Godrej goes herbal to enter busy skincare niche

Viveat Susan Pinto & Sheetal Agarwal, Business Standard, 04 November 2014

The Rs 1,500-crore facewash market is seeing a lot of activity. While in the personal care space, deodorants have been seeing the maximum action, facewash is the skincare category that has seen the maximum number of launches in the past few months.

The Rs 7,583-crore Godrej Consumer (Godrej), the second-largest soap manufacturer, is the next major FMCG player which is training its sight on the category, in its second attempt.

While earlier this year, the new launches have been mostly in men’s facewashes — HUL’s Pond’s Men and Emami’s Fair & Handsome — Godrej’s entry would target women.

It is looking to extend its Godrej No 1 soap brand into the category. MD Vivek Gambhir says facewash is a category that bears close resemblance to personal care soaps. Also, “while the (facewash) category is growing at 30 per cent per annum, urban and rural penetration levels are not high. Urban penetration alone is just 18 per cent,” he says.

While the men’s facewash segment is a fledgling one, products based on herbal ingredients have done consistently well and have catered to both men and women, including the market leader in facewashes — Himalaya Neem facewash. Consumers seek strong product benefits in a facewash, making it a difficult market to crack, experts say.

Godrej plans every bit to highlight the herbal antecedents, as a result. Gambhir says that the new product will take the herbal equity of Godrej No 1 forward.

Most players from giants like HUL, Procter & Gamble, Nivea, ITC, J&J (Clean & Clear and Neutrogena) and L’Oreal (Garnier) to smaller companies such as Himalaya, Wipro Consumer, Zydus and Lotus Herbals have forayed into the facewash segment, given its high growth rate. Almost all of HUL’s skincare brands (Dove, Pears, Ponds, Fair & Lovely, and Lakme) have a variant, and hence, it accounts for a large share of the overall market.

Godrej had attempted to enter facewashes a few years ago with FairGlow, extending its fairness soap, but failed to find a market.

In herbal facewashes, the key players include Wipro (Santoor’s sandalwood-based product) and Zydus (Everyuth), besides Himalaya. “Facewash users are those who want a bit more in terms of cleansing,” Zydus’ managing director, Elkana Ezekiel had earlier said. Himalaya’s Neem facewash, which first became the leader across all kinds of anti-blemish skincare products (creams, facewash etc.), has now scaled to the top of the facewash pecking order, by dint of its positioning.

In the last few years, ingredients such as tulsi (holy basil), turmeric, sandalwood and neem have emerged as popular facewash variants. Godrej would add kesar (saffron) to the list, besides its neem variant.

For Godrej, the entry into facewash would unlock a new segment. Among other Adi-Godrej Group companies such as Godrej Properties and Godrej Agrovet, the consumer business is leading the charge to expand revenues, pegged at Rs 13,500 crore at the overall level, ten-fold in 10 years. In August, Godrej had moved from hair colour into haircare with the launch of a range of shampoos, masques, gels and other styling products under B:Blunt, the salon chain in which it has a 30 per cent stake.

In the last two years, Godrej has taken an aggressive stand on innovations, launching differentiated products such as a creme hair colour at Rs 30, an anti-roach gel, mosquito-repellent body sprays and a Rs 1 mosquito repellent (Good knight Fast Card is a Rs 100 crore brand in 11 months since launch). Godrej already derives a third of its incremental revenue from new products. The screw cap fixed to the new facewash satchets, Gambhir explains, is part of this larger agenda of innovation.

The smaller the better?

Besides a tube (Rs 35), the new multi-use sachet, expected to be launched in a week, will be priced at Rs 10. “Sachets account for over 75 per cent of the volumes of shampoo brands. Facewash could also shift to sachets if more players step into the fray,” Abneesh Roy, associate director, research, institutional equities, Edelweiss, says. Zydus had already entered with its Everyuth Naturals facewash sachets in September. HUL, in its second quarter results last week, indicated its intent to focus on “low unit packs” as well. P B Balaji, CFO, HUL, had said, “Our focus on LUPs will be across categories such as cleansing, laundry, oral and haircare. It has given us good sales traction in the second quarter and we intend to continue with it.”

Gambhir says that Godrej will look at associated categories in its core segments. Besides soaps and hair colour, Godrej is big in household insecticides (gets 45 per cent of its domestic revenue from it). Soaps give the company 35 per cent, while the balance 20 per cent comes from hair colour.