Shampoos

Shampoos: Putting money where the lather is

Aarati Krishnan

AT A time when most FMCG (fast moving consumer goods) categories are inching along, personal products are being seen as the harbinger of prosperity. And hair care products is the fastest-growing category within personal products.

Between 1994 and 1998, the market size of products such as skincare and toothbrushes doubled in value. But the size of the shampoo market expanded two-and-a-half times over the same period. Not surprisingly, shampoos is a high priority area for major players such as Hindustan Lever. The current size of the shampoo market, according to ORG-MARG, is Rs 850 crore -- equivalent to 30,000 tonnes in volume terms.

Unlike other FMCG categories such as soaps and detergents, which boast of a penetration level of more than 90 per cent, shampoos remain a low penetration category. Industry sources estimate that the urban market penetration of shampoos is a modest 36 per cent. Shampoo usage in the rural markets is even more infrequent, with a penetration level of 12 per cent. Thus, even for the largest player in this industry, there is considerable scope for volume expansion by converting non-users.

Few players, HLL dominates

For a market with high potential, the shampoo market in India is dominated by just a few players. From scores of brands five years ago, the shampoo market has now been whittled down to a handful. Hindustan Lever (HLL), with a 65 per cent volume share (68 per cent share by value), dominates the market with brands such as Sunsilk, Clinic Plus and Clinic All Clear. Cavin Kare Limited, an unlisted company from Chennai, with brands such as Chik and Nyle follows with a 19.8 per cent volume share.

Procter & Gamble (P&G) is the only other large player in this category with brands such as Pantene Pro-V and Head & Shoulders. P&G discontinued its shampoo manufacturing operations in India in 2000. Most of its brands are today directly imported from other Asian countries such as Thailand, Taiwan and Vietnam.

New entrants are probably discouraged by the formidable task of establishing a distribution network from scratch. HLL's long established ties with retailers and its extensive distribution reach probably acts as an entry barrier for new entrants.

Cavin Kare Limited, which has managed to garner a significant share of the shampoo market despite this handicap, has focussed on scaled-down versions of its brands and herbal shampoos -- two segments where the market leader did not have a presence. Cavin Kare's shampoo business has grown faster than the overall market, at 20 per cent in 1998, 4 per cent in 1999 and 34 per cent over the past four quarters.

A blip in growth rates

Despite its undisputed potential, the rapid expansion of the shampoo market was interrupted in 1999. Overall growth rates in the market slowed to 1.7 per cent in 1999, from 16 per cent the previous year. Between January and November 2000, however, the market appears to have recovered some, and the shampoo category has grown by around 10 per cent.

The reasons for the slowdown? ``Lack of innovation'', says Mr D. Shivakumar, General Manager Marketing, Personal Products, Hindustan Lever. The company has identified three major barriers to shampoo use in India -- the perception that shampoos contain harsh chemicals that could damage hair, high price and the view that the shampoo is more of a glamour product rather than a hygiene product.

``We like to see it this way. Though we have a 69 per cent share of the shampoo market, we have just 10 per cent of the hair wash occasions in the country. We will work at getting consumers to switch over from alternatives, such as natural products and soaps, to shampoos'', says Mr Shivakumar.

His counterpart in Cavin Kare attributes the slowdown in growth rates to the contraction of agricultural incomes. ``The rural markets have slowed down due to the two consecutive disastrous monsoons'', says Mr Nandakumar, President, Marketing and Sales, Cavin Care. This does seem a plausible explanation. Roughly a fourth of the shampoo market is in rural India. But the rural market is the key driver for sachets, which make up 70 per cent of the total shampoo sales. HLL has higher stakes in the rural market with an 80 per cent share.

Scaled down versions

Therefore, the strategies of the major players have revolved around attacking these barriers to usage. The players obviously believe that the key obstacle to recruiting new users lies in the high price of shampoos as a product. Unlike other FMCG categories, where marketers are experimenting with low unit packs, as a concept, the low unit shampoo packs have been around for over a decade. Therefore, marketers have been working at scaling down prices further.

Cavin Kare made the first such attempt last year. It introduced a smaller 50 paise sachet of Chik, when most other sachets retailed at Rs 2. The effort appears to have been an unqualified success, with the Chik brand expanding by 40 per cent after the launch. A new 50 ml bottle of Chik priced at Rs 6 (when most other brands were available in 100 ml bottles and above) has also helped expanded the brand.

HLL acknowledges that the Chik innovations have expanded the overall market, trimming HLL's volume shares by 2-3 percentage points. ``Cavin Kare has expanded the market itself. Though our volume shares are down, our brands have not lost volume. They continue to sustain their earlier growth rates,'' says Mr Shivakumar.

HLL has responded with its own 50 paise version of Lux shampoo. The company claims the recently launched 30 ml bubble pack for Clinic Plus (Rs 8), is an innovative and cost-effective alternative for sachet users. While sachets are difficult to store and re-use, the bubble pack allows the user to extract just the right quantity for a single wash.

The scaled down versions could help pep up volume growth rates for major players. But they have also had the effect of lowering the per ml cost of the major brands retailed through sachets. Till the time the players upgrade users to the larger pack sizes, the sachet revolution could restrict margin expansion for the players.

Functional benefits

Players have also tried other routes to expand the shampoo market. Fighting the perception that shampoos are essentially glamour products, marketers have tried to add a utility value to shampoos by offering functional benefits. Anti-dandruff shampoos represent this attempt. Clinic Plus, one of the first anti-dandruff brands, is the largest shampoo brand today, with a market share of 31 per cent.

Clinic All Clear, an anti-dandruff extension targeted at the youth has also managed to garner a 13 per cent share. Due to its low pricing (Rs 71 for a 160 ml bottle against Rs 68 for a 100 ml bottle of Head & Shoulders anti-dandruff shampoo), the brand also has a significant rural market share of 44 per cent.

HLL has also experimented with different versions of Sunsilk for dry, normal and oily hair. Procter & Gamble's Head & Shoulders Menthol and Pantene Lively Clean also offer functional benefits to users. Since these add-ons enable brands to command a price premium over the plain shampoos, this strategy could aid both volume and margin expansion.

Herbal opportunity

One of the key barriers to shampoo usage lies in the reluctance to use a synthetic product on hair. Worldwide, therefore, herbal shampoos or botanicals, are a fast growing category. Ayur from RDM Traders Private Limited and Nyle Herbal, a herbal shampoo launched by Cavin Kare, have been some of the early entrants in the Indian herbal shampoos market.

These products claim to use traditional Indian herbs such as shikakai, soap nuts and amla as ingredients and have been a success. Nyle Herbal is among the top five shampoo brands in the country and herbal shampoos today account for 10 per cent of the market size.

That industry leader, Hindustan Lever, does not as yet have a presence in this segment is noteworthy. ``We do not have immediate plans to enter this category. Today, brands are expensive assets, requiring continuous investment. Creating a new brand from scratch would be quite undesirable in these circumstances'', feels HLL's Mr Shivakumar. However, brands such as Sunsilk have been emphasising natural ingredients such as `fruitamins'.

However, high price could be a key barrier when it comes to herbal shampoos. The key challenge in manufacturing herbals lies in efficacy. Users typically require larger quantities or higher concentrations of herbal shampoos to replicate the results of synthetic shampoos. Bringing down prices can therefore be quite difficult in this case. This is probably why 90 per cent of the herbal shampoos still sells only in the urban markets.

Moving across category barriers

Meanwhile, the value-added shampoo segment is getting quite crowded, with a range of pharmaceutical and cosmetics companies launching specialised products. While Dabur has leveraged Vatika's brand equity to launch Vatika Herbal shampoo, Godrej Soaps has leveraged its dominance of the hair colour market to launch Godrej Colourgloss shampoo, for users with coloured hair. This apart, several pharma companies (including Johnson & Johnson) have launched medicated anti-dandruff shampoos (which will probably carry higher credibility with buyers), while cosmetic companies such as Biotique and Lotus Herbals also have herbal shampoos on the shelves.