a severe pressure on the margins of
manufacturers of FMCG products due to cut-throat competition, finds the analysis.
Companies in the sector to benefit will include known names such as Nirma, HUL,
Dabur, ITC, Godrej, Britannia, Coca-Cola, Pepsi, among others. Rural market may be
alluring but it is not without problems such as low per capita disposable incomes and
large number of daily wage earners.
Some of the other problems associated with rural markets are acute dependence on the
vagaries of the monsoon, seasonal consumption linked to harvests, festivals and
special occasions, poor roads and power problems.

26

The other difficulty that FMCG companies are likely to face is that of logistics. India's
627,000 villages are spread over 3.2 million sq km. Delivering products to the 750
million Indians living in rural areas will be a tough task.
The net profit of HUL for the full year fell to Rs 1,197.36 crore (Rs 11.97 billion)
from Rs1771.79 (Rs 17.71 billion) last year.

27

OBJECTIVE
1. To evaluate current consumer sales promotion schemes in toilet soap market.
2. To get an insight into retailers views regarding the schemes being offered in toilet
soap category and consumer perceptions
3. To study consumer perceptions regarding various promotion schemes in this
category and responses toward them.

28

SCOPE OF RESEARCH :-

My scope is restricted to consumer perceptions and retailer viewEs regarding various

schemes

29

RESEARCH METHODOLOGY
Research Type: Exploratory Research

Data Collection Tool:

Questionnaire
In-depth interview

Research Area: Ghaziabad

Sampling Plan
Sample type:

Users of the Toilet Soap.

Sample Size: 100 people between the age of 20-40 years.

Primary Data: The primary data is collected through questionnaires and in-depth
interview.
Secondary Data: The sources of secondary data are various researches conducted by
HUL, business magazines and internet.

Reason for opting this Topic

The Indian FMCG sector is the fourth largest sector in the economy with a total
market size in excess of US$ 13.1 billion. It has a strong MNC presence and is
characterized by a well established distribution network, intense competition between
the organized and unorganized segments and low operational cost. Availability of key
raw materials, cheaper labour costs and presence across the entire value chain gives
India a competitive advantage. The FMCG market is set to treble from US$ 11.6
billion in 2003 to US$ 33.4 billion in 2015. Penetration level as well as per capita
consumption in most product categories like jams, toothpaste, skin care, hair wash etc
in India is low indicating the untapped market potential. Burgeoning Indian
population, particularly the middle class and the rural segments, presents an
opportunity to makers of branded products to convert consumers to branded products.
The slow growth rate witnessed through the years 2000 to 2004 by the FMCG sector
was revived in FY05, registering a growth rate of about 6%. The growth was mainly
30

driven by improved performance of personal care products such as shampoos,

deodorant, hair dyes, soap, toiletries, etc and penetration into the rural and semi-urban
areas of India. Rural marketing has become a critical factor in boosting bottom lines.
This study will give the detailed insight of FMCG sector in India and how it has
surmounted the downturn faced in the past. How the companies like HUL has
changed their marketing strategies to overcome their shrinking profit margins and
beat competition.

RESEARCH AND SURVEY METHODOLOGY

The research study entailed two major phases.
I. Pre- field Study
a. Unstructured in-depth interviews were conducted to create the initial questionnaire
(the instrument)
b. Expert opinions on the questionnaire were collected and further improvements were
made to the questionnaire.
II. Field Study
a. A structured questionnaire was prepared and the survey was conducted by
explaining the purpose of the research to the respondents and administering the
questionnaire.
b. A split panel test was also conducted to test certain questions that were felt to be
inadequate in their design, to evoke responses from the respondents and to test the
effect of changing the structure of these questions. Most of the questions in the survey
are not disguised; but to assess certain non-factual variables disguised questions are
used. For example, there are some questions pertaining to the effectiveness of email,
internet etc. which measure the attitudes of the respondent and we take these data as
the proxy for that of the organization as a whole. The rational behind this is that the
respondents are typically top management personnel in the Information Technology
department of the organization and they are in a position to assess the impact of these

31

technologies on their organization. In some cases, to test the relevance of hypotheses

and to assess the impact of the questionnaire on the respondent, personal interviews
were combined with the completion of the questionnaire.
Both the panels received identical treatment. The questionnaire version was changed
but the mode of administration etc. remained the same to preserve the integrity of the
comparisons. Evaluation of the split panel tests was done along with the analysis of
the original questionnaire. The techniques included comparison of response
distributions and examination of item non-response data.
Modifications in some questions/ items used in the questions were made to increase
the response rate and effectiveness of the questionnaire.
Some of the respondents had reservations about some questions in the initial
questionnaire, due to the sensitive nature of the topics addressed. This necessitated
some changes in the later versions of the questionnaire.

RESPONDENTS AND DATA COLLECTION

The population addressed by the survey comprises of those, who use various toiletry
items. The main respondents were the general public as toiletry soaps are used by all
the people.
Its main objective is to know about the buying behavior and the likes and dislikes of
the consumers. Basically the research was done to know what the consumer thinks
before buying the product, what they think about the product and what they want from
the product i.e. their need.

32

EXPLORATIVE RESEARCH SYSTEM

The marketing research process adopted by us is as follows:
Define the problem and research objectives: The objective of this research is to study
the past and current marketing and demand trends. The research highlights various
marketing and demand concerns faced by HUL in the soap category.
Develop the research plan: This includes:
Primary data
Focus-group research
Questionnaires
Sampling plan: Urban people of the middle class. Both male and female
between the age of 20 to 40.
Sampling Size: 35

INFERENCES ON IMPLICATIVE RESEARCH

Following are the inferences made from the research which closely matches with the
SWOT Analysis of HUL.

SOME

FACTS

OBSERVED

FROM

THE

RESULTS

SO

OBTAINED:
LUX still rules the soap market with substantial market share. Others which
include DOVE also have some share in higher class thus it serves as the
STARS for HUL.
Most of the customers are satisfied with the product they are using and they
are likely to retain the same product again.
Most of the customers think that the HUL soaps are good with respect to other
brands in the market.
However there is a close tie between the people who will recommend HULs
product to others to the people who will probably not recommend it. This may
be a concern for HUL but due to there recent attacking marketing (SRK IN
LUX AD) strategy they are trying to regain there market share.

33

LIMITATIONS OF THE STUDY

1. The study was confined to Ghaziabad city only and differences in perception and
profile may exist for other parts of the country.
2. The sampling was based on convenience that could have given rise to errors.
3. These result may not be appropriate for the whole population ( i.e universe).

34

CHAPTER 2
COMPANY PROFILE
DATA ANALYSIS
CONCLUSION

35

Hindustan Unilever Limited

Meeting Everyday Needs of People Everywhere

36

COMPANY PROFILE

Introduction
Hindustan Unilever Limited (HUL), a 51%-owned subsidiary of Anglo-Dutch giant
Unilever, has been prying its way into India since 1888. India's largest consumer
goods company, HHL markets products such as beverages, food, and home and
personal care goods. Its brands include Kwality Wall's ice cream, Lifebuoy soap,
Lipton tea, Pepsodent toothpaste, and Surf laundry detergent. HUL markets atta (a
type of meal), maize, rice, salt, and specialty chemicals, and its export division ships
castor oil and fish. The company also sells bottled water and over-the-counter
healthcare products.
Hindustan Unilever Limited (HUL) is India's largest fast moving consumer goods
company, with leadership in Home & Personal Care Products and Foods &
Beverages. HUL's brands, spread across 20 distinct consumer categories, touch the
lives of two out of three Indians. They endow the company with a scale of combined
volumes of about 4 million tonnes and sales of Rs.10,000 crores.
The vision that inspires HUL's 32,400 employees (40,000 including Group
Companies), including about 1,425 managers, is to meet everyday needs of people
everywhere - to anticipate the aspirations of our consumers and customers and to
respond creatively and competitively with branded products and services which raise
the quality of life. This objective is achieved through the brands that the company
markets.

37

Business nature
HUL is India's largest marketer of Soaps, Detergents and Home Care products. It has
the countrys largest Personal Products business, leading in Shampoos, Skin Care
Products, Colour Cosmetics, and Deodorants. HUL is also the market leader in Tea,
Processed Coffee, branded Wheat Flour, Tomato Products, Ice cream, Soups, Jams
and Squashes.
HUL is also one of the country's biggest exporters and has been recognized as a
Golden Super Star Trading House by the Government of India; it is a net foreign
exchange earner. HUL is India's largest exporter of branded fast moving consumer
goods. The company's Exports portfolio includes HUL's brands of Soaps and
Detergents, Personal Products, Home Care Products, Tea and Coffe

Market leading brands

HULs brands have become household names. The companys strategy is to
concentrate its resources on 30 national power brands, and 10 other brands which are
strong in certain regions. The top five brands together account for sales of over
Rs.3000 crores.
Some of the big brands in Soaps and Detergents are Lifebuoy, Lux, Liril, Hamam,
Breeze, Dove, (all soaps), Surf Excel, Surf, Rin, Wheel (the number one detergent
brand in India, and HUL's largest), 501, Sunlight (all detergents). HUL also markets
the Vim and Domex range of Home Care Products.
In the Personal Products business, HUL's Hair Care franchises are Clinic, Sunsilk and
Lux shampoos; the company markets Nihar oil. In Oral Care, the portfolio comprises
Close-up and Pepsodent toothpastes and toothbrushes. In Skin Care, HUL markets

38

Fair & Lovely Skin Cream and Lotion, the largest selling Skin Care Product in India;
a brand developed in India, it is now exported to over 30 countries. It has been
extended as an Ayurvedic cream, an under-eye cream, a soap and a talc, in line with
the strategy to take brands across relevant categories. The other major Skin Care
franchises are Ponds, Vaseline, Lakme and Pears. In Colour Cosmetics, HUL markets
the Lakme and Elle-18 ranges. In Deodorants, the key brands are Rexona, Axe,
Denim and Pond's, while the Talc brands are Pond's, Liril, Fair & Lovely, Vaseline
and Lifebuoy. Axe and Denim are HULs franchises for Mens toiletries.

39

SWOT ANALYSIS OF HUL

STRENGTHS:

strong brand portfolio

consumer understanding
R&D ability
distribution reach
high quality manpower
WEAKNESSES:
Increased consumer spends on education, consumer durable, entertainment,
travel, etc resulting in lower share of wallet for FMCG
limited success in changing the eating habits of people
complex supply chain configuration and unwieldy number of stock keeping
units (SKUs) with dispersed manufacturing locations
price positioning in some categories that allows for low price competition and
high social costs in the plantation business.
OPPORTUNITIES:
market and brand growth through increased penetration especially in rural
areas
Brand growth through increased consumption depth and frequency of usage
across all categories.
Upgrading consumers through innovation to new levels of quality and
performance.
Emerging modern trade to be effectively used for introduction of more upscale
personal care products.
Growing consumption in out of home categories.

40

Positioning HUL as a sourcing hub for Unilever companies elsewhere and

leveraging the latest IT technologies.

THREATS:
low-priced competition now being present in all categories
grey imports
Changes in fiscal benefits and unfavorable prices in oils, tea commodity, etc.

41

TOILET SOAP INDUSTRY IN INDIA Implicative Study

Toilet soap industry is one of the oldest Fast Moving Consumer Goods (FMCG)
industries in India. It is among the highest penetrated category within FMCG sector
reaching an estimated 95% urban and 87% of the rural households. In value terms the
industry is worth Rs.45000 million and in volume terms it is worth .53 million (in
2001 as reported by Operations Research Group (ORG) Survey). The main
characteristic of the industry was severe competition and high level of brand
proliferation. The industry witnessed 7% decline in value in year 2001.
There were 45 leading national brands. None of the national brands had more than 5%
market share and many more regional and unorganized sector/local brands. Hindustan
Unilever was the market leader with about 30 (number) of toilet soap brands with a
total market share of 67% in 2000-2009 in organized sector as seen from Table below,
which gives the lead players and their respective market share

42

The leading brands in the market are Dove, Pears, Lux, Dettol, Liril, Rexona,
Lifebouy, Nirma, Palmolive and Hamam. The industry had witnessed many
innovative sales promotion activities in the recent past. Numerous factors were
responsible for such a phenomenon. The reasons are:
The market being sluggish, companies were trying to increase market share in
stagnant to declining (volume terms) market in order to retain consumers, to
encourage switching, to induce trials and liquidate excessive inventories.
With the presence of so many brands the competition had increased severally
leading to fight for market share and shelf space.

Hence, sales promotion activities in toilet soap industry posed a very interesting
study and consumer and retailer perceptions thereof.

The brands in popular segments were found to be frequently promoted as there was
intensive price competition in this segment. The brands could also be classified based
on medicinal benefits, cosmetic benefits, perfumes, natural/herbal properties.
After posting a modest single digit growth in 1997-2000, figures for the first seven
months of this year suggest that the market for toilet soaps has actually shrunk.

43

Estimates about the extent of the decline of market size vary. Hindustan Unilever,
which straddles the category with a 59.9 per cent market share by value, says the
market shrank by 4.4 per cent in value terms in the first half of 2001.
The Indian Soaps and Toiletries Manufacturers Association, puts the decline at 1 per
cent. Other industry sources suggest that the extent of `de-growth' in the first eight
months of 2001 could be as high as 7 per cent.
This is despite the fact that this usually sleepy category has seen a spate of new
players debut new offerings in recent times. Over the past couple of years, Nirma has
launched a slew of low-priced soaps under the banner of Nima and Nirma Beauty.
Godrej Consumer, a long-standing player, has relaunched old brands such as Cinthol,
apart from new ones such as FairGlow, Allcare, and Nikhar.
But if the shrinking market size suggests that Indian consumers have actually been
cutting back on their use of toilet soaps, this is not really the case. In volume terms,
the market for toilet soaps has continued to show a growth of 6 per cent in the first
eight months of 2001.
The major players have certainly managed to sell more toilet soaps by volume. But
price competition in the segment and a slew of promotional campaigns have reduced
the effective realisations per unit sold. This has probably neutralised the gains from
volume expansion. Theories about the reasons for the shrinking the market size vary.

Low-priced brands
Industry players commonly attribute the `de-growth' in the soap market to
downtrading. Toilet soaps are among the highest penetrated products within the

44

FMCG market, reaching an estimated 95 per cent of the urban and 87 per cent of the
rural households. The fairly high contribution from the rural market makes this
category sensitive to the fortunes of the agricultural economy.
The prolonged drought in the North and West of the country (until 2000) and the
sharp fall in farm disposable incomes (brought on by falling farm product prices) has
probably persuaded low-income households to downtrade, that is, switch from highto low-priced brands.
HUL, too appears to endorse the phenomenon of downtrading. ``There has been an
inter-sectoral shift in the soap market, with consumers downtrading from premium
and popular to discount soaps'', explains the company's spokesperson.
However, Mr Hoshedar K. Press, Godrej Consumer Care, begs to differ. ``We think
consumers have already pre-committed their incomes for instalments on durables. The
substitution of soap with shampoos for hair wash has also impacted growth'', he said.

Better quality
The crowded market place has also brought a few benefits to the consumer as
marketers of soap have tried to woo consumers through upgraded offerings and better
quality soaps. Aided by low input prices, the marketers of toilet soaps have increased
the TFM (total fatty matter) content in their brands, to offer better quality soaps at a
lower price. Industry watchers say that the TFM content on some brands has moved
up from the 50-60 per cent earlier to over 70 per cent of late.

45

Therefore, per unit realisations on soaps have declined, the marketers of soaps have
actually sacrificed a part of their margins on hiking the TFM content.
Tough times ahead
With competitive pressures on the rise and a larger number of brands jostling for
consumer attention in a sluggish market, the soap market is likely to remain a difficult
one for most players. Smaller players such as Godrej Consumer and Henkel SPIC
have been in a position to report robust sales growth in the category over the past year
despite the bruising competition.
However, this is partly due to a relatively small base of comparison. Unless the
market expands, the frenetic promotional activity may soon tell on the growth rate of
the players. And when it comes to sustaining a high decibel promotional campaign,
HUL's size certainly gives it the wherewithal to do it.
Rural revival -- A wild card
It appears that a genuine boost to the market size for toilet soaps will still have to
come from a revival in rural demand. Evidence from the past does appear to suggest
that a sharp rise in rural incomes would have a cascading effect on FMCG demand.
The pick-up in volume growth in the soap market in 1999, after a year of sluggish
growth in 1998, demonstrated that a recovery in agricultural output does have an
indirect impact on sales volumes of FMCG products.
This year, reports of a good monsoon in the northern and western parts of the country
have sparked off speculation about a revival in FMCG growth rates. The fact these
two regions account for 55 per cent of the demand for FMCG products strengthens

46

this argument. However, it appears to be a bit early in the day to call it a revival. For
one, while the northern and western regions have received satisfactory rains, southern
India has been the victim of a very erratic monsoon. Second, given that the good
monsoon in the current year succeeds two or three consecutive years of drought in
some regions, there could be a substantial time lag before higher rural incomes
translate into better FMCG demand.
Third, the key crisis in agriculture over the past year has been that farm product prices
have dropped sharply in response to a build up of surplus foodgrain stocks. Therefore,
even if a good monsoon translates into a higher agricultural output, there is the
question of whether this will actually expand or shrink farm incomes.
These factors suggest that it may be premature to take investment exposures in
companies focussed on toilet soaps in the hope of a revival. It may be better to wait
for concrete signs of a pick-up in rural demand, which is certainly some way off.

THE FOUR COMPONENTS OF THE MARKETING MIX

In toilet soap market HUL has 63% market share. This is the product segment where
HUL has seen growth over last year but the growth is not as high as there is expansion
in the market for toilet soaps. The cash cows for HUL include Life boy, Lux, Liril,
Rexona and Breeze. The company's premium soap include Dove, Pears. The company
has come up with a new product offering i.e. Fair & Lovely soap. The strategy for
2006-07 would be to increase the market share from existing 63% to 70%. The
strategic changes taking 4 P's into consideration would be:
Product: HUL would continue with the existing portfolio of the products and would
concentrate on coming with new fragrances on different soaps than launching new
47

soaps. It would position Dove and Lux International soap very urban rich women who
are extra conscious for their complexion. Pears, Lux International would be
positioned for the urban and rural rich. For the consuming urban class, Liril, Rexona,
Pears and Lifebouy International would be positioned. It would also come up with
40gm packaging for different products. It will also be thinking of extending popular
brands of cosmetics in the toilet soap segment by that decision would be based on the
popularity and acceptance of that particular brand (Brand Extension).
Price: HUL would be trying to customize the packaging of various products on the
basis of price points. e.g. it will come up with the pricing of Rs 5, Rs 10 and Rs 15 for
different products. It would try to experiment it with the products positioned for
consuming class.
Promotion: For promotion, apart from continuing the existing strategy of
concentrating on T.V. channels, HUL would try to focus on the promotional campaign
in rural sector. It would also concentrate on promoting through radio and sponsoring
the programs e.g. Krishi Darshan' and Aap ka Swasthaya' programs that have greater
number of audience. The advertising for them would have a pastoral and cultural
looks. It would chalk out the rural promotion scheme for those areas where the cable
T.V. has not reached. Under this scheme It would try to include Gram Panchayat',
Swasthaya Parishad' and other local bodies by offering knowledge for using good
and anti-germ products.
Place: As the marketing channels of the company are already established HUL would
try to increase the penetration in the rural sector to the extreme remote areas which
are not touched till now. It would try to reduce the delivery time of the products by
choosing and increasing the strategic locations of warehouses. It would also track the

48

distribution path of the wholesalers in small cities through marketing team and would
establish a platform or team at a zonal level for all the wholesalers and would try to
take their feedback on the market developments.
These kinds of congregations could also increase the brand loyalty in the wholesalers
and they would be motivated to push HUL products.

The Real Challenge: Bridging the gap between Philip Kotler and
Countryside India
Marketing in developing countries like India have often been borrowed from the
western world. Concepts like Brand identity, Customer relationship management, 4
Ps of the marketing mix, Consumer behavior process; Segmentation, targeting and
positioning etc. have often been lifted straight from the marketing intelligentsia
abroad and adopted in Indian conditions, often with minimal success. Reason lies not
in the fault of such concepts, but their integration with the Indian ethos and
culture. The rural India offers a tremendous market potential. Nearly two-thirds of all
middle income households in the country are in rural India and represents half of
Indias buying potential. Despite, the strong potential the rural markets are by and
large less exploited.
HUL Bridging the Gap by Extending 4Ps Of the Marketing Mix to the 5 Ps And 2
Es
HUL has modified 4 Ps of the marketing mix by including an additional P i.e.
Packaging. Further to ensure the sustainability of the marketing mix two Es i.e.
Education and Empowerment have to be at the core as they help in generating
widespread participation from the rural client by enhancing their standard of living.
49

PACKAGING:
The reason for putting packaging out of the product as a special focus area is that due
to low literacy levels the importance of symbols and packaging become more
important in having a high brand recall.Thus, after the 4 p of marketing, it is 5th P
which is packaging going to play a key role in rural markets. Also since the rural
customers are usually daily wage earners and they dont have monthly incomes like
the ones in the urban areas have. So the packaging is in smaller units and lesser-priced
packs that they can afford given their kind of income streams.
THE CORE 2ES
The two biggest problems that the rural India faces are Illiteracy and Unemployment.
To integrate them in ones Marketing mix ensures that the product or service offered
ensures wider participation and better chances of success. Hence, it gives the rise to
the concept of two Es: Education and Empowerment at the core of our improved
Marketing Mix. This concept presents an opportunity to improve the life of rural
Indians and thus, ensure that they actively patronize the companys products.
1.) Education: Since vast majority of rural India lacks even basic education levels and
modern outlook, it is important that the company introducing a new product should
look at building category and not just selling products. It is important to consistently
drive home the point that the customers life is going to be enhanced because of
products consumption.
2.) Empowerment: Because of huge disguised unemployment levels in agriculture and
lack of employment opportunities in other sectors, any concept which uses any scope

50

for income generation would be favored more than the traditional marketing mix
concepts.
HUL runs the program of Self-Help Groups (SHG), which operate like direct-to-home
distributors. The model consists of groups of (15-20)
villagers below the poverty line (Rs.750 per month) taking micro-credit from banks,
and using that to buy HUL products, which they will then directly sell to consumers.
RETAILER:
Data on rural consumer buying behavior indicates that the rural retailer influences
35% of purchase occasions. Therefore, sheer product availability can determine brand
choice, volumes and market share. So, role of retailer is also very important in rural
markets, because he would be one who provides information regarding quantity of
pack, promotional schemes, influences of advertisement, consumer feedback etc to
company. So the retailer plays a very big role here. The rural customer goes to the
same shop always to buy his things. And there is a very strong bonding in terms of
trust between the two. The buying behavior is also such that the customer doesn't ask
for the things by brand but like -- "paanch rupey waala sabun dena". Now it is on
the retailer to push whatever brand he wants to push as they can influence the buyer
very easily and very strongly on the preferences. Hence, there is the need to get his
support through proper trade promotion activities to get more retail shelf and
convincing on his side to make the customer buy the brand.

51

DISTRIBUTION STRATEGIES OF HUL

The need for innovative and effective distribution network for rural areas is evident
from the fact that HUL has come up with new distribution channels to cater to rural
markets.
For eg, Project Streamline was conceptualized to significantly enhance the control
on the rural supply chain, through a network of rural sub-stockist, who are based in
these very villages. As part of the project, higher quality servicing, in terms of
frequency, credit and full-line availability, was be provided to rural trade. The pivot of
Streamline is the Rural Distributor (RD), who has 15-20 rural sub-stockists attached
to him. Each of these sub-stockists is located in a rural market. The sub-stockists then
performs the role of driving distribution in neighboring villages using unconventional
means of transport such as tractor, bullock cart, et al. The Streamline system has
extended direct HUL reach in these markets to about 37% of India's rural population
from 25% in 1995 and the number of HUL brands and SKUs stocked by village
retailers has gone up significantly.
HUL MODEL:
HUL have adopted the 4 Ps in addition to 1 more P, 1 R (RETAILER) AND 2 Es.
So the new MARKETING MIX model adopted by HUL look like:

52

53

CONSUMER SALES PROMOTION

The importance of consumer sales promotion in the marketing mix of the fast moving
consumer goods (FMCG) category throughout the world has increased. Companies
spend considerable time in planning such activities. However, in order to enhance the
effectiveness of these activities, manufacturers should understand consumer and
retailer interpretations of their promotional activities. A study of these perceptions will
reveal their preferences, their knowledge, and motivations.
In India fast moving consumer goods (FMCG) category has witnessed an outburst of
sales promotion activities in the post-liberalization era. This project study though
exploratory has considered perceptions for price as well as non-price promotions in
toilet soap category.
The reasons for the study were:
i) The widespread use of sales promotions in toilet soap category
ii) Historically, whenever there was a downward trend in growth, sales promotion
activities took the front seat of promotional mix.
iii) Companies planned these activities with inward looking view hence it was felt that
it would be useful to understand the perceptions of consumers and retailers regarding
sales promotion activities to improve the effectiveness of these activities.

LATEST ADVERTISING TRENDS

Last three-four years have seen a tremendous increase in the number of regional
channels as well as the amount of advertising on it. The entire advertising scenario is
dominated by FMCG categories and more recently, in the last one or two years, by
cellular phones/ cellular phone service categories. FMCG categories, which dominate
the market scenario, include toilet soaps, tooth pastes, shampoos, ready to eat food
and fairness creams. But out of all these categories, the most heavily advertised
category across the entire channel whether regional or national is the toilet soaps
category.

54

DATA ANALYSIS
Volume Growth of Soaps* on TV during January - May 2010.

During January -May 2010, advertising of Soaps* category on TV has seen a

rise of 19 per cent compared to same period in year 2009.

Note: Soaps* Category only includes Bathing/Toilets Soaps and not the
Laundry/Washing Soaps.

55

Share of Variants of Soaps* on TV during Jan - May 2010.

During January - May 2010, 'Protection-Ayurvedic/Medicated' segment had

the largest share (i.e. 49 per cent) of overall advertising share of Soaps* on
TV, followed by 'Nourishing-Beauty' and 'Hydration-Moisturising' Soaps with
26 per cent and 13 per cent share respectively.

Note: Soaps* Category only includes Bathing/Toilets Soaps and not the
Laundry/Washing Soaps.

56

Top Advertisers of Soaps* on TV during Jan - May 2010.

'Hindustan Unilever Ltd', 'ITC Ltd' and 'Reckitt Benckiser (India) Ltd' were
the Top three advertisers, contributing 76 per cent share of overall Soaps*
category ad pie on TV during January - May 2010.

Note: Soaps* Category only includes Bathing/Toilets Soaps and not the
Laundry/Washing Soaps.

57

New brands of Soaps*advertised on TV during Jan-May2010

'Vivel Satin Soft', 'Lux Strawberry & Cream' and 'Vivel Di Wills Toilet Soap'
were top three new Soap* brands advertised on TV during January - May
2010.

Note: Soaps* Category only includes Bathing/Toilets Soaps and not the
Laundry/Washing Soaps.

58

Top States in Soaps* advertising on TV during Jan - May 2010

During January -May 2010, Soaps* category advertising on Regional and

National channels in the ratio of 61:39.
'Maharashtra', 'Andhra Pradesh' and 'Karnataka' were the top three states
accounting for more than 50 per cent advertising share of Soaps* category on
Regional channels during January - May 2010.

Note: Soaps* Category only includes Bathing/Toilets Soaps and not the
Laundry/Washing Soaps.

59

Average advertising frequency of Soaps* on TV during

Jan-May2010

Compared to January - May 2009, average advertising frequency of Soaps*

saw a rise of 14 per cent on TV during January - May 2010.

Note: Soaps* Category only includes Bathing/Toilets Soaps and not the
Laundry/Washing Soaps.

60

Celebrity Endorsements for Soaps* on TV during Jan-May 2010.

'Priyanka Chopra' with 24 per cent share leads in Celebrity endorsement of

Soaps* on TV closely followed by 'Kareena Kapoor' with 23 per cent share
during January - May 2010
The third spot of the Celebrity Endorsement chart for Soaps* was occupied by
'Yuvraj Singh' during January - May 2010.

Note: Soaps* Category only includes Bathing/Toilets Soaps and not the
Laundry/Washing Soaps.

61

During 2010, TV advertising of Personal Care sector saw a rise of 22 per cent
compared to 2009.

62

Share of Personal Care Categories on TV during 2010

During 2010, 'Personal Hygiene' category had maximum share i.e. 44 per cent
of overall Personal Care sector advertising on TV followed by 'Hair Care' and
'Personal Healthcare' with 26 per cent and 16 per cent share respectively.

63

Top Sub Categories of Personal Care Brands advertised on TV

'Toilet Soaps' , 'Shampoos', 'Tooth Pastes' were the top 3 sub categories
contributing 39 per cent share of overall Personal Care sector advertising on
TV during 2010.

64

Top Advertisers of Personal Care brands on TV during 2010

'Hindustan Unilever Ltd', 'Procter and Gamble', 'Reckitt Benckiser (India) Ltd'
were the top 3 advertisers, they contributed 36 per cent of overall Personal
Care sector advertising on TV during 2010.

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New Brands of Personal Care sector launched on TV during2010

'Lux Strawberry and Cream', 'Axe Dark Temptation' and 'Sunsilk Hair Fall
Solution' were the top 3 new Personal Care brands advertised on TV during
2010.
During 2010, 4 of the Top 10 new Personal Care brands advertised on TV
were 'ITC Ltd' and 3 belonged to Hindustan Unilever Ltd which had occupied
the Top 3 places.

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Top Celebrities endorsing Personal Care Brands on TV

'Priyanka Chopra' was the top celebrity endorsing Personal Care brands on TV
followed by 'Kareena Kapoor' and 'Sushmita Sen' during 2010.

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Top 10 Brands in the Indian market

STUDY ON CONSUMER PERCEPTIONS:

1. Current usage of toilet soap Brands:
Table below gives current usage of toilet soaps across different income categories
(research was conducted with 30 people):

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2. REASONS FOR SWITCHING BRANDS:

This could be seen from Table below:

As obvious from the above table, sales promotion was not the main reason for
switching brand in this category. Need for variety was the predominant reason. It was
found through deeper probing that even though consumers would have switched
brands due to sales promotion, there was reluctance about admitting the same and
variety was given as a reason for switching. It was further found that consumers had
positive disposition towards promoted brand. As a result when toilet soap brand was
changed for variety, the brand which was promoted had higher probability of purchase
than non-promoted brands.

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3. RECALL OF BRANDS BEING PROMOTED:

It could be seen from Table below:

As seen from above, Lux (Gold Star offer most promoted and advertised brand) had
the maximum recall. This brand used TV advertisement heavily to announce sales
promotion offers.
Six out of 30 did not recall any sales promotion scheme on any brand. It could be
inferred that
i) hard core loyals to a particular brand (eg. Hamam) would never (pay attention to
any announcements of any other toilet soap brand.
ii) Unless sales promotion offers were properly communicated to the target audience,
required impact might not be created and
iii) Unless promotional offers were of significant value to a consumer, it was likely to
get unnoticed and/or ignored.

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4. WILLINGNESS TO BUY ON SALES PROMOTION OFFER

Sixty-three per cent of the sample did not show willingness to buy a brand due to
promotion while 27% showed willingness and 10% were not sure. This indicates that
when 27% showed willingness, and 10% consumers who were not sure, these groups
might be lured through innovative and lucrative sales promotion offer.

5. ABILITY TO INDUCE TRIAL

Forty per cent of the respondents had said that sales promotion had the ability to
induce trial which reinforces the above inference.

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CONCLUSION:

After conducting the survey, observed can be made that HUL still rules the FMCG
market. There premium class like LUX and LIFEBUOY acts as the CASH COW for
them and others like DOVE is growing fast in the market.
HUL is in a sticky ground and finds itself between devil and deep sea, on one end is
local and international competitors while on other is humongous population in
villages . FAST Moving Consumer Goods (FMCG) sector will witness more than 50
per cent growth in rural and semi-urban India by 2012, according to an analysis
carried out by the Associated Chambers of Commerce and Industry of India.
HUL has learned its lesson the hard way that INDIA is full of vagaries in spite of the
fact that HUL has so many products in the market , to cater to the whims of customer
is almost impossible. There is very peculiar market dynamics prevalent in the rural
parts so multi national like HUL find it difficult to follow the trends here in
comparison of local manufacturers. The rural market may be alluring but it is not
without problems such as low per capita disposable incomes and large number of
daily wage earners. Some of the other problems associated with rural markets are
acute dependence on the vagaries of the monsoon, seasonal consumption linked to
harvests, festivals and special occasions, poor roads and power problems.
The other difficulty that FMCG companies are likely to face is that of logistics. India's
627,000 villages are spread over 3.2 million sq km. Delivering products to the 750
million Indians living in rural areas will be a tough task.
Moreover our findings indicate that with respect to the nature of the schemes,
premiums (free gifts) were found to be the most frequently used in both premium and
popular toilet soap category, followed by price offs. Retailers perceived price offs to
have relatively greater impact compared to any other forms of sales promotion. In line
with the retailers perceptions, the findings of consumer perceptions indicated that
price offs was the most preferred type of sales promotion. Retailers stated that role of
word of mouth and television advertising was very important in providing information
inputs to the consumers regarding sales promotion activities. This perception of
retailers was supported by the consumer unaided recall of sales promotion schemes

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which were widely advertised. As the retailer interacts and observes consumers more
frequently and closely than the manufacturer, it would be useful for the companies to
incorporate perceptions . We believe that younger age-groups are more experimental
in nature, amenable to trying new brands, and sought/looked for or asked whether
there were any) sales promotion schemes running on any toilet soap at the time of
purchase. Also the person going to the shop for the purchase of soap is the final
decision maker of the brand. Hence it is essential that companies need to design
attractive, striking, visible POPs for scheme announcements.
Also following inference can be made that UNILIVER is using new innovative media
campaigns which are not only alluring customers but also increasing brand awareness. The
theme for media campaign is almost common for Uniliver but it changes the application for
e.g. DIRT IS GOOD is transformed into DAAG ACHHEY HAIN in INDIA.

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CHAPTER 3
RECOMMENDATIONS
BIBLIOGRAPHY
QUESTIONNAIRE

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RECOMMENDATIONS

The two point remedies for HUL through which it can recover its lost grounds are:
1. Retailing is the new mantra in marketing these days, HUL should come up with its
exclusive stores in metros and sub-urban areas. In this way it can not only decrease
number of intermediaries but also direct contact with the customers can be
established.
2. HUL should identify that there are two segments in Indian market that have vast
potential which are youth and rural market. So, HUL should introduce product
specifically to this segment, there is specific soap in the market which leverages on
the youth and rural aspect of India.
The organizational pressure, tight financial control and overall dull ness make the
marketers to sulk and squeeze. But, marketers have to be more focused just apply
themselves. Then they can rejoice that the spring will not be too far. Apart from the
usual 4Ps, its all in the recessionary 3Ps, perception, planning and plundering of the
market to find growth out of de-growth. One who finds the opportunity reaps the
benefit. Some time, slow down may be a blessing in disguise for some companies.
Upon compulsions, some companies may be forced to enter some new categories and
either knowingly or unknowingly they may end up having hit the jackpot with some
niche brand winners!
Customers become a rare commodity in a slow down. Increase promotions and
incentives to lure them. The Indian market has become so intense that every player,
including the local brand player has become intelligent enough to come out with

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some scheme or the other. As a great brand builder and with principles of strategic
marketing, companies may have a tendency to give a stoic smile on the lesser
mortals. Its a trap and do not ever dare to miss the race. Its time to be an Indian in
India.

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Bibliography
Philip kotler, V.A., Marketing management, First edition (2007),
Himalaya Publishing House, Mumbai
McDonald, W.J., Direct Marketing-an Integrated Approach, First
edition (2008), Irwin/McGraw Hill
Roberts, M.L., Berger, P.D., Direct Marketing Management,
sixth
edition (2008), Prentice Hall International Inc., USA
Shankar, Ravi, Services marketing, Second edition (2002),
South Asia Publications, Delhi
Sheth, J.N., Mittal, B., Newman, B.I., Consumer Behavior, First
edition (1999), The Dryden Press, USA
WWW.economictimes.com
WWW.hul.com
WWW.fmcg.com
WWW.google.com
WWW.adexindia.com

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Annexure

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QUESTIONNAIRE

Name: ______________________________________
1. Age (in Years):
(a) 20-25

(b) 30-35

(c) 25-30

(d) Above 35

2. Occupation:
(a) Student
(b) Housewife
(c) Working/Professional
(d) Others, Specify_____________________

3. Annual Household Income:

(a) Less than Rs. 1 Lakhs
(b) 1-2 Lakhs
(c) 2-3 Lakhs
(d) Greater than 3 Lakhs
1. Which HULs soap do you use?
Lux
Liril
Lifebuoy
Rexona
Others (dove, pears..)
2. Overall how satisfied are you with the product?
Very unsatisfied
Unsatisfied
Somewhat satisfied
Satisfied
Extremely satisfied

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3. How likely are you to use/purchase (product) again?

Definitely
Probably yes
Probably not
Definitely not
4. How would you rate HULs soap with respect to others?
Excellent
Very good
Good
Average
Poor
5. Would you continue buying or start buying lux after srks appearance in
luxs advertisement?
Definitely
Probably yes
Probably not
Definitely not
6. Would you like to recommend the product to others?
Definitely
Probably yes
Probably not
Definitely not
7. Would you suggest any improvement from the following?
Quality improvement
Price reduction
More diversified
Any other suggestion.
8. On which parameter do you buy soap
Company name
Soap name
Price
Need
9. Are you satisfied with the quality of HUL products.
Satisfied
Unsatisfied

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10. Have you get attracted from the brand ambassador.

Yes
No
11. How often do you switch to another product
Very frequently
Frequently
Rarely
Never
12. Who buys the soap in your family?
Mother/wife
Father/husband
Yourself
Hardly matters

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