A victim of its own success : The Nirma Story part 2

The first part of the story focused on how Karsanbhai Patel created a story which had been considered a valuable lesson in management classrooms for generations. In this post, we shall see how the brand lost its share in the detergent market and ended up with a less than 10% share in the last year.


Stuck in Time

Well.. The reason for this downfall is not hard to see. It originally hijacked the HLL's detergent business by cracking the low-cost code, which at the time showed a clear difference when compared to the other brands. Thereafter, the brand failed to evolve and the product remained largely unchanged. It failed to convert its recognition earned from its trademark jingle into sales and monetize the brand. Arvind Singhal, Chairman of Technopak, a management consultancy says, " Brand recall doesn't translate into brand purchase. It is the product utility and connect that matters." As he correctly points out, though Nirma dancing girl is etched into the back of our minds, we don't go straightaway to purchase it, not with so many other competitive products floating around on the counter.

By the late 90s, the consumers were no longer the first-time users of the detergent. There was a huge market expansion with substantial launching of various new brands. After being displaced by Nirma in the 80s, HLL struck back with Wheel, which is today the world's largest detergent in terms of volume. However, unlike Nirma, HLL ensured that it had brands like Rin in the mid range and Surf in premium segment, something which the former was late to react to. Meanwhile P&G also threw in Tide and Ariel.

Also, even in a single segment, the lackluster product differentiation was Nirma's downfall. Surf went from Surf to Super Surf to Surf Excel and changed its technology along the way. Nirma also slowly tried to launch Nirma Blue and Nirma Cake, but the differentiators were no longer clearly visible.

Nirma is a classic example of "A victim of its own success". It was wedded to its success formula and failed to evolve. Locked firmly into its original low-price plank, Nirma lost its contemporariness and ended up stuck in a time warp. Even its jingle remained unchanged. It made sense at the time because the Indian populace consisted of highly frugal sections. But it doesn't make any sense now. The original Nirma was a product intended for rough use and not for the modern day washing machines or for that matter not even suitable for the typical modern smooth-handed house-wife. During the course of time, Nirma might have changed a little but the difference was not made visible to the general public. Its name, its jingle and even its colour remained the same. So, how would the public know that it changed to the needs of the modern day?

Other factors contributing to delisting:

As mentioned in the first post, the Nirma group consists of not just its detergent and toilet soap segment but a mix of various other products whose exhaustive list can be obtained from its homepage. Let us take a look at the revenues of few of its products to understand the trend. Nirma's detergent segment accounted for the biggest chunk- a 37% - amounting to Rs.1787 crore in FY10 against the Rs.2109 crore a year earlier. The chemicals business accounted for 31% in FY10 amounting to Rs.1509 crores. Pharma recorded gross sales of Rs.230 crores against the Rs.160 crores last year. Soda ash and alkyl benzene had a sales of Rs.908 crores. Nirma is also recently getting into the cement business.

With these figures, it is obvious that Nirma is looking to invest more in them. Currently, all these products are parts of Nirma with their results clubbed with the soaps and detergent business. According to the analysts, delisiting from the stock market will allow the company to restructure itself, perhaps spinning off its other verticals into separate companies and listing them.

Future prospects

The company needs to modernise its brands and products and it surely can with a reserve of Rs.2675 crores on its balance sheet. It needs to appeal to the modern customers.

To conclude, the business is still a profitable one. Although its fortunes are slipping now, a few astute moves could help arrest the decline.

Celebrating everything,

Aravind M