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-
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