PARADIGM, VOL. 3, NO. 1, JANUARY - JUNE, 1999, 32-44

Marketing Strategy of Family Business in FMCG Sector Indian family business is moving thro11gh a transition phase. Before liberalisation , Ind11stn; was tightly controlled by the government and demand 11sually exceeding supply. In most of the sectors , there was s11ppliers market. Only resource which was scarce was finance. This will change after liberalisation . I have taken five companies which have developed core competency in FMCG Sector and compared thelr strategy with HLL. These companies are Dab11r, Marica, Pam;, Nirma & Godrej. Indian companies should shift their priority from finance and prod11ct ion to marketing in FMCG sector. Indian companies sho11ld tn; to launch a prod11ct in each segment, tn; to p11t their effort in managing the brands, improve their distribution network, tn; to compete head on with MNCs in premi11m brands, take advantage of information technology to keep track of the market and should follow contracting 011t strategy seriously in order to increase flexibility in the market.

SRINIVAS SHIRUR*

Post liberalisation, family business will be facing competition from MNC's and professional companies. There is lot of speculation going on as to the survivability of family business due to the onslaught of global competition. It is necessary to undertake sectorwise analysis of Indian industry to conclude the ability of family business to succeed in the market. This study will analyse the role of family business in FMCG and its future scope in the FMCG industry. The penetration of the family business in the FMCG sector is lower than that of professional companies. A MARG survey found no family business manufacturing in the top ten FMCG segment. However, five of the 10 biggest consumer durable goods were made by Indian family businesses. Market share of family business in consumer nondurable sector is only 40% as compared to 80% in the consumer durable sector. Rate of growth of consumer non durable goods was 3.8% in 1981-85, 6.4% in 1985-90 and 9.4% in 1990-91. With the

Faculhj in BLS Institute of Management , CCS University.

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33

liberalisation of Indian economy, and growth of Indian consumerism, there is high potential in this sector. More and more commodities which were previously sold as generic products were getting branded. This has become possible because of increase in eamirg power of the middle class. The Middle class are now looking for quality products and they are willing to pay a premium for better quality which the branded products are able to deliver. Family businesses can succeed in this sector only if they can succeed in changing their strategies and mind set. Family business should understand the unique characteristics of this sector and adapt themselves accordingly. Before analysing the role of family business in FMCG sector, it is necessary to state the prerequisites for succeeding in FMCG industry.

SUCCESS FACTORS IN FMCG SECTOR 1)

The FMCG industry is usually the most dynamic sector of the economy because of the fact that consumer taste, technology, government legislation and international competition can change the scenario within a short time. In order to succeed in this market, it is necessary to have a well defined product line and product mix. Companies active in FMCG industry should have realistic information about their product life cycle. Company should rapidly launch new products and periodically review pruning. Success of the company depends on how well they can manage their product portfolios. The main reason for failure of family business in FMCG sector is the high rate of failure of new products. One study by Keving Clancy and Robert S. Schulman has stated that the new product failure rate in packaged goods is estimated at 80%. Except for few family businesses, others don't have effective organizational arrangements for successful new product development. In FMCG industry, where consumer tastes keep changing and degree of loyalty is low and technology is changing rapidly, the successful launch of a new product is a very costly affair and rate of success is low. Recent changes in the market have reduced the return on new products.

2)

Intense competition is leading to market fragmentation. Companies have to aim their new product at smaller market segments, which can mean lower sales and profits for each product. Product life cycle is getting shorter. When a new product is successful, rivals are quick to copy it. FMCG industry has very low barriers to entry and it is difficult to create barriers to entry in FMCG industry through patents. The degree of consumer loyalty towards any one brand is also decreasing, which increases the uncertainty in the FMCG industry.

3)

Products in FMCG cost a very small proportion of the consumers income and have a very low involvement in purchase. Consumer's tendency is to increase value by increasing benefit rather than low prices.

4)

Managing supply chain is very difficult in the case of FMCG sector as the products move fast from the shops and as consumers are not that much brand loyal, consumers shift to other brands if they find the company's brand is not available. Therefore, the Company should have sound sales chain management so that there are no stock outs.

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5)

Rather than efficiency or technology base, major competency required to succeed in FMCG sector is local responsiveness. This can be generated only if a company is close to the customer. That is the reason why professional companies contract out manufacturing to other companies and concentrate only on the marketing aspect.

6)

The FMCG industry has powerful tiger competitors like P&G, HLL etc. who react swiftly and strongly to any assault on their terrain. FMCG industry requires flexibility on the part of management because launching a new product or pruning any existing product is not easy, as lot of vested interest and sentiments are attached. Success in this sector is guided by how well the management can understand the customers needs and ways to satisfy it. This requires not only flexibility but also high level of marketing skills, which most of the family businesses lack. Historically, family businesses have excell~d in getting licenses and have been working in a protected economy. To change their mindset and work according to changing customer need is a totally new game for family business. Family business also fear that acquiring marketing skill may mean transfer of power from family members to professionals who have adequate technical knowledge and skill of marketing. Family business are also reluctant to empowerment of managers which is essential because launching of a new product requires rational logic steps like Idea generation, Idea screening, Concept development and Testing, Marketing strategy development, Business analysis , Product development, Market testing and Market research and Commercialisation. Most of family businesses are dogmatic and sentimental in their heir approach when it comes to pruning a product which is in the declining stage of its life cycle, they waste resources in keeping the product alive.

In order to analyse the approach of family business towards FMCG sector we distinguish between two set of companies. On the one hand, top five family houses have been analysed which have core competency in FMCG sector. They are l.

Dabur

2.

Nirma

3.

Marico

4.

Muragappa

5.

Godrej

On the other hand, five companies have been analysed which have failed to develop any competency in FMCG sector. 1.

TATA

2.

BILT

3.

B.K.BIRLA

4.

RELIANCE

5.

BAJAJ

MARKETING STRATEGY OF FAMILY BUSINESS IN FMCG SECTOR

35

BACKGROUND OF FAMILY BUSINESS In order to succeed in any sector of the economy, a company should have competitive

advantage. According to Peter.D.Bennet, competitive advantage exists when there is a match between the distinctive competitiveness of a firm and the factors critical for success within its industry. For developing this competitive advantage, a company should implant new advantage required to succeed in that sector deep within its organization. Hence strategic intent, growing out of ambition and obsession with winning is very important, because few competitive advantages are long lasting. Keeping score of existing advantages is not the same as building new advantages. The essence of strategy in FMCG sector lies in creating tomorrow's competitive advantage faster than competitors can imitate the one you have possessed today. An organization's capacity to improve existing skills and learn new ones are the most defensible competitive advantage of all. If we analyse the core competency required for success in the FMCG industry with the core competency available with family business, we can find the reason for low share of family business in the FMCG industry. Firms create value for their buyers by the activities they perform. In the FMCG sector, core competency is required in the area of marketing. Margins

Support Activi ties finance

HRD

Technology Development Procurement

R&D

Manufacturing

Marketing

Out bound Logis tics

Primary Activities

At the top of the diagram are supporting activities. At the bottom are primary activities which create values. At present family business has the following value chain with core competency in finance .

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Support Acti vi ties Marketing

HRD

Technology Development Procurement

Monufacturng

Finance

Out bound Logistics

Primory Activities

The main advantages which a family business has in India is its ability to raise finance through capital market, public sector financial institutions, community network and through dummy banks. It is through deeper knowledge of finance by karta of the family, he is able to control the diversified portfolio of companies. In the process of controlling the business, karta fears delegating his authority to professional managers which is very important for success in FMCG sector since changes in this sector are quite rapid and only the decision taken by managers who have in-depth knowledge of the market, target consumers and its positioning and the distribution channels will succeed in the market. In family business, all decision-making processes are centralised, hence whenever changes in policies are required, they have to be referred to the karta. This delays the decision, which makes family business uncompetitive in FMCG industry. In order to succeed in FMCG sector, family business must gain core competency in marketing through rapid introduction of product line, optimum extension of product line and pruning of products according to the requirements and analysis of the consumer behaviour with the help of marketing research. For effective execution of such duties, powers should be delegated to professional managers which is totally a new way of doing business for family-owned companies. Professional companies concentrate all their management efforts in marketing by contracting out manufacturing to other companies. In contrast, most of the family businesses are still concentrating on product aspect which takes lot of management effort leaving very little time to concentrate on the marketing aspect. Though all family businesses use marketing strategy i.e., adopting their product to marketing condition by right mix of 4 P's i.e., product, price, place and promotion. While implementing it, they have hardly used 4P's in an integrated way. Firstly, all the Indian companies have targeted the lowest segment of the market. They targeted those consumers who were initially consuming generic products.

MARKETING STRATEGY OF FAMILY BUSINESS IN FMCG SECTOR

37

Secondly, major effort of Indian family business is penetration of the market as deep as possible by selling at the lowest price, by using all types of distribution channels available. Although this has benefited the company in the short run but has reduced the flexibility of the company to adjust to changing market conditions. Thirdly, Indian companies depend more on sales and trade promotion rather than creating brand value. The only reason a consumer buys such products is its low price. As the income of consumers increases, they shift to better quality products. Although in India, we don't have powerful supermarkets like Walmarts, K-Marts etc., hence there is no threat of private brands. But it seems that Indian brands are performing a function nothing more than that of private brands of USA. Fourthly, a problem which the Indian family business is facing is that, although they use marketing strategy, they hardly use strategic marketing. By strategic marketing we mean assigning top priority to marketing function and integrating other corporate functions to satisfy consumers' needs in a much better way than other competitors. For succeeding in FMCG sector, organizations should develop core competency in marketing and should develop marketing policies which are flexible and which are able to adjust to new environment changes with minimum of friction. The most important attribute required to succeed in FMCG industry is to introduce new products rapidly according to consumers needs. Given the fact that the rate of failure in FMCG sector is as high as 80%, it is also necessary to prune some brands. It requires quick decisions. Products in FMCG sector face the threat of imitation. Although brands can be registered, but unlike in drugs, electronics etc., products are rarely patented. Hence imitation is a normal feature and no law can stop it. Imitation is also easy in FMCG sector. The only way to face the threat of imitations is the rapid launch of products before the competitors as the product life cycle get shortened. Another unique characteristic which Indian companies have to take into consideration is that innovation of new products in FMCG sector is comparatively cheap and easy as compared to innovation of a new product. But to transfer a product into a successful brand, the company has to incur heavy expenditure on marketing. In FMCG sector, expenditure on marketing the product is most risky. It is necessary therefore that companies should have core competency in marketing. It is ironic that eventhough the major advantage of family businesses in India is their

understanding of the Indian market and consumers, but they have failed in exactly the same sector where the understanding of the market and consumer is most important. The main reason is the rigid mindset of the family business. The only way in which they can succeed in this sector is by changing this mindset. Basically family business has moved ·through the following stages. STAGES OF FAMILY BUSINESS

Family businesses usually move through four stages before they are finally able to acquire core competency in marketing as proposed by KEARNEY CONSULTANTS. Stage 1: Entrepreneurial : Key decision-making is being handled by an individual. Management process is informal and works well when an organization is small. Communication is of a personal nature.

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Stage 2: Functionally Specialised: As the family business becomes large, entrepreneurial business is converted into functionally specialised departments. Companies have tight financial control, structured around a comprehensive budgeting and control process. Bureaucratic focus is internally on budgeting results rather than externally on customers and competitors. In this stage, which most of family businesses are functioning at present, core competency is in finance i.e., its availability to raise resources and invest the resources to earn profit. Such companies concentrate on efficiently producing the product. But they do not have the ability to withstand external threats. There is no thought given about strategy formulation. Only budgetary control is the main focus in functionally specialised organization. Most of the family business members are trained in finance rather in marketing. Even the tools used by family businesses for launching the products are crude. They use intuition and common sense when taking marketing decisions instead of using rational tools of marketing decision rather than concrete tools of marketing, consumer behaviour and market research. Companies concentrate on efficiency at the cost of effectiveness. Stage 3: Process driven: Companies have achieved excellence in one or more areas of their business. In those areas, they apply non-financial performance measures to drive management decisions rather than rely solely on budgetary performance. Companies have long term planning with formal objectives focused on just managing current performance. Stage 4: Market driven: As the company becomes market driven, it has to install strategy formulation and implementation machinery. This is needed because the company now enters those sectors of the economy where changes in the market are rapid due to changes in consumer demand, competitors strategy, government policies etc. In order to succeed in such an industry like FMCG industry, the company should be flexible enough to be able to adapt to external environment. Requirement of timely information and its use becomes important for survival in this industry. Companies blur the traditional functional organizational structure found in tht. 0ther stages and refocus their management around key business process. As a company evolves towards stages 3 & 4, it is able to master the external challenges. This implies the setting up of customer oriented business process team of comprehensive measurement and controls to monitor company performance along strategy driven, rather than just financially driven. Most of the Indian family businesses are in the second stage of their evolution. But to succeed in FMCG sector they have to become market driven. Let us first analyse five companies which have never tried to develop core competency required to succeed in FMCG industry. Despite that Tata and Bajaj have tried to enter this sector in a small way. Tata is the biggest and most diversified group of India with total assets of over Rs.40,000 crores and turnover of Rs .35858. But Tata group has failed to maintain its competitiveness in FMCG industry. It has divested TOMCO and Lakme. The only products of FMCG sector where Tata group has any market share is Tata salt, tea and coffee. Salt is contributing only 1% of total Tata sales and Tea is contributing 8%. In products like salt and tea,

MARKETING STRATEGY OF FAMILY BUSINESS IN FMCG SECTOR

39

consumer taste does not change frequently. Hence managing these two products is not very difficult. But still Tata salt was taken aback when Captain Cook salt was introduced . Tata is still vulnerable in FMCG sector. Tomco was not able to compete against P & G, HLL and Colgate Palmolive and it was divested by Tata. Similarly Lakme is facing difficulty with companies like ELLE-18, Avon etc. Henceit is also being divested . As far as L M Thaper, BK Birla and Reliance are concerned, they have till date kept themselves out of FMCG industry. Bajaj has Bajaj Sevashram, but it is contributing only 1% turnover of the Bajaj group of industries. Bajaj has never tried to give high priority to Bajaj Sevashram and has not expanded the product line and neither have they tried to invest in a new product line like Dabur and Marico have done. Now let us analyse those companies which have tried to develop core competency required to succeed in FMCG industry and have entered this sector in a big way. Murugappa Group: It is one company which has done quite well in the FMCG sector. FMCG sector contributes 15% of the total turnover of the company. Parry Confectionery achieved a turnover of Rs.131.17 crores. It has decided to build brands in a low involvement and low unit cost product category which have helped it become the market leader. As sugar is the most important input of Parry Confectionery, hence capacities and efficiencies apart, one critical factor for the company's success is the company's relatioRs with cane growers. EID Parry works with cane growers in its defined area by offering them advice on better cultivation practices, developing high yield cane plantlets and ensuring that they receive their payment within 10 days of supplying cane to the company. Parry Confectionery is the leader in this sector. The major advantage which Murugappa is able to enjoy is the synergetic relation with other companies in the group. For example, when Parry confectionery wanted to make its own machines as none were available in India, then the company took the help of expertise of Tl's cycle division. Murugappa has invested substantially in upgrading its manufacturing facilities. It is also emphasising on people. Over the past two years, the time spent on training has increased by four times. Murugappan are having low debt/ equity ratio which shows that Murugappa group believes in long term survival. Murugappa group have their own threats and weaknesses. Muragappa group is controlled by the family through several investment companies and cross-holdings between group companies. Delegation of power to professional managers is of utmost importance which the company at present may not be willing to give. Return on capital employed (ROCE) of Parry confectionery's at 16.24% is substantially lower than Nutrine's 35%. Though this is due to substantial investment made by the group in upgrading its manufacturing facilities. Hence Parry confectionery is a star of Murugappa group which will be needing a lot of cash inflow to maintain its position. Godrej: It is a major player in the FMCG sector. Godrej is active in soaps, hi-care, foods and oil palm konkan. FMCG sector's turnover contributes 25% to the total Godrej group turnover. Godrej has introduced Total Quality Management (TQM) in Godrej soaps in

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1995, which is being used as a key to improve its processes. In product development, TQM's objective was to reduce the time between concept and commercialisation by redesigning processes. Initially information flows between its marketers and innovators used to get clogged, delaying efforts at both ends. By 1996, this anomaly was corrected by creating concurrent processes through which product development, market research and manufacturing take place simultaneously and not sequentially. Consequently, product development time has crashed by 50%. Godrej has used its marketing skill quite well. It has spent upto Rs.100 crores or. advertisement in 1997. It has premium brands in its kit like Cinthol, Evita, Crowning Glory, Vigil and Marvel. Although Godrej Soaps Oleochemicals is doing very well whereas Godrej Soaps - Soaps is losing its market share. It means that Godrej is serving as a manufacturing base for other companies to share its manufacturing base without the risk or expense of having to build brand shares. In the long run, Godrej may lose if they don't concentrate on building the brands. Its ROCE of 14.25% stands poorly in comparison with Nirma (23%) and Marico (35%). In the Rs 4000 crores soap market, the Rs.607.40 crores Godrej soap has a market share of 8% compared to HLL's intimidating 70%. HLL has 16 soap brands compared to Godrej's. Hence HLL is able to generate economies of scale in Manufacturing, Marketing and Distribution. To overcome this handicap, Godrej collaborated with P & G. But serving as a manufacturing base for P & G was a quick route for Godrej soaps to increase its manufacturing share without the risk or expense of having to build its brand . This was a short term view taken by Godrej. But the collaboration broke down on 1996. P & G walked away with the company's sales and distribution infrastructure. In order to strengthen its distribution channel, Godrej has acquired the Rs.204 crores household insecticide maker Transelektra domestic products (now Godrej hi-care) and two brands, Jet and Banish mosquito-repellant mats. It has a distribution network comprising 1.20 million outlets which is now being used by Godrej soaps. The success will depend on how clearly it is able to position its brands in order to generate competitive advantage. Only by creating a brand image Godrej can compete with professional companies as well as with down market competitors. Marico: As a division of Bombay Oil Industries, Mariwala family reached the conclusion that as a mere division, the c01;::pany may not be able to adopt to changing market conditions. Marico was formed in 1990, when the consumer products division of Bombay Oil Industries was spun off as a separate company. In the first year of its operations, it crossed the Rs.100 crore mark with a profit of Rs.4.5 crore. Marico registered a turnover of Rs.152 crore in 1991-92 with a profit of around Rs.6 crore. In the later years, the profit was knowingly 'sacrificed' for achieving higher volumes, market shares and in creating new infrastructure in respect of a corporate centre, R & D centre and manufacturing plants. Marico 's mission aspired that it would be in the FMCG business. Marico had set a goal of one new product a year. It has innovatively used its product and positioning policy. In the case of Parachute coconut oil, the company concentrated on marketing small packs rather than 15 kg tins which was the norm with other companies. It had a clear cut positioning policy of giving a distinct identity to the brand with purity, clarity and aroma. For the first time, a coconut oil seller in India had thought of advertising. Professional managers from

MARKETING STRATEGY OF FAMILY BUSINESS IN FMCG SECTOR

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HLL were appointed . As a result, in the 90's even though Parachute was charging a premium price it was still able to capture 51 % of the market share as compared to 9% by TOMCO. Saffola edible oil was positioned as a cholesterol level reducing and health beneficial oil as it reduces the risk of heart attack. It was for the first time that an edible oil had taken a health platform and Saffola was promoted aggressively through doctors. Literature on heart care, medical and cardiac conferences and heart care campus were used as fora to create awareness ofSaffola's cholesterol reducing properties. Recipe books on cholesterol reducing diets were freely circulated and mailed to potential users. From a very small market demand for Safflower oil, this two-pronged strategy of mass education and doctor detailing virtually created a captive health oil segment for Saffola. Marico also pioneered the movement from tin packs to HDPE packs in the vegetable oil segment. Saffola and Sweekar combined have 14% of the market share in refined edible oil brand in an industry where 40% of the market is captured by local brands and NDDB's Ohara has a 20% market share. In 1991, Marico launched Hair and Care, a non-sticky hair oil. By Dec. 1991 its market share was 13%. Within one year Marico had spent around Rs.2 crore in advertising this brand and in creating a franchise for this product. Meanwhile, Marico had put together a team of formulation chemists, nutritionists, and packaging technologists to provide an impetus to product development activities in the laboratory. Marico tried to enter other fields like tooth powder, groundnut oil and packaged pulses, but failed due to lack of sufficient product development work. There was no department devoted to the task of product development for understanding the technology and translating them into manufacturing skills. Quality was not given high importance. Marico also faced difficulty in attracting talented people eventhough Marico was part of Bombay Oil Industries Ltd. Marico is concentrating on quality management, computerisation and organizational development. Simultaneously with the activity of setting up a quality laboratory and the staffing of such a department, Marico tied up with Quimpro Consultants, the Indian affiliate of Juran Institute, USA, to launch the Juran quality improvement programme. It realised that if it had to respond with speed and alacrity in the market place, it needed to deal with virtually on-time information. Its current systems were geared to providing historical information and therefore, its response in the market place was relatively slow. It felt the need to invest in computers and information technology so that this became a distinctive competitive edge for it. It spent Rs.80 lakhs to modernise its software and hardware. Marico also worked on an organization-development programme. It was aimed at creating an apolitical, stress-free work environment, in which people worked with a sense of ownership and belonging. Marico believed that if this is to inform you could create such a culture, other companies would find it hard to poach management talent from it. Marico visualised this as a major threat with the opening up of the Indian economy.

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Dabur: Within Dabur, the family will be taking a back seat in the company's running. The goal set by Dabur is to achieve a turnover of Rs.2000 crore by the year 2003. The main driver of Dabur's growth will be in things like hair care products (Amla Hair Oil or Vatika Hair Oil and Shampoo), oral care products (Binaca and Red toothpowder) and herbal tonics (Chyawanprash and Restora). In the past five years, Dabur grew at a compound annual growth rate of 27% per annum, its sales rising from Rs.316 crore in 1993-94 to Rs.811crorein1997-98. The major drawback of Dabur is its supply chain from buying of the raw materials to the selling of finished goods to the retailer. For FMCG companies, this is the most critical aspect of business. Dabur has hired consulting firm Mckinsey & Co. last year primarily to fix its internal processes spanning the five aspects of supply chain management viz., demand forecasting, production planning, logistics, order processing and procurement planning. In these processes Dabur benchmarked itself against other FMCG companies like Marico, Cadbury India, HLL and Reckitt & Coleman. HLL, for example tracks the number of times its clearing & forwarding (C & F) agents fail to restock dealers (it happens only once in 10 attempts.) Dabur didn't even know the number of times its dealers returned empty handed. Dabur's working capital cycles were inordinately high. Compared to an industry average of 60 days, Dabur had a working capital cycle of 160 days. Similarly, Dabur's return on capital, at 20% was far less than industry average of 45%. Dabur is also upgrading its forecasting tools. Dabur is now using three monthly forecasts, where the projections for one month are fixed while others are tentative. Dabur is investing heavily on information technology. Over the past three years, it has invested Rs.15 crore on hardware and software. All Dabur branches and godowns are connected by employee-mail to its Sahibabad headquarters, which gets information updates on the movement of stocks every 24 hours. Earlier, information from frontlines took 15 days to reach Sahibabad. One main advantage which Dabur is having over others, which hardly any other family owned FMCG is having is strong brand image of its product in the minds of the consumers. Dabur has taken advantage of this, extending its product line as well as its product mix by entering new fields like fruit juice and masala. Other four companies under study are facing problems in building their brand image. Nirma: It is a company with a turnover of Rs.758 crore in 1997 and profit of Rs 106 crore. Its ROCE is 32%. Nirrna is the king of the detergent sector. The 1.5 million tonne market is growing at an annual rate of 12%, thrice the rate of soap, and the market is broadly segmented on the basis of price. One reason for this category's dynamism is that everybody in India hasn't adopted detergents yet. Penetration level for bath soaps is 98% as compared to 80% in detergents. The economy powder segment today accounts for 70% of the entire detergents market in India (by volume) and Nirma's share in this segment at 55% is more than twice of HLL's 25%. In the premium segment, HLL has a share of 45% and P&G has a share of 30%, as compared to 10% share of Nirma. In future, the share of economy powders in detergents markets will certainly decrease. This will certainly affect Nirrna's market share adversely. As consumers income increase,

MARKETING STRATEGY OF FAMILY BUSINESS IN FMCG SECTOR

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they will certainly move from spray dried detergents to compact detergents where Nirma is weak. At present compact detergents market share is only 50%, but certainly its market share will increase as more and more women move to working outside. Nirma is depending on cost competitiveness. They are going for the backward integration and building plants to produce Linear Alkyl Benzene (LAB) and Soda Ash. These are costly items and fluctuation in price is high. But Nirma is concentrating on the production aspect rather than to actively consider entering upmarket and directly competing with HLL and P&G. When Nirma launched its products in the 1980's at one-third of the price of Surf, HLL launched Wheel to counter that move. But Nirma has hardly launched any brand in the premium segment. Nirma has also taken the advantage of brand extension in the past but that will have a major constrain in entering the premium segment. Nirma is considering foreign collaborations and bringing foreign brands to enter the premium segment, but failure of the collaboration between Godrej and P&G does not give a bright picture to Nirma. Entering the premium segment requires creating a brand based on unique benefits and position. This game is totally new to Nirma. In the case of soaps, where HLL has a share of 65% and has brands for each segment, Nirma has only 10% market share. Unlike detergents where share of the economy segment is 70%, in the case of soaps it is only 35%. Soap sector is only growing at 4%. Hence threat in this sector is more than in detergents. Nirma is ambitious in the soap sector also. Nirma has recently launched Nirma lime fresh to directly compete with Liril. Nirma has been working towards getting itself an image of premium personal care products marketer, although it didn't get very far with Nirma Bath, Nirma Beauty and Premium. The only way it can succeed in the premium segment is by dropping the policy of unnecessary brand extension, especially when people already perceive Nirma as a downmarket product, it will be difficult to penetrate the premium segment unless it builds different brands for different segments. This is possible only if Nirma concentrates on marketing aspects rather than production. Only then it will be possible for Nirma to reach all segments and regions of India. CONCLUSION

1)

Indian FMCG family business have concentrated on price factor to increase value rather than concentrating on benefit aspect. As the household income increases, demand elasticity for FMCG products will become inelastic and it will make sense to concentrate on benefit aspect of the product.

2)

Most of the family businesses in FMCG sector have concentrated on downward market and moved upscale only to save their position in the downmarket. Family businesses basically compete with generic products, whether it is in edible oil, hair oil, soaps, detergents or confectionery. Professional companies usually concentrate on upmarket and downscale the product line when competitors from the lower segment try to compete with their products. For example, HLL, which has launched Wheel in order to compete with Nirma.

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3)

Professional companies are concentrating on marketing. They have subcontracted the production to other manufacturers. HLL is using small manufacturers as production base as P&G used Godrej as manufacturing base. They only concentrate on R & D and quality aspect of production. In contrast, family business is heavily involved in production aspect of the products. Instead of competing with generic products, they should get ready to compete with professional companies by concentrating on marketing by even divesting production to release resources which can be used to create brands, strengthening supply chain and developing a coordinated product development mechanism.

4)

Empowerment of professional managers will be of strategic importance. Only then can information move with speed and decision be taken swiftly. Managers in the field should be given powers to take tactical decisions according to the situation without loss of time, especially in releasing the sales promotion funds.

5)

Most of the family businesses in FMCG sector are regionally concentrated. Instead of building a national brand like professional companies, they have wide diversity in the way people perceive the brand image regionally. Dabur is strong in the east but weak in north. Nirma is strong in west but weak in south. Nirma is strong in rural areas but weak in metros. Marico is strong in west and weak in north. Parry is very strong in south but weak in other regions. Godrej is strong in west but weak in other regions. In order to take advantage of economies of scope of the marketing cost, it is necessary that all the segments and all the regions are targeted. Only then will family businesses be able to survive in FMCG sector.

REFERENCES: Business India : Survey of 100 Indian companies; November 3-16, 1997 A & M: Smriti Jacob, Soaps and Detergents; August 1998 Business Today: Sixth Anniversary; 1997 Michael Porter: From competitive advantage to corporate strategy, Harvard Business School Press 5 B Budhiraja & M B Athreya, Cases in Strategic Management : Tata McGraw Hill Publishing Company Ltd. Delhi 1997