New Delhi: As Indian consumers obsess—and spend lot of money—over their grooming and care, they are getting more demanding about even mundane activities such as their daily shower, with an increasing number of urban households beginning to use shower gels and body washes instead of a good old soap bar.
The aspiration is also being fuelled by marketers looking at shoring up sliding profits in traditional soaps.
Moving forward:Hindustan Unilever’s Dove soaps in a Mumbai store. With consumers spending more on premium products such as body washes and shower gels, the segment has caught the eye of big players. Adeel Halim / Bloomberg
With an estimated Rs6,500 crore annual business, the traditional soaps category has become increasingly cut-throat with new brands and rising raw material costs putting intense pressure on margins. Meanwhile, the Rs300 crore annual shower gel and body wash segment appears poised to grow at a much faster pace in the next three to five years and commands better margins, at least for now.
While the premium soap category is dominated by brands such as Dove and Pears from Hindustan Unilever Ltd (HUL), and Cinthol from Godrej Consumer Products Ltd, at the mass level, there is intense competition among brands from companies such as Henkel India Ltd, Wipro Ltd, Reckitt Benckiser (India) Ltd, Nirma Ltd as well as HUL and Godrej.
According to an analyst with a Mumbai-based brokerage, who did not wish to be identified, HUL’s soaps category grew 8% and 10% in value terms in 2007 and 2006, respectively, whereas in volume term, the growth was only 1% and 6%. HUL’s sales in 2007 were about Rs13,718 crore. According to a report by brokerage firm India Infoline, the quarter ended June 2008 saw HUL’s margins from soaps category drop by 160 basis points in comparison with the same quarter the previous year.
“The soaps category is growing 12% every year but profits have mainly come from the price hikes carried out by companies in the past two years,” said Sameer Deshmukh, an analyst at IL and FS Investsmart.
Indeed, eroding margins and slower growth has also led some companies to withdraw from the market. Dabur India Ltd, for one, recently decided to discontinue its Vatika soap brand. “The margins in soaps category have eroded to the extent that it is not worthwhile to continue the business,” said Sunil Duggal, chief executive officer, Dabur. “Having said that, we have not given up on soaps. We are seeing whether there are any segments where margins will be high. If we can have a product which is differentiated enough, we can create a new soap brand.”
Analysts see the growth in shower gel and body wash segments as one way for soap companies to boost their sales and profits.
“Shower gels and body washes are innovations that can help companies rein in their sliding margins. Being premium products, these products definitely offer better margins,” Deshmukh said.
The segment is dominated by HUL and Colgate Palmolive Co. but has caught the attention of other aggressive players such as ITC Ltd, Henkel and Wipro. ITC, which is focusing on establishing a strong presence in the personal care industry, has already launched a range of shower gels under the Fiama Da Wills brand. Henkel introduced Fa Yoghurt range of body washes in May.
“We believe the shower gel category will grow handsomely in the near future. Today, the category is just about 1% of the total personal wash segment. The potential to grow, therefore, is large,” said Sandeep Kaul, chief executive, personal care products business, ITC.
Godrej too is planning to enter the category soon. “Godrej is actively considering to get into the category. We are conducting consumer research right now,” said H.K. Press, executive director and president.
Wipro, which acquired Singapore-based consumer goods firm Unza in 2007, has already launched bodywash under Enchanteur brand from Unza portfolio and will also introduce shower gel as an extension of its soap brand Santoor in the second quarter of this fiscal.
“India still has a very low penetration of shower gels but the category is growing especially in the urban centres. Higher disposable incomes and the trend to indulge self will fuel the growth of the segment,” said Anil Chug, vice-president, Wipro Consumer Care and Lighting.