lever brothers internship report
TRANSCRIPT
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Internship Report On
Competitive Strategy AnalysisAnd
Strategic ResponseFor Detergent Brands At
Lever Brothers Bangladesh Limited
Submitted To
Mr. Shama E Zaheer
Lecturer
Institute of Business Administration
Submitted By
Sami Ashraf
ZR 46BBA 8
thBatch
June 5, 2004
Institute of Business Administration
University of Dhaka
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June 5, 2004
Mr. Shama E Zaheer
Lecturer
Institute of Business Administration
University of Dhaka
Dhaka
Subject: Letter of Transmittal.
Dear Sir,
I, Sami Ashraf am hereby submitting my internship report. The last 10 weeks has been the
most fabulous learning experience for me. Without your guidance and help this learning
experience would not have been the way it has been.
I have tried my level best to come up with as well written and informative report as possible.
However, because of the confidentiality policy of Lever Brothers Bangladesh Limited it has
not been possible to put as many data and information as I would have liked to.
Hope you enjoy reading the report just as much I enjoyed writing and working for the
report.
With Regards
Sami Ashraf
ZR46
BBA 8thBatch
Institute of Business Administration
University of Dhaka
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Acknowledgements
This report would never have been the way it is without the help and guidance of thefollowing people.
I thank Mr. Shama E Zaheer for all his help, guidance and suggestions and above all the
precious time that he spared for me on a regular basis.
I also thank Mr. Ahmed Zakaria Baig, my supervisor in Lever Brothers Bangladesh Limted
for guiding me all the way till the end.
A special thanks goes to Mr. Sharaman Jha for providing me with invaluable insights about
P&G.
I also thank all the countless others who helped me with data, information and analyzing
them properly.
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I
Executive Summary
Lever Brothers Bangladesh Limited is a dominant name in the Household and PersonnelCare products market of Bangladesh. It is said that to go to the top is tough but to stay there
is even tougher and Lever Brothers Bangladesh Limited has been successfully doing that
extremely tough job of staying at the top for a long time now. They always work very hard to
identify any threat in the market and find a way to neutralize that threat before it is too late.
Recently in the premium segment of detergent powder arch rival of Unilever, Proctor &
Gamble has been posing a great threat with their brand Ariel and is expected to come to
Bangladesh market with as much as 25% reduced price. This is learning that Lever Brothers
Bangladesh Limited has learned from P&Gs strategies in India and other emerging markets.
This will predominantly be a fight between Ariel of P&G and Surf Excel of Unilever.
However, logically it will not be easy for P&G to come to this market with such a reduced
price as they do not have any production facilities in Bangladesh. If they are to import the
detergent from India, which they have been doing, then after paying import tax the margin
left with them will be simply too less. If they still come with a discounted price then they willhave to rationalize their advertisement and other promotional expenses, which will make it
tough for them to, sell a detergent, which is not very well known in the market. Also, P&G
is currently not being able to supply enough of their flagship detergent brand, Ariel in India
because of lack of production facilities. In a situation like this, it will be next to impossible
for them to export detergent in Bangladesh before they expand their production facility.
However, currently they are setting up new production facility in India and is expected to
complete work by July after which they might come to Bangladesh with a price cut.
Lever Brothers Bangladesh Limited will on the other hand take all necessary steps to if not
prevent P&G from coming into Bangladesh at least make it a little tough for them to come
in. It is suggested that as a pre-emptive measure, Lever Brothers Bangladesh Limited should
cut down the cost of Surf Excel and at the same time do some heavy conventional and un-
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II
conventional media advertising. Also as and when P&G comes in with Ariel, Surf Excel
should do certain activities like line filling and other temporary promotional activities which
will make it little more difficult for P&G to get a foothold in Bangladesh.
Surf Excel also has a high brand equity on the other hand Ariel is a detergent which is
almost unknown to the Bangladesh market. This advantage if utilized properly can work for
Surf Excel and Ariel can be made to look like a copy Surf Excel brand.
Many information used to work out the strategies discussed in this report are highly
confidential and hence could not be used in the report. Also some data used in this repot are
not actual and have been fabricated intentionally to maintain confidentiality.
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III
Table of Contents
Description Page Number
Report Preliminaries
Executive Summary I
Table of Contents III
List of Figures VI
Introduction VII
Background of the Report VIII
Area of the Project VIII
Scope IX
Objective IX
Methodology X
Limitation XI
1. Organization Part 1
1.1 Overview of LBBL 1
1.2 History 2
1.2.1 Unilever 2
1.2.2 LBBL 4
1.3 LBBL at a Glance 71.4 LBBL Credo 8
1.5 Unilever/LBBL Corporate Purpose 9
1.6 LBBL Mission 10
1.7 LBBL Goals 10
1.8 LBBL Code of Business Principles 11
1.8.1 Standard of Conduct 11
1.8.2 Obeying the Law 11
1.8.3 Employees 11
1.8.4 Consumers 111.8.5 Shareholders 12
1.8.6 Business Partners 12
1.8.7 Community Investment 12
1.8.8 Public Activities 12
1.8.9 The Environment 12
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IV
1.8.10 Innovation 12
1.8.11 Competition 13
1.8.12 Business Integrity 13
1.8.13 Conflict of Interests 13
1.9 Current Operations 14
1.10 Markets served by LBBL 16
1.11 Distribution Network 18
1.12 Strategies 21
1.12.1 Functional Level Strategy 21
1.12.2 Business Level Strategy 21
1.12.3 Strategy in Global Level 22
1.12.4 Corporate Strategy 23
1.13 Organogram 24
2. Detergent Market 26
2.1 Fabric Wash Market 27
2.1.1 Soap Market 29
2.1.1.1 Ball Soap Market 29
2.1.1.2 Mechanized Laundry Soap Market 29
2.1.2 Detergent Market 30
2.1.2.1 Mass Market 30
2.1.2.2 The Mid Tier Market 31
2.1.2.3 Premium Tier 32
2.2 Target Demographics 33
2.3 Form Competition 35
2.4 Existing Strategy 36
3. Competitor Analysis 38
3.1 Categories & Brands 39
3.2 P&G Billion Dollar Brands 40
3.3 P&G Strategic Choices 41
3.4 P&G Core Strategies 42
3.5 P&G India 43
3.6 P&G Bangladesh 44
3.7 Roll Out 45
3.7.1 Strategy 45
3.7.1.1P&G Global Strategy 45
3.7.1.2 P&G Strategy in Emerging Markets 46
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V
3.7.1.3 P&G Strategy in India 48
3.7.2 Timing 53
3.7.3 Possible Cost After Price Cut 55
4. Lever Brothers Bangladesh Limited Response 57
4.1 Pre-emptive Strategy 58
4.1.1 Price Cut 58
4.1.1.1 Timing of the Price Cut 59
4.1.1.2 Surf Excel Cost Post Price Cut 60
4.1.2 Heavy Mass Media Advertising 61
4.1.3 Below The Line Campaign 62
4.1.4 Move into District Towns 63
4.1.5 The Mass Segment?? 64
4.2 Pro-active 65
4.3 Reactive 66
4.4 Brand Equity 67
4.4.1 Wheel 67
4.4.2 Surf Excel 67
4.4.3 Ariel 67
4.4.4 Tide 67
5. Recommendations 68
6. Conclusion 70
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VI
List of Figures
Description Page
Number
Figure 1: Distribution Chain of Command 18
Figure 2: Organogram Up to Director Level 24
Figure 3: Organogram Brands & Development Function 25
Figure 4: Fabric Wash Market 26
Figure 5: Three Tiers of Detergent Market 28
Figure 6: P&G Price Cut 49
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VII
Introduction
Everyday just like we brush our teeth and take a bath, we wash our clothes as well. LeverBrothers Bangladesh Limited has been providing the nation with quality fabric wash
products for almost 40 years now. However, high quality products cost higher than ordinary
products and with the kind of limited income our mass people has, it has not always been
possible for them to use these products. Still the effort goes on to provide mass people with
quality fabric wash products at a reasonable price.
The latest technology in Fabric Wash is the Enzymatic Detergent Powders from Unilever
and Proctor & Gamble. They call this category of detergents, Top Clean category.
Unilever has a strong presence in Bangladesh with their Top Clean brand Surf Excel where
as P&G presence with their Top Clean brand Ariel is not very significant. As one would
guess, Top Clean category detergents comes with a Top Price as well which makes it even
less accessible to the mass. Recently, both Unilever and P&G has decided not to charge a
premium any longer on this category of detergents in the emerging markets of Asia which
they used to do to offset the huge R&D costs incurred in developing these detergents. This
recent strategic shift has made this market highly competitive and in some regions of AsiaUnilever and P&G are having street fights after they both slashed their prices by as much as
25%. It is expected that the fight will very soon hit the Bangladesh market. Although in
paper it seems unlikely that the fight will be an even one (Due to nominal presence of P&G
in Bangladesh market) still Lever Brothers Bangladesh Limited will not take any chance with
P&G.
In this paper P&G strategies in different parts of the world are analyzed with special
emphasis on their strategy in India. Based on the learnings from these strategies and counter
strategies, a detail strategy for Lever Brothers Bangladesh Limited will be suggested.
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VIII
Background of the Internship Program
As part of Internship requirements, ten weeks organizational attachment with an
organization is required. After joining Lever Brothers Bangladesh Limited as a Management
Trainee in the Brands and Development function I was assigned to the Fabric Wash Team
with particular focus on the premium category detergent which is Surf Excel. My first
assignment was to investigate the strategies of P&G globally, in emerging markets and
particularly in India. Based on the findings, future strategy of P&G in Bangladesh was
sketched out a possible response by Lever Brothers Bangladesh Limited was suggested.
This was a very extensive study and this is what this report is on.
It may be mentioned here that, the data and other information used in this study are
confidential and hence a lot of them could not be used in this report. Some data used in this
report are not actual and have been intentionally fabricated to maintain confidentiality as per
the policy of Lever Brothers Bangladesh Limited.
Area of the Project
The area of the project has been confined to the Fabric Wash market only with special
emphasis on the premium segment.
The whole project is on what the strategy of P&G will be regarding their premium brandAriel which belongs to the premium detergent segment and the response of Lever Brothers
Bangladesh Limited with their premium brand Surf Excel. However, the mass detergent
market have not been ignored while working out the strategies which will be evident in the
report.
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IX
Scope
The scope of the report is limited to the Fabric Wash market only. While doing the
competitor analysis, only Proctor & Gamble have been analyzed with special emphasis on
their premium category brand, Ariel.
While formulating the response strategies of Lever Brothers Bangladesh Limited, strategies
have been worked out only for their premium category brand, Surf Excel. However, their
mass-market brand Wheel has not been ignored while formulating the response strategy or
while analyzing the market.
Objectives
The objectives of the report are as follows:
1. Analyze P&G strategies in their detergent category Globally.2. Analyze P&G strategies in their detergent category in the Emerging Markets of Asia.3. Analyze P&G strategies in their detergent category in India.4. Predict future P&G strategy in their detergent category in Bangladesh.5. Formulate Lever Brothers Bangladesh Limited response to these strategies.
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X
Methodology
All the analyses are done based on secondary information. The sources of information used
to analyze P&G strategies are:
1. Unilever archive2. Lever Brothers Bangladesh Limited Archive.3. Market Research Information from Bangladesh.4. Market Research Information from India.5. Market Intelligence from Bangladesh.6. Market Intelligence from India.7. The Internet.8. Past experience of Unilever.
The sources of information used to formulate strategies for Lever Brothers Bangladesh are:
1. Past strategies from Unilever archive.2. Past strategies from Lever Brothers Bangladesh Limited archive.3. Market Research Information.4. Market Intelligence Information.5. Production information of Surf Excel.6. Sales information of Surf Excel.
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XI
Limitations
The only limitation faced is, Lever Brothers Bangladesh Limited is not a listed company in
any stock market of Bangladesh as a result of which, they do not disclose ANY financial
information to the public. This has compelled to exclude the financial analysis section from
this report.
Also this being a conservative organization, do not allow any other information or data
belonging to Lever Brothers Bangladesh Limited to be disclosed to anyone outside this
organization.
By policy, Lever Brothers Bangladesh Limited do not disclose any financial, research,
production or sales data to anyone outside the organization or even inside the organization
who do not have proper authorization. Because of this policy it has not been possible to
include the data and other information used to analyze different strategies and work out
strategies for Surf Excel and Lever Brothers Bangladesh Limited in this report. Most of the
data used in the report are not actual and have been fabricated to maintain confidentiality as
per the policy of Lever Brothers Bangladesh Limited. Any inconvenience is regretted.
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1. Organization PartPage 12of 84
1. Organization Part
1.1 Overview of Lever Brothers Bangladesh Limited
Lever Brothers Bangladesh Limited is a subsidiary of Unilever, worlds one of the largest
Household and Personnel Care and Foods Manufacturer with an annul turnover of 47Billion
Euro or approximately 3,20,000 Crore Taka. Lever Brothers Bangladesh Limited is the
leading Household and Personnel Care producer in Bangladesh with 15 brands and
numerous sub-brands. They have been here in this country for the last forty years and have a
huge manufacturing facility in Kalurghat, Chittagong aside from six other third party
production facilities.
Its offices are located in:
Registered Office Lever Brothers Bangladesh Limited
51 Kalurghat Heavy Industrial Area
P. O. Box # 125
Chittagong 4000
Bangladesh
Corporate Office Lever Brothers Bangladesh Limited
ZN Tower
Plot No. 2, SW (1)
Road No. 8
Gulshan 1
Dhaka 1212
Bangladesh
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1. Organization PartPage 13of 84
1.2 History
1.2.1 Unilever
Unilever is one of the largest fast moving consumer goods companies in the world. Its roots
go back more than a century!
Margarine was first produced commercially in the Netherlands in the 1870s and by 1927 two
early manufacturers, Jurgens and Van den Bergh, decided to merge their operations to form
Margarine Unie. Meanwhile, in the UK, William Hesketh Lever founded his company, Lever
Brothers, in 1885 and soon established soap factories around the world. In 1917, he began to
diversify into foods, ice cream, acquiring fish, and canned food businesses. The Unilever
Group came together in 1930 through the merger of Margarine Unie and Lever Brothers.
Since then Unilever has operated as one.
With a portfolio comprising of Home and Personal Care and Foods products, Unilever
today operates in more than 100 countries across the world. Unilever is, in every sense, a
truly multi-local multinational company. With deep roots into the local cultures in which it
operates. Unilever offers brands suited to local tastes. Every day 150 million people choose
our brands to feed their families, groom themselves and clean their homes!
Some Facts about Unilever
Worldwide turnover in 2003 was 47,700 million Euros
Employed 247,000 people, with 90% of managers locally recruited and trained. Over half of Unilever's sales are generated by its foods division brands.
In many parts of the world Unilever leads the home care market with brands such as
Brilhante, Comfort, Skip and Omo.
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1. Organization PartPage 14of 84
Unilever's top personal care brands include Lux, Ponds, Sunsilk, Rexona, Axe, and
Dove
In 2002 Unilever spent 1,166 million Euros on research and development - about 2.4%
of its turnover.
Unilever spent 69 million Euros on community programs in 2002.
Unilever aims to source all fish from certified, sustainable fisheries by 2005.
Unilever has 111 sites certified to the international environmental management standard
ISO 14001.
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1. Organization PartPage 16of 84
In the early 90's Lever Brothers entered the tea-based beverage market introducing Lipton
Taaza, Lever's flagship packet tea brand, with the objective to be the most preferred tea of
the Bangladeshi consumers.
The appetite to innovate and grow was insatiable. New products such as fabric washing
powders were manufactured for the first time with formulations technically suitable for
conditions in Bangladesh at an affordable price. Such washing powders led the country to
witnessing a revolutionary change in washing habits moving from direct application to
significantly convenient solution wash.
Product formulations were of international standard and by tapping into the vast know-how
base of the parent Company - Unilever, Lever Brothers was able to make the productsavailable to the consumers at an affordable price. The growth of the company provided
ample employment opportunities both direct and secondary with attendant fillip to the
economy of the country.
Focused on meeting and responding to the needs of our consumers in Bangladesh, the
journey to grow and the quest for excellence continue unabated!
Brief History of Brand Launches by Year:
1964 Lifebuoy
1964 Lux
1972 Wheel Laundry Soap
1982 Sunsilk
1987 Close Up1987 Vim
1989 Clear
1988 Fair & Lovely
1990 Lipton Yellow Label
1991 Ponds'
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1. Organization PartPage 17of 84
1991 Pepsodent
1992 Taaza
1993 Surf Excel
1997 Wheel Washing Powder
2002 Clinic
2002 Rexona
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1. Organization PartPage 18of 84
1.3 Lever Brothers Bangladesh Limited at a Glance
Constitution : Unilever - 60.75% shares, Government ofBangladesh - 39.25%
Operations : Home and Personal Care, Foods
Product Categories : Household Care, Fabric Cleaning, Skin Cleansing,
Skin Care, Oral Care, Hair Care, Personal
Grooming, Tea based Beverages
Top Brands : Wheel, Lux, Lifebuoy, Fair & Lovely, Pond's,
Close Up, Sunsilk, Lipton Taaza
Manufacturing Facility : We have a Soap Manufacturing factory and a
Personal Products Factory located in Chittagong.
Besides these, there is a tea packaging operation in
Chittagong and five manufacturing units in Dhaka,
which are exclusively dedicated to Lever Brothers.
Employees : Over 4000 people are provided direct employment
through our factories, distributors, and exclusive
manufacturers.
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1. Organization PartPage 19of 84
1.4Lever Brothers Bangladesh Limited Credo
Several product categories.Various brands. Numerous variants and pack sizes
The choices are endless.
We provide wide ranging options to fulfill diverse
aspirations and tastes.
We tailor our products to satisfy our consumers with
different needs and means.
We span the country covering hundreds of thousands
of outlets.
The wide range of products and brands we offer are a
realization of the simple universal fact different
individuals have different needs.
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1. Organization PartPage 20of 84
1.5 Unilever/ Lever Brothers Bangladesh Limited Corporate Purpose:
Unilevers purpose is to meet the everyday needs of people everywhere. To anticipate the
aspirations of their consumers and customers and to respond creatively and competitivelywith branded products and services which raise the quality of life.
Their deep roots in local cultures and markets around the world are their unparalleled
inheritance and the foundation of their future growth. They bring their wealth of knowledge
and international expertise to the service of local customers a truly multi-local
multinational.
Their long-term success requires a total commitment to exceptional standards of
performance and productivity, to working together effectively and to a willingness to
embrace new ideas and learn continuously.
They believe that to succeed requires the highest standards of corporate behavior towards
their employees, consumers and the societies and world in which we live.
This is Unilevers road to sustainable, profitable, growth for their business and long-term
value creation for their shareholders and employees.
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1. Organization PartPage 21of 84
1.6 Lever Brothers Bangladesh Limited Mission
The mission of Lever Brothers Bangladesh Limited is:
Continuous effort to meet the everyday needs of people everywhere
1.7 Lever Brothers Bangladesh Limited Goals:
1. To manufacture high-standard products.2. Promoting products to the highest extent3. Producing large volume to achieve production cost economies.4. Enabling quality products to be sold out at obtainable prices.
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1. Organization PartPage 22of 84
1.8 Code of Business Principles
The following Unilevers business principals are also applicable for Lever BrothersBangladesh Limited.
1.8.1 Standard Of Conduct
They conduct their operations with honesty, integrity and openness, and with respect for the
human rights and interests for their employees. They will similarly respect the legitimate
interests of those with whom they have relationships.
1.8.2 Obeying The Law:
Unilever companies and their employees are required to comply with the laws and
regulations of the countries in which they operate.
1.8.3 Employees:
Unilever is committed to diversity in a working environment where there is mutual trust and
respect and where everyone feels responsible for the performance and reputation of their
company. They will recruit, employ and promote employees on the sole basis of the
qualifications and abilities needed for the work to be performed. They are committed to safe
and healthy working conditions for all employees. They will not use any form of forced,
compulsory or child labor. They are committed to working with employees to develop and
enhance each individuals skills and capabilities. They respect the dignity of the individual
and the right of employees to freedom of association. They maintain good communications
with employees through company based information and consultation procedures.
1.8.4 Consumers:
Unilever is committed to providing branded products and services which consistently offer
value in terms of price and quality, and which are safe for their intended use. Products and
services are accurately and properly labeled, advertised, and communicated.
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1. Organization PartPage 23of 84
1.8.5 Shareholders:
Unilever conducts its operations in accordance with internationally accepted principles of
good corporate governance. They provide timely, regular and reliable information on our
activities, structure, financial situation and performance to all shareholders.
1.8.6 Business Partners:
Unilever is committed to establishing mutually beneficial relations with our suppliers,
customers and business partners. In their business dealings they expect their business
partners to adhere to business principles consistent with their own.
1.8.7 Community Involvement:
Unilever strives to be a trusted corporate citizen and, as an integral part of society, to fulfillour responsibilities to the societies and communities in which they operate.
1.8.8 Public Activities:
Unilever companies are encouraged to promote and defend their legitimate business
interests. They co-operate with governments and other organizations, both directly and
through bodies such as trade associations, in the development of proposed legislation and
other regulations, which may affect legitimate business interests. They neither support
political parties nor contribute to the funds of groups whose activities are calculated to
promote party interests.
1.8.9 The Environment:
Unilever is committed to making continuous improvements in the management of their
environmental impact and to the longer-term goal of developing a sustainable business. They
work in partnership with others to promote environmental care, increase understanding of
environmental issues and disseminate good practice.
1.8.10 Innovation:
In their scientific innovation to meet consumer needs they respect the concerns of their
consumers and society. They work on the basis of sound science applying rigorous standards
of product safety.
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1. Organization PartPage 24of 84
1.8.11 Competition:
Unilever believes in vigorous yet fair competition and supports the development of
appropriate competition laws. They conduct their operations in accordance with the
principals of fair competition and all applicable regulations.
1.8.12 Business Integrity:
Unilever does not give or receive whether directly or indirectly bribes or other improper
advantages for business or financial gain. No employee may offer give or receive any gift or
payment, which is, or maybe construed as being, a bribe. Any demand for, or offer of, a
bribe must be rejected immediately and reported to management. Their accounting records
and supporting documents must accurately describe and reflect the nature of the underlyingtransactions. No undisclosed or unrecorded account, fund or asset will be established or
maintained.
1.8.13 Conflicts Of Interests:
All Unilever employees are expected to avoid personal activities and financial interests,
which could conflict with their responsibilities to the company. They must not seek gain for
themselves or others through misuse of their positions.
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1. Organization PartPage 25of 84
1.9 Current Operations:
Existing Products
Home Care
Laundry
1. Wheel Laundry Soap
2. Wheel Washing Powder
3. Surf Excel
Household care
1. Vim Scourer
2. Vim Bar
3. Vim Liquid
Personal Care
Skin Cleansing
1. New International Lux
2. Lux Body Wash
3. Life Buoy Extra Strong
4. Life Buoy Neem
5. Life Buoy Gold
6. Life Buoy Liquid Gold
Skin Care
1. Fair & Lovely
2. Fair & Lovely Body Fairness Milk
3. Fair & Lovely Ayurvedic
4. Fair & Lovely Cold Cream
5. Ponds Snow
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1. Organization PartPage 26of 84
6. Ponds Cold Cream
7. Ponds Vanishing Cream
8. Ponds Dream Flower Lotion
9. Ponds Dream Flower Talc
Hair Care
1. New Sun Silk Shampoo
2. All Clear Shampoo
3. Clinic Plus Shampoo
Oral Care
1. Close-up Gel Toothpaste2. Pepsodent Toothpaste
3. Pepsodent Toothpowder
Deo
1. Rexona Deo Spray
2. Rexona Roll-on.
3. Rexona Tube Deo
Foods
1. Lipton Yellow Label Tea Bag
2. Lipton Taaza
3. Lipton Taaza Tea Bag
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1. Organization PartPage 27of 84
1.10 Markets Served by Lever Brothers Bangladesh Limited
Lever Brothers Bangladesh Limited serves all kinds of markets. Its product mix actuallycaters for almost all types of markets. Following is a detail of the types of markets served.
Broadly speaking, the distribution network of Lever Brothers Bangladesh Limited is vast and
reaches all sorts of markets on at least twice a week basis. They serve markets in:
1. Urban areas.
2. Sub-urban areas (small towns).
3. Rural markets.
Out of the total number of retailers in Bangladesh (the total number has been provided by
AcNielsen Bangladesh Limited by a census conducted last year) Lever Brothers Bangladesh
Limited reaches more than one third of them directly at least twice a week. The other half
that is not covered directly are predominantly, small tea shops, small retailers in the deep
rural areas like Chittagong hill tracks and unrelated retail outlets like clothes stores etc. So it
is evident that there is not much scope for Lever Brothers Bangladesh Limited to expand its
direct coverage as almost all related and economically viable outlets are already covered.
The types of outlets that are covered directly are:
1. Grocer stores.
2. Wholesalers.
3. General stores.
4. Tea stalls.
5. Cosmetic stores.
6. Super stores.
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1. Organization PartPage 28of 84
The few retailers who sell Lever Brothers Bangladesh Limited products but are not served
directly are served by the wholesalers which make this channel very important. The company
also gives considerable importance to the wholesalers and from time to time special trade
promotional activities are done specifically for the wholesalers. One suck kind of activity is
known as Dosti Program. However, the detail of Dosti program is outside the scope of
this report and hence is not elaborated further. This is basically a summary of the markets
served by Lever Brothers Bangladesh Limited.
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1. Organization PartPage 29of 84
1.11 Distribution Network
Distribution of Lever Brothers Bangladesh Limited products is done by the Customer
Management Department. It is a huge network with thousands of field workers working sixdays a week. It is through their relentless effort that the goods reach the end consumers. The
basic structure of distribution is as follows:
Figure 1:Distribution Chain of Command
DirectorCustomer Management
Regional Manager
Area Manager
Territory Manager
Distributor
Sales Supervisor
Delivery ManDistributors Sales
Representative Cashier
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1. Organization PartPage 30of 84
The Customer Management Director is the head of the sales or Customer Management
team. Apart from others, the regional managers reports directly to him. The whole of
Bangladesh has been divided into five regions based on geography and sales volume. The
regions are,
1. Central Metro Region (Dhaka).
2. Central Outer Region (Dhaka).
3. Eastern Region (Chittagong and Sylhet division).
4. Northern Region (Rajshahi Division).
5. Southern Region (Khulna and Barisal Division).
Each or these regions have two or more areas headed by the area manager who reports tothe regional manager. Each area has three or more territories which are headed by the
territory manager who reports to the area manager. The territory manager has his office in
the distribution house of the area (in case of multiple distribution house in one territory he
usually sits in a central location) and mans an army of sales supervisors, distributors sales
representatives, cashiers and delivery men.
The Territory Manager is an employee of Lever Brothers Bangladesh Limited but below him
the distributor and others are simply distributors employees. When a company becomes
distributor of a certain territory, it has to sign a contract where it says that the distributor will
have to employ certain number of people in each trade (i.e. cashier, supervisor etc.) and the
number of people in each trade will be advised by the territory manager of that particular
territory. The day to day work plan of these people will also be set by the territory manager
although they will be supervised by the sales supervisor who will report to the distributor
and Territory manager.
This contract also says that there will be a room in the distribution house to be used by
Lever Brothers Bangladesh Limited employees, primarily by the Territory Manager. In every
distribution house there is an issue of dual authority. The problem is the distributors sales
representatives, cashiers and delivery men reports to both the distributor and territory
manager which can potentially create problems. However, Lever Brothers Bangladesh
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1. Organization PartPage 31of 84
Limited do not consider their distributors as just a company or person working for them
rather they consider the distributors as partners in business where both have the same goal;
achieving greater sales volume. By doing this, now there are no issues regarding dual
authority and all the territories are running smoothly.
It may be mentioned here that, the distributors sales representative (DSR), cashier and
delivery man is one group. The DSR takes the orders from the markets, the cashiers collect
the payment as per order and based on orders and payment, the delivery man delivers the
goods to the intended retailers.
This distribution network is very vast and can reach literally any corner of the country any
day of the week.
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1. Organization PartPage 32of 84
1.12 Strategies
1.12.1 Functional Level Strategies:Lever Brothers Bangladesh Ltd follows different functional level strategies to gain
competitive advantages and sustain it in the long run in the matured industries.
They increase their efficiency through exploiting economies of scale and learning
effects. For example, 808,720 bars of soaps, 1,023,810 packets of detergent powders, 154,
430 toothpaste tubes and sachets, 329, 530 bottles and sachets of shampoo, 156, 910 tubes,
jars, bottles and sachets of creams and lotions, and 35, 000 packets of tea are produced in
one day in Bangladesh by Lever Brothers.
They adopt flexible manufacturing technologies, upgrade the skills of employees
through training and perform research and development function to design products that are
easy to manufacture. As a result, they can provide quality products at cheaper rate.
They have higher customer responsiveness rate. They carry out extensive research to
innovate new products and modify the existing products to better satisfy the consumers.
They continuously innovate products, promotional activities, packaging and
distribution. This way they can respond quickly to customer demands.
1.12.2 Business-Level Strategies:
Lever Brothers strategic managers adopt different business level strategies to use the
companies resources and distinctive competencies to gain competitive advantage over its
rivals. These are discussed below:
They follow cost-leadership strategy as they have intermittent over capacity and the
ability to gain economies of scale. This way they can produce cost effective products and yet
be profitable. Moreover, most of the LBBL products are designed for the mass. For
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1. Organization PartPage 33of 84
example, Wheel, Vim. As a result they go for mass production and marketing, therefore
achieve cost leadership.
They also follow differentiation strategy for some products to meet the needs of the
consumers in a unique way. For example, for Sun Silk Shampoo they have different
ingredients for different hair types.
They also target different market segments with different products to have broad
product line. By product proliferation they reduce the threat of entry and expand the range
of products they make to fill a wide variety of niches. For example, the Ponds brand has
snow, cold cream, vanishing cream, dream flower lotion, daily face wash and dream flower
magic talc and classic talc.
1.12.3 Strategy In The Global Environment:
Lever Brothers Bangladesh Ltd. is a multi national company. The main company is Unilever.
However, in Bangladesh it is named Lever Brothers Bangladesh Ltd. as the home and
personal care items are mainly sold in Bangladesh market. It follows some generalized
strategies and principals of Unilever. However, they also modify different strategies based on
the national conditions. The different strategies that they follow in the global environment
are stated below:
Unilever is a world wide famous company comprising internationally renowned
brands. They have unique strengths that allow a company to achieve superior efficiency,
quality, innovation, or customer responsiveness. Moreover, they have long-term experience
for running this business. The different policies and strategies Unilever follows and their
experience is transferred to Lever Brothers Bangladesh Ltd. For example, Unilevers
worldwide supply chain network helps LBBL to get supplies at cheaper rate as most of theraw materials are bought from foreign countries. These transferred distinctive competencies
gain LBBL competitive advantage.
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1. Organization PartPage 34of 84
They import the raw materials from the places where it is less costly, thus achieve
location economy. For example, they import the Fair & Lovely Fairness body milks cap
from France because it is cost effective.
They are locally responsive. They are always ready to improve and modify their
products to meet the needs of the local customers. For example, Sun Silk Mehendi is
especially designed for the local consumers, as there is demand for it.
LBBL follows a multi domestic strategy where the companies extensively customize
both their product offering and marketing strategy to different national conditions.
1.12.4 Corporate Strategy:
LBBL carries out the following corporate level strategies:
They involve in short term contracts and competitive bidding for the supply of raw
materials. For example, a French supplier on contract basis supplies the Fair & Lovely body
milk lotions cap. The similar case happens for distributors as well.
They have a diversified business. LBBL has both related and unrelated diversification.
They compete in nine different industries with various products from home care, personal
care and even food products. They have economies of scope as most of the products can
share the same manufacturing facilities, inputs and specially the distribution channels.
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1. Organization PartPage 35of 84
1.13 Organogram
Figure 2:Organogram upto director level
Chairman & Managing Director
Director
Brands & Development
Director
Customer Management
Director
Supply Chain
Director
Finance
Director
Human Resources
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1. Organization PartPage 36of 84
Figure 3: Organogram Brands & Development Function
Director Brands & Development
Development
Manager
Activation Manager Marketing Manager(Body & Fabric
Wash)
Media Manager
Market Research Manager
Asst. Market Research
Manager
SBM Lifebuoy & Vim
SBM Wheel & SXL
Management Trainee SXL
SBM Hair Care
SBM Rexona
SBM Fair & Lovely
SBM Ponds
SBM Tea
SBM Oral Care
Product
Development
Manager
Packaging
Development
Manager
Asst. Pkg.
Development
Manager
Rural
Activation
Manager
Outdoor
Activation
Manager
Events
Activation
Manager
Dental
Services
Manager
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2. Detergent Market
There has been a market for detergent in Bangladesh for decades but it is only recently
that this market has started to evolve towards a mature and prospective market. The
whole market is called fabric wash market which has two major divisions in it; the soap
market and the detergent market. The diagram below will explain it better.
Figure 4:The Fabric Wash Market
Fabric Wash Market
Soap Market Detergent Market
Ball Soap
Market
Mechanized
Laundry Soap(MLS) Market
Mass
DetergentMarket
Premium
DetergentMarket
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2.1 Fabric Wash Market
It is needless to say that this market has been there since the dawn of times. History sayspeople used to wash their clothes using certain home made detergents which changed
with new innovations and with time. Not too long ago the only thing people used to use
to wash their clothes is Ball Soaps. This was easy to make, a low technology product
which many people were able to make in their backyards and it was cheap. The raw
materials required to make this product was also readily available in the nature. It was
only in the mid 60s that a Mechanized Laundry Soap was first introduced in Bangladesh
in a mass scale. This was called Wheel and the first major challenger of the
predominant Ball Soap market. Then with time many other MLSs came into the market
and posed a challenge to the ball soaps. During this period another new form of fabric
wash product hit the market called Jet Detergent Powder. This was a government
owned venture which did not do much marketing activities and still was able to capture a
decent amount of the market primarily because it was something different and the
market looked at it as a up-market product. However till 1997 this was the only detergent
in the market but things were about to change very soon.
Lever Brothers Bangladesh Limited after doing some test marketing with a few
detergents decided to enter the detergent in grand style. A factory was established in
Tongi and the primary target was to become the number one detergent in the market.
The only major competitor for Wheel Washing Powder was the heritage brand Jet
Detergent Powder. Wheel became the number one detergent in the market surpassing
the decades old heritage brand Jet in just less than a year (in terms of volume). And there
started a fairytale journey for Wheel Washing Powder (WWP). Today WWP is more thanten times bigger than its nearest competitor, Jet. In the mean time seeing fairytale success
of WWP numerous other detergent brands entered into the market which are yet to
topple Jet Detergent Powder let alone WWP.
A few years later inspired by the success of Wheel Washing Powder, Lever Brothers
Bangladesh Limited decided to create a new category in the detergent segment mainly to
counter the imported detergent powders. There Lever Brothers Bangladesh Limited
introduced Surf Excel, its premium washing powder with break through formulation in a
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new platform; stain removal. Shortly after Surf Excel was introduced it also became the
leader in its category. This category was clearly distinguished from the existing other
categories in terms of pricing and the benefits offered. However, in terms of pricing the
current detergent market can be divided into three categories as follows:
Figure 5:Three tires of Detergent Market
From this diagram one would assume Jet is not a competitor of Wheel or Surf Excel but
in reality it is predominantly competing with Wheel Washing Powder.
Premium Segment
Mid-price Segment
Mass Market
Segment
Tk. 160+/Kg(Surf Excel)
Tk. 60-80/Kg(Primarily only Jet)
Tk. 35-45/Kg(Wheel, Square, Keya, Aromatic etc.)
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2.1.1 Soap Market
The soap market is the bigger market of the two ie. soap and detergent market. The soap
market have been there for ages and people are habituated in washing their clothes by
scrubbing it with soap. People have a common perception that the clothes do not clean
unless soap is scrubbed with considerable physical power and then the cloth is rinsed
against something hard. This is the main reason why still today there is such a big market
for soap. Another perception people have is that after soaking the cloth in detergent
solution extra soap needs to be put as top-ups in areas of tough stain such as the collar of
the shirt.
2.1.1.1 Ball soap market
More than two third of the soap market is ball soap market. Ball soaps are easy to make
and cheap. Also as they are very hard compared to their counterpart, Mechanized
Laundry Soaps, people have a perception that this soap cleans tougher stains better. In
the market there is no single dominant ball soap producer. Ball soaps are mainly
produced locally and sold at a very cheap price without much packaging. These soaps do
not have much perfume in them and have some basic detergency properties. They are
without any doubt much inferior to the mechanized Laundry Soaps but as they are
cheap, they sell a lot. Their volume share and value share are significantlydisproportionate to one another. The volume share is more than two third of the market
and value share is less than half the market. One kg of ball soap can cost as less as Tk.15
where as one 140gm wheel laundry soap costs Tk.9 or Tk. 64/kg.
2.1.1.2 Mechanized Laundry Soap Market
Mechanized laundry soap or MLS is a superior product than ball soaps. These soaps are
costly, have much higher detergency properties which means less soap is required, does
significantly less harm to clothes and hands than ball soaps, and as they are produced
mechanically, they are consistent in quality. These soaps also has perfume in them, nice
attractive packaging, most significantly, they come from known producers which assures
high quality products. The main draw back of these soaps is the price of the soap. As
mentioned earlier, MLSs costs around Tk. 55-65/kg as opposed to Tk. 15-20/kg for ball
soaps. People in general know that MLS is a superior quality product than ball soaps but
in most cases cannot afford MLS. When a person cannot eat twice a day, quality clean for
their clothes is never a priority.
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2.1.2 Detergent Market
The detergent market is very big in Bangladesh although smaller than the ball soap
market. As mentioned earlier, this is a three tier market with the lowest tier known as the
mass market tier being the biggest and the top tier being the smallest in terms of volume.
However in terms of value, the middle tier is the smallest. Below is a more detail look
into the three tiers.
2.1.2.1 The Mass Market
Wheel Washing Powder is the dominant leader in this market with market shares more
than all the other players combined. The total market size in terms of volume is
extraordinary and over the last few years the volume growth in this market has platued.
The rise of this market is a fairytale story which started in the mid nineties. For ages in
the markets of Bangladesh a single detergent powder had monopoly business. The
detergent powder is called Jet Powder. Jet almost became a generic name for detergent
powder. Very few others ever ventured into this market. It seemed like a market with no
future in it.
During the early nineties, Lever Brothers Bangladesh Limited started marketing theirpremium brand Surf on a test basis. After carefully evaluating the market, Lever
Brothers Bangladesh Limited finally decided to launch a mass market detergent powder
priced at half of what Jet Powder costs, and they named their detergent powder, Wheel
Washing Powder. The name Wheel was used to leverage from the already well
established Wheel Laundry Soap.
The initial target was to sell more than Jet Powder in three years time and to do so, the
people needs to be educated first. So they launched their new detergent powder and at
the same time spent humongous amount to educate the market or what is known as
market development. The result was mind boggling. In the very first year Wheel sold
more that Jet Powder in terms of volume and for six consecutive years Wheel grew at
more than 100%. Today, if Wheel is a hay stack then Jet is a pin in the hay stack. What
happened at the same time is seeing the incredible growth of Wheel, numerous other
detergent brands came into the market. Making detergent powder is not a very
complicated technology and it seemed like everyone was now making detergent
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everywhere. These brands became Me Too brands beside Wheel. None of them could
till date pose any significant challenge to Wheel although, all these brands combined
takes up a big chunk of the detergent market which is a concern for Wheel today.
This market is extremely price sensitive and most of the people are not soles detergent
powder users. They use either ball soap or laundry soap as a top-up on detergent. This
means, they first soak the clothes in detergent solution and while washing, they scrub
some parts of the clothes with a ball soap or a laundry soap and finally rinse the clothes.
Many of these people would like to upgrade to a better detergent like Surf Excel but due
to their monitory constrains they refrain from upgrading. However, occasionally some of
these consumers buy sachet of Surf Excel to be used on special clothes or during special
occasion.
2.1.2.2 The Mid Tier Market
This market predominantly belongs to Jet Powder, the heritage detergent brand of
Bangladesh. The market size of Jet has shrunk significantly and is today barely surviving.
However, Jet has a small but very loyal consumer group who are mostly using jet for
decades now and as they do not have too many complains, they are extremely reluctantto tryout other brands. Nevertheless, even then, there are some people who can be
intimidated into trying something better provided they are not required to pay too much
premium.
The main problem for Jet is, as they are increasingly becoming a smaller brand with
everyday passing, their visibility in the market place is also decreasing. There will be a day
when that loyal consumer group to Jet will find it difficult to find Jet in the marketplace.
This will ultimately lead to these people trying out other brands and this is a fact that,
there are better brands than Jet Powder in the market. Also, the bigger competitors of Jet
from other categories will one day squeeze Jet Powder out of the market. What happens
to Jet in the future is yet to be seen but this is certain that future do not look very rosy
for Jet Powder.
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2.1.2.3 Premium Tier
The premium tier is the smallest tier in terms of volume but the second biggest in terms
of value. This is the tier which has premium and state of the art technology detergents
like Surf Excel and Ariel. Detergents in this tier costs Tk160 per kg and above. This tier
is dominated by Surf Excel with only a nominal share going to Ariel and the other
imported detergent brands.
Without a doubt the best detergents belongs to this category. The problem is, good
things do not come cheap and these detergents costs four times or more than the mass
market detergents. This tier is mostly un-accessible by the mass people although
everyone is aware of Surf Excel if not the other brands. People aspire to buy these
detergents but price has always been the main barrier. However, with Surf Excel sachet
priced at Tk. 3, many people can now buy these detergents although at a smaller scale.
The beauty of these detergents is the quality of clean they give. Unilever and P&G
brands in this tier are Enzymatic detergents which removes stains without harming the
color of the cloth. Also with new innovations these detergents are getting better
everyday.
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2.2 Target Demographics
Everyone washes their clothes and hence everyone needs detergent of some form or theother. The only difference is in the form of detergent people uses ie. Ball soaps,
Mechanized Laundry soaps, mass market detergents or premium detergents. The type of
detergent selection usually has a relationship with, habits, perceived cleaning capability
and income to say the least. The target demographics if the two Lever Brothers
Bangladesh Limited detergent brands are described below.
a. Wheel:Wheel has perhaps one of the biggest consumer base in the country
among all known brands irrelevant of category. This also means that people
belonging to all Socio-Economic Class (SEC) in all geographic locations of
Bangladesh use Wheel. However when we talk about Wheel users we will
primarily mean people belonging to SEC B & C.
In Bangladesh not long ago the only form of detergent was Ball soap with a
very in-significant market for detergent powder. Over the years Wheel has
mainly developed the market for detergents by educating the people about
detergent powder and eventually upgrading them to detergent from ball soap
and mechanized laundry soap. The more educated and economically more
sound people upgraded quicker than the rest but eventually a substantial
number of people upgraded to washing powders although most people are
dual users of detergent powder and some form of soap (ball soap or MLS).
They prefer using soap on top of detergent to get the best clean although
scientifically this is not the best practice.
Most of the Wheel users are habituated to cleaning clothes using their muscle
power and have a perception of getting good clean only when the cloth is
scrubbed with soap. Not to forget, these people not long ago solely used ball
soap or MLS to clean their clothes. These people belong to SEC B & C and
have limited family income. Family size is around 4.5 members per household
and the husband makes the buying decision more than the wife does it.
Family income has a great influence on the type of detergent to be bought.
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Many of these consumers during days of economic hardship switches to ball
soap and use detergent powders only on special occasions. They perceive
detergent powder to be something modern and premium hence have a high
level of aspiration to use detergent powder.
Awareness level of detergent powder among SEC D is low and their main
constrain is ability to spend for detergent.
b. SXL:Priced four times higher than Wheel Detergent, Surf Excel is definitely
not for everyone. This powder is for only the very evolved detergent users
who can afford to spend such premium. Surf Excel is the latest technology in
detergent having Enzymes in it and definitely good things does not come
cheap. The regular users of Surf Excel belongs to SEC A & B with
substantial family income. However, occasional users of Surf Excel can be
found in other SECs as well and does not necessarily have a very high family
income. They buy Surf Excel Sachets priced at Tk.3 (Pack size 20gm) and
uses it on occasion and when there is a tough stain.
Surf Excel users are predominantly urban people with bulk belonging to thedivisional headquarters.
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2.4 Existing Strategy
In this section scope of discussion will be limited to Surf Excel as that is the main focusof this paper. Lever Brothers Bangladesh Limited in general markets only mass market
brands. However Surf Excel might look to be an exception but at a closer look it is
actually not. The formulation of Surf Excel is state of the art and it is promoted as the
detergent of tomorrow. This is the future of detergents but high costs are currently the
barrier to making it affordable to the mass. Unilever and its major competitor P&G is
however now working on cutting down the costs and making this formulation affordable
for the mass. It may be mentioned here that this type of formulation is only available
with two companies in the world currently, Unilever and P&G. Hence the major
competitor of Surf Excel is premium detergent brands from P&G.
Surf Excel Strategy:The different marketing strategies of Surf Excel are described in
detail below.
Product Strategy:The product has to out-perform all the existing detergents in
the market, the strategy is as simple as that. Surf Excel is a detergent having a
breakthrough state of the art technology and new technology is in general
suppose to be better in terms of performance than the earlier technologies. When
talking about the competition with the same technology (Premium detergent
brands of P&G), Surf Excel has to be at least at parity in terms of performance.
Currently Surf Excel and Ariel from P&G are the two detergents in this category
with performance being at parity and the only differentiating factor being the
perfume.
Place Strategy: Surf Excel is distributed through the normal distribution
channels of Leer Brothers Bangladesh Limited, which means it, can be
distributed directly to literally any part of the country. Even if any remote rural
pocket of the country has demand for Surf Excel, that demand will be met. In
general however, major distribution emphasis is given in the urban areas.
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Promotion Strategy:Surf Excel does both above the line (ATL) and below the
line (BTL) promotional activities. In ATL the use all conventional media with the
main strategy being increasing consumption and also brand maintenance. With
BTL activities Surf Excel mainly drives penetration. In ATL the main focus is on
the value that Surf Excel gives to the consumers. For example, it cleans better
than any other detergent and it costs reasonable as the quantity of Surf Excel
needed to clean clothes is half the amount needed by ordinary detergent. In BTL
activities the current theme is Dirt is Good. The modality if this proposition is
no matter how much dirty your children make their clothes, there is nothing to
worry, as Surf Excel will take care of the cleaning part. Last year Surf Excel did a
massive painting carnival through out the country where the proposition was, if
children are to learn painting, they will get their clothes dirty. And no matter how
dirty the clothes become, Surf Excel will take care of the dirt.
Pricing Strategy:Currently Surf Excel has a premium pricing strategy as has its
competitors. The idea is to get enough profit while Surf Excel is still in its early
days to justify the huge Research & Development Investment that has gone into
developing this breakthrough formulation. However, at the same time
consumers perceived price for Surf Excel has been tried to keep at par with itsactual price. Market Research shows, people actually perceive Surf Excel as a
premium product priced the way it is expected to be. So the pricing strategy is
premium pricing in line with perceived value of the brand.
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3. Competitor Analysis
As mentioned earlier the only competition for Surf Excel comes from P&G i.e. Ariel.
However, Unilever has multiple brands in their premium category globally although in
one country not more than one of these premium brands is present. In case of
Bangladesh and this Sub-continent it is Surf Excel. In the proceeding parts of the report
scope of discussion will be limited mainly within Surf Excel and Ariel. By competitor it
will mean Ariel of P&G.
Before knowing about Ariel it is necessary to know about its company, P&G.
P&G:P&G is the worlds largest household and personal care manufacturer with annual
sales amounting to a staggering 35 billion Euro and Net profit of 4.15 billion Euro in
2003. Their turnover has been grew at 8% and net profit grew by 19% last year. P&Gs
earning per share grew by 14% and gave a dividend of 11% for the 48thconsecutive year.
P&G is also into food business with brands like Pringles but that accounts for less than
10% of their sales. The mission statement of P&G tells a lot about them in a nutshell.
The mission statement is:
Two billion times a day, P&G Brands touch the lives of people around the world. We have one of
the largest and strongest portfolios of trusted quality brands including Pampers, Tide, Ariel,
Always, Whisper, Pantene, Bounty, Pringles, Folgers, Lenor, Lams, Crest, Clairol, Nice n Easy,
Actonel, Olay. Nearly 98000 people, working in almost 80 countries world wide, make sure that
P&G Brands live upto their promise to make everyday life just a little better.
TOUCHING LIVES, IMPROVING LIFE
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3.2 P&G Billion Dollar Brands
P&G has 12 billion dollar brands which forms the heart of their business. These Brands are:
.Olay
Folgers
Pringles
Dawry
IAMS
Tide
Crest
.Pampers
Pantene
Always/Whisper
Bounty
Ariel
A total of 12 Billion dollar brands
These 12 brands account for
$24 Billion in Revenues
A company with these 12 brands
could be in Fortune 70 by itself
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3.3 P&G Strategic Choices
P&G strategies (Global Strategies) are as follows:
1. Build existing core business and leading brands into stronger leaders. (4 Key
Categories) Fabric Care, Hair Care, Baby Care, Feminine Care. 50% Sales
from these categories and greater profits.
2. Grow faster with leading customers
In 5 years, share in US 30% - 55%
Higher in Europe,
Understanding of the shoppers and partnering with retailers.
Joint business plan with key customers.
Grow via leading portfolios and new innovations.
3. Grow in Big Countries
80% of the sales coming from 10 countries, 11% Growth
P & G, in US, is a leader in 23 categories.
4. Develop and Invest in faster moving, higher margin business.
Strengthening P&G leadership into health care and beauty care.
Expecting higher growth in these two categories.
5. Build P&G leadership in fast growing developing countries.
Emphasis in China,
Growth in cons prod business = Fx((population growth, household
formation, household income growth)
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3.4 P&G Core Strengths
The core strengths of P&G are as follows:
1. Branding:
3 off top 10 new non food product introduced in US, are from P&G.
In past 8 yrs P&G has had #1or #2 positions in non food products.
7,500 Ph. D. / 20 Technical Centers / 4 continents
2. Global Scale:
Resources to interact with retailers on finance, logistics, marketing and
shopper study.
Create greater value through total supply chain.
Roll out new products in 18 months, globally.
In a glimpse that was P&G globally. However, for Surf Excel it is more important to look into P&G
India as they do not have any major operation in Bangladesh and controls this market from India. The
production facilities are in India and the marketing is also done from India. However, how P&G works
in Bangladesh will be discussed a little later.
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3.5 P&G India
P&G have a strong presence in India although one would guess, they would have likedthe presence to be stronger. Below is P&G India at a glance:
A history spanning from 1951, Vicks Launched in 1952
Chairman: Bharat V Patel
Sales: Rs. 438.2 Crore
Growth: 7%
Operating Profit: 89.3 Crore
Growth: 11%
2003:P&G rated the best employer in India by Hewitt Associates + Business
Today. (Was No.2 in 2001 & 2002)
Vicks Action 500+ :
Cold Tablets,
R&D in India, Launched in 1978,
SOM 44.7 %
Vicks Started in 1952 (Vicks VapoRub)
Completed 50 years in India.
Exports of VapoRub to ASEAN, Australia & Japan
Whisper Ultra: Rs 550 million
Menezes Cosmetics:
Licensed in Dec 1, 2002 to manufacture,
Distribute & market Old Spice in India Bangladesh &
Sri Lanka
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3.6 P&G Bangladesh
P&G do not have any operation as such in Bangladesh. They have only one Marketing Manager who is
the sole employee of P&G in this country and distributes their products through MGH, a local business
group. MGH is the sole distributor for Kodak and Gillette apart from all P&G products in Bangladesh.
However, their main business is shipping in terms of revenue generation. For P&G India, the Indian
market gets the priority and not Bangladesh because of the small size of the market and the fact that
they are not directly present in this market. Another fact for P&G to not come into Bangladesh in a big
scale as yet is the fact that Unilever/ Lever Brothers Bangladesh Limited has a very strong presence in
this country and for a long time. Also the brands of P&G are not affordable by the mass market of
Bangladesh. It may be worthwhile mentioning here that, Unilever has two types of brands in countries
like Bangladesh. One type is not affordable by all but the other type is. For example, Surf Excel is not
affordable by the mass market but Wheel is. In case of P&G, their lower detergent, Tide is twice as
costly as Wheel making it less affordable for the mass market. This means, P&Gs product range is not
always the most ideal for markets like Bangladesh.
P&G presence in Bangladesh is very insignificant till date. Their presence in India even is
not the strongest with sales of only over 800 crore Ruees where as Unilever in India has
business over 15 times bigger than that. In Bangladesh P&G has around 1% market
share in the detergent market and again a single digit market share in the hair care
market. Never the less, this is no ordinary company being talked about this is P&G,
worlds largest household and personnel care products manufacturer and they are capable
of coming from behind and give Unilever a run for their money. P&G is not the
competitor to be taken lightly under any circumstances. They are always a very serious
threat even if they are not currently present in the market.
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3.7 Roll Out
First it is needed to understand thoroughly as for how P&G works and what their
strategies have been globally and in the regions around Bangladesh. by understanding
that it will be easier to understand how and when they are likely to come to Bangladesh.
3.7.1 Strategy
P&G strategy will be discussed in a few segments. First P&G Global strategy.
3.7.1.1 P&G Global Strategy
Globally P&G is known to be a company which produces and markets quality products
at not the cheapest of prices. They do not have too many brands which are affordable by
the mass people in the developing countries although they might be in the developed
countries. Brands like Penteen, Head & Shoulder, Whisper, Old Spice, Hugo Boss etc.
are there in all the markets but not necessarily the most affordable of brands. Recently
the CEO of P&G changed and their new CEO Mr. A G Lafley brought in some policy
changes. It may be mentioned here that under Mr. A G Lafleys predecessor P&G did
not have the best of times. They actually had negative growth. Among the major
strategies they had strategies like building their key markets and earn the most revenue
from those markets. And also they were putting more and more emphasis on the key
brands that contributes the most of their business (it has previously been mentioned
about their billion dollar brands). Also now P&G was desperately trying to find a
foothold in the emerging markets of South and South East Asia where their presence was
minimal.
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3.7.1.2 P&G Strategy in Emerging Markets
The markets of the Western and European countries have opportunity to grow but no
booming opportunity is there. The booming opportunities lie in the countries of South
and South East Asia apart from in Africa and South America. The problem in these
markets with P&G was that the mass cannot afford their brands unlike the brands of
Unilever, Colgate or Nestle. So they had to reduce their prices if they were to put up any
fight in these markets. The other problem was that the three global giants, Unilever,
Colgate and Nestle have a very strong presence in these markets for a long time.
P&G can reduce the prices of their products temporarily but to sustain with that kind of
reduced prices they needed to reduce their production and raw material prices as well
which was not the easiest of tasks on hand. However, they have some competitive edge
by having the same kind of packaging and formulation Globally but even that was not
enough. P&G has been looking for cheaper sources of raw materials (which includes
substitute products) so has been their competitors but it is not known if they actually
found one or not. People suspects they have and if they did then it is still a very tight
P&G secret and secrecy has been maintained P&G Style.
P&G now did a small calculation. Their operations in these countries are very limited.They do not have too many managers or other facilities in here and they were selling very
little amount of everything but making very handsome profit in percentage. One of the
reason for this high profit margin was to offset the huge R&D costs they incur in
developing these products. First P&G decided they do not need any R&D return form
these emerging markets as the return they were getting inn absolute terms was very
nominal in any case.
Next they thought, rather than making Tk. 30 profit per unit and selling only 1000 units
it is better to make a profit of Tk. 10 per unit and selling 3000 units.
The next strategy was not to increase the number of P&G managers in these countries
with the increase in their volume. This way they would be making more net profit in
percentage terms. For example, currently if their salaries and wages accounts for 15% of
revenue which comes to 120 crore Taka then it should not increase proportionately with
revenue increase. It should stay at 120 crore Taka even if the revenue doubles which will
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lead to salaries and wages becoming only 7.5% of revenue in other terms what this
means is huge cost savings. This strategy was basically all about cutting down the costs in
percentage terms which will lead to more net profit in percentage terms and if they could
gain their desired volume then with this policy it will mean making more profit in
absolute terms as well. The following table will explain this strategy a little better.
Current Situation New Strategy
Taka % of
Revenue
Taka % of
Revenue
Sales Volume 1000 Units 3000 Units
Unit price 70.00 50.00
Total revenue 70,000.00 150,000.00
RM Costs 20,000.00 28.57% 60,000.00 40%
Advertising Costs 10,000.00 14.2% 21,300.00 14.2%
Salaries & Wages 5,000.00 7.14% 5,000.00 3.33%
Other Expenditures 5,000.00 7.14% 10,710.00 7.14%
Net Profit 30,000.00 42.85% 52,990.00 35.33%
1 2
This calculation looks like a good enough reason for any company to cut their prices but
no matter how flowery they look, there is a devil hidden inside. One will have to actually
increase their sales volume three times which is not a matter to be taken lightly.
Considering the image, perceived value and brand equity of P&G brands like Panteen
and Ariel, a cost cut like this might automatically double their volume but the challenge is
how to increase the volume one more fold and triple it?
The P&G managers took the challenge and they focused on their Hair care andDetergent categories to implement this price cut strategy. They first went on with a
massive price cut strategy in these two categories in China followed by Philippines and
finally India. Their India strategy is elaborated further as India is the country from where
P&G controls their Bangladesh operations.
1
All the numbers in the table are fictitious and do not necessarily have any resemblance with theactual numbers of P&G.2 However simple the calculations looks like in the table, the actual calculations are way complicated.
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3.7.1.3 P&G Strategy in India
P&G strategy in India is very closely monitored by Bangladesh as they run their show in
Bangladesh from India. In this part of the report only the detergent strategy of P&G in
India will be discussed. It may be mentioned that in India they had the same sort of
strategy for their detergent and hair care categories.
Their strategy was the same as in China and Philippines, massive price cut and making
their expensive brands affordable to the mass people or at the least making it more
affordable. After getting reasonably satisfactory results from price cut strategy in these
two countries it was time to roll it out in India. India had a three tire detergent market
which after price cut became a two tire market. The market before and after the price cut
looked like this:
Before Price Cut After Price Cut
Rs. 140+/kg
(Surf Excel, Ariel etc.)
Rs. 100+/kg
(Surf Excel, Ariel etc.)
Price Cut
Rs. 70-80/kg
(Rin, Tide etc) Rs. 30-45/kg
(Rin, Tide, Wheel etc.)Rs. 30-40/kg
(Wheel etc.)
Ariel and Tide are P&G brands while the others mentioned in the table above are
Unilever brands. What the price cut effectively attempted to do was upgraded the mid
segment detergent users to the upper segment and at the same time made the midsegment detergents available to the mass market. One reason was that, the mass market
was almost 20 times bigger than the two upper segment markets combined and P&G
was not present in that market. Unilever was doing huge business with Wheel.
Both Ariel and Tide has high perceived value and by cutting down the costs they were
now available at a lower price which means it was offering more value to the consumers.
In theory mostly Wheel users were now expected to upgrade to tide and Rin and on the
other hand Rin and Tide users were expected to upgrade to Surf Excel and Ariel. The
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theoretical number of consumers expected to upgrade was extraordinary. In reality what
happened was as follows:
Error!
Figure 6:P&G Price Cut
What effectively happened is the post price cut premium segment is more or less the size
of the pre price cut mid segment. A huge loyal customer base of Tide and Rin actually
did not upgrade to Ariel and Surf Excel rather they are still using Tide and Rin spending
less than what they used to. In terms of total volume of the market the current scenario
is like this:
Premium
Segment
Mid
Segment
Mass
Segment
Premium
Segment
Mass
Segment
Pre-Price Cut Post-Price Cut
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Pre-Price Cut (Tons) Post-Price Cut (Tons)
Premium Segment 15
Mid Segment 30 Premium Segment 30
Mass Segment 400 Mass Segment 410
Total 445 Total 440
3
The actual total detergent market size has shrunk primarily because many people
upgraded from the previous mass market detergents to Tide and Rin. Please note that to
wash the same quantity of clothes the amount of Tide, Rin, Ariel or Surf Excel needed is
half of that of Wheel. However, a better picture can be obtained by looking at the total
value of the market. The total value of the market is as follows:
Pre-Price Cut (Rs.) Post-Price Cut (Rs.)
Premium Segment 2,100
Mid Segment 2,100 Premium Segment 3,000
Mass Segment 16,000 Mass Segment 16,400
Total 20,200 Total 19,400
4
The total value of the market have actually gone down although not very significantly.
However insignificant the total difference looks like, Wheel and the other mass marketdetergents took a major hit. The following table will give a better understanding in terms
of what happened to different brands.
3These are not the actual numbers and are intended to only show the direction in which the market is
going.4These are not the actual numbers and are intended to only show the direction in which the market is
going.
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Pre-Price Cut Post-Price Cut
Volume Value Volume Value
Value
Gain
Surf
Excel 13 1820
Surf
Excel 20 2000 10%
Ariel 1 140 Ariel 2.5 250 79%
Others 1 140 Others 7.5 750 436%
Rin 20 1400
Tide 5 350 Rin 50 2000 43%
Others 5 350 Tide 12 480 37%
Wheel 260 10400 -13%
Wheel 300 12000 Others 88 3520 -12%
Others 100 4000
Total 445 20200 Total 440 19400 -4%
Unilever 333 15220 Unilever 330 14400 -5%
P&G 6 490 P&G 14.5 730 49%
Others 106 4490 Others 95.5 4270 -5%
5
This clearly shows how badly Wheel and the other mass market detergents were hit.
Unilever as a whole also was hit and loosing 5% value share is much bigger than what it
looks like. On the other hand P&G did not as yet been able to gain their intended market
share in terms of value or volume although they have seen an extraordinary growth.
It is now time to see the supply situation of P&G. Their sales volume has grown to such
an extent that they are finding it very difficult to keep up their supplies with the demand.
The P&G factories are working overtime and yet not being able to meet the demands.
5
5These are not the actual numbers and are intended to only show the direction in which the market is
going.
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On the other hand, Unilever factories are being able to keep up with the demand as their
total volume has actually declined although very insignificantly.
Media Expenditure of P&G is also on the rise alongside their volume. According to MR
findings, their media expenditure has doubled over the last few months. Till date the only
real cost savings that P&G has been able to do is by not increasing their size of the
operation in terms of manpower. However, it is to be seen if they can actually sustain
with their current manpower in the long run.
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3.7.2 Timing
The question is not IF P&G will come to Bangladesh or not rather WHEN will they
come. There are a few things that will be under consideration before P&G comes in.
These are as follows:
1.P&G do not send supplies to Bangladesh regularly rather they send stocks in
bulks and the last bulk was sent just before they went for the price cut in India.
This last bulk was a reasonably big one and the next supply will not come before
this bulk is exhausted as it is obvious that the next bulk will come with a price
cut. According to Lever Brothers Bangladesh Limited analysis, it will not be
before July this year if not later. This has been calculated considering their sales,
usual bulk size and market reports.
2.They cannot re-price their current stocks as they have paid higher taxes and
due to some legal complications like price declaration. However, reports suggests,
their cost of the current bulk is not permitting them to cut the rice immediately
which means they are waiting the lot to get exhausted and get a new bulk supply
from India with which they will cut the price.
3.The other problem is with the supply. As said earlier, P&G is right now not
being able to meet their demands in India so it will be a little on the tough side to
send some supplies to Bangladesh. Also at the same time if they send supplies to
Bangladesh at a reduced rate then they will have to ensure adequate
replenishment supplies for the future otherwise all the demand created by P&G
will ultimately be taken away by Lever Brothers Bangladesh Limited. So here they
have two problems as follows:
a. Initial Supply
b. Future Replenishment
a. Initial Supply:The initial supply that P&G will be looking forward to send to
Bangladesh will have to be at least a 50 tons bulk otherwise it will not be possible
to create any impact in the market. It is estimated that to produce 50tons of Ariel
alone will take P&G about 15 days which means they will not have enough
supplies for India for those 15 days. This is true irrelevant of whether they
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produce these 50 tons in one go or build up their stocks over a period of may be
2 months or so. Also if they build up their stocks over 2 months then their
inventory costs will go up tremendously which they can ill afford at this point
after price cut. Also by selling 50 tons of Ariel in India they will be able to make
more profit than by selling it in Bangladesh as there is an import tax involved for
Bangladesh. This means in simple terms, the opportunity cost of selling 50 tons
of Ariel in Bangladesh is very high.
Reports suggest, P&G is setting-up a new factory in India and after it is
commissioned they will be able to easily supply to Bangladesh.
b. Future Replenishment: Some experts suggests, the only reason P&G has not
yet come to Bangladesh with a price cut is not because of their previ