Premium Brands Are Driving Growth Of India’s Detergent Market

Premium brands, including Surf Excel, Comfort, Tide, Ariel and Henko, are driving growth for makers of personal care products. And that has come at the expense of mid- and mass-market offerings.

Consumers are opting for premium detergent brands as there is very little price difference between a mid and a premium brand, Dhanraj Bhagat, partner (consumer and retail) at Grant Thornton India LLP, told BloombergQuint over the phone. Ad campaigns to push costlier and branded detergents have also helped push sales, he said.

The Rs 28,298-crore detergent market is growing at an annualised rate of 7 percent, according to Euromonitor International. That growth in the last three years has been driven by the higher-priced segment.

Share of costlier, branded detergents jumped from 15 percent in July 2016 to 22 percent in December 2018 in the overall Indian market, according to Hindustan Unilever Ltd.’s data cited in the report. The contribution of both mid- and mass-market categories declined.

When GST rates were reduced on detergents, HUL cut prices of premium detergents, bringing down the difference with the mass segment, said financial advisory Phillips Capital (India) Pvt. Ltd.

HUL, in an analyst meet in June, acknowledged the shift. The firm’s mass segment has lost 1 percentage point share, it said, adding that as smaller affordable packs gain momentum, consumers are opting for premium detergent brands in typically Rs 5-10 packs.

“If you look at our total premium portfolio (detergents), it continues to grow at a rate faster than the average (detergent segment),” Sanjiv Mehta, chairman and managing director at HUL, said after the earnings for quarter ended June. While the pace has slowed from what it used to be in the past, he said, it’s still growing faster than the overall detergents category.

The potential to grow in the premium detergent category is immense as penetration of washing machines is low in India.

As of March 2018, only 11 percent of Indian households owned a washing machine, according to a report by government-backed India Brand Equity Foundation. Production of washers rose 5.1 percent in 2017-18, with fully-automatic machines garnering an increased market share due a fall in prices and higher disposable incomes. The market size stood at 5.8 million units, according to the report, and is expected to grow in double digits.

HUL has been gaining from the shift. The company expanded its consumer base in the automatic detergents and fabric conditioners segment with its brands Surf Excel Matic and Comfort Fabric conditioners, Euromonitor International said in its country report.

Last year, HUL launched a ‘matic’ variant under the mass-market Rin brand for top-loading washing machines. Even a regional company like Rohit Surfactants Pvt. Ltd., the maker of Ghadi detergent, launched a Ghadi ‘Machine Wash’.

According to Ullas Kamath, joint MD at Henko maker Jyothy Laboratories Ltd., “Urban market buys premium detergents as it is a part and parcel of their monthly requirement.” Sales have jumped on offers like ‘buy two, get one free’ and increasing penetration of washing machines, he said.