Detergent market in India

The demand for detergents has been growing at an annual growth rate of 10 to 11 per cent during the past five years. Where an urban consumer prefers washing powder and detergents, a rural consumer is more inclined towards washing cakes and bars. But, over the last few years, we have seen that rural consumers are gradually shifting their preferences from detergent bar to detergent powders.

The market leader in the popular (low priced) detergent category, Nirma, created a revolution in the market by pioneering the concept of low-cost detergents. The Indian rural market is extremely price sensitive. Keeping this factor in mind, a number of companies followed the strategy of launching a wide range of package sizes and prices to suit the purchasing preferences of India’s varied consumer segments.

Targeting on the price factor, P&G introduced Tide Naturals at a lower price unit which further helped the company to gain a bigger share of the detergent pie in the year 2010. Another strong Rural India is rapidly becoming target market for most of the brands in the country. The contribution of rural markets in the FMCG sector is growing faster than urban markets. Powered with an incremental increase with better employment opportunities, rural consumers are upgrading their lifestyle with shifting preferences from non-branded and local product to the branded ones.

At present, the size of the Indian FMCG market is estimated to be Rs 125,000 crore and is growing at the rate of 12 per cent yearly. According to an industry reports, the sector is expected to grow by up to 17 per cent annually to touch Rs 400,000 crore by 2020.

Consumption of detergent in rural India

The per-capita consumption rate of detergents in India is 2.7 kg per annum and this market is expected to grow at the rate of 7 to 9 per cent per annum in terms of volume. The penetration level of detergent bars and powder in India is higher as compared to the urban market. According to the research conducted by Equitymasters.com, HUL, Nirma and P&G are the major players in the market with 40 per cent, 30 per cent and 12 per cent shares respectively. Further, the detergent market in India can be classified into premium, economic and popular segments. While HUL dominates the premium segment, Nirma is the leader in the popular segment.

Low cost to rule rural India

regional player in the category, Jyothy Laboratories, launched another detergent, Ujala Techno Bright, under its Ujala brand in the market. The new product was priced 15-30 per cent lower than other brands in the categories. The product is an addition to Jyothy’s portfolio in the laundry detergents space, which earlier comprised only the hand wash detergent, Ujala Washing Powder.

These price-warriors, small in turnover figures but large in numbers, are said to be gnawing at the market shares of leading national detergent brands, forcing companies to rethink pricing strategies. Most brands are luring consumers with propositions like superior wash at affordable prices.

Generally detergents in pack sizes of 500 gm to 20 gm are highly available in the stores with price ranging from Rs 50 to as low as Rs 2 and Re 1. Dalip Jolly, Director, Fena India Pvt Ltd, says, “We have seen an increase in the purchasing capacity of village people. For example, the demand for 100 gm pack is growing as compared to the  previous 20 gm pack. With the help of national rural employment initiatives, village consumers are able to upgrade their lifestyle and shopping behaviour.” More than 70 per cent of these low price detergent packs are sold through kirana, or mom-and-pop stores constituting almost 95 percent of the total retail market. Though organised retail is showing double digit growth, it has very little influence in rural India.

Unexplored product categories

Though detergents have been  in India for a long time, many product categories within these categories were still unexplored until 2010. Product categories, such as washing machine detergents, had slow growth in India because of the low penetration of washing machine in India. The reason could be ignorance towards the functional difference between hand wash and automatic detergents, which further limits the product use over the historic period. Another emerging category, Fabric Softeners and Conditioners, is estimated to reach $13.3 billion globally by 2015, says market research firm, Global Industry Analysts Inc. (GIA). As per the report, current demand for fabric softeners in developing markets, such as India, is growing at a higher rate owing to the economic growth as compared to developed markets, which are relatively mature. But both these categories have shown low penetration in rural areas. Thus, in spite of hand wash detergents enjoying appreciable penetration in both rural and urban areas, there have not been much trading up within the category.

Future penetration in rural area

According to the research firm, Euromonitor, “A laundry detergent as a whole is expected to reach a degree of saturation in terms of volume growth rates in the forecast period. Thus, the shift from bar to hand wash detergents and from hand wash to automatic detergents is pivotal to the category.” The future value growth of the category may also be adversely affected by the consistently high inflation rates since 2010. During the end of 2010, two leading players, HUL and P&G, hiked their detergent prices up to 8 to 12 per cent. Rising product prices may discourage consumers from switching to relatively premium products, or investing in the value-added category of laundry aids. The national firms also get tough competition from regional and small unorganised players who account for a major share of the total volume of the detergent market in rural India due to low pricing. “Increasing rural distribution network, value for money positioning and smaller packs are the three success keys for companies to strength their position in rural India,” says Jolly. Today, brands are investing heavily on innovation, R&D and distribution so that their offering becomes more localised, accessible and affordable to consumers.            

Source: Retailer Magazine - July 2011 Issue - Small is big