Karsanbhai Patels Detergent
Had you ever thought that a farmer’s 24-year old son will shake the foundations of a 40-year-old company?
1969 This story is about the chemist who used to experiment with chemicals in his backyard.
More than that this story is about a father who lost his daughter very soon.
One day while experimenting, he made a thing that can be used in every home.
That was Detergent Powder.
At that time Hindustan Unilever used to dominate in India. Every home had its products.
HUL started in 1933 and till 1969, they strengthened their position so much that it was impossible to defeat them.
But who had thought that a 24-year boy, selling detergent on his cycle will defeat Hindustan Unilever in their game?
story of origin
1969, 24-year old Karsanbhai Patel was a chemist. once he was experimenting with some chemicals in his backyard.
And while experimenting he made a compound that can be used as a detergent.
Karsanbhai named this detergent – NIRMA. And this name came from Nirupama.
Nirupama Patel was Karsanbhai’s daughter whom he lost too early.
Now the product was ready but how to sell it?
Karsanbhai approached retailers to keep his product and sell.
Then all retailers refused him.
Because at that time only one detergent was popular.
That was Hindustan Unilever’s Surf Excel.
Due to this,
Karsanbhai started selling Nirma door-to-door on his cycle.
When he used to go to his office in the morning,
he used to sell Nirma to homes that were on the way.
And when he used to come back from the office, he did the same thing again.
In 1988, Nirma created havoc in the market.
In every home, every person had only one name -NIRMA.
With a 60% market share, Nirma was the leading Indian detergent market.
Now the question arises,
How Nirma did do so much in less time? And if we see today, maybe someone uses Nirma.
What’s the reason behind this downfall?
most importantly what is those business lessons we can learn and implement in our business.
In 1994, if you only had invested 1000 rupees in Nirma’s share then till 2009, it would have turned to 1 Cr.
The good times of Nirma
In 1969, Detergent Powder was a Luxury in India. The detergent powder was not used in every home.
90% of Indian houses used soaps to wash clothes. Now the question arises, Why was that?
So the reason is THE HALO EFFECT. In simple words,
If you take any decision by judging the quality of the product by knowing only one or two features about it.
this is called ‘The Halo Effect.
Similarly, before the entry of Nirma,
the perception of detergent was A THING OF RICH.
What we call BOUNTY OF RICH.
Surf Excel was 15 Rs at that time.
Now you will say Bro this is not costly.
I know. But in 1969, according to an Indian middle-class family, it was costly.
Karsanbhai observed this gap in the market and turned this perception after launching Nirma.
Surf Excel was 15 Rs but Nirma was just available at 3 Rs.
Interestingly,
now HUL can’t drop Surf Excel’s price by around 3 Rs.
Why? Because Surf Excel was a premium product.
And if any company drops this much price of their premium product
then people start to doubt and stop buying it.
That’s why Adidas burns its old stock but never sells its shoes at 200 Rs.
And then Nirma became popular in every house.
Now from the rich to the middle class, everyone had detergent powder.
credit issue
Then Karsanbahi Patel hired some salesman and started making his market base large.
But suddenly a problem came into the market and if not taken action then Nirma could be bankrupt.
The problem was CREDIT OVERLOAD.
Retailers were keeping Nirma in their shops but were showing tantrums in payments.
Whenever Nirma’s salesman went to retailers to take payment,
then retailers used to give some reason.
After 3-4 months also, Nirma couldn’t get its payment.
Nirma’s credit overload was too much that
if in the next 2 months they didn’t get payments then Nirma would become bankrupt.
And to get rid of this Karsanbhai made SUPPLY SCARCE STRATEGY.
SUPPLY SCARCE STRATEGY.
So let’s see how it works.
So according to basic economic principles,
When a product’s demand rises and its supply is limited then the price of the product begins to rise.
But Karsanbhai did something different.
So when retailers were not giving payments,
then Karsanbhai decided to bring back all the stock from the market.
And within 5 days, Nirma brought back its stock.
And then an explosion happened
Nirma launched its TV Advertisement.
This one ad changed all the perceptions about detergents.
This campaign became so popular that everybody only liked and wanted Nirma.
But SURPRISE!!!
Nirma was not there in the market.
People started demanding Nirma from retailers, but they had no stock to give.
This caused extreme stress for retailers.
Nirma is demanded but if there is no Nirma then how will we give?
Then Karsanbhai talked to retailers and gave them stock after some conditions only.
Now those retailers who didn’t give the money till 3-4 months now used to give full cash.
Slowly Nirma was so popular in every home that people stopped asking about Surf Excel.
Till 2000, Nirma was selling 1.72 tons of detergent powder.
And till 2009, Karsanbhai Patel became the 92nd richest man in India.
Downfall
So what happened that at one time whose market share was 60% is now just 6%.
So the reason is MARKET DYNAMIC ENVIRONMENT.
Before 2010, India’s per capita income was 1000 Rs
but after 2010 due to the good performance of private sector companies,
it started growing speedily. The purchasing power of people increased.
And as I previously said India is a status-driven society.
Here people don’t run after wealth but to show status.
People stopped using things that made them feel cheap.
Nirma was cheap but most importantly its vibe was cheap,
its packaging quality was cheap. So people started to use Nirma less.
And Nirma also didn’t make any innovations in their product or their ads.
So people started forgetting Nirma.
A company that used to lead the market is now asked by no one.
And Nirma also entered many unrelated businesses.
Till 2005, Nirma was in Education, Chemical, Cement.
Nothing is wrong with it. But Diversification Requires Specialization.
HUL is also diverse but they manage every business segment separately.
So their brand can perform better individually.
Business lessons
Most importantly what are those business lessons we can learn and implement in our business.
NO 1 – NO WORK IS SMALL
Karsanbhai Patel sold Nirma door-to-door on his cycle
without even thinking this work is small.
Work is not small or big. Work is Work.
Never consider any work small or big. Every work has its value.
NO 2. FILLS THE GAP
In every industry, there is a gap.
And the one who fills this gap takes the lead.
Karsanbhai Patel identified a big gap in the detergent market.
And when he filled this gap, he built his huge empire.
NO 3 R C I
What does this mean?
Ritualistic Continous Improvement
When you think “It’s done now no need to work hard.”
This is the start of your end.
Any business needs to improve continuously.
Make process improvements, in processes, in fact even in their team.
