Ghari’s Success Against HUL and P&G

Ghari detergent, a product of Rohit Surfactants Private Limited (RSPL) has overtaken all the biggest multinational brands to become the second largest selling detergent in the Rs 45000-crore home and personal care (HPC) market in India.

In December 2010 there was only HUL’s Wheel detergent ahead of Ghari as the latter doubled its market share to 13.5% entering the Rs. 12000 crore market segment. The gap between both the detergent’s market shares was narrowing very fast. How could a small company like RSPL have achieved such a success beating all the brands that existed in the Indian market? I have done a small study on the strategies that RSPL implemented to gain the competitive advantage over other its competitors.

Ghari has been positioned at the bottom of the market in the economy segment and its main competitors are Wheel, Nirma and Fena. The market segmentation is shown below.

Ghari detergent has grabbed a market share of 17% which is second to the leading HUL 37% which includes Rin, Surf and Wheel. Third is P&G with 16% through its brands Tide and Ariel and fourth is Nirma with 8% of the market share.

The different strategies used by RSPL for this phenomenal success are:

1.       Achieve higher market penetration in existing markets and simultaneously exploring new markets

Most of the Ghari detergent sales come from Uttar Pradesh, which is also its birth place, Madhya Pradesh and Maharashtra. Recently it has started distribution in 8 more states, thus making its presence in a total of 20 states across the country. Entering new markets doesn’t mean that the existing markets are saturated as far as Ghari detergent is concerned. Even in the existing markets, the market share of the competitors was decreasing while the industry as a whole was growing.

2.       Providing Incentives to the Dealers

Ghari detergent provides a profit margin of 9% to its dealers, which is substantially lower than the standard 12-13% for premium brands, and at the same time, higher than the 6-7% being offered by the competitors in the same segment. Thus the company has been working towards creating a strong dealer base while keeping its prices low.

3.       Advertising Strategy

Ghari detergent has been very innovative in reaching the customers. With only 35 crores allotted for marketing and promotional activities it has used trains for initial campaigns to promote the product. Their hoardings were visible at all the railway crossings in Uttar Pradesh and West Bengal. RSPL has even promoted Ghari in roadside shows and magic shows in smaller towns where people are unlikely to see other brands. Recently it has sponsored a show Rakt Sambandh on NDTV Imagine. Also, instead of going with celebrity endorsement, the brand has left it on the consumers to try the product and decide if they like it, just as it claims in its campaign.

4.       Segmentation Strategy

For any successful marketing plan segmentation is the first key step. The organization must carefully craft its strategy to exploit the market potential. RSPL being a small firm could not afford expensive marketing strategy so it has segmented according to it. Generally market is segmented on the basis of demographic, geographic and psychographic variables but RSPL has mainly concentrated on geographic variable. The geographical split of Ghari detergent is shown below.

5.   

 

5.   Pricing Strategy

Keeping in mind its target market, i.e. the lower end of economy, the company has, as far as possible, avoided passing on the burden of rising raw material costs on to the customers.

6.       Restructuring and Optimization of Resources

Citigroup Venture Capital India (CVCI) approached RSPL in 2006 to buy around 14% stakes but the deal did not succeed due to valuation differences. This proved to be an eye-opener for RSPL as it immediately decided to go for introspection, restructured its business and optimized its resources.

7.       Regional Focus

Due to its financial inability to compete with HUL and P&G in other states, RSPL had launched Ghari detergent in Uttar Pradesh. It focused on developing an intense distribution network to reach the customers effectively. This is evident from the fact that out of 3000 dealers in India Ghari has 900 dealers in UP and 25 of them are in Kanpur alone. It also has 9 out of its 18 manufacturing units in UP.

These effective strategies implemented by RSPL for Ghari has made it to the second largest selling detergent in India. In the last fiscal, it has enjoyed a profit after tax of Rs. 190 Cr, more than many of its MNC peers. Further to overtake Wheel the challenge that RSPL should now be concentrating is on the spread in South and Western parts of India and build a distribution network as strong as HUL’s.

The writer of this article, T V Dheeraj Vishnu is a PGP student of Indian Institute of Management, Raipur. He has done his B.Tech in Electrical and Electronics Engineering from Nalla Malla Reddy Engineering College, Hyderabad and can be reached at pgp11039.dheeraj@iimraipur.ac.in or at +91-7587208639.

3M: A struggle between Efficiency and Creativity

In the late 1990s, 3M was facing a huge crisis of large costs. James McNerney was then made the CEO of 3M in such a time. It was the first time an outsider was made the CEO in the company’s 100 year long history. Right from the beginning of his stint as the CEO, McNerney initiated cost cutting measures in the organization. These included downsizing the company by removing 11% of its workforce. He also intensified the performance review process and tightened the purse strings.  He also imported the Six Sigma process which was just then embraced by GE. Thousands of the staff became black belts. The plan appeared to work: McNerney jolted 3M's moribund stock back to life and won accolades for bringing discipline to an organization that had become unwieldy, erratic, and sluggish.

 When McNerney left the company abruptly after four and a half years, the company was faced with the question whether the large cost cutting measures actually made the company a less creative one. George Buckley was roped in as the next CEO. He dialed back many of the initiatives taken by McNerney. The new CEO felt that invention by its very nature is a disorderly process.

The tension between innovation and efficiency is felt in every organization and by every CEO in the world. Once the organizations have become profitable global competitors, the onus shifts to growth and innovation. While process excellence demands precision, consistency, and repetition, innovation calls for variation, failure, and serendipity.

Buckley has loosened the reins a bit by removing 3M research scientists' obligation to hew to Six Sigma objectives. There was a one-size-fits-all approach to the application of Six Sigma as the initial implementation got under way. As a part of the cost cutting drive introduced by McNerney there were metrics established across the organization and some of them did not make as much sense for the lab as they did other parts of the organization. Metrics involved keeping track of how many black-belt and green-belt projects were completed.

To help get the creative juices flowing, Buckley has opened the treasury. There was an increased spending on R&D, acquisitions, and capital expenditures. The overall R&D budget grew by 20% that year to $1.5 billion. Even more significant than the increase in money was Buckley's reallocation of those funds. He funneled cash into the core areas of 3M technology from abrasives to nanotechnology to flexible electronics.

Quietly, the McNerney legacy was revised at 3M. While there is no doubt the former CEO brought some positive change to the company, many workers said that they were reinvigorated now that the corporate emphasis has shifted from profitability and process discipline to growth and innovation.

References:

http://www.businessweek.com/magazine/content/07_24/b4038406.htm

http://en.wikipedia.org/wiki/3M

Karthik KVR has done his B.Tech. in Mechanical Engineering from National Institute of Technology, Surathkal and can be reached at kvrkarthik at gmail dot com