Rohit Surfactants to launch mid-premium laundry brand Uni Wash to challenge HUL & P&G brands Sagar Malviya, ET Bureau Apr 18, 2012, 10. 37AM IST Tags: * Uni Wash| * tide| * Rohit Surfactants| * margin pressure| * HUL| * ghari| * Bimal Kumar Gyanchandani * MUMBAI: Maker of India’s largest-selling detergent brand Ghari, Kanpur-based Rohit Surfactants plans to launch a mid-premium laundry brand to take on Hindustan Unilever’s Rin and Procter & Gamble’s Tide. “We want to tap into mid-priced category which has good potential as well as offer higher margins,” Rahul Gyanchandani, director at Rohit Surfactants, said.
Ghari competes in the highly competitive mass-priced segment, where companies are under margin pressure due to high raw material costs. “In addition, apart from brands such as Rin and Tide, there is a vacuum in the segment which we want to fill,” Gyanchandani said. The new brand, Uni Wash, will be launched in the next 2-3 months and be priced similar to Rin and Tide, the company said. Rin’s 1-kg pack costs 50, while Tide Naturals’ 870-gram pack is sold at 30. Spokesperson of HUL and P&G said as a company policy they do not comment on competitors.
Rohit Surfactants’ Ghari late last year beat HUL’s Wheel to become the top brand in the 13,000-crore laundry industry. The firm’s entry into the mid-premium segment is expected to make the infamous Rin-Tide fight even murkier. HUL early this year priced Rin lower than P&G’s Tide and released an advertisement asking consumers to choose the better brand-the latest in a series of aggressive commercials from either brand targeting the other. Some blatant ads even attracted legal recourse from the other side. According to an industry insider, Tide’s share has doubled in the last two years to over 13. % in 2011 while Rin’s share has grown from 4% in 2009 to around 6%. TOUGH MARKET Analysts feel that Rohit Surfactants’ entry could further dent margins in laundry, one of the largest segments that contribute to more than a quarter of the revenues for both HUL and P&G. “The category has limited pricing power already and a new brand entering will surely affect the exiting brands in the long term,” Gautam Duggad, an analyst at brokerage Prabhudas Lilladhar, said. Duggad, however, added that it would not be easy for Rohit Surfactants to build a brand from scratch. Launching a completely new brand altogether would be a challenge in this cut-throat market as it will take a long time for a brand to start from scratch,” he said. Rohit Surfactants has been building its distribution network to reach most of the country and believes it now has the wherewithal to compete with established brands. “We already have a solid platform now, which we can leverage for the new brand to push it,” Gyanchandani said. Rohit Surfactants entered 10 new states in the last three years to expand its reach to 19 states through more than 3,500 dealers.
It has 21 manufacturing units, 15 of which were added since 2006. The company now plans to expand its distribution and build manufacturing plants in markets such as Bihar, Raipur and Karnataka. Launched in 1987 by brothers Muralidhar and Bimal Kumar Gyanchandani, Rohit Surfactants had sales of over 2,500 crore in the year ending March 2012. But there is increasing pressure on the margins of detergent makers due to increasing prices of key raw materials such as LAB, or linear alkyl benzene, that has increased 19%, and soda ash that climbed 4% in the last three months.
HUL, the Indian unit of Anglo-Dutch Unilever, has indicated that it is facing the heat of inflation in categories such as soaps and detergents, and has tried to moderate its advertising spends to protect margins. There’s only Hindustan Unilever Ltd’s (HUL’s) Wheel detergent that’s ahead of Ghari, with estimated sales of Rs 2,500 crore. As of December 2010, Ghari had almost doubled its market share, taking it up to 13. 5% in the Rs 12,000-crore detergents segment. Wheel still leads with over 17%, but the gap is slowly but surely narrowing.
To reinforce how formidable this feat is, take a look at the other HPC brands that tail Ghari. There is Lifebuoy soap with estimated sales of Rs 1,400 crore in the last fiscal year, Lux (Rs 1,400 crore), Surf (Rs 1,400 crore) and Colgate (Rs 1,250 crore). Detergents, soaps, oral care, skin care and hair care are the main constituents of the HPC segment. Now take a look at the size of the company that owns Ghari. Rohit Surfactants Pvt Ltd (Rs PL) ended fiscal 2011 with net sales of Rs 2,200 crore — Ghari contributed Rs 2,083 crore, with minor soap and dishwashing brands like MR2, Xpert and Venus accounting for the rest.
That gives it a scale that’s on a par with the likes of multinational fast-moving consumer goods majors like Reckitt Benckiser and Cadbury, both unlisted in India. Reckitt had sales of Rs 1,813 crore for the year ended December 2009, the latest year for which numbers are available. Cadbury India’s top line was a little under Rs 2,000 crore for the same period. So how did the Gyanchandanis pull it off? “We have been inspired by Nirma’s low-cost model,” Muralidhar, the 66-year-old co-founder who is still hands-on, told ET.
His 34-year-old son Rahul manages daily operations while nephew Rohit (Bimal Kumar’s son) is in charge of marketing. He also oveRs ees the group’s real estate operations. Muralidhar is, of course, referring to Karsanbhai Patel’s famous low-cost blitzkrieg to take on HUL (then Hindustan Lever) in the ’80s and ’90s. With low-cost manpower and low-cost capital, Nirma took on HUL in detergents and emerged a leader. Ironically, Ghari has emerged as today’s Nirma and, in the process, stolen the thunder along with some market share from yesteryear’s price warrior.
At the end of 2010, Nirma lagged Ghari with a share of 7. 9% of the detergents segment — a far cry from the 35% it once had when it was top dog. “Ghari did a Nirma on Nirma. So far Ghari’s gain has come from Nirma and smaller regional brands because it is definitely a better product in comparison,” says a former HUL senior executive, who was directly involved with HUL’s operation STING (Strategy To Inhibit Nirma’s Growth) in the late eighties. Ghari took birth when Nirma was at its peak. Launched in 1987, it took almost 15 years for Ghari to hit Rs 500 crore in sales.
But the next 10 years saw it adding another Rs 1,700 crore. It’s difficult not to draw comparisons between Ghari and Nirma. Both share humble beginnings marked by tin-shed operations and street-smart marketing. But what’s helped Ghari is the sheer size of its home market Uttar Pradesh, which contributes 17% to total FMCG revenues, according to market research firm The Nielsen Company. What’s more, the adjoining markets the company expanded into — Bihar, Madhya Pradesh and Punjab — along with UP account for a third of the total consumer products market. The tipping point, however, came in the past hree years when Ghari added 10 states to its distribution reach. The brand is now present in 19 states. A regional brand had suddenly gone national, reaching out to millions of new customers. To complete this push effect, the company added over 1,000 dealers and now has a total network of 3,500. The next target: to cover the remaining 15-odd regions (states and union territories) in the next two years to have a truly national footprint. Spreading into newer markets calls for more manufacturing plants too. Ghari now has some 21 units, 15 of which were added in the past five years.
With the company now looking to enter more markets, especially in southern India, at least four more plants are expected to be put up in the current fiscal year. “Ghari has been a bigger rival than Nirma for many quarters now. Their model of having either small manufacturing units or large depots every 200 km in key markets is working in their favour,” says an HUL sales executive. If there’s one glaring difference between Nirma and Ghari, it is that the latter has not fought a battle on the price front. In fact, Ghari took the bold step of pricing at a 10% premium over HUL’s Wheel and Nirma – Rs 35 a kg as against Rs 30.
