The product categories can be classified into three segments; premium (Lux, Dove), popular (Nirma, Cinthol), and economy (Nirma Bath, Lifebuoy). The price differential between the premium and economy segments is about 2X. The popular and economy segments account for about 4/5ths of the entire market for soaps.
Penetration of toilet soaps is high at 88.6%. However per capita consumption levels remain low India's per capita consumption of soap at 460 gms per annum is lower than that of Brazil at 1,100 gms per annum.
80% of the raw materials used in soap are oils. Since animal fats (which are used worldwide and are far superior to vegetable oils and also cost effective) are banned in India, Indian soap manufacturers are forced to use vegetable fats and hence settle for a poorer quality of soap. Various kinds of oils such as rice bran, palm, soyabean, neem, karanji, olive, kopra etc. are used for manufacturing of soap, depending upon its positioning. The most commonly used oil is rice bran, followed by palm. Other oils are also added but in a small quantity to get different variants of soaps.
Rice bran and palm oil are the most common base oil used in nearly all soaps, Apart from the base other additives used are perfumes, colour and other more expensive oils in small quantities. Since these additives are added in small quantities they do not make much difference to the cost structure. Therefore the contribution (excluding packaging cost) on premium soaps vis-à-vis the popular soaps is substantially higher.
Distribution network |
Soaps are available in 5 m retail outlets in India, 3.75 m of which are in the rural areas. Therefore availability of these products is not a problem. 75% of India's population is in the rural areas; hence about 50% of the soaps are sold in the rural markets.
Rural demand growth is expected to occur mainly with consumers moving up towards premium products. But in the past, the proportion of premium soaps to economy soaps has not changed much, in volume terms. This is because as some consumers move up the value chain with increase in disposable incomes, some consumers move down looking for cheaper substitutes as prices move up. This has been the case especially, as growth in soap prices has generally outpaced overall consumer inflation.
The Indian fabric wash market consists of synthetic detergents (comprising bars, powder and liquids) and oil-based laundry soaps.
Although the per capita consumption of detergents in India (2.7 kg pa) is comparable to some countries like Indonesia, China and Thailand (around 2 kg pa), it is lower than in others such as Malaysia, Philippines (3.7 kg) and the USA (10 kg). The Indian detergent market is expected to grow at 7-9% pa in volume terms.
The synthetic detergent market can be classified into premium (Surf, Ariel), mid-price (Rin, Wheel) and popular segments (Nirma), which account for 15%, 40% and 45% of the total market, respectively. The product category is fairly mature and is dominated by two players, HLL and Nirma. Nirma created a revolution in the market by pioneering the concept of low-cost detergents. Currently, the market is highly segmented with the differential between the premium and popular segments at almost 7X.
High consumer awareness and penetration levels will enable the market to grow at an average 8-10% per annum with slightly higher growth in the rural areas. Higher penetration stems from popularity of low-cost detergents. Hence, besides increase in per capita consumption, there is tremendous scope for movement up the value chain.
HLL, Nirma and P&G are the major players in the market with 40%, 30% and 12% share, respectively. While HLL dominates the premium segment, Nirma is the leader in the popular segment.
Personal Care Products |
The annual value of personal products business in India, including oral care, hair cares and skin cares products, is currently estimated to be Rs 54.6 bn.
Just five years ago personal products were considered to be luxury items and attracted a high excise duty of 120% (except the oral care category). Gradual taxation reforms in India since 1991 have lowered the excise duty rates to a reasonable 30%, making these products more affordable. At the same time, rising income levels have led to rising aspirations on the part on Indian consumers. These factors have been the catalysts in the exponential growth rate in the personal product category over the past five years.
Personal care products are further divided into 6 categories:
Hair care - oils
Hair care - shampoos
- Oral Care
The oral care market can be segregated into toothpaste (60%), toothpowder (23%) and toothbrushes (17%). While 60% of toothpaste is sold on the family platform, around 35% is sold on cosmetic propositions. On the other hand, while toothpowder accounts for 52% of the market, red toothpowder accounts for 40% and black toothpowder accounts 8%. The penetration level of toothpast/powder in urban areas is 3X that in the rural areas. Traditional materials such as neem and tobacco are popular for cleaning in the rural areas, Frequency of usage for toothpaste is only 1.5 times among other consumers, compared with 2 times in the developed world. Per capita consumption of toothpaste is only 70 gm compared with 300 gm in Europe and 150 gm in Thailand.
Given the low per capita consumption and penetration rates, toothpaste demand is mainly being driven by the overall market growth of 8-10%. Toothpowder growth is also being driven by the rural segment.
- Hair care - Oils
The hair oil market is huge, valued at Rs 6 bn. Due to the varied consumption habits of consumers across the country, where coconut oil and edible oil are interchangeably used, the size of the market is likely to be higher than estimated. More importantly, the market is growing at an impressive 6-7% in volume terms despite the high penetration level.
Usage of hair oil is a typical Indian traditional habit. It is perceived to offer benefits of nourishment, hair strengthening, faster and better growth, and reduce the problem of falling hair. There are two types hair oil available in the market; coconut oil and non greasy perfumed oil. Coconut oil comprises 2/3 rd of the total market and the balance comprises the non greasy perfumed oil.
Usage of hair oil is an everyday habit with 50% of the population out of which some perceive that massaging the head with hair oil has a cooling impact. The penetration of hair oil is fairly high at around 87% and evenly distributed among the urban and rural areas.
- Hair Care - Shampoos
The shampoo market in India is valued at Rs 4.5 bn with the penetration level at 13% only. The market is expected to increase due to lower duties and aggressive marketing by players Shampoo is also available in a sachet, which is affordable and makes upto 40% of the total shampoo sale.
The Indian shampoo market is characterised by a twin-benefit platform: cosmetic and anti-dandruff. It is basically an upper middle class product, as more than 50% of the consumers use ordinary toilet soap for washing hair.
While the awareness level is high, the penetration level is very low even in the metros which is only 30%. Urban markets account for 80% of the total shampoo market, The penetration level is rapidly increasing due to decline in excise duty, which was 120% in 1993 to 30% currently.
- Skin Care
The skin care market is at a very nascent stage with basic requirements of the consumers being protecting the skin from cold and dryness in winter, and improving fairness of the skin. Most of the product categories are niche segments.
While the awareness rate is high in both urban areas accounting for 60% and rural areas accounting for 30%, the penetration level is low for both. This is because of apprehensions that usage of skin care products may benefit in the long run due to the chemical contents. Many households prefer to use traditional and natural home made products.
Since the market is at a very nascent stage with very low penetration levels, the growth rates are expected to be higher at 24-255 over the next five years. New players such as Avon and Oriflame have entered the market with the natural ingredient benefit platform, which could further spur growth.
The cosmetic segment primarily comprises of colour cosmetics (face, eye, lip and nail care products), perfumes, talcum powder and deodorants. All these are very small segments.
Talcum powder is the most popular cosmetic product in India. This market is estimated at Rs 3.5 bn and is yet growing at 10-12% pa. Awareness is very high at 80%, with a penetration of 45.4% in urban areas and 25.2% in rural areas. Pond's dominates the talcum market with a 70% share followed by Johnson & Johnson, which has a 15% market share.
Attar and alcoholic perfumes each account for 50% of the fragrance market estimated at Rs 3 bn. In the alcoholic perfume market, 1/3rd represented by an unorganised, with the balance largely imported. The June 98 budget halved duties to 50%. Lakme has a minor presence in the segment.
Perception of damage to skin on account of chemical ingredients restricts usage of face care products. The nailpolish market is the largest at Rs 1.25bn followed by the lipstick market at Rs 0.7 bn. All segments in this category are growing at Rs 25-30%.
Deodorants have a very negligible presence in the Indian market with an estimated of Rs 0.3 bn. Worldwide, deodorants is the largest market followed by skin care, shampoos and toothpaste. HLL has launched a couple of products in this segment.
Feminine Hygiene Most women use cloth during their menstruation days. This is because price is the biggest entry barrier. A pack of 10 sanitary napkins would cost Rs 30-40. Therefore, average spending during the menstruation days would be around Rs 48, which is expensive by Indian standards.
While awareness in the urban areas would be reasonable given the substantial advertising, the penetration rate is abysmally low at 10%. The product is virtually absent in rural markets.
Given the low base and increasing awareness of hygienic products, the market is growing at a robust 20-25%. Entry of cheaper brands, at Rs 20 for a pack of 10, has spurred market growth. Currently, the market is mainly urban.