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||| corporate strategy |||


NIRMA is a soap & detergent major, based in India. When they had entered into the market, HLL was the most dominant player. But, soon Nirma pushed HLL to the second rank after claiming the most of the market share in some segments.

In the early 1970s, when Nirma washing powder was introduced in the low-income market, Hindustan Lever Limited (HLL)1 reacted in a way typical of many multinational companies. Senior executives were dismissive of the new product: "That is not our market", "We need not be concerned." But very soon, Nirma's success in the detergents market convinced HLL that it really needed to take a closer look at the low-income market. Starting as a one-product one-man outfit in 1969, Nirma became a Rs 17 billion company within three decades. The company had multi-locational manufacturing facilities, and a broad product portfolio under an umbrella brand – Nirma. The company's mission to provide, "Better Products, Better Value, Better Living" contributed a great deal to its success. Nirma successfully countered competition from HLL and carved a niche for itself in the lower-end of the detergents and toilet soap market.
------ ¤ THE BRAND NIRMA ¤
The brand name became almost synonymous with low-priced detergents and toilet soaps. However, Nirma realized that it would have to launch products for the upper end of the market to retain its middle class consumers who would graduate to the upper end.The company launched toilet soaps for the premium segment. However, analysts felt that Nirma would not be able to repeat its success story in the premium segment. In 2000, Nirma had a 15% share in the toilet soap segment and more than 30% share in the detergent market. Aided by growth in volumes and commissioning of backward integration projects, Nirma's turnover for the year ended March 2000 increased by 17% over the previous fiscal, to Rs. 17.17 bn.
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preeti jhangiani the nirma sandal soap model ::: A Humble Beginning In 1969, Karsanbhai Patel (Patel)2, a chemist at the Gujarat Government's Department of Mining and Geology manufactured phosphate free Synthetic Detergent Powder, and started selling it locally. The new yellow powder was priced at Rs. 3.50 per kg, at a time when HLL's Surf was priced at Rs 15. Soon, there was a huge demand for Nirma in Kishnapur (Gujarat), Patel's hometown. He started packing the formulation in a 10x12ft room in his house. Patel named the powder as Nirma, after his daughter Nirupama. Patel was able to sell about 15-20 packets a day on his way to the office on bicycle, some 15 km away. Thus began the great journey. By 1985, Nirma washing powder had become one of the most popular detergent brands in many parts of the country. By 1999, Nirma was a major consumer brand – offering a range of detergents, soaps and personal care products. In keeping with its philosophy of providing quality products at the best possible prices, Nirma brought in the latest technology for its manufacturing facilities at six places3 in India. Nirma's success in the highly competitive soaps and detergents market was attributed to its brand promotion efforts, which was complemented by its distribution reach and market penetration. Nirma's network consisted of about 400 distributors and over 2 million retail outlets across the country. This huge network enabled Nirma to make its products available to the smallest village. After establishing itself in India, Nirma expanded to markets abroad in 1999. Its first foray was into Bangladesh, through a joint venture – Commerce Overseas Limited. Within a year, the brand became the leader in the detergent market in Bangladesh. The company also planned to enter other regions like the Middle East, China, Russia, Africa and other Asian countries.

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lime fresh

The Road to Success The use of detergent powder was pioneered in India by HLL's Surf in 1959. But by the 1970s, Nirma dominated the detergent powder market, simply by making the product available at an affordable price. In 1990, Nirma entered the Indian toilet soaps market with its Nirma Beauty soap. By 1999, Nirma became India's second largest manufacturer of toilet soaps by acquiring a 15% share of the 5,30,000 tonnes4 per annum toilet soap market. Though way behind HLL's share of 65%, Nirma's performance was remarkable as compared to Godrej, which had a share of 8% (Refer Figure I). By 1999-2000, Nirma had also garnered a 38% share of India's 2.4 million tonnes detergents market. HLL's share was 31% for the same period. • Higher Costs - NO Within a short span, Nirma had completely rewritten the rules of the game, by offering good quality products at an unbeatably low price. Nirma's success was attributed to its focus on cost effectiveness. From the very beginning, Patel had focussed on selling high-value products at the lowest possible price. The company endeavored to keep improving quality while cutting costs. To keep production costs at a minimum, Nirma sought captive production plants for raw materials. This led to the backward integration programme, as a part of which, two state-of-the-art plants were established at Baroda and Bhavnagar, which became operational in 2000. This resulted in a decline in raw-material costs. The two new plants were completed ahead of schedule and at a much lower cost than estimated. The second phase of the Baroda plant was completed six months ahead of schedule and at a cost of Rs.2.5 bn as against the original estimated cost of Rs. 2.8 bn. The Bhavnagar plant was completed in a record time of two years at a cost of Rs.9.85 bn as against the original estimated cost of Rs. 10.36 bn. The staff strength at this plant was a low 500. In contrast, Tata's Chemical's plant, which was about twice the capacity, employed 10 times the number of people. The Baroda plant produced 65000 tpa of N-Paraffin for Linear Alkyl Benzene (LAB) and Synthetic detergents. The technology for this plant was sourced from UOP Inter Amercana, USA. The Bhavnagar plant could produce 4,20,000 tpa of soda ash. The Akzo Dry Lime technology used in this plant was sourced from Akzo Nobel Engineering, Holland. The plant had 108 km of salt bunds, which would help it to produce vacuum iodised salt in the future. Said Patel, "We have a capacity of producing three lakh tonnes of pure salt. No one, except Tata Salt, has a similar plant in the country." Nirma also curtailed its costs of distribution by eliminating intermediaries The product went directly from the factory to the distributor. Hiren K Patel (Hiren), CMD, Nirma Consumer Care Ltd. explained, "An order is placed and the truck leaves straightaway. It is like a current account. We send the stock, they send the money." The company maintained depots in states like Andhra Pradesh, Tamil Nadu and southern Karnataka, as getting stocks to these areas was sometimes difficult. In states like Uttar Pradesh and Madhya Pradesh, stocks were delivered directly from the plants. In March 2000, in a further cost reduction exercise, Nirma opted for in-house printing and packaging by acquiring Kisan Industries at Moriya, near Ahmedabad. Nirma hoped this would improve the quality of its packaging.

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