Late mover Advantage

Written by Viveat Susan Pinto | Updated: Mar 24 2009, 06:24am hrs
Who said that advantage belongs to the first mover alone Since severing ties with partner JL Morrison & Co three years ago, Nivea India, the 100% subsidiary of the global cosmetics and toiletries company Beiersdorf AG, has managed to push its brands into the top-three league in their respective categories.

Of course, Nivea woke up to the potential of the Indian market a little later than its European peers such as LOral India, which had formed a subsidiary in 1994 and posted a turnover of Rs 600 crore in 2007. Following the promoter groupsHamburg-based Beiersdorf, that istilt towards emerging markets, the need to take charge of matters here became imperative.

JL Morrison & Co was the Indian franchisee for Nivea, managing distribution of its products such as the Nivea Crme, the flagship cold cream, in the country.

The groups fully-owned subsidiary became operational by end 2005-early 2006, says Soma Ghosh, marketing director, Nivea India. By 2007, the company had taken over modern-trade distribution from JL Morrison. In 2008, we took over general-trade distribution too.

This meant investing in a full-fledged team, investing in a network etc. The effort paid off with its turnover increasing from Rs 40 crore in calendar year 2006 to Rs 63 crore in 2007 to over Rs 100 crore in 2008. It is a fraction of what category leader Hindustan Unilever Ltd (HUL) clocks in its personal products segment.

In calendar year 2008, for instance, the fast moving consumer goods giant saw revenues of Rs 4,328.84-crore coming from its personal products segment alone. This is the second-best in terms of performance following soaps and detergents, which achieved revenues of Rs 7,868.37 crore in the same period.

Even as Nivea seems an upstart to HUL in terms of revenue, what is worth noting is how the company has been trying to bounce back into the consumer consciousness with its line-up of products. Controlling distribution has been one part of the strategy, coming out with intelligent products that target specific need gaps, backed by the right amount of noise and association, has been the other.

I think what worked for us over the last few years has been our innovative products, says Ghosh. Nivea, for the record, has almost 70 products in its portfolio at the moment in India spanning mens and womens face care, mens grooming including care, cleansing and shaving, deodorants, lipcare, cold creams and body lotions.

Of this, the company has already managed to push its brands into the top-three league in categories such as deodorants, mens face care, premium fairness creams, cold and moisturising creams, lip care, toners etc (check chart for details). Though in the top three in categories such as lip care and toners, our value share for the month of December 2008 wasnt very large. We would like to take that up, says Ghosh.

That is an objective that the company has set for itself this year and it seems to be working in that direction. According to Nielsen data, the company has increased its value share from 8.9% in December 2008 to 10.2% in January 2009 in lipcare in the all-India urban segment. Our aim is to consolidate our position this year, says Ghosh.

To achieve this, the company will focus on improving its existing line-up rather than getting into new categories altogether. We will launch extensions within our existing categories, maybe relaunch products if required to stay relevant. But we will not aggressively get into new categories this year, says Ghosh.

Though most of Niveas products are from its international portfolio, Ghosh claims that there are separate researchers working on products for Asian and European skintypes. We dont mix the two, she says. Our research laboratories are based in Hamburg. But we have separate teams working on products for Asian and European skintypes, she reiterates.

Inputs provided by the team here and constant study of the market to understand requirements is what Ghosh claims is helping it be ahead of the curve. There is no denying that the Indian consumers need to upgrade to better products is what is also driving up market share for the assortment presented by Nivea.

The premium end of the roughly Rs 3,000-crore skincare market in India is growing by about 15-20% year-on-year, say analysts. This has been on for some time now, says Pankaj Gupta, practice head, consumer and retail, Tata Strategic Management Group. Most skincare companies including HUL have been responding to this growth with products targeted at the premium end of the market.

For Nivea, its legacy of being a premium European brand seems to be working for it in India, say analysts. It has managed to adapt to Indian conditions without compromising on that premium positioning. I think that is what is driving the consumers to it, says an analyst based in Mumbai.

Ghosh herself makes no bones about the fact that Nivea has this certain mass-premium tag attached to it. We are not targeted at the lowest common denominator, she says.