Soaps and detergents company Nirma Ltd, which gave Hindustan Unilever Ltd’s (HUL) Surf a run for its money in the 1980s, is now battling a shrinking market share in its core business. The company’s profitability and stock price have been on the decline since April 2006.

According to market research agency ACNielsen, Nirma had a 15.2% share of the detergents segment and an 8.2% of soaps (both in terms of value) in April last year. But by June this year, its market share had dipped to 13.5% in detergents and 6.74% in soaps.

Nirma’s sole USP, value for money, is not enough to take on rivals, analysts say

Nirma did not respond to a detailed questionnaire sent by Mint to it.

HUL, leader in the Rs8,000 crore detergents segment, commands a 38% share of the market.

In the Rs6,000 crore soaps category, Godrej Consumer Products Ltd (GCPL) has surged past Nirma with a market share of around 11%.

In the 15-month period between April 2006 and June 2007, Nirma’s market share declined by 1.5 percentage points, while GCPL gained by 1.9 percentage points.

HUL and GCPL refused to comment on Nirma. GCPL, however, said its focus on brand communication and product quality helped it grow in a fiercely competitive market. “We have, as a company, believed in the power of positive word of mouth from satisfied users of our products, which seems to be working. The more users try our products, the stronger the word of mouth," says R.K. Sinha, chief operating officer, GCPL.

In the year ended December, Nirma’s sales grew 4.3% year-on-year to Rs1,918.8 crore while its net profit fell 15.2% to Rs241.38 crore. In the quarter ended 30 June, sales grew to Rs609.1 crore against Rs525.5 crore in the same quarter last year, while the net profit fell 45% quarter-on-quarter to Rs41.1 crore.

According to experts, Nirma suffers from the inability to innovate in the product categories it is present in and also tinker with its pricing. They say companies in the detergents and soaps categories, both multinationals as well as local players, have built their strategies around viability, affordability and visibility; Nirma’s focus, they add, has largely been on affordability.

“With rising incomes, consumers are now shifting from economy brands to aspirational purchases and Nirma has failed to capitalize on this shift," says Jagdeep Kapoor, chairman and managing director of Mumbai-based brand marketing consultancy firm Samsika Marketing Consultants Pvt. Ltd.

Analysts say Nirma’s brand promotion efforts and pricing strategy have weakened over the past few quarters. “Nirma has been continuing with the same advertising for years and now; even its visibility is on the decline on TV channels, except for Doordarshan," says an analyst with a Mumbai-based brokerage firm, who did not wish to be named because he has not met the firm’s officials in a long time. “They have not been meeting analysts," he adds.

The firm, the analyst says, has also not raised its prices for some time despite the increase in prices of LAB (linear alkyl benzene, a key ingredient used in manufacturing detergents) and palm oil (another key ingredient in the manufacture of soap).

“Also, the rivals have products across all price points to mitigate the input cost effect, while Nirma is available in only one plank—value for money," he adds.