Entrepreneurship & Brand Making

Nirma: Dr. Karsanbhai Patel

CREATIVITY & INNOVATION ASSIGNMENT

Name Batch & Section PRN

Kashyap Shah Section-C, MBA 2014-2016 14020841136

Submitted to,

Dr. Neelima Watve

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Index

Topic Name Page No.

Abstract (Nirma in Indian FMCG Sector)

03

Making of Nirma: Visionary Dr.Karsanbhai Patel as an Entrepreneur

04-05

Marketing Mantra: Low Cost, High Quality

06-07

Recognitions, Awards & Achievements

08

Backward Integration & Diversification of company portfolio

09

CSR Activities by Nirma 10

Recent Developments & Challenges Ahead

11-12

Bibliography 14

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Abstract (Nirma in Indian FMCG sector)

There was an inescapable reality about the fast moving consumer goods (FMCG) segment in

India: the huge population portended that sooner than later purchasing power would develop

enough muscle to help various FMCG categories penetrate deep into the country's semi-urban

and rural markets. The trigger for this was an innocuous event in 1969.Today, it is universally

recognised that Nirma's entry into the market radically changed the entire FMCG perspective.

It set the stage for a new scramble for rural markets in which multi-national companies as

well as established Indian players became fierce competitors. Nirma's focus was on ensuring

that products like detergents were made affordable to even the lower economic strata of

society. This philosophy had a profound effect on the entire FMCG sector and laid the

roadmap for others to follow. In pure market terms, Nirma proved that supply, at the right

price, could create its own demand. MNCs, which were hedging their bets till then, woke up

to altered market realities and the latent rural potential of India.The government's relaxation

of norms also encouraged these companies to look at economies of scale in order to make

FMCG products more affordable. Players in the organised sector, till then only focusing on

the urban markets, vied to outdo each other in reaching the rural consumer first.

Consequently, today soaps and detergents have almost 90% penetration in India.

Today, the company's two brands, Nirma and Nima with 32 variants, are distributed through

more than 2 million retail outlets, generating gross sales in excess of Rs. 4000 crore (US$

833.30 million).The company has a significant presence in the personal care category through

detergent powders and cakes, toilet soaps, scouring bars and in the food category through

free-flow, edible salt.

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Making of ‘Nirma’: Visionary Dr. Karsanbhai Patel as an Entrepreneur

The 'Nirma' success story of how an Indian Entrepreneur took on the big MNCs rewrote the

rules of business:

Dr. Karsanbhai Khodidas Patel was born in 1945, into a farmer family from Ruppur,

Mehsana, North Gujarat. At the age of 21, he completed his B.Sc in Chemistry. Karsanbhai

started his career with the New Cotton Mills of the Lalbhai Group, in Ahmedabad, as a lab

technician. He later joined the Geology and Mining Department of the State Government.

It was after three long years that Karsanbhai felt confident enough to quit his job for the

further development of Nirma. He set up a shop at a small workshop in an Ahmedabad

suburb. Later he said: “The lack of any such precedent in my family made the venture fraught

with fear of failure. But farmers from North Gujarat are known for their spirit of enterprise.”

It was in 1969 that Dr. Karsanbhai Patel started Nirma and went on to create a whole new

segment in the Indian domestic detergent market. During that time the domestic detergent

market only had the premium segment and there were very few companies, mainly the MNCs

which were into this business. Karsanbhai Patel used to make detergent powder in the

backyard of his house in Ahmadabad and then carry out door to door selling of his hand made

product. He gave a money back guarantee with every pack that was sold. Karsanbhai Patel

managed to offer his detergent powder for Rs. 3 per kg when the cheapest detergent at that

time was Rs.13 per kg and so he was able to successfully target the middle and lower middle

income segment.

Sabki Pasand Nirma...

Nirma became a huge success and all this was a result of Karsanbhai Patel's entrepreneurial

skills. Karsanbhai Patel had good knowledge of chemicals and he came up with Nirma

detergent which was a result of innovative combination of the important ingredients.

Indigenous method was used,and also the detergent was more environment friendly.

Consumers now had a quality detergent powder, having an affordable price tag. The process

of detergent production was labour intensive and this gave employment to a large number of

people. Nirma focused on cost reduction strategies to make a place for itself in the market.

Nirma has always been known for offering quality products at affordable prices and thus

creating good value for the consumer money. In the 1980s nirma moved ahead of Surf , a

detergent by HLL , to capture a large market share. Later, Nirma successfully entered in the

premium segment of soaps and detergents. Nirma went on to become the largest detergent

and the second largest soap company in India. Nirma had more than 35% market share in the

detergent segment and around 20 % market share in the toilet soap segment. The company

got listed on the stock exchanges in the year 1994.

The launch of Nirma detergent cake came sixteen years after the introduction of the detergent

powder. In 1990, Nirma Super Detergent, a spray-dried blue detergent powder, was launched.

With the launch of the high-TFM (total fatty matter) content Nirma Beauty Soap, Nirma

began to expand its product portfolio.To counter the success of Nirma Beauty Soap,

Hindustan Lever Limited launched Breeze. In a flanking operation that would have done

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military strategists proud, Nirma, launched another brand: Nima. Both the brands from the

Nirma stable have been successful in grabbing a huge chunk of all incremental sales growth

in the soap category in the past twelve years. Subsequently, the Nima sub-brand, too, has

been extended to the detergents category.

And within a decade, Nirma was the largest selling detergent in India. It gave the bigger

established brands like Unilever and Procter & Gamble, a run for their money and soon

occupied the top market share. In the 1980s, Nirma moved ahead of Surf, a detergent by

HLL, a giant in the field. After establishing its footprints in the economy-priced detergents,

Nirma entered the premium segment, launching toilet soaps: Nirma bath & beauty soaps and

a premium detergent, Super Nirma. The company also ventured into shampoo and toothpaste,

but were not as successful. On the other hand, the edible salt Shudh is doing well. Nirma

beauty soap is one of the leading toilet soaps, behind Lifebuoy and Lux. Overall Nirma has a

20% market share in soap cakes and about 35% in detergents. The company got listed on the

stock exchanges in the year 1994.

Today, Nirma has entered the neighboring countries’ markets as well. In the national market,

Nirma’s soaps and detergents sell through two million retail outlets. In 2004, it expanded into

pharma by acquiring an IV fluid factory in Ahmedabad. The company also acquired US

based Searles Valley Minerals to become one of the top producers of soda ash in the world.

Karsanbhai’s two sons and his son-in-law are now at leading positions in the Nirma

organization.

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‘Marketing Mantra’ of Nirma: Low Cost, High Quality

Higher Costs – NO

Within a short span, Nirma had completely rewritten the rules of the game, by offering good

quality products at an unbeatably low price. Nirma's success was attributed to its focus on

cost effectiveness. From the very beginning, Patel had focussed on selling high-value

products at the lowest possible price. The company endeavored to keep improving quality

while cutting costs. To keep production costs at a minimum, Nirma sought captive production

plants for raw materials. This led to the backward integration programme, as a part of which,

two state-of-the art plants were established at Baroda and Bhavnagar, which became

operational in 2000. This resulted in a decline in raw-material costs.

The two new plants were completed ahead of schedule and at a much lower cost than

estimated. The second phase of the Baroda plant was completed six months ahead of

schedule and at a cost of Rs.2.5 bn as against the original estimated cost of Rs. 2.8 bn. The

Bhavnagar plant was completed in a record time of two years at a cost of Rs.9.85 bn as

against the original estimated cost of Rs. 10.36 bn. The staff strength at this plant was a low

500. In contrast, Tata's Chemical's plant, which was about twice the capacity, employed 10

times the number of people? The Baroda plant produced 65000 tpa of N-Paraffin for Linear

Alkyl Benzene (LAB) and Synthetic detergents. The technology for this plant was sourced

from UOP Inter Amercana, USA.

The Bhavnagar plant could produce 4,20,000 tpa of soda ash. The Akzo Dry Lime

technology used in this plant was sourced from Akzo Nobel Engineering, Holland. The plant

had 108 km of salt bunds, which would help it to produce vacuum iodised salt in the future.

Patel said, "We have a capacity of producing three lakh tonnes of pure salt. No one, except

Tata Salt, has a similar plant in the country." Nirma also curtailed its costs of distribution by

eliminating intermediaries. The product went directly from the factory to the distributor.

Hiren K Patel (Hiren), CMD, Nirma Consumer Care Ltd. explained, "An order is placed and

the truck leaves straightaway. It is like a current account. We send the stock, they send the

money." The company maintained depots in states like Andhra Pradesh, Tamil Nadu and

southern Karnataka, as getting stocks to these areas was sometimes difficult. In states like

Uttar Pradesh and Madhya Pradesh, stocks were delivered directly from the plants. In March

2000, in a further cost reduction exercise, Nirma opted for in-house printing and packaging

by acquiring Kisan Industries at Moriya, near Ahmedabad. Nirma hoped this would improve

the quality of its packaging. As Nirma started to grow and the salesmen started to reach out to

the retailers, who were working with multinational brands till then, did not pay attention and

used to take the stock on long credits and as a special favor. As and when the salesmen would

go asking for the payment either he will be shown the door or may be offered a part payment

even in the condition that the total material was sold. To the insisting ones they will give the

material back asking them not to show up again. This carried on for some time and there was

huge accumulated credit in the market making it difficult for the Nirma to operate. This is

when Karsanbhai said enough was enough and called the entire team one day and decided on

a drastic step which was risky but revolutionary. Karsanbhai was realizing the power of

advertising and promotions which made him take this step. The day after the meeting all the

team members went out in the market and collected either cash or material. Next day on

retailers were shocked, competition was dazed and market was without Nirma.

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For full one month the media was carpet bombed with the campaign WASHING POWDER

NIRMA, WASHING POWDER NIRMA, DOODH SI SAFEDI......

Now what this did was kick start the consumer demand. People started asking for Nirma but

it was not to be found. When the demand reached its peak then the Retailers started to look

for Nirma. This is what Karsanbhai was waiting for. One fine day the team was called for

another meeting and Delivery vans were cleaned, material loaded and NIRMA hit the market

again. Now Nirma was dictating terms. All cash on delivery, no credits and tight supply.

Overnight the brand was changed and within no time gave a fantastic fight back to the

leading global brands.

The best case of - Give your consumer what he wants, when he wants, where he wants

and at the price he wants, selling will be done quite automatically. This is the marketing

'mantra' of Nirma.

Promotion

Nirma's advertising has always focused on the value-for-money angle. Its simple and catchy

jingle – Dudh Si Safedi Nirma Se Sye, Rangeen Kapda Bhi Khil Khil Jaye (Nirma's

whiteness is as white as milk, even the most resplendent clothes blossom with it) – has

continued to echo in the drawing rooms of middle-class Indian homes through the decades.

While the jingle stresses the product, it also salutes the savvy and budget-conscious Indian

housewife. The jingle, which was first aired on radio in 1975, was broadcast on television in

1982. It is one of the longest running jingles and has seen very few changes since the time it

was first aired.

Brand Values

Dr. Karsanbhai Patel puts enormous stress on operating efficiencies and marketing practices

so that consumers receive their money's worth. Every packet of Nirma that Karsanbhai Patel

sold to his consumers came with a money-back guarantee. Nothing has changed since.

But as sales grew, so did Nirma's scale of operations. The cost-conscious approach of the

initial years was to evolve into a strategic branding perspective. By the 1980s, Nirma was the

toast of marketing gurus. Today, it's not just a brand – it's a phenomenon whose time has

come.

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Recognitions, Awards & Achievements

In 1994, Nirma Limited was listed on the stock exchanges. Today, Nirma is the flagship

company of the group with complete rights and ownership of the brand. Its wholly owned

subsidiary – Nirma Consumer Care Limited is the distribution arm. Nirma and Nima are

named after Dr. Karsanbhai Patel's daughter, Nirupama. The white dancing girl, featured in

Nirma's television advertising is, perhaps, the most enduring image of Nirma. Though Ms.

Patel passed away in a car accident, she continues to live on in the corporate logo and the

best-selling brands of the company Nirma's radio spot has been aired without a break for 33

years Till 1986, Nirma was a single product brand Nirma is one of the largest selling

detergent brands in the world More than 2 million retail outlets stock Nirma products and

reach 400 million consumers.

The company that was started in 1969 with just one man, who used to deliver his product

from one house to the other, today employs around 14 thousand people and has a turnover of

more than $ 500 million. In 2004 Nirma's annual sales were as high as 800000 tonnes.

According to Forbes in 2005 Karsanbhai Patel's net worth was $ 640 million and it's going to

touch the $ 1000 million mark soon.

Achievements

Some six years ago, an ACNielsen Retail Audit had ranked Nirma India's seventh largest

consumer brand. Remarkably, this status was achieved entirely on the strength of homegrown

research and marketing strategies. Its story of success – from a small, backyard company to

one of the largest detergent manufacturers in the world – merited a Harvard Business Review

case study.

The Nirma success story is the result of its founder, Dr. Karsanbhai Patel's relentless focus

on quality, cost and value. The distribution model, sustained line extensions, innovative

packaging, backward integration and umbrella branding strategies have all enhanced the

brand's leadership.To achieve control on cost, size and scale of operations and supply of

keyraw materials, Nirma pursued a backward integration strategy and established its own

soda ash, linear alkyl benzene (LAB), fatty acid, glycerine and huge salt works facilities. It's

a matter of record that Nirma became one of the largest soda ash manufacturers in India and

the 7th largest globally.

On this path to success, Karsanbhai has won himself many accolades, along with people’s

acceptance and love.

Padma Shri Award for the year 2010.

In 2001, Karsanbhai was awarded an honorary doctorate by Florida Atlantic

University.

In 1990, the Federation of Association of Small Scale Industries of India (FASII),

New Delhi, awarded him the ‘Udyog Ratna’.

The Gujarat Chamber of Commerce has felicitated him as an ‘Outstanding

Industrialist of the Eighties’.

He has served twice as Chairman of the Development Council for Oils, Soaps and

Detergents.

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Backward Integration & Diversification of company portfolio

Nirma adopted backward integration strategy for the regular supply of raw materials, 90 % of

which they manufacture themselves. Nirma also gave due importance to modernization,

expansion and up gradation of the production facilities. The company also made sure that it

uses the latest technology and infrastructure.

Nirma’s diversification began over a decade ago when the company decided to allocate Rs.

1,500 crore to set up soda ash and LAB (linear alkyl benzene) capacities, key raw materials in

soap. Both ingredients were controlled by a small clutch of manufacturers with GHCL and

Tata Chemicals controlling the soda ash; while Tamil Nadu Petro Products and Reliance

Industries supplied most of the LAB.

“Over the past decade the company has moved from being a consumer centric business to a

chemical business,” says a former Unilever director who has watched the company grow over

the years. “(With all the backward integration) they thought they could do a Reliance in this

business,” he adds. In 2007 the company acquired Searle Valley Minerals, a US-based

producer of soda ash making it the world’s seventh largest producer. At Rs. 1,509 crore the

chemicals business almost brought in a third of revenues last year.

Its plans in the healthcare space are no less ambitious. The company sees this as the third

flank of their growth strategy after consumer goods and chemicals. In 2004, Nirma acquired

Core Healthcare and started marketing IV fluids. At that time the company was making

losses and industry watchers suspect it was acquired so losses could be offset against income

taxes Nirma had to pay. Sales at this division have risen from Rs. 160 crore to Rs. 230 crore

last year. In the next few years Hiren says he would like to become a global player in

generics and over the counter drugs. While the brands were making marketing history, the

company was strengthening its operations. Setting up backward integration projects

reinforced the detergents' portfolio.

Today, almost 90% of all raw materials – including linear alkyl benzene, soda ash, salt and

packaging material – are manufactured in-house. A 15,000-strong work force at different

locations ensures that there is no compromise on quality and that production deadlines are

met.

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CSR Activities by Nirma

The brand has also given back freely to society. It has established the Nirma University

offering varied academic and doctoral courses in the disciplines of technology, management,

diploma studies and pharmaceutical science – besides setting up schools and colleges in rural

areas.

As far as Corporate social responsibility (CSR) is concerned, Nirma has made some good

efforts by starting Nirma Education & Research Foundation (NERF) in the year 1994 for the

purpose of running various educational institutes. Nirma has also set up Nirma labs, which

prepares aspiring entrepreneurs to effectively face the different business challenges. Nirma

also runs Nirma Memorial Trust, Nirma Foundation and Chanasma Ruppur Gram Vikas

Trust as a part of their effort as a socially responsible corporate citizen.

Along with being a noted businessman, Karsanbhai is a philanthropist as well. He has

established one of the premier institutions of higher learning in Gujarat, the Nirma University

of Science & Technology in 2003. Apart from this, Nirma Education & Research Foundation

(NERF) that came up in 1994, runs these various educational institutes. Nirma has also set up

Nirma labs in 2004, which prepares aspiring entrepreneurs to face different business

challenges effectively.

Nirma also runs Nirma Memorial Trust, Nirma Foundation and Chanasma Ruppur Gram

Vikas Trust as a part of their efforts of a socially responsible corporate citizen.

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Recent Developments & Challenges Ahead

Though Nirma was better known as a producer of low-cost economy range of products, it was

successful in the middle- and up-market segments. But at the same time, competition was

also increasing. While HLL continued to be a major competition, P&G and Henkel SPIC also

adopted aggressive measures10. Players from unorganized sector were also adding to the

competition in the detergents and washing powder industry. However, Patel was confident of

tackling the competition. He said, "We hold the price line and the satisfied consumer

naturally reverts to us."

In the past three decades, the brand had grown in value and volume on the basis of his

success formula: "A customer does not look for one-time frills or feel-good factors. Rather,

the householder wants a long term solution to his or her needs." What remained to be seen

was whether Nirma's cost-focused model would be a success in the long run.

Recent Developments

In a changing market environment, the company has re-launched Nirma Yellow Washing

Powder and Nirma Beauty Soap, two of its strongest brands. Nirma Yellow Washing Powder

is being repackaged with an improved formulation. Nirma Beauty Soap will now have a new

face. Two new fragrance variants are also being added to the portfolio – Jasmine and Saffron.

The packaging of the Nirma Beauty Soap has also been changed to provide better shelf

visibility.

In 2008, through the acquisition of massive production facilities near Ahmedabad, Nirma

entered the healthcare segment with 'Nirlife' to manufacture and market intravenous fluids,

lifesaving drugs, amino acids etc.Within a short span Nirlife achieved sizable market share of

the domestic as well as the global parenterals market. Nirma was once the poster child for

entrepreneurship. Then its maverick founder decided to call it a day. His son wants to recast

the firm, but is missing Karsanbhai’s spunk.

The decades after Karsanbhai Patel started Nirma out of a small shed in Saraspur, an

Ahmedabad suburb; it’s hard to identify what this Rs. 4,831 crore company stands for. If

looked at purely as a consumer goods company, it appears to have lost its way. With barely

10 percent of market share, Nirma, the detergent powder it manufactures, is no longer

numero uno. It lost the top spot to Wheel, which was set up by Hindustan Unilever to battle

Nirma. Managers from rival firms who’d battled the company in the eighties and nineties say

they’ve written Nirma off as a serious competitor. On the stock markets, it now trades at Rs.

213. Adjusting for a stock split and bonus, it is around the same rate at which it traded ten

years ago. And not a single equity analyst tracks the stock anymore. It’s the kind of thing that

is far removed from Karsanbhai’s call to arms once upon a time to make Nirma the largest

detergent brand in the world. Though he continues to be chairman of the company, the Hindi

film buff has practically retired from the business he founded. Operational control is with

younger son Hiren who is managing director. Elder son Rakesh is vice-chairman.

On his part, Karsanbhai has chosen to focus almost completely on education and his life is

now pretty much around Nirma University, which he founded in 1995. It is now the largest

private university in Gujarat. The 37-year-old Hiren is now remaking the business. People

who know him describe him as a man in a hurry. He sees Nirma’s chemicals and fledgling

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healthcare business as key to its future and has made use of the company’s current cash flows

to get into these areas. He also wants to get into cement when he reckons the time is right.

For the time being it is the consumer goods business generates most of the Rs. 250 crore

profit every year. In going after new growth areas Nirma seems to have decided that growth

in the consumer space will be more difficult for several reasons. Firstly, the FMCG business

has slowed down over the years. Hiren knows that unlike what it was two decades ago,

building a national brand just by advertising on a single television channel is near impossible.

Nirma was always seen as a low-end brand and to be successful in other categories, it would

have to build new brands. That is a battle Nirma is loath to fight.

Secondly, in competing with multinationals HUL and P&G that have deep pockets to

advertise their wares, well developed research and development facilities and a larger

distribution reach, Nirma finds itself out of depth. It has also seen rising input costs.

Last year its revenues in the soaps and detergents business declined to Rs. 1,787 crore from

Rs. 2,109 crore a year earlier. Former employees say the company still sticks to its roots as a

low cost producer. There is a constant emphasis on keeping costs low. The Patels are not

known to be good paymasters and rarely offer a free hand to their employees. As a result, few

professional managers have joined Nirma over the years. But as someone who competed with

Karsanbhai for many years says, “In making these diversifications Hiren has shown that he

can run disparate businesses. But where is the spirit of Karsanbhai the entrepreneur?”

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Challenging established multinationals needs extreme courage and to win in the long run

needs foresight and skills. Karsanbhai has fulfilled this challenge and he made the

multinationals to follow Nirma and introduce substitutes such as Wheel. He is a man to be

followed. He teaches us a lesson that entrepreneurs can build their empire on gut feeling too,

rather than just following the classical patterns taught in business schools.

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ory1.htm http://aditirindani.wordpress.com/2011/11/18/the-spirit-of-enterprisedr-

karsanbhai-patel/ http://images.google.com