SALES & DISTRIBUTION MANAGEMENT

Group Assignment PART A

FMCG Non-Eatables
SOAP INDUSTRY (INDIA)

Group 3FH
Chandran M 2016PGP099
Garima Sharma 2016PGP126
Harshwardhan Singh 2016PGP140
K N Nagadarshini 2016PGP158
Mehta Chirag 2016PGP211
Rishab Khaitan 2016PGP313
Saumya Garg 2016PGP343
Vandan Vamsi 2016PGP417
 TABLE OF CONTENTS
Sr. No. Title Page No.
1 INDUSTRY ANALYSIS 3
1.1 FMCG Industry overview 3
1.2 Introduction to Soap Industry 3
1.2.1 Product Developments in Soap industry 4
1.2.2 Factors affecting buying behavior 5
1.2.3 Distribution 5
1.2.4 Rural Market Analysis 5
1.2.5 Demand and Supply scenario 7
1.2.6 Top players and their Market share 8
1.3 BCG Matrix 10
1.4 Industry SWOT Analysis 12
1.5 5 Forces Analysis 13
2. EXTERNAL ENVIRONMENT SCANNING 14
2.1 PESTEL Analysis 14
3 CURRENT TRENDS 16
3.1 Demand Driving Trends 16
3.2 Marketing Trends 17
3.3 External Triggers 17
3.4 Future outlook 18
4 References 19

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I.INDUSTRY ANALYSIS

FMCG INDUSTRY OVERVIEW

The Fast Moving Consumer Goods (FMCG) sector is the fourth largest
sector in the economy with a total market size in excess of Rs 60,000 crore.
This industry essentially comprises Consumer Non-Durable (CND) products and
caters to the everyday need of the population.

Industry Segments

The main segments of the FMCG sector are:

Personal Care: oral care; hair care; skin care; personal wash (soaps);
cosmetics and toiletries; deodorants; perfumes; paper products (tissues,
diapers, sanitary); shoe care.
Household Care: fabric wash (laundry soaps and synthetic detergents);
household cleaners (dish/utensil cleaners, floor cleaners, toilet cleaners,
air fresheners, insecticides and mosquito repellents, metal polish and
furniture polish).
Branded and Packaged Food and Beverages: health beverages; soft
drinks; staples/cereals; bakery products (biscuits, bread, cakes); snack
food; chocolates; ice cream; tea; coffee; processed fruits, vegetables and
meat; dairy products; bottled water; branded flour; branded rice;
branded sugar; juices etc.
Spirits and Tobacco Major companies active in this segment include ITC,
Godfrey Philips, UB and Shaw Wallace.

INTRODUCTION TO SOAP INDUSTRY

The first soap manufacturing company established was North West Soap
Company, in the city of Meerut, Uttar Pradesh in 1897. Soap became a
necessity in India, at least for the moneyed class people, by 1937.
Concentrating on the personal Wash Soap market, the major players are HUL,
NIRMA, Procter and Gamble, Godrej, Wipro and ITC.
Soaps are categorized into mens soaps, ladies soaps and common soaps.
There are few specialty soaps like Glycerin soaps, sandal soaps, special

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flavored soaps, medicated soaps and baby soaps. Specialty soaps are high
valued which enjoy only a small share of the market in value terms. The market
is growing at a rate of 7% every year.
However, the industry generally categorizes Bath soaps into 3 segments:
Premium (Lux, Dove), popular (Cinthol) and economy (Nirma bath, Lifebuoy).
The price differential between the premium and economy segments is about
2X. The popular and economy segments account for about 4/5ths of the entire
market of soaps.

PRODUCT DEVELOPMENTS IN SOAP INDUSTRY:

Hand Wash Market: Hand wash market (close to 300 crore) stands at a
fraction of the total soaps market( 3000 crore), but it stands on a high growth(
CAGR of 37% in 3 years) when compared to soaps( 2012 statistics)

In liquid hand wash category, Dettol holds 50% market share.

In 2012 Dettol was the leader in the hand wash category with a share of 53
per cent. Lifebuoy had a share of 29.1 %.
Slowly the penetration has increased not only in urban households but also in
distant villages.
To bring down the overall cost, refill packs have started gaining momentum
amongst the consumer base owing to coupled purchase with dispensing
format and gaining on cost front when buying for refilling. (200 ml to 5 litrs)

Main Players in hand wash market: Lifebuoy, Palmolive, Dettol, Savlon,

Santoor.

Banega Swach India Campaign:

A trio of Reckitt Benckiser + NDTV + Facebook has recently launched a 5 year

ambitious program to raise the awareness about hygiene and its importance in
India.

Not only the major brands are getting benefited but overall hand wash market
is also growing owing to enhanced awareness and a power of heightened
overall voice in the marketplace.

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 FACTORS AFFECTING BUYING BEHAVIOR

Product Sales Advertise Brand Social

Promotion
Availability Price
Features ments Image Factors

DISTRIBUTION INTRODUCTION
Soaps are available in 5 million retail outlets in India, 3.75 million of which are
in the rural areas. Therefore, availability of these products is not a
problem.75% of Indias population is in the rural areas; hence about 50% of
soaps are sold in rural markets.

RURAL MARKET ANALYSIS

The Indian rural market with its vast size offers a huge opportunity with 128
million households and the rural population is nearly three times the urban.
Rural India has a large consuming class with 41 percent of India's middle-class
and 58 percent of the total disposable income.
Population (Number) No. of Villages Proportion of Total Villages (%)

Less than 500 people 236,004 37.00

Between 500 and 999 158,124 25.00

Between 1000 and 4999 221,040 35.00

Between 5000 and 9999 15,058 2.00

More than 10,000 3,976 1.00

Total 634,202 100.00

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CONSUMER BEHAVIOR IN RURAL AREAS
A complex set of factors influence rural consumer's behavior. Social norms,
traditions, castes, and social customs have greater influence on the consumer
behavior in rural areas than in urban areas. The seasonality of agricultural
production influences the seasonality of rural consumers' demand.
They tend to exhibit greater trust in products and services endorsed by the
government and its agencies. Rural consumers also tend to be more loyal as
brand switching has greater perceived risk. Compared to the urban
counterparts, rural consumers have different interpretations of colors,
symbols, and social activities. Rural consumers show a preference for bold,
primary colors; red color connotes happiness and auspiciousness, and green
color prosperity.

MARKETING INFRASTRUCTURE IN RURAL AREAS

Factors such as limited physical access, low density of shops, limited storage
facilities, need for a large number of intermediaries in the distribution channel
to reach the end customers, and low capacity of intermediaries to invest in
business (investments for keeping stock, storage facilities, vehicles for
distribution) make the tasks of reaching rural consumers very complex.
Haats are a "public gathering of buyers and sellers of commodities, meeting at
an appointed or customary location at regular intervals. Most of these periodic
markets are held once a week.
Mandis or agricultural markets are set up by the state governments for
facilitating exchange of agricultural produce (providing information on prices
and arrivals of produce, meeting of buyers and sellers) and for procurement of
food grains by the government agencies.

CHARACTERISTICS OF RURAL CONSUMER GROUP

A scattered market: The rural market of India is a geographically
scattered market.
Socio-economic position: By and large, rural consumers continue to be
marked by low purchasing power/low per capita income. Similarly, they
continue to be tradition-bound community, with religion, culture and
tradition strongly influencing their consumption habits.

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 Culturally a diverse and Heterogeneous market: The diversity is manifest
in a more intense manner among the rural segments. It can be said that
heterogeneity is the number one hallmark of the rural market.
Literacy Level: It has been estimated that rural India has literacy rate of
28 percent for the whole country. Every year about eight million people
get added to rural India's literate population. The adult literacy programs
launched in the rural areas are bound to enhance the rural literacy rate
in the years to come.

BUYING BEHAVIOR OF RURAL VIS A VIS URBAN SECTOR

Influence of Culture: Culture and tradition influences perception and
buying behavior. For example, the preference in respect of color, size
and shape is often the result of cultural factors.
Geographic Location: Rural consumer behavior is also influenced by the
geographic location of the consumers. For example, nearness to feeder
towns and industrial projects influence the buying behavior of
consumers in the respective cluster of villages.
Exposure to urban lifestyles: Extent of exposure of rural consumers to
urban life styles also influence their buying behavior.
The way the consumer uses the product: The situation in which the
consumer utilize the product also influences their buying behavior. Since
rural consumers cannot use washing powders/ detergent powders that
much, as they wash their clothes in streams or ponds, they go in more
for washing bars and detergent cakes.
Place of Purchase: Buying behavior of rural consumer also varies
depending on the place of purchase. Different segments of rural buyers
buy their requirements from different places/outlets.

DEMAND AND SUPPLY SCENARIO

The Indian Soap industry includes about 700 companies. The total market size
of the Indian soap industry is about Rs 17000 crore. Lifebuoy is the largest
player in terms of market size, followed by Lux, Santoor, Dettol. The toilet
soaps market is estimated at 530,000 tonnes per annum including small
imports. Hindustan Unilever is, of course, the market leader.

The market is littered over with several, leading national and global brands and
a large number of small brands, which have limited markets. The popular and
premium brands include Lifebuoy, Lux, Cinthol, Liril, Rexona, and Nirma.

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TOP OF THE PACK:

As the market is constituted now, it can be divided into four price segments:
premium, popular, discount and economy soaps. Premium soaps are estimated
to have a market volume of about 80,000 tons. This translates into a share of
about 14 to 15%. However, by value it is as much as 30%.

Size (In Lakh Tonnes)

1 0.8
Premium

Popular

Economy
1.3
2.2 Discount

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MARKET SHARE
Hindustan Unilever (HUL) dominates the Indian Soap market with as many as
four brands among the top 10. In fact, Lifebouy and Lux by HUL are the market
leaders in their segments by a large margin.

According to Nielsen data, Wipro Consumer's Santoor gained the most market
share in the first quarter of 2015. Even Dettol has gained considerable market
share according to the quarter-on-quarter data.

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BCG MATRIX
The BCG matrix method can help understand a frequently made strategy
mistake: having a one-size -fits-all-approach to strategy, such as a generic
growth target.
In such a scenario:
A. Star Stars generate large amounts of cash because of their strong
relative market share; but also, consume large amounts of cash due to
high relative market growth; therefore, the cash in each direction
approximately nets out. If the Star can maintain its market share, it can
become a cash cow once the growth rate declines. Rexona, Dettol are
examples of soaps in this segment
B. Cash cows business units will beat their profit target easily; their
management has an easy job and is often praised anyhow. Even, worse
they are often allowed to reinvest substantial cash amounts in their
businesses, which are mature, and not growing anymore. Dove, Liril are
examples in this space
C. Dogs business units fight an impossible battle and, even worse,
investments are made now and then in hopeless attempts to turn the
business around. Godrej No1 is an example in this block.
D. As a result, (all) question marks and stars business units get mediocre
size investment funds. In this way, they are unable to ever become cash
cows. These inadequate invested sums of money are a waste of money.
Either these SBUS should receive enough investment funds to achieve a
real market dominance and become a cash cow (or star), or otherwise
companies are advised to disinvest and try to get whatever possible cash
out of the question marks that were not selected. Santoor, Nirma are
present in this block.
Limitations of BCG matrix:
Some limitations of Boston consulting group matrix include:
High market share is not only success factor.
Market growth is not the only indicator for attractiveness of a market.
Sometimes dogs can even more cash as cash cows.

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 BCG MATRIX
Market Share

?
Santoor
Rexona, Pears, Lifebuoy, Nirma nirma bath soap
breeze
- nirma lime soap
Savlon, Dettol, breeze,
Mysore Sandal soap, Godrej- Fair glow
Market Growth

Lux, Dove, Liril Colgate Palmolive

NIRMA-beauty soap Godrej-Ganga, Godrej No.1
Johnson & Johnson baby breeze
soap
Godrej-Cinthol

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INDUSTRY SWOT ANALYSIS

Strengths:

Well-established distribution network extending to rural areas.

Strong brands in the FMCG sector.
Low cost operations

Weaknesses:

Low export levels.

Small scale sector reservations limit ability to invest in technology and
achieve economies of scale.
Several "me-too products.

Opportunities:

Large domestic market.

Export potential
Increasing income levels will result in faster revenue growth.

Threats:

Imports
Tax and regulatory structure
Slowdown in rural demand
Better Global Value added products
New trends like Shower gel.

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 Five forces analysis of bath soap industry

LOW

SUPPLIER POWER
Numerous Suppliers
Differentiation of inputs is low
Impact of inputs on cost or
differentiation
Switching costs of firms in the
industry is low
Presence of substitute inputs
HIGH Threat of forward integration is low
HIGH

BARRIERS TO ENTRY THREAT OF

HIGH
SUBSTITUTES
Huge investment requirements
Establishing Brand identity DEGREE OF RIVALRY Switching costs
Switching costs Government Emerging demand for
policy Exit barriers medicinal soaps
Setting up of distribution Leading national and global Buyer inclination to
networks such as HUL, Godrej, RB, ITC substitute such as
Expected retaliation from Huge volume sales in metros body wash
existing players Rural Market Penetration Relative price
Emerging Local Players performance of
Industry growth substitutes
Product differences
Switching costs
Brand identity
Diversity of rivals

HIGH

BUYER POWER
Buyer volume
Easy access to Buyer information
Brand identity
Price sensitivity
Downtrading
Product differentiation Consumer
discounts
Value for money Deals
Substitutes 13
available Buyers'
incentives
II.EXTERNAL ENVIRONMENT SCANNING:
PESTEL ANALYSIS

Political Factors:
-Reforms: Under the proposed GST regime, tax on most consumer goods will
come down from over 30 per cent to 28 per cent and even to 18 per cent in
the case of certain categories including soaps, oils and some white goods. This
will lead to a consumption boost.
-Demonetisation had a temporary impact on the last quarter earnings of many
players. Although the effect of demonetisation is expected to wane by March
-The current governments emphasis on sanitation and policies to support the
social initiatives will benefit the entire hygiene industry in general.

Economic Factors:
-Penetration of toilet soaps is high at 88.6%. However per capita consumption
levels remain low India's per capita consumption of soap at 460
gms per annum is lower than that of Brazil at 1,100 gms per annum.
- Rising disposable incomes has resulted in urban affluent consumers looking
for premium and alternative products such as liquid soaps, shower gels and
body wash products
-High input prices: HULs last 2 quarters reports highlighted that prices of palm
fatty acid distillate, a key raw material for soaps, were higher by 30%
compared to the year-ago period, while milk prices were higher by 14%. This
triggered them to increase prices but the demand dampened as a result. The
companies are trying to compensate for inputs costs by concentrating on sales
volume growth.
-Competition from indigenous producers like Patanjali which has been heavily
promoting the natural origin of their soaps vis a vis the synthetic
manufacturing done by competitors. This has impacted incumbents to react by
offering herbal variants of soaps (eg. HUL has launched a new and expanded
range of Ayurvedic personal care products under the Lever Ayush brand
name)

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 Socio-Cultural Factors:
-Shift in Indian consumer preferences toward natural, organic or herbal
products
-Bath and shower players are expected to shift away from meeting basic
hygiene requirements of consumers towards more premium personal care and
demand for shower gels, liquid soaps and intimate washes is expected to pick-
up over the forecast period as awareness and availability of these increase
among consumers.
-The Swachh Bharat Abhiyaan has made people more hygiene conscious than
ever, which is good for business for soap industry.
-Low penetration in isolated rural areas and lack of literacy in such regions is
still a challenge for soap manufacturers.
-Effect of demographic factors: Young population value new features,
fragrances, brand as compared to the old population who the demand for
products with softer colors, milder formulations, and the treatments for aging
skin increases. New cosmetic products are being produced to satisfy demand
for these products. As the consumers become better educated and informed,
there is a fast growing market for scientifically based soap and detergent
products, which at the same time medicate and beautify.
-The incremental demand flows from population increase and rise in usage
norm due to greater concern for hygiene.

Technological Factors:
- The industry though capital intensive is not very technology intensive as the
rate of technological change does not have a significant impact on the industry
growth. More important is the marketing and distribution management where
technologies like supply chain management is roped in.
-Any technological innovation is limited to big players who are pumping money
on R&D to improve their products and woo customers. Current technologies
used by some are: Germ-fighting technologies (lifebuoy, Dettol) and unique
propositions like gel bathing bar (Vivels) and allergens-free soaps for sensitive
skin (Dove)

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-Apart from their enhanced functions and premium natural ingredients, more
Bar Soaps are providing sensory experiences with unique scents, textures,
colors and shapes. Some interesting new textures and formats are being
launched which offer a more unique sensory feel and experience.

Legal Factors:
-The firms in the industry need to adhere to the Drugs and Cosmetics Act
which is punitive in nature.
-Government of India is acting strongly against maltreatment of animals for
testing by soap manufacturers. The Committee for the Purpose of Control and
Supervision of Experiments on Animals (CPCSEA), under the ministry of
environment, forests and climate change, had issued a circular to
manufactures and industry associations, recently.

Environmental Factors:
-Many industries are using eco-friendly campaigns and eco- mark to attract
customers.
-Triple bottom line concept and sustainability reporting is followed by many
companies (ITC,HUL) to demonstrate their awareness and responsibility
towards environmental impact.

III. CURRENT TRENDS:

DEMAND DRIVING TRENDS
Consumers of this industry focus on the moisturizing capabilities and
scent of the product. However, the awareness regarding other
ingredients in the soap is slowly catching up.
This is leading the customers to look at products with more organic and
natural ingredients as opposed to chemicals.
The market for bar soaps is more or less mature whereas there exists a
huge potential for growth in the newer bath products.
There is a scope for lot of customization in the ingredients as well as the
types of products.

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 The market for traditional bar soaps is considered mature, while the
markets for newer bath products and natural and antibacterial soaps
present significant growth potentially.
Demand in the soap and bath product industry is typically driven by the
evolving age composition within the general public, as well as consumer
income.
Additionally, the soap and bath products industry is creating products
geared toward the aging process, and also products geared specifically
towards children.

MARKETING TRENDS
Soap and bath retailers that previously resided firmly in niche markets
are rapidly moving to the forefront of the soap and bath products
industry.
Though the need for soap and hygiene products has increased over the
years(almost 50% from 2009-2014) because of the rise on the affluent
class and increase in disposable income in the rural market, soap
companies still resort to pull marketing through ad campaigns etc.
To avoid the danger of being commoditised various brands try to
differentiate themselves through major advertising campaigns (Doves
real beauty campaign) with famous brand ambassadors, CSR initiatives
and Green marketing campaigns like The Body Shop.
The SKUs delivered in rural markets are smaller than the ones in the
urban markets (Urban even have buy 3 get 1 free bundles). In the rural
market small SKUs and pocket sachets are sold, but with the increase in
brand awareness and need for good hygiene this trend is changing to
larger SKUs.

EXTERNAL TRIGGERS
In addition to that the penetration and use of premium brands for both
urban and rural has seen considerable increase. This trend in urban and
rural markets is expected to continue on in 2017 as the disposable
income will increase because of tax cuts in 2017 budget.
The usage trend in urban markets in moving towards relatively
expensive liquid soaps and all natural beauty products.

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FUTURE OUTLOOK

The slow economy has influenced the industry in various ways. During a
recession consumer's look to buy products that offer multifunctional
benefits, like shampoos, which can clean, condition, and add shine at the
same time. Therefore, products with multiple benefits are becoming
trendy.
Handmade soaps are becoming immensely popular. It is an amazing
alternative to chemical free medium to conventional soaps. Handmade
soaps are usually made of natural ingredients and essential oils like olive
oil, avocado oil, cocoa butter, grapeseed oil and other organic
ingredients which in turn are getting popular because of their benefits
reaped by general users.
It also have a bright future, since this handmade industry is supported,
encouraged by government due to its employment upliftment.
Acknowledging that natural resources are a matter of prestige and pride
is eliciting huge interest even from Elite Classes.

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