The Hindu Business Line : Nirma's food foray

IT has been a tough year for the Rs 2,276-crore soaps and detergents maker, Nirma. Pressure, it looked like, was two-pronged. The detergent segment was under strain with the overall market size shrinking by nine per cent in volume terms, says Nirma's annual report for the year 2001-2002. Meanwhile, the toilet soap segment also recorded a de-growth of 12 per cent with a two per cent drop in realisations. In short, it was a double whammy.

Mr Hiren Patel, Director, Nirma

With its core business areas under unrelenting pressure, Nirma decided to open up another front and give impetus to its foods business by relaunching its two-year-old salt brand - Nirma Shudh. For a start, it reinforced its baseline - `A better product with better value for better living' - and its packaging. Emphasising the wholesomeness of his salt brand, Hiren Patel, Director, Nirma, says, "Sales contribution from salt may not appear significant considering the total turnover of the company. But Nirma Shudh salt has received a good response in the market. It is vacuum-evaporated unlike other brands which are sun-dried in the salt fields and then refined. The vacuum evaporation process removes all unwanted material and impurities to give the salt its purest form. The entire process, right from pumping of seawater to the packing of salt in polybags, is free of human intervention.''

Despite Patel's endorsement of the salt's quality, the fact is that every time Nirma has tried to get into new product categories, it has never quite managed to make a dent in the market. Says Nikhil Vora, Portfolio Advisor, Alchemy Stockbroking Ltd, "Whenever Nirma has tried to get into new areas, it has not met with any success. In fact, it has never managed to go beyond soaps and detergents. Even its pilot project into retailing has not really taken off."

Nirma's strong association with the VFM (value for money segment) has possibly been its biggest impediment while venturing into new areas, especially when it intends going up the value chain. Also, new forays into fast moving consumer goods have to be spearheaded by new brands - an initiative which Nirma has been unwilling to undertake. It expects to piggyback on the strength of the Nirma brand in other categories as well.

Industry analysts underscore the importance of choosing the right name for a food brand. Considering the `Shudh' brand already stands for a detergent (The Tatas already have a detergent brand by the name of Shudh), having a salt brand under the same brand name can be a futile exercise as it may not gain acceptance. Besides, sharing the same distribution network with detergents may not be a wise move since the distributor concerned has already made his margins selling Nirma's detergents and is not necessarily concerned about pushing or stocking its salt. Under these conditions, Nirma's move to get into foods or even personal care products in the future has to be carefully considered by it, say analysts, before a launch. Says Jagdeep Kapoor, Managing Director, Samsika Marketing Consultants, "Foods is a sensitive market and any brand name has to be carefully chosen," adding, however, that the company has the expertise to make a foray into any FMCG category. A detergent brand name can never stand for a food brand and vice versa and unless Nirma takes the trouble to develop new brands for its new FMCG forays, it cannot possibly think of having the same success it has had in its detergent business.

Considering it has never enjoyed any success for its brand extensions in the past, like those for toothpaste and matchsticks as they all nestled under the Nirma umbrella, the company does not seem to have learnt from its mistakes in the past. According to a marketing analyst, "It wasn't that the products were poor but the problem lay in branding. After using Nirma as a detergent and a soap, consumers were sceptical of using an oral product such as toothpaste that identified with Nirma." But the company is still not committed to creating more brands to enter other FMCG categories. In spite of introducing a new `sister' brand, Nima, in 1999, Nirma has believed in umbrella branding. Elucidates Anil M. Naik, Chief Executive, Sudit Consultancy Services, a strategic consultancy firm, "Nirma has to look at a totally different brand and not brand extensions, as it decides to get upmarket in its offerings."

According to industry observers, Nima was introduced as an offering for the upper middle class but Nirma could never leverage the brand since it was more of a brand extension or rather a sub-brand of Nirma and never enjoyed a standalone status as a separate brand. Claims Patel, "Nirma and Nima are treated as sister brands although they are marketed through parallel distribution channels. Both are treated as separate profit centres. Today the company is committed to umbrella branding which has its inherent advantages which in any case outweighs the disadvantages. It is a proven success and even multinationals have resorted to this strategy."

Patel is confident that Nirma can make a success of every FMCG category it enters. Say he: "The company has amply demonstrated its manufacturing skill, marketing strength and distribution reach as a FMCG company. In fact, we have segments yet to be explored in soaps and detergents. Today, the food segment looks exciting and is worth noticing, and so is personal care. However, we do not propose to enter any category which is processed and perishable."

Besides, he says, Nirma also has the added advantage of owning its own supermarkets under the Radhe chain of stores. Although it stocks a host of other brands, pushing its own brand through these stores in Ahmedabad itself is an added bonus for the company. At present, there are three stores under the Radhe name in Ahmedabad, but there may be plans to stretch its `super' retailing project to other States in the future. Also, its decision to stay away from processed food seems to be a wise one. Focusing on staples could well be its strategy for the food segment in the future. Observes Subash Ramachandran, General Manager, SM Foods, "As long as Nirma sticks to basic commodities, it should be all right. Nirma should avoid getting into hard core value-added FMCG products and should try out only the staples market."

Nirma Shudh has already clocked a turnover of Rs 16 crore this year. The saree maker, Kunwar Ajay, with its Dandi brand of salt from the same State intends to cross a Rs 100-crore turnover this year, in spite of launching its brand much after Nirma Shudh.

Whether Nirma is willing to take lessons from its competitors remains to be seen. Meanwhile, Patel declares, "Salt will be a distinct business.

We aim to be a major foods player within the next two years. Be it a product or a segment, Nirma believes in creating markets."

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