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ITC tries to find its feet in personal care

Pradipta Mukherjee / Kolkata

Business Standard, April 15, 2010, 0:26 IST

Cigarettes to hotel major ITC entered the consumer products business in 2007. In three years, it has managed to corner a two per cent market share.

But ITC feels that’s no mean achievement for a late entrant. The consumer and personal care products market is highly competitive, dominated by well-entrenched brands from companies such as Hindustan Unilever (HUL), Procter and Gamble, L’Oreal India, Dabur India and Cavinkare. The lion’s share is with HUL, whose brands – Lux, Dove, Sunsilk and Clinic Plus – have about half the market.

Some analysts agree with ITC’s view. Anand Shah of Angel Broking, says it takes about five years for a brand to break even. If ITC gains 5 to 10 per cent market share in 10 years, that should start earning the company profits, Shah adds.

In absolute terms, two per cent of the personal care market is not a small share. According to Nielsen, the personal care market between March 2009 and February 2010 touched Rs 16,313 crore, which is a growth of 10 per cent over the same period in the previous year. While the men’s personal care market is estimated at Rs 1,429 crore and growing at 10 per cent, that for women is worth Rs 6,678 crore and growing at nearly 21 per cent.

ITC knows it’s a tough fight and is willing to give time. Innovation and extensive marketing are the company’s mantra to strengthen its footprint in the personal care domain.

"We intend to build on innovations to find a foothold in the already cluttered personal care market," says Sandeep Kaul, chief executive of ITC’s personal care business. The Fiama Di Wills transparent gel bathing bar is an example of product innovation which is developed with liquid crystal freezing technology that intends to combine a shower gel in a bathing bar format. ITC’s current personal-care portfolio includes soaps, shampoos and fragrances. These products are marketed under the Fiama Di Wills, Superia and Vivel brands. Superia caters to the mass consumer segment, Vivel targets the premium and Fiama the so-called super-premium market.

According to Kaul, the personal care sector holds immense appeal for ITC due to the category’s size and growth potential.

But the personal care segment in India is immensely competitive. Anand Ramanathan, analyst with KPMG, says, "In categories like soaps, the competition is quite intense. But ITC is likely to combat it with its distribution muscle. However, because of intense competition, ITC would be under margin pressure and so the personal care business for the company would not be as profitable as its other businesses."

"ITC, however, can recover from the margin pressure to some extent with the help of premium products in niche categories," Ramanathan points out.

Devangshu Dutta, chief executive of specialist management consultancy firm, Third Eyesight, says that a market leader like HUL still feels it reaches only 60 per cent of the market. So, even a new entrant like ITC can find potential in the personal care segment.

"ITC has diversified over the last 10 years as part of its strategy to expand into non-cigarette categories. The real challenge will be effective communication and marketing", Dutta adds.

Ramanujam Sridhar, CEO, Brand-Comm, says: "There is a reasonable amount of loyalty among consumers for personal care products, especially in skincare, which can pose a challenge for any new entrant, including ITC.

However, ITC enjoys a strong brand recall and its strongest qualifier is its distribution muscle, which should help the company establish itself in newer categories as well."

Won’t need? Don’t pay.

Kamya Jaiswal

Money Today , April 1, 2010

As they wrap the refrigerator for delivery, you can’t help feeling smug. For one, despite loud protests by the salesman, you wrangled a 10 per cent discount on the price. The extra-large freezer also seems a smart pick; after all you throw beer parties regularly. The extra Rs 2,500 for a three-year extended warranty is another good move. You won’t have to pay a rupee if some part goes in the next three years. What’s more, it is a fivestar refrigerator, so your annual electricity bills will be much lower.

Sounds like a good deal. In effect, it may not be so. Consider this: according to research by Consumer Reports, the odds of a refrigerator requiring repair in the first three years is just 8 per cent. Also, the price difference between a four-star and five-star refrigerator is about Rs 2,500, whereas the difference in the electricity consumed annually is only about 100 units. This means that the difference in your annual eletricity bills will be Rs 400 (at Rs 4 per unit). And you forgot that chilled beer can be stacked anywhere in a refrigerator.

Most people think they are value-conscious customers, especially in the case of big-ticket expenses like consumer durables. Yet, they fall into the trap of paying for services and features that they don’t need. Here’s how you can avoid doling out money for the unnecessary extras.

Ignore extended warranty

The biggest problem with this option is that you may never use it. The study by Consumer Reports says that in the first three years, the probability of a washing machine requiring repair is 22 per cent and a microwave, 12 per cent. Such products face problems either in the first year or after a long period of usage.

Says Devangshu Dutta, CEO of Third Eyesight, a retail consultancy: "There are enough horror stories about service quality in the first year of warranty. How can one be sure that the service will be good during the extended warranty?" He also cautions against the fine print. For instance, you may have to lug the product to the service centre or if you shift to another city after buying the product, the extended warranty (also called annual maintenance charge) may no longer be free. Perhaps the biggest flaw in extended warranty is that it does not cover the expense of replacing a part. Mostly, it provides for free engineer visits and minor repairs only.

"This concept works in the West, where labour charges are very high, but in India, the services of an electrician are relatively cheap," says Dutta. Even if you call engineers from the brand’s service centre, they charge approximately Rs 250 a visit. This means that by paying Rs 2,500 for an extended warranty, you expect the appliance to break down at least 10 times in two years. Not practical is it?

Match energy efficiency with usage

Yes, energy-efficient products reduce your electricity bills.

However, the financial benefit is usually nullified by the premium you pay for the more efficient product. It takes seven years for a five-star, 1.5-tonne, split air conditioner (AC) to justify the additional cost over a four-star AC. By this time, you will probably be looking for a new one that is packed with more features and better technology.

How can you start reaping the dividends of a five-star AC from the first year itself? By using it every hour of every day. Of course, this also means that your electricity bill will be more than Rs 66,000 a year. This is not the usage pattern in most households. So before shelling out money for a more efficient appliance, ensure that the benefits are earned during its lifetime.

Buy what you need It is really a no-brainer: if you are not likely to use a particular feature, do not opt for the appliance, or choose a more basic model. Says Dutta: "The biggest issue with consumers is that they tend to buy products with more features than they need. There is value attached to these features, which increases the cost of the product."

So why not rein in the technophile in you? Don’t opt for a 10-kg washing machine if you have three members in the family. Check if the cooling technology with a fancy tag is any different from that offered by other brands. If this option doesn’t work for you, buy warm beer once in a while.

Reproduced from Money Today. Copyright 2010