The Nirma Story: - Karsanbhai Patel, CMD, Nirma LTD
The Nirma Story: - Karsanbhai Patel, CMD, Nirma LTD
The Nirma Story: - Karsanbhai Patel, CMD, Nirma LTD
"It all started to earn a side income, and at that stage, I had never imagined this kind of success."
- Karsanbhai Patel, CMD, Nirma Ltd.
"Like other FMCGs, we have not concentrated only on marketing strategy. From the very beginning, operational
strategy in cost containment, backward integration, economies of scale, innovative production, packaging and
penetration schemes have received equal attention."
- Hiren K Patel, CMD, Nirma Consumer Care Ltd. (Nirma's marketing arm)
Introduction
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 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.
Introduction Contd...
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.
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 places 3 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.
• 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. (Refer Exhibit I).
For instance, the North preferred pinks soaps and while the South preferred green
ones. Sandal soaps were more popular in the South. Initially, the advertising spend of the company was very low, as
compared to other FMCG companies. Nirma spent only 1.25-2% of its turnover on advertising as compared to the
normal 6-10%.For endorsing soaps, the company used starlets like Sangeeta Bijlani, Sonali Bendre, and Riya Sen,
who were relatively unknown at that time. The advertisement messages were also very simple and focused on the
benefit of the product. Nirma always preferred to place the product on the shelves first, receive feedback, and then
create an enduring ad campaign.While introducing toilet soaps and detergents in the premium segment, Nirma relied
on its time-tested weapon – Price. The company planned to concentrate on volumes in these segments as well. But
there was a change in the margins given to retailers. Unlike the economy products, where the cost benefits were
passed on to the consumers, Nirma passed on this benefit to the retailers. It gave them huge margins. For instance,
for Nirma premium soap, it offered 52% and for Nirma shampoo, it offered an unbelievable margin of 140%.
Analysts were skeptical about Nirma's chances of success in the premium segment of the soaps market.