Santoor Vs Godrej No. 1

While most of the companies are busy in cutting cost, increasing sales and improving margins, Godrej Consumer Product Limited and Wipro, both are claiming the number three position in toilet soap category for the quarter ended June, 2009 eating into market leader Hindustan Unilever’s market share.
According to Godrej Consumer Product Limited, Godrej No 1 is now third highest selling soap behind Lifebuoy and Lux. No. 1 grew at 24 percent for the quarter ended June 2009; it increased its market share (by volume) to 6.45 percent from 5.76 percent in June 2008. The rise in percentage terms may not be a lot, but in the fast moving consumer goods sector, even a 0.5 percentage point rise is huge. . Lifebuoy and Lux, both HUL products and market leaders, saw market share decline by almost 2 percent to 16 and 15.4 percent respectively in the same period.

Santoor also stakes claim to the number three spot. The figures show Godrej No. 1 in the number three slot, but only in terms of volume. Since it is a discount brand, it falls to number five in terms of value. Santoor and Dettol take the third and fourth spots on that table. According to Wipro, which also cited ACNielsen data, Santoor grew at 17 percent for the quarter ended June 2009 and 22 percent in 2008-09. While both Santoor and Godrej No. 1 have grown at a fast clip and taken share from HUL, Godrej No. 1 is among the newer entrants in this space, having been relaunched in 1998 while Santoor was launched in 1984.

Strategy-

No. 1 growth figure have come through rural areas due to bad judgment of HUL’s in assessing consumer insight. During global slowdown, rural buying was unaffected while urban buying dropped drastically. But rural consumers are hard bargainer and very price sensitive. They even response to marginal price rise very fast.

Prices of palm oil, a key ingredient in soap, started rising and HUL imposed steep price hikes. Godrej waited and increased prices slowly and at a much lower rate than HUL. HUL hike price when consumer was not ready for a price hike and responsive to any hike. That is when consumer started to shift to Godrej No. 1 and market share increased to 6.45% from 5.76% a year ago in 2008 and it’s rural sale touched 50% from 38%.

Once consumers started trying out Godrej No. 1, the brand managers used a combination of clear mass market, rural positioning and a rapid increase in distribution to cement the gains. The company sharply increased its rural distribution network. No. 1 ads now appear only on Doordarshan because it is cheaper and ubiquitous in the areas where they want to be. Spending only on Doordarshan also means that Godrej No. 1’s ad to sales ratio is just 1 percent compared to the industry figure of around 8 to 10 percent. Currently Godrej No. 1 and its hair dye make for more than three-fourths of the company’s sales. No. 1 was traditionally popular in Punjab and Haryana but not known in other states. It has doubled distribution in Uttar Pradesh in the last two years to compete with large competitors. The Godrej group re-branding campaign also helped. “The shopkeeper is the biggest influencer in the rural area and Godrej now has good relations with rural shopkeepers because they now have a basket of products including hair dye and soaps to offer.”

Wipro has also worked with micro finance institutions to promote its soaps in rural areas. “The rural economy has been doing very well because of the high minimum support prices and we concentrated there,” says Anil Chugh, vice president for sales and marketing at Wipro Consumer and Care and Lighting. Santoor is now one-and-a-half times as big in rural areas as it is in urban.

Meanwhile, HUL wants to regain lost ground. With palm oil prices stabilizing, HUL has moved to correct prices over the last quarter. It increased pack sizes and reduced prices by up to 15 percent in some soaps. But that will take time to yield results.