FMCG strategies before liberalization – some illustrations

That was a time when FMCG companies were still the kings of marketing and HLL was the undisputed emperor of all that it surveyed. And then from out of nowhere came Karsanbhai Patel’s Nirma. If there was ever a Mahabharat in the annals of Indian marketing, this was it. Lever’s was caught in the ‘mythical wheel’ of war, unable to curb the ascending star of Nirma. Never before had a brand shaken the Lever citadel so decisively.

Alyque Padamsee, former CEO Lintas (the agency that worked on the detergents portfolio back then), recalls that Nirma was priced at a third of Surf and was as aggressive as HLL. Surf was Rs 21/kilo and Nirma was Rs 7/kilo. Importantly Karsanbhai borrowed a leaf out of HLL’s marketing manual and out advertised HLL. Ashok Ganguly, former chairman of Hindustan Lever, who back then was leading the company concurs that Karsanbhai Patel’s bottom of the pyramid approach was one of the most astute marketing moves that he has ever encountered.

Before the managers at Levers realised, Nirma was more than just another regional brand. It was time to find a way out of the mythical wheel. The company decided that Surf could not take on the Nirma challenge by dropping prices (there was actually a committee called C.R.I.S.P. – Cost Reduction in Surf Prices) and that a new strategy was needed to combat this challenger. And all this led to the birth of Operation S.T.I.N.G. — Strategy to inhibit Nirma’s growth. This was not a question of business growth, but business survival. It might seem like that’s a strong statement coming from a player credited with creating the detergent category in India. But it was true acknowledgement that the playing field had shifted, right under its nose. From Surf accounting for 70% of the market, the low cost detergents had grown rapidly enough to account for 80% of volumes – a statistic that remains true to date with mass market detergents making up 80% of volumes and 68% in value.

Even the choice of the name Wheel was not strategic, rather it was a matter of compulsion. In those days given the stringent FERA regulations it was not easy to launch international brands. HLL had launched a detergent bar called Wheel some years prior to 1987 (with the famous Leela Mishra commercial), which had not done too well in the market and been canned. But given the FERA issue they were forced to look at an existing basket of names and decided to go with Wheel.

HLL set up a group outside the company to take the battle to Nirma’s doors. Wheel was the first low-price product from Hindustan Lever, the company decided to have a different management system. For example, even as the rest of Hindustan Lever was headquartered in Mumbai, the Wheel operations were controlled from Chandigarh. They wanted Wheel to be a standalone business of its own to dominate the low price segment. At that time the management understood the importance of going to the bottom of the pyramid. Enen consulting, heading Operation STING believes that Wheel would have never happened if it had not been for the “board at HLL that did what it took to empower people to go ahead and do it”.

The first big challenge was to come up with a low cost product that conformed to the HLL quality standards. Then CEO was determined to prove that it was possible. He says that he was convinced that it was time to move out of the long held beliefs that MNCs would not sell low end products. To him low end products did not have to be synonymous with low quality. The consumer was saying we cannot afford Lalitaji (Surf).

If consumers wanted low-price detergents, “who the hell were we to judge?” he asks. The key was to not only develop the right product but get all the other elements as well. When you are fighting low cost competition the role of other elements like marketing, pricing and distribution are very critical. Lever’s managed to be at the right time at the right place.