Reckitt: Working up a lather with Dettol

Flagship brand's mkt share improves from 4% to 9% in 4 yrs

Urban India’s appetite for Dettol has helped Reckitt jockey into third position in soaps, behind Levers and Godrej, but competitors won’t let it rest on its laurels.

Changing habits can never be easy. But Reckitt Benckiser India appears to have done just that with its germ-fighter Dettol. Four years ago, the market share of the flagship soap brand from the British consumer goods maker was just about four per cent. It is now close to nine. It was once number eight in the pecking order of soaps, but has clawed its way to number three. In the process, Reckitt, which derives close to half its Rs 2,000-crore turnover from Dettol alone, has successfully tapped into the growing health consciousness of Indians, pitching its product as an able fighter and protector against germs.

 

“I think the fact that we have never compromised on quality has worked,” says Chander Mohan Sethi, Chairman & Managing Director, Reckitt Benckiser India.
 

DETTOL’S WINNING WAYS

• In four years, market share of Reckitt's flagship soap brand has increased from four per cent to nine per cent 
• Dettol was once in the eighth position in soaps, but has clawed its way to third 
• The firm derives close to half its '2,000-crore turnover from Dettol
• Urban areas have contributed to Dettol’s success, but Reckitt is training its sights on rural India for growth
• This means selling smaller packs and lower price points-like its 35-gram soap priced at '7
• Reckitt’s ‘Health’ segment is growing rapidly, next only to ‘Beauty’ and occupies 25 per cent of the overall soaps market
• HUL and GCPL are first and second in soaps with a share of about 45 per cent and 10.1per cent 
• The next three are neck and neck with only a percentage point separating GCPL, Reckitt and Wipro 
• Reckitt faces renewed competition from Cinthol and Chandrika soaps which have made inroads into the health space

Most Indians have known Dettol primarily through the antiseptic liquid which was launched in the 1930s. This product is used for a wide variety of reasons from cleaning floors to disinfecting wounds. Dettol soap, in contrast, has been a more recent addition by the company, launched in the 1990s. It now has a number of extensions too —from liquid handwash to bodywash, hand sanitisers, plasters and shaving creams.

But, its early adoption by people in urban areas is what has helped it gain share, say market experts. Reckitt in the last few years has also attempted to take Dettol into rural areas with smaller packs and lower price points to entice consumers there. For instance, the firm has a small 35-gram soap priced at Rs 7 in rural areas. In urban areas, an average Dettol costs nothing less than Rs 19 for a 70-gram and Rs 31 for a 120-gram.

Sethi says the challenge for Reckitt now lies in winning consumers over in rural areas who don’t necessarily bathe using a Dettol soap or even use an antiseptic liquid to clean their surroundings. “The concept of cleanliness and hygiene is something we are pushing in these areas,” he says. Consumer awareness programmes highlighting the need to fight germs is part of Reckitt’s strategy to increase penetration in rural areas.

At the same time the firm is also expanding its distribution network in rural areas. Its soaps reach, for instance, has increased from 1.8 million outlets to 2.3 million outlets in the last few years, thanks to its endeavour to reach rural areas. “The increase has given us direct access to 600 towns more than we had earlier,” says Sethi. Reckitt reached 2,600 towns prior to this.

But its direct coverage pales in comparison to Hindustan Unilever’s (HUL) and Godrej Consumer Product’s (GCPL) roughly 5,500 and 4,000 towns respectively. HUL and GCPL are the number one and two players in soaps with a share of about 45 per cent and 10.1 per cent respectively.

FMCG experts say that increasing direct coverage is important for companies who are keen to push their products directly to retailers. This way firms are able to get a better grip on distribution. “The greater the direct coverage, the more retailers you are able to reach,” says Dalip Sehgal, managing partner, DS Consulting, who was formerly at the helm of GCPL. He has also worked with HUL in the past.

Most firms have been working on boosting their direct coverage in an attempt to increase the footprint of their products aggressively.

For the $12-billion Reckitt, these initiatives are critical as it turns to markets such as India in search of growth. For the full year 2010, revenue growth of the Slough (UK)-headquartered company was six per cent mainly because of stagnant markets in the west. Emerging markets, however, grew 18 per cent during the year, while North America and Australia grew three per cent only and Europe saw no growth at all.

Reckitt hopes to drive growth in emerging markets through segments such as healthcare, where it has been investing heavily in the last few years.

Reckitt’s current chief executive Rakesh Kapoor, who took over on September 1, helped the firm snap up buys such as Boots Healthcare in 2006 and SSL International and Paras Pharmaceuticals in 2010, which gave the firm access to brands such as Strepsils and Clearasil (from Boots), Dr Scholl’s and Durex condoms (from SSL) and D’Cold, Dermicool, Livon and Setwet (from Paras).

What makes India exciting for Reckitt is that the ‘Health’ segment is growing rapidly, standing second only to ‘Beauty,’ which is the largest one with 50 per cent of the overall category. The Health segment occupies 25 per cent of the overall soaps market, having grown from about 18-20 per cent about three years ago. Beauty was about 55 per cent of the market then.

But rivals argue that there is still a strong proposition for Beauty with Indian consumers who seek that quality in most products. “Every brand has a strong functionality,” says Tarun Arora, executive vice-president, marketing, GCPL. “Whilst Health has been growing, Beauty is still a large segment,” he says.

This point is endorsed by Wipro Consumer Care & Lighting president Vineet Agrawal. Wipro is the number fourth soaps player with a share of 8.2 per cent. Both Wipro and GCPL have strong beauty brands in their portfolio, with Santoor and Godrej number one respectively. HUL, on the other hand, has both beauty and health with Lux and Lifebuoy, also the number one and two soap brands in the country.

With only a percentage point separating GCPL, Reckitt and Wipro from each other, experts say that it is easy for one company to swap positions with the other. The threat, in particular, to GCPL from Reckitt remains strong. Arora of GCPL says, “I am not taking competition lightly. There are ways and means of addressing the health benefit.”

For instance, he points out that Cinthol has been increasingly addressing the issue of skin protection rather than freshness and deodarancy alone. Wipro’s Chandrika soap has also made inroads into the health space with its focus on treating skin problems.

But with both players lacking a strong brand with a germicide property, this leaves Reckitt within striking distance of number two.