season

Strategy for

in India

Brand Strategist

The Dream Team Season 2

Case Study for Strategy Development

S T R AT E G Y F O R T I D E I N I N D I A

Case Background
The Mint, 3rd December 2012: In a recent global investor meeting, Procter & Gamble afrmed that a strong momentum in developing markets continues to be a key part of its strategy. It said it will invest resources on the biggest opportunities, and aim for protable expansion by focusing on growing markets, increasing market share, improving mix, localizing production, and leveraging scale. It is doing all of that in India. India ranks as one of P&Gs top 10 developing markets.Shantanu Khosla, who heads P&Gs India operations, also addressed this meeting, and said that the companys value share has risen to 12% in FY12 from 2% a decade ago and sales have risen by 30% for each of the past two scals. Its distribution footprint has increased by 25% in the past two years, and consumers using its products have risen to 700 million, a 14% increase in just one year.

Tide Brand Background

Tide was launched in year 1946 and was touted as the biggest innovation in the detergent industry. Over the years, Tide has grown to be one of P&Gs 26 billion Dollar brands. From being the worlds rst compact detergent to being the rst detergent to break carbohydrate and protein stains, the Tide brand has had a history of path breaking innovations credited to its name. Every hour, P&G produces over 400,000 pounds of Tide! Tide entered India in the year 2000 spearheading P&Gs entry into the extremely competitive, India Laundry business. Over the years, the category had been dominated by Wheel, Nirma, Ghadi in the low tier segment and Surf in the premier segment. In 2003, P&G, with its renewed focus on Emerging markets decided to explode the category, thereby ushering in an era of discontinuous growth of >20% CAGR per annum. Tide mirrored the companys progress in India, rapidly progressing from 3MM cases (per annum) to 3MM cases per quarter. (1MM = 1000,000 units). Tide Safedi was the new slogan of the washing business, with Tide rapidly growing market share in the Tier 2 category to 8.6% in year 2008.With the India business surging, the expectations from the laundry business were huge. With 69% of India residing in the rural areas it was imperative that P&G win across all segments of the Indian population and delight all consumers. Despite trying to up-tier from popular tier, Tide was not able to play meaningfully in the bottom tier (Market Share: 2.8%). Tide was 2.4 times more expensive than the popular tier detergents and the overall product proposition was not geared to win in the rural household, which required a different approach in managing the supply chain end to end and make lower pricing sustainable. The need of the hour was to unlock the fortune at the bottom of the pyramid!

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Case Study for Strategy Development

Fig 1: India Laundry Category Split and P&G Market Share by market segment * Nielsen Data Pre Launch Category Size (Laundry) P&G Laundry Share Urban 9% 32.5% Semi Urban 45% 20.5% Rural 46% 5.7%

Tide Naturals - Genesis

Reaching more consumers in Indias 1.5$ billion laundry market meant developing a detergent with just the right balance of cleaning performance and mildness, at an affordable price. About 80% of consumers in India200 million householdswash their laundry by hand. With their extremely limited laundry detergent budgets, most Indian consumers settle for the lowest priced powders, which can irritate hands during after washing. P&G set out to ease the burden of everyday washing for these consumers, and develop a product to break into their households. With ingredients developed at P&Gs Innovation Centers, this product aimed to balance cleaning and mildness at a price 30% lower than the existing Tide detergent. It also dissolved in water, unlike most competitive products in the low price range, which leave gritty materials in the wash water that can be harsh to hands. Its unique scent containing natural oils offered an attractive benet to Indian consumers that other low-cost detergents did not. By 2009, Tide had established itself as an important Tier 2 detergent and had been consistently growing equity year on year. There was a signicant chunk of consumers who wanted to buy Tide but decided otherwise only due to affordability issues. Hence P&G decided to leverage this equity it had built with Tide to bring this revolutionary product to market and named it Tide Naturals, thereby launching it as an extension of the existing Tide brand. The challenge was to differentiate the benet of Tide and Tide Naturals clearly, so that consumers understood Tide as the superior product of the two. Hence as P&G launched Tide Naturals, it also upgraded the original Tide product and restaged it to Tide Plus with reinforced superior whiteness messaging. With the introduction of Tide Naturals, P&G which was earlier playing in the Urban and semi urban market, now offered laundry detergents at three distinct performance and pricing levels, delivering a solid value that was now affordable for more than 70% of Indian consumers!

The Laundry Powders Category

The laundry powders category was dened into Tiers as below: Brand Tier 1 Pricing Priced 4 times of popular tier Ariel, Surf Brands

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Brand Tier 2 3 4

Pricing Priced 2 to 2.4 times popular tier Popular tier - National Brands Popular tier - Local Brands Tide, Rin Ghari, Wheel

Brands

Oorvashi (South India); Safed (North India); Nirma (West India)

The Consumer for Tide Naturals (Source: P&G CMK)

Tide Naturals

The Tide Naturals consumer is Tier 3/Tier 4 brand consumer, who expects good cleaning from her detergent which should come within her limited budget. She currently uses brands like Wheel, Ghadi and Nirma (as well as local Tier 4 brands because these are cheaper. Good fragrance and good everyday cleaning dene good laundry for her. She is a risk-averse consumer and does not want to switch from her current detergent as she believes other detergents at the same price point will damage her hands. Awareness of product is extremely critical to develop belief that both virtues can be provided on one product.

Tide Plus

The consumer is a Tier 3 brand user who expects superior whiteness and is not completely satised with her current brand. She wants to provide the best to her family but and actively seeks superior performance brands that t into her monthly budget. She currently believes that Tide is better than her current detergent; however she feels that it is expensive. She is not sure how better Tide is vs. her current detergent and whether its worth the premium. There was difference in the different consumer segments targeted for Tide Plus and Tide Naturals. A need based segmentation carried out, revealed that benets like Keeps white clothes white and cleans well with only a small amount are amongst the top drivers for Tide Plus consumer whereas Tide Naturals consumer was driven by benets like Does not irritate skin, Is inexpensive and Overall cleaning.

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Strategy to Win
Tide Plus Tier - 2 Grow size of Tier 2 segment via up-tiering from tier 3 Tier 2 currently only 15% of category volume Tide Naturals Tier - 3 Grow share in Tier 3 via sourcing volume from Competition Ghadi / Wheel/ Nirma Tier 3 is 70% of the category Volume

Launch Strategy
The overarching strategy for Tide Plus and Tide Naturals was to attain growth by increasing penetration into Tier 3 consumer households. The biggest challenge was on ensuring no cannibalization of Tide Plus with the launch of Naturals. This needed a whole new launch approach, taking the overall portfolio into consideration. 1. Packaging Visual cues are extremely important in dening the product. Moreover, consumers identify the product by its colour. The Green colour package with Sandal, Lemon icons communicated mildness & cleaning helped bring-to-life the benet which the product was offering while the price on the pack helped re-emphasize the differentiate.

2. Pricing Tide Naturals was priced at 1.3 times the popular tier. However specic states were targeted (e.g. UP, MP Rajasthan) as the key growth priority states in India for which P&G adopted a very different pricing-sizing strategy for Tide Naturals, pricing much closer to Tier3. Since the launch of Tide Naturals, macroeconomic conditions have been on a somewhat downward spiral. India laundry category was clearly impacted by it and the category came under the impact of signicant cost pressure due to commodity prices. Almost all laundry players started taking several price ups in the past 2 years. The most popular way of taking price ups was to
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reduce grammage, with the intent of continuing to keep the product at popular price points like Rs.10, 20 etc.. The series of price ups by way of grammage reductions on Tide Naturals have been leading to capacity challenges.Further watch-out with gram-mage reductions is that the experience for the consumer gets worsened as the pack size is not enough for sufcient number of dosages which impacts the value seen by the consumer on using the product. Recently Govt. of India came up with a regulation (Notication No- G.S.R 784(E)dated 24thOctober 2011), that prohibited grammage play on a number of SKUs; hence it became a further challenge to rightly price and size SKUs. 3. Media and Communication TV was used to target early adopters to build Word of Mouth. TV Channel choices for Tide Plus and Tide Naturals were dened to ensure that the right consumers were targeted. Tide Naturals was advertised more in Terrestrial (DD) while Tide Plus had higher presence on cable & satellite channels. Media weight between Tide Plus and Tide Naturals was also varied by state depending on the states laundry demographics. Advertising patterns were based on electricity patterns by state and the time of viewing. Radio was extensively used to reach the consumers whom TV could not reach. Overall, 50% of rural consumers were covered. To see the advertisements, visit the Facebook page: http://www.facebook.com/PGTheDreamTeam. 4. Go To Market From a Sellers standpoint it was extremely important to have the right SKUs and quantities of Tide Plus and Naturals at the right place, based on where the Tier 2 and 3 shoppers shop.

Tide Naturals was launched only at the Rs 10 and Rs 20 price point. (95% of Tide Plus business came from >500g packs which were all priced over Rs 30). Tide Plus 500g became the focus SKU across all channels this was made a part of the sellers recommended distribution list across all stores and the distribution of this SKU was incentivized. Distribution grew to 0.8 MM stores generating a lot of incremental trials. Trade inputs focused only on Tide Plus in top channels with stronger trade input on Tide Naturals for Wholesale and smaller stores Visibility is a key in-store deliverable for all sellers. This meant disproportionate investment on devices, wire hangers and banners in top channels on Tide Plus, thereby communicating the benets strongly. In smaller stores and wholesale shops BOTH Tide Plus and Naturals were made visible and not just Tide Naturals.

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Case Study for Strategy Development

Launch of larger sized packs like 6 kg and consumer promotions drove consumption harder as a source of growth for Tide Plus

What happened after Tide Naturals Launch

The Tide India business exploded within a year of the launch with Tide Naturals becoming the fastest growing laundry brand-form in India since launch. The overall brand grew to 14.98MMSU (36% YOY) and sales at $167.9MM (14% growth) with Tide achieving highest ever share towards year end behind the explosive entry of Tide Naturals into Tier 3 and ensuring the continued growth of Tide Plus despite competition collapsing prices by 30% on Tier 2. (Note: 1 SU = 12 kg/ 1MSU = 12 Ton / 1MMSU = 12000 Ton). The competition responded immediately to the launch and there were signicant price downs across the industry. Along with this, the demand exploded immediately. The onus was on the Product Supply function to respond to the existing challenges as well as support the growth of Tide naturals by changing/modifying the manufacturing process and supply chain. The Product Supply team executed price off & free-bee promotion by crashing the artwork lead time, packing materials procurement time & deployment time within 2 months of competitive activity. Sudden upsurge of demand put immense pressure on the supply team to increase overall throughput. Following action steps were taken to support the unconstraint demand:

Increased production reliability by making various changes on the line ( PR denition) Improved batch cycle time Expansion of existing facilities Introduction on contract manufacturing sites to meet the future need

Today Tide Plus and Naturals are both at their highest ever shares and consumption is driving 50% of our growth in the current year. Post Launch (Latest) Category Size P&G Laundry Share
*Nielsen Data

Urban 10% 36%

Semi Urban 45% 27%

Rural 45% 11%

Stiff competition from existing players through deep trade discounts/media spends has required signicant investments which have diluted margins. Increasing the penetration of Tide Naturals in remote areas however, further increases the reach cost and adversely impacts the cost structure. The key to growth now lies in exploding the washing powder category and signicantly growing the Tide Brand with a sustainable cost structure.
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Case Study for Strategy Development

The Mission
The overarching mission is to take the Tide brand to market leadership from the existing 15% share to 25% share over the next 3 years. We need to keep in mind that currently, the washing powder category in India has a penetration of 98% and washing bars category has a penetration of 97%. Achieving this would mean that we explode the powders category and at the same time, make sure that the Tide brand remains protable as a whole with gross margins increasing. The Laundry category has been one of the oldest and the most explored category in the consumer goods space. Achieving the objectives would require innovative thinking, effective application and robust nancial planning to accomplish the mission. P&Gs Tide Multi-function Team has put forth the following critical questions for you, The Dream Team, to answer, to accomplish the mission: Marketing and Brand Communication P&Gs Marketing & Brand Communication Function is responsible for all Brand Management activities. [P&G invented the concept of brand, brand management, and even the Soap Opera (originally designed to showcase our soap powders on TV). Over the years, Marketing remained consistently on the cutting edge of marketing, always nding new and exciting ways of reaching consumers.]

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What are the strategic choices the company needs to make as it explodes the washing powder category and takes the Tide portfolio (Tide Plus, Tide Naturals) from 15% to 25%. While doing so, Evaluate this on all brand parameters as below: 1. Marketing mix i. Product Strategy - Key SKUs for Tide Plus and Tide Naturals ii. Pricing Strategy - In the context of sizes & price points iii. Place iv.Promotion 2. Communication Strategy" I. Consumer Insight - What is the consumer insight that should be the focus of communication & copy? How would you communicate price/ grammage changes suggested in 1a while doing so? II. Big Idea/concept and related Benet III.Touch-points for execution of communication strategy Customer Business Development (CBD) P&Gs Customer Business Development (CBD) Function is more than mere "selling" it's a P&G specic approach which enables us to grow our business by working as a "strategic partner" (as opposed to just a supplier) with those who ultimately sell our products to consumers. Today Tide Naturals is available in about 1.7 MM stores, Tide Plus Bags (Rs 10) and bigger packs i.e. all SKUs other than the Re 1 - 12g Sachet) are available in 1 MM stores. To grow Tide Plus further we need to instigate new trials (which would need Tide Plus to go into more than 1 MM stores) and to grow consumption via driving larger packs (usually in Modern Retail and larger stores).

What do we grow Tide Plus distribution to 1.5 MM stores (P&G covers ~1.25 MM non chemist outlets) in terms of SKUs and channel choices, communication to stores and trade incentive structures and strategies.. How best can we grow our larger packs (2, 4 and 6Kg) on Tide Plus? Again the options available are SKU choices, trade incentives, consumer promotions and communicating whats in it for the store.

Consumer Market Knowledge (CMK) P&Gs Consumer & Market Knowledge (CMK) Function champions the voice of the consumer and be on the forefront of market trends makes CMK Managers critical leaders on multi-functional business teams. What is the right portfolio strategy for P&G to win in laundry category in Tier-2 & Tier-3 segment? (total portfolio includes Tide Plus and Tide Naturals)
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Pointers to determine the portfolio strategy:

What are the trial drivers of Tide Naturals and Tide Plus? How can we use these to ensure differentiation across portfolio? What are the trial barriers of Tide Naturals among the tier-2 & tier-3 laundry users? How do we design our portfolio strategy overcome these trial barriers? What are the key reasons for a current Tide Plus user not to downgrade to Tide Natural? (Understand different needs of the design segments) What is the right Sizing/pricing strategy for portfolio to minimize cannibalization and drive competitive conversion? What is the right channel strategy to drive total portfolio?

Product Supply (PS) P&Gs Product Supply creates value in the supply network every day. PS is uniquely positioned to lead the supply chain from end to end this position, along with their broad-based supply network mastery, accelerates their ability to create and build value for P&G, our customers, and our suppliers. 1. 2. 3. 4. As we keep growing the Naturals business, what is your recommendation so that you help reduce/ maintain the Total Cost for Tide Naturals? (Refer Table 1 from Appendix ) What is the Production Innovation needs/requirements (Packaging design, features, performance etc) to ensure lower costs? How will you do the supply planning so as to ensure that the demand forecast is serviced effectively? Does the Supply Network design facilitate the agility needs (Plant-DC-DepotCustomer-Retailer-Shopper-Consumer)? What Capacity to Demand ratio would we maintain? ( Refer Supply network in appendix ) What is the ideal inventory you would maintain at retailer, depot, distributor points

5.

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Finance and Accounting (F&A) P&Gs Finance & Accounting (F&A) Function is the custodian of shareholder value, wearing the business leadership hat, and guides the team into creating protable and sustainable businesses. In P&G, F&A works across every area of the business, both domestically and globally, leading business partners in the understanding and application of nancial concepts and techniques. For an initiative of this magnitude, there are various challenges to be overcome while meeting the shareholder objectives. The key aspects you need to address are: 1. Understand and build a P&L glide path up to 2015, highlighting the gross and net margins we would be making based on the portfolio and 4P strategy that we adopt, Price Setting Glide path for FY 2015 based on competitive pricing/trade terms/ commodities/ FOREX and product portfolio choices that we have made. 2. Assuming that the interaction between the top and remaining tiers is small, it is important to know how the P&L for the brand will look like until 2015. The xed cost component of the lines set up for is an inverse function of the sales. With every 10% of volume growth, the xed cost as a percentage of net sales will drop by 1% for Tide Naturals and 0.5% for Tide. But depending on the initiatives, marketing spends needed for generating awareness and trade spends for ensuring availability move in the positive direction as % of net sales. Marketing spends needed will grow by 6% for a 10% increase in sales, while trade spends will grow by 11% for a 10% increase in sales. 3. While P&G tries to explode the category by growing Tide, what competitive forces/ reaction should it gear up for? Identify the key internal and external risks for your growth plan of Tide. Information & Decision Solutions (IDS) P&Gs Information & Decision Solutions (IDS) Function spans across all the functions in P&G and leverages information to build relevant connections and drive better decision making. IDS expertise in deep knowledge of business operations and technology solutions to drive breakthrough Transformations. The store coverage at metros and Tier-1 cities is about 80% and we are reaching saturation. However, Tier-2 and Tier-3 areas have potential. Mobile penetration is increasing in India, and can present great opportunities if tapped well. A positive ROI for this increase is absolutely essential. The team is looking at solutions on mobile platforms as key-enabler, with the requisite back-end systems support. The important questions that need resolution are: 1. How do we use Mobile platform to increase the distribution coverage? 2. Can we use Mobile platform to generate more trials by consumers? How should we track this to measure ROI? 3. As we look at mobile platform, what will be the key challenges / potential issues? How can we plan to minimize/control them? What should be the real time data that needs to be reported/ tracked to ensure we achieve target ROI?
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Appendix
Table 1 - External Benchmarking: If we compare Tide naturals to the popular tier, we nd the following benchmark data. a. CFR Case Fill Rate (Service Levels) Case Fill Rate = cases received / cases ordered * 100 (%).It is a measure for the 'satisfaction' of the 'customer'. This satisfaction is not measured with the 'missed cases' measure. T&W Cost Transportation & Warehousing cost based on our supply network choice (Scattered Contract Manufacturing site model versus centralized plants in limited location and have depots across states) TDC = RM (Raw Material cost) + PM ( Packing Material Cost) + Plant Overhead + T&W PR - Process Reliability is a measure to understand how much product is manufactured and converted into sellable product (Net Production) during Scheduled Time at a set Target Rate Costs Raw Material Packaging Materials Plant Expenses Tide Naturals Vs Popular Brands Higher Higher Equal for contract manufacturing Higher for P&G Plant Higher Lower Higher Competitor plants in excise free zones Reason Superior raw materials Better Laminate used Higher people cost

b.

c. d.

Transportation & Wearhousing Cost Non Manufacturing Expenses Excise

*Representative Data

Competitor production take place in CM states across India

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Table 2 - Volume share by Detergent (2008-2011): Brand Washing Powder/Liquid Total Tide Tide Plus Tide Naturals Ariel Rin Surf Wheel Ghari 2008 - 09 10,15,73,567 7.0 7.0 0.0 4.9 4.6 10.5 21.2 13.5 2009-10 11,90,14,879 7.2 6.5 0.7 4.3 4.5 9.3 21.1 17.5 2010-11 13,16,53,604 11.0 6.7 4.2 4.5 5.6 9.3 20.3 18.5 2011-12 13,27,27,200 13.2 6.9 6.3 5.1 5.9 9.7 18.9 18.4 Current 5,73,43,542 14.9 7.5 7.4 5.2 6.5 9.9 17.6 18.5

* Nielsen Data; Data indicates % Volume

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Table 3 - Value Share by Detergent (2008 - 2012): Brand Washing Powder/Liquid Total Tide Tide Plus Tide Naturals Ariel Rin Surf Wheel Ghari 2008 - 09 6,79,86,161 8.6 8.6 0.0 6.2 5.3 12.2 19.5 13.2 2009-10 7,69,80,361 9.0 8.5 0.5 6.1 5.2 11.7 18.1 15.4 2010-11 8,43,76,940 11.3 8.3 3.0 6.4 5.6 11.5 17.9 17.3 2011-12 9,58,09,425 13.4 8.7 4.6 6.4 6.2 10.9 17.2 17.8 Current 4,54,90,146 14.9 9.3 5.6 6.1 6.8 10.8 16.7 18.1

* Nielsen Data; Data indicates % Volume

Table 4 - Cost Split for Tide: Tide Plus (1 Kg) Maximum Retail Price (MRP) %Retailer Margin (% MRP) %Distributor Margin (% MRP) %VAT (% Distributor price) %Manufacturing Cost (% sales realized after VAT) %Marketing Spend (%sales realized after VAT) %Trade spend (% sales realized after VAT)
* Representative Data

Tide Naturals (1Kg) Rs. 52 10% 6% 14% 80% 5% 8%

Rs. 92 10% 6% 14% 65% 10% 8%

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Table 5 - Find below details of Pricing/Grammage for 2012 Wheel (Rs/Kg) 42.5 44 42 Ghari (Rs/Kg) 43.5 44 43 Tide Plus (Rs/Kg) 90.9 90 92 Tide Naturals (Rs/Kg) 55.5 56 52 Rin (Rs/Kg) 55.5 78 77 Ariel (Rs/Kg) 178 175

Pack Sizes Rs. 10 Pack 500 Gm 1 Kg

* Nielsen Data; Figures as on December 2012

Table 6 - Find below details of Pricing/Grammage for 2012 Rs 10 Pack Wheel (Gm) Ghadi (Gm) Tide Natural s (Gm)
* Nielsen Data

Mar1 1 310 300

Jun11 290 280

Aug1 1 280 280

Oct1 1 300 265

Dec1 1 280 265

Feb1 2 265 255

May1 2 250 245

Jul12 235 235

Sep1 2 235 230

Dec1 2 235 225

290

270

270

240

240

220

220

200

190

180

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Illustration - P&G Indias Distribution System

Suppliers(
Domes&c( Supplies( (RMPM)( CM(

Plants(
FP(

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FWIP( FP(

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Customiza&on( Center(

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Repacking( Imported( Suppliers( (RM)( Wareh ouse(

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CM :- Contract manufacturing RM : Raw Material PM : Packing Material FWIP : Intermediate Product (Base Product sent for Packing )

FP : Finished Product DC: Distribution Centre FG: Finished Goods WIP: Work in Progress

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