Soap opera

Godrej No.1 has risen to the third spot with minimal advertising support

This should shake up conventional marketing wisdom. A brand gets minimal advertising support, yet leapfrogs to the third spot in a highly competitive market. This is exactly what Godrej Consumer Products has done with its No.1 brand of soap. Brought out of oblivion in 1998, it is now ranked third (market share: 6.45 per cent, up from 5.67 per cent a year ago, according to AC Nielsen) after Hindustan Unilever’s Lifebuoy (16.6 per cent) and Lux (15.5 per cent). The Rs 7,500-crore soap market has over a dozen key brands and is growing at 8 to 9 per cent per annum.

It became the first Godrej Consumer Products brand to cross the Rs 500-crore mark in sale in June this year. (A year ago, it stood at Rs 442 crore.) The heavily-promoted Cinthol has now been left way behind in the sweepstakes. The company, mind you, spends only around one per cent of the revenue from No.1 on its promotion. The norm in fast-moving consumer goods is 12 to 13 per cent. No.1 is the leading brand in the north and is doing particularly well in Punjab, Haryana and Uttarakhand. In these markets, the brand has bested Lifebuoy in sale value and Lux in volume.

Rise to the top
No.1 is actually an 87-year-old brand. For a long time, No.1 sold in the premium end and was priced around the same as Cinthol and Hindustan Unilever’s Lux. In the mid-1980s, it was priced at Rs 6 (for 100 gram) — a good 50 paisa above Cinthol. However, No. 1 lagged far behind in sales. It was ranked a lowly 15th in the market. Experts believe that its appearance did it in. It was a chunky rectangular bar, an idea that its up-market target consumer group was averse to. They wanted something that looked sleek. But the company did not alter the design and the brand continued to languish. Finally, sometime in 1988, Godrej Consumer Products decided to withdraw it from the market.

Around 1997, Godrej Consumer Products found that its flagship, Cinthol, had come under attack from lower-priced soaps like Breeze and Nirma. Consumers were found switching from Cinthol to these brands which carried lower price tags. “We were losing out to lower-priced products and we needed something to counter that,” says Godrej Consumer Products Vice-chairman Hoshidar K Press. That is when No.1, which had been mothballed, was brought out and put in the market as a price warrior almost a decade after its exit. It was priced at Rs 6.50 for 75 gram and Rs 10.50 for 125 gram — way below Cinthol (now Rs 10.50 for 75 gram) but close to Breeze and Nirma.

The soap brand’s fortunes began to change during the slowdown in the soap industry some time in 2000. There was a global meltdown as the dotcom bubble went bust and the stock markets tanked. For the first time perhaps, consumers began to down-trade heavily on FMCG products. Brands that were competitively priced were in great demand. Though overall soap sales fell 9 per cent, the sub-popular segment (the lowest priced) grew as much as 16 per cent. That set the ball rolling for the brand.

By 2001, it had become a Rs 25-crore brand. Still, nobody could have told that in eight years its turnover will rise to 20 times. Actually, the real upturn in No.1’s fortunes has come in the last two years. The urban markets slowed down. Consumers began to down-trade once again and thus started the hunt for value-for-money products like No.1. At the same time, the rural economy gained strength. The farm-loan waiver and the rural jobs scheme helped purchasing power in the farm sector. The government had for some years regularly raised the support price for various crops and rains till last year had been bountiful. No.1, with its attractive price tag, began to fly off the shelf.

That was also the time when commodity prices shot up to unheard of levels the world over. Hindustan Unilever, the market leader, imposed steep price hikes on its soaps on account of higher palm oil prices. Lux became dearer by Rs 1 to Rs 18 (for a 100 gram bar) and Lifebuoy also saw its price rise by Rs 1 to Rs 13. But rural consumers were in no mood to pay more. Godrej Consumer Products increased prices later and at a lower rate than its rival — Rs 47 to Rs 50 for its pack of four a full three months after Hindustan Lever. “No.1’s prices went up a few months later and that was when people began to take notice and appreciate the brand,” says Godrej Consumer Product Managing Director Dalip Sehgal.

“No doubt the positioning is very good, but its biggest gains have come from the economic slowdown,” says Anand Shah, an analyst with Angel Broking. Sehgal, on his part, says there is more to No.1’s success than down-trading alone. “In fact, in terms of value and product, consumers are up-trading. Besides, how does one then explain the fact that we’ve gained from cheaper brands such as Nirma?”

The price game, to be sure, is now being played by all. With the softening in palm oil prices, all soap makers dropped prices in March 2009. Lux’s pack of four fell from Rs 75 to Rs 66 and Breeze saw a discount of 12 per cent. But the first mover’s advantage seems to have gone to No.1 which is growing two-and-a-half times faster than the market. “The good news for Godrej is that once a customer leaves a particular brand, it’s a challenge for any company to get him back,” Shah points out.

Re-launches vs variants
The downside for No.1 is that Hindustan Lever is taking some very serious steps to resurrect. Price cuts apart, the company has re-launched brands like Lifebuoy and Breeze. “Brand activation gets noticed but it will be a slow and steady journey for Hindustan Unilever,” adds Shah.

Given its low promotion budget and miserly ways, it’s unlikely that No.1 will see any re-launch. “We don’t want to surprise consumers with re-launches and new packaging,” says Sehgal. Instead, he’s decided to concentrate on variants. “Nobody has understood the variant story the way we have and that’s why we’ve consistently given a whole new experience without having to re-launch.”

Thus, twice a year the soap gets a new variant. Much thought is given before launching any variant and a pulse is kept on the latest fad and trends. For instance, Asian trends show that consumers have moved from flowery fragrances to fruity ones. Hence Godrej Consumer Products came out with the Papaya Lotus variant. Similarly, Strawberry and Walnut was launched with moisturising benefits for premium imagery. The latest to be added to the portfolio is Lime and Aloe Vera. The Lime variant gave No.1 0.5 per cent of the soap market within just three months of launch.

Though its appearance not so long ago got the thumbs down from consumers, today No.1’s packaging is its unique sale proposition. Of all the soaps available in the market, No.1 is the only one without a woman’s face on its jacket. Reports from the market place have indicated that this bodes well for the company as consumers have a higher recall of it. “The uniqueness of packaging in a crowded market gives us an edge,” says Sehgal.

Remodelling the Ps
No.1, it so happens, is a Grade I soap (Grade I soaps have less talc/filler and a high total fatty matter or TFM of over 76 per cent) and therefore lasts longer when compared to rival Lux which is a Grade II soap. This gives No.1 anywhere between four and five extra baths. All this at an attractive price point seems to have got the consumers’ attention. “For each brand, there is a hypothesis and the Ps can be modelled differently. While others depend on promotion spends, No.1 relies on the product,” says Sehgal.

The price-product proposition perhaps explains why the promotional spend for No.1 is so low. “We’ve always depended on word-of-mouth publicity. We were always aware results would come in later. But if we had to advertise that would mean taking the price up and we wanted to stay with our price points,” says Godrej Consumer Products Chief Operating Officer RK Sinha. The low price points of Rs 5, Rs 10 and Rs 50 for a pack of four are critical for the brand, especially in regions characterised by low per capita income.

This is not to say the brand has been left totally without advertising support. Once consumers started using No.1, Godrej Consumer Products used a combination of below-the-line marketing and increased distribution to capitalise on it. As for mass media, No.1 advertises only on Doordarshan because it is cheaper and has just the reach the product needs. Keeping the rural markets in mind, the company came up with on-ground marketing initiatives that included participating in exhibitions and local puppet shows. It even organised vans to travel from village to village. Shah of Angel Broking believes that the campaign the company undertook during its master brand’s re-launch one year ago also rubbed off on No.1.

Distribution too has played a key role. In the past, No.1 was considered weak in rural markets. In recent times, its distribution there has really picked up. At present, the soap is available in 1.8 million shops covered by 4,000 sub-stockists and 1,250 direct distributors. It is available in around 20,000 villages directly. In Uttar Pradesh alone, distribution has doubled in just a couple years. The return on the measly investment has been high. Less tangibly, the brand has given Godrej Consumer Products carriage into a lot of markets with its distribution prowess and reach. Godrej’s other soap brands are Cinthol, FairGlow, Evita, Vigil and Shikakai.

No doubt, No.1’s success sounds enviable. But the fact remains that No.1 is still penny pinching with media spends. While Hindustan Unilever has cut back prices, No.1 has not. At the same time, brands like Reckitt Benckiser’s Dettol and Wipro’s Santoor are growing at a fast pace. And with Hindustan Unilever all set to up the ante, will this minimally marketed brand sustain its performance? Wait for the soap saga to lather up.