Consumer: Shopping Cart Deep dive into the laundry care market :: JPMorgan

We take a deep dive into the Indian laundry market in this report and
discuss emerging trends in this category. The laundry segment remains
one of the largest HPC categories in India in terms of size and, despite
high levels of penetration, consumer uptrading and higher per capita
usage, would still enable low double-digit growth (mid single digit vol
growth) for this category (for branded players) in our view. This category
has seen huge volatility in margins owing to history of price wars and
severe competition, however of late we have seen recovery in profitability
led by more rational price competition and easing commodity prices.

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 Competitive intensity in laundry category is amongst the highest in
HPC space, though a clear shift towards branded players. Hindustan
Unilever, Rohit Surfactants and P&G dominate the laundry segment
with over 65% share combined and compete closely with each other to
maintain/gain share in respective sub-segments. If we look at the longerterm trend, HUL has given away market share to other players, though
of late they have been able to hold on to their share. Rohit Surfactants
(with Ghari brand) has gradually moved from being just a regional
player to a national player and is now eyeing the mid-premium space.
Jyothy Laboratories is eyeing a bigger share of laundry market post
acquisition of Henkel India’s detergent portfolio (Henko).
 Pricing power is fairly weak in this low involvement category given the
large number of local players, limited product differentiation and high
penetration. This segment has witnessed a fair share of price wars in the
past (2004 and 2009). However, since 2011 we have seen more rational
competition and there has been a gradual improvement in pricing and
profitability for this category. We estimate current laundry margins to be
around 10-12%. HUL has significantly stepped up its focus on mid and
premium brands, which have been growing ahead of mass brands.
 Premiumisation – key to improve pricing longer term. A gradual shift
from bars to powders to premium powders is underway as consumers opt
for convenience and better product efficacy. Mass detergent brands
account for ~55-60% of category size currently and we expect this share
to come down as consumers uptrade. We find that incumbents are
introducing various laundry aids (currently ~7% share) like liquid
detergents (HUL recently launched Surf Excel Liquid priced at
Rs230/litre) , fabric softeners, stain removers, etc. to help support margin
profile for their laundry care portfolio. While share of these products is
still miniscule, they do have potential to drive consumer uptrading (with
increasing awareness, higher incomes and rising advertising spends by
incumbents) and support margin growth for laundry care portfolio.
Modern trade is also supporting growth for premium offerings. Growing
usage of washing machines would further drive growth for automatic
powder detergents.