Deoderent Market in India Essay

Abstract Topic:- Monopoly or monopolistic competition in Deodorant brands? After seeing so many outrageous deodorant advertisements on television we were wondering whether it affects the consumer behavior and we also wanted to find out whether Axe has a monopoly over this market or not. The aim of this assignment is to compare the parent companies of five deodorant brands with the help of ratio analysis. We are going to consider the time period 2007-12. Primary data was collected through a survey which will help us determine what thinking goes behind purchasing a deo between college students and the office going crowd. To conduct the ratio analysis we used secondary data by obtaining the balance sheets of the various companies. The market share and revenues of five major brands- Axe, Adidas, Nivea, Wildstone and Park Avenue will be analyzed. Introduction Monopolistic Competition Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another as goods but not perfect substitutes (such as from branding, quality, or location). In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms.[1] In a monopolistically competitive market, firms can behave like monopolies in the short run, including by using market power to generate profit. In the long run, however, other firms enter the market and the benefits of differentiation decrease with competition. There are six characteristics of monopolistic competition (MC): * Product differentiation * Many firms * Free entry and exit in the long run * Independent decision making * Market Power * Buyers and Sellers do not have perfect information (http://en.wikipedia.org/wiki/Monopolistic_competition) Economic Background The deodorant market in India is estimated at Rs 900 crore. Men’s deodorants dominate the category with a 70 per cent share estimated at Rs 650 crore. The segment is expected to grow 25 per cent annually to become three times its current size in the next five years. The overall deodorant market has grown by about 40 per cent a year in the past five years driven by introduction of new brands and aggressive media promotions. The market will continue to grow at 20-25 per cent thanks to low penetration and availability at low price points. Deodorant sales are seasonal — maximum sales happen in the summer months (April to September). About 90 per cent of the market is concentrated in the mass segment (with deodorants priced between Rs 125 and Rs 175 for a 150 ml pack). With new players entering the category at popular price points, the mass segment, with brands like Axe, Adidas, Nike and Reebok, will continue to grow faster and command higher share in the deodorant market. The size of the premium and above segments, which have brands like Burberry, The Body Shop, Kenzo and Ralph Lauren, will double by value in the next five years. (http://www.business-standard.com/india/news/kit-the-men%5Cs-deodorant-market-in-india/443714) Method We will be using the financial tools of various ratios to determine which company has been more successful in this market. Survey The survey was conducted on 200 males in the college and office going crowd the results were as follows. 1. Which Deodorant do you use? Analysis As we can see from the above graph that Axe has a majority amongst the people surveyed while the others are below 10%. This gives us a picture of the domination of Axe in this market and same is the case when market share all over India is observed. 2. Reason for buying the particular brand. From the above graph we find that the decision of people in the age group of 15-25 behind buying a particular deodorant is not its fragrance but its price followed by easy availability and advertising. This shows us that main factor which affects a consumer’s decision, in this age group is the price of the product followed by other factors regarding quality, availability etc. This was the result obtained from the office crowd which gave an entirely different reason. The consumers decision in this age group is affected by the brand as people become brand conscious and are more bothered about which brand they use rather than its use. After the brand value the price affects their decisions. Hence from both these results we see that consumer behaviour varies on the different age groups and changes as a consumer grows older. Findings: Name: Mahikaansh Reddy Brand: AXE (Hindustan Unilever) AXE was launched in France in 1983 by Unilever. It was inspired by another of Unilever’s brands, Impulse. Unilever were keen to capitalize on AXE’s French success and the rest of Europe from 1985 onwards, later introducing the other products in the range. Unilever were unable to use the name AXE in the United Kingdom and Ireland due to trademark problems so it was launched as Lynx. The European launch of the deodorant was followed by success in Latin America and moderate impact in Asia and Africa. In the new millennium, the brand has launched with great success in the United States and Canada. The company has also consolidated its deodorant portfolio by migrating other overlapping male deodorants into the Lynx brand such as South Africa’s Ego brand. In January 2012, Unilever launched its first Lynx product for women in the United Kingdom as part of a global expansion of the previously men’s-only brand. The AXE deodorant was popular in India in the Grey market (duty paid shops). Impressed by the volume of AXE sold there, AXE deodorant was launched in India in 1999. The brand launch was very quiet and had the strategy of ‘High Price, Low Promotion’. At that time, the deodorant market was a nascent one with an estimated market size of Rs 72 crore. HLL, at that time, had the brands Denim and Rexona and was ruling the market. AXE was priced at a premium. In just three years flat, AXE had a market share of over 35% and HLL started phasing out Denim to concentrate more on AXE. It is known for its very controversial advertisements which actually helped in its publicity and led to a faster growth in the industry. Its target group was mainly men between the age group of 18-24 as they were seen as the easiest to convince with such advertisements. Not only does the brand use TV commercials to its advantage, but it also uses its print ads effectively. Besides print, the brand also uses outdoors for maximum impact. Hence, Axe is a classic example of the 360 degree branding effort. Therefore Axe is a perfect example of how important advertising is for a brand and how it can lead to higher revenues. Marketing Mix 1. Product: 2. Place: Available at all malls across India. Every deodorant selling shop will 99% be selling Axe. All other variants of Axe brand could be purchased from established retailers viz. BIG BAZAAR (PANTALOONS RETAIL INDIA LIMITED). 1. Promotion: Concentrates on single- segment male youth and targets young at heart. The competitive advantage of this brand is its complete monopoly over this proposition. The â€Å"Axe Effect† is one of the most famous claim in the world. This so called effect is supposed to draw women in hordes to any male who has sprayed himself liberally with the Axe deodorant. The advertisements are very slick and usually display a normal male but with oodles of self-assurance as an Axe user. The females get irresistibly drawn to this male implying that Axe acts like a nasal aphrodisiac. 2. The Axe brand of deodorants is from Unilever and is primarily targeted at 15 to 25 year old males. The brand portrays normal yet cool, trendy and confident, a positioning that is aspirational to the target segment. At a more subtle level, the Axe Effect also acts on the confidence levels of the user. The very act of being associated with the brand serves to boost the ego. The success of AXE attracted lots of new brands which were trying to follow the same marketing strategy as AXE. The one notable difference though is that all these newbies use hunks as opposed to the regular guys which are a stable for the Axe advertisements. This strategy has proven very effective for the brand. It comes across as approachable and it acts like a confidante and friend to its users. They are currently distributed in more than 40 countries. Unilever started out allotting roughly 60 percent of its advertising budget to television, but it has since winnowed that down to about 30 percent, pouring more money into offbeat alternatives. Competitive analysis: Axe faces competition from new entrants such as Wildstone, Adidas, Park Avenue etc. However among all these brands AXE has a dominating share in the market because of the brand equity and brand loyalty that it has built and is leveraging the same. AXE has a wide acceptance among the youth which forms the major chunk of perfume & deodorant users. Vis-à  -vis all these the AXE deodorant never forgets to promote any of its new product. AXE time and again, on launch of the new product goes for PR as well as wide advertising campaigns. 3. Target group- 18 to 24 What next? As such, I believe that AXE has the potential to spread its reach and increase its market share by expanding into the 35-50 year old demographic. In doing so, AXE will need to associate and disassociate itself with a more mature brand image and its inexpensive nature respectively, thereby attracting the average male aged 35-50 years. Hence it needs to re-focus the marketing mix towards 35-50 year old demographic, whilst retaining its keystone market, the 16-25 year olds. Conclusion Axe has a very large share in this market and has hardly got a foot wrong. It just needs to follow its tried and tested market strategies and build upon it, by doing that it can thwart the competition and maintain its kind of monopoly in the market. The only thing that could be suggested is to increase its target group so that it could expand more in the market and serve a larger base leading to higher revenues. Hence Axe just needs to follow what it was doing from before and be wary of the new competition in this segment with the help of excessive advertising and PR.