Watch out for Ghari express

Ghari has outshined several multinational brands to become the second largest-selling detergent in the country. Here’s how The Grand Trunk Road starts at Sonargaon in Bangladesh, cuts across Kolkata, Varanasi, Delhi, Amritsar, Lahore and Peshawar before it completes its 2,500-km journey at Landi Kotal in north-west Pakistan. In between, it passes through dusty Kanpur. If you travel on the road, made immortal by Rudyard Kipling in Kim, in the city, you would hardly notice a nondescript three-storey building on it. At best, it could be an outpost of a largish telecom company. But in here resides perhaps the biggest challenger to Hindustan Unilever’s dominance of the detergent market. This is the office of Rohit Surfactants, the maker of Ghari detergent powder and bar.

 

Men here can be found working on newer ways to take on Hindustan Unilever and others in the fiercely-competitive Indian fast-moving consumer goods (FMCG) market. In the last year or so, the company has come out with a premium detergent called MR2, Ghari Gold for modern trade, Xpert dish cleaner and Venus soap. Next in the works is Ghari Unn for woolens and Venus shampoo. At the moment, these businesses are small — out of Rohit Surfactants’ Rs 1,940-crore turnover in 2009-10, Ghari contributed as much as Rs 1,825 crore, or 94 per cent. But the intent is clear.

Much of the confidence, of course, stems from the success of Ghari. The detergent market in the country is estimated at Rs 11,000 crore per annum. About two-thirds of that is powder and the rest is bars. While Hindustan Unilever (Surf, Rin and Wheel) leads the pack with a 37 per cent share, industry sources say Rohit Surfactants (Ghari) is second with around 17 per cent — ahead of Procter & Gamble (16 per cent) and Nirma (8 per cent). Of all its rivals, only Wheel sells more than Ghari. While the market is growing at a low rate of 5 to7 per cent per annum perhaps because the market is more or less saturated, Ghari is growing faster at 10 to 15 per cent. This means that its market share is on the rise.

What has contributed to Ghari’s rise? There are after all not too many homegrown brands that have been able to withstand the onslaught of multinational corporations. The first is clever positioning.

Everybody’s brand
The detergent market has three well-defined segments: Premium which is about 15 per cent of the market and includes brands like Hindustan Unilever’s Surf and Procter & Gamble’s Ariel, midscale (40 per cent of the market; main players are Hindustan Unilever’s Rin and Procter & Gamble’s Tide) and popular (45 per cent of the market where Ghari, Nirma, Hindustan Unilever’s Wheel and Fena’s Fena operate). Ghari is positioned at the bottom of the market where the real volumes lie. Rohit Surfactants Chairman & Managing Director Murlidhar is very clear where his flagship brand is slotted. “Ghari is everybody’s brand. It is the best solution available in the market and gives you value for your money.”

This is actually sound business logic. Detergent is bought largely by the housewife once a week or month, and she happens to be an extremely value-conscious consumer. FMCG experts also say that consumers, especially those in villages and small towns, have begun to look for cheaper options in staples like soap, detergent and toothpaste so that they can spend more on discretionary items like mobile phones, televisions and automobiles. Their choice of detergent is inevitably one that gives the maximum results at the lowest price.

There are indications that the popular segment is growing faster than the other two. KPMG Manager (advisory services) Anand Ramanathan says that regional detergent brands have grown much faster than the national brands in the last one year. He puts their growth in the year till July 2010 at 40.7 per cent. And all regional brands are price warriors — they have nothing to offer by way of quality or brand. Excise evasion by some of them, experts say, cannot be ruled out. (All told, one can find over 1,000 detergent brands across the length and breadth of the country.) So, Ghari powder is priced at Rs 20 for 400 grams and Ghari bar at Rs 5 for 145 grams. This is way below brands like Surf, Ariel, Henko and Tide, though it is more or less the same as Wheel, Nirma and Fena. So far, the aggressive price tags seem to have worked. “One of the factors that have contributed to Ghari’s success is the price-quality ratio,” says Samsika Marketing Consultancy Chairman & Managing Director Jagdeep Kapoor who has in the past worked with Nirma.

More with less
Ghari’s low prices are a result of Rohit Surfactants and its promoters, Murlidhar and family, willing to settle for a lower net profit margin of 9 per cent — the industry standard is 12 to 13 per cent for the premium players. In other words they are ready to sacrifice some profits for market share. Companies the world over have used this strategy to get a foothold in the market; profit margins can be raised subsequently. “We have kept our profit margins low, which is not an easy thing to do for large companies,” says Murlidhar. What helps is that Rohit Surfactants is a closely-held company and Murlidhar need not justify this strategy to a large body of shareholders and analysts. Two, the company works on a shoestring advertising and marketing budget. In 2009-10, while Ghari did a turnover of Rs 1,825 crore, its marketing team was handed out only Rs 35 crore, or less than 2 per cent, to promote the brand through above- and below-the-line activities. Most national brands have a marketing budget that adds up to 13 to 15 per cent of their turnover.

Three, Rohit Surfactants keeps its wage bill on a tight leash by not hiring high-profile marketers on sky-high salaries. “We hire smart people from local institutes, and train them in-house. We have conducted campus interviews at 20-odd engineering colleges and business schools in Kanpur, Lucknow and other smaller cities,” says Rohit Surfactants President (corporate affairs) & Company Secretary Sushil Kumar Bajpai. Before he took up his current job, Bajpai had worked with Kanpur-based companies Mirza International (it makes Red Tape shoes) and LML (it makes scooters).

Break the clutter
The trick in marketing, because of the small budget, is therefore innovation. Bajpai set the ball rolling by taking the brand to trains. The first campaign was the Ghari Detergent Express (a summer special) in 2008 that ran between Lucknow and Guwahati for two months. Taking the cue from there, Ghari has now advertised in Pushpak Express that runs between Lucknow and Mumbai. The brand can also be seen on railway crossings in West Bengal and Uttar Pradesh. “The train is the medium that the masses interact with,” says Bajpai. “We started putting up advertisements inside the bogies of Swarna Jayanti Express (from Trivandrum to Hazrat Nizamuddin in Delhi) last year that cuts across three or four states in south India.” This is a clear indication that the company wants to take Ghari down south.

In addition, Rohit Surfactants promotes Ghari at roadside shows, magic shows and exhibitions in smaller towns and cities. Customers are unlikely to see other brands at these places — an innovative idea to break the clutter. The magic shows, says Bajpai, have given Ghari good visibility in cities like Jaipur, Indore, Kota, Alwar and Kanpur. About 30 company-owned vehicles are used for out-of-home advertising. Of late, the company has taken some tentative steps towards the popular media. It has sponsored a show, Rakt Sambandh, on NDTV Imagine. Three television commercials are also in the pipeline.

Cleverly, before going national which would have spread its resources very thin, Rohit Surfactants focused on Uttar Pradesh to begin with. Uttar Pradesh, with a population of 167 million, accounts for over 12 per cent of the country’s FMCG sales. Thus, of the 3,000 Ghari dealers in the country, 900 are in Uttar Pradesh — 25 of them in Kanpur alone. Nine of the company’s 18 manufacturing units are in Uttar Pradesh. Once the home base was secured, it spread out to other states. According to Bajpai, 60 to 70 per cent of Ghari’s sales now come from Uttar Pradesh, Madhya Pradesh and Maharashtra.

And now it wants to sell in the South. There could be problems, warn experts. “The company needs to have its supply chain close to these markets. This will help it control the transportation costs,” says former Dabur India Chief Operating Officer Kannan Sitaram. Indeed, outside the “cow belt,” Rohit Surfactants’ only unit is at Aurangabad in Maharashtra. Bajpai says that plans are afoot to set up one in Karnataka. Also, it will have to build its brand awareness from scratch. What may work in Ghari’s favour is the higher profit margin of 9 per cent the company offers its dealers; rivals seldom offer better than 6 or 7 per cent.

Also, as it grows in size and adds more products to its portfolio, Rohit Surfactants will have to compete in the market for top talent. Can the low-profile company do that? Bajpai says it plans to go to the Indian Institutes of Management to recruit from the campus.

In the final analysis, is all this good enough to snatch market share from heavyweight rivals like Hindustan Unilever, Procter & Gamble and Nirma? Sitaram says that Nirma has the advantage of backward integration because it makes soda ash, the key raw material for detergent. Hindustan Unilever, on its part, straddles all price points. Its Wheel sells more than Ghari. KPMG’s Ramanathan says that it will protect its market share with great energy because detergents account for almost 40 per cent of its turnover. “Some years back when Nirma posed a threat to it, Hindustan Unilever responded with its rural marketing strategy and restored its market position. This indicates that for Hindustan Unilever the detergent category is important, and it is unlikely to let go off its market leadership,” says he.

The journey ahead is not going to be a cakewalk for Murlidhar, Bajpai and the members of their team.