Germany's Henkel in the Indian FMCG Industry
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Case Code: BSTR086 Case Length: 15 Pages Period: 1993 - 2003 Pub Date: 2004 Teaching Note: Not Available |
Price: Rs.400 Organization: Henkel Spic India Ltd. Industry: FMCG, Countries : India Themes: Marketing Mix |
Abstract Case Intro 1 Case Intro 2 Excerpts
Background Note
In 1987, Henkel KGaA, a leading chemicals and consumer products manufacturer based in Germany (Refer Exhibit I for a profile), entered India through Spic Fine Chemicals Ltd. (Spic). Spic was a joint venture between Henkel KGaA and Tamil Nadu Petro Products (a leading Indian chemical products manufacturer); the two companies entered into a technical collaboration to manufacture Zeolite based, phosphate free, eco-friendly detergents. In January 1992, Spic made its initial public offering, issuing equity shares of Rs 260 million. In March 1993, the company set up a detergent manufacturing plant at Karaikal in Pondicherry. The plant had the capacity to manufacture 15000 tonnes each of detergent powder and bar, and 10,000 tonnes of Zeolite.
Spic planned to export Zeolite and detergents to Oman, Dubai, Greece, Egypt, Turkey, Singapore, Seychelles and a few African countries. In August 1993, Spic launched its first product, a detergent powder branded Henko in the premium category (Refer Exhibit II for a profile of the market segments tapped by the company).
The company paid Henkel KGaA a royalty of 55 DM per ton of sales (this was applicable for all products launched in the future). Initially, Henko was launched only in some parts of south India like Kerala and Tamil Nadu, with very little, regional promotional support. Though Henko was a superior product in terms of quality, it did not receive much attention in the market. This was largely because Spic did not do much to create awareness for the new brand. Spic was thus unable to persuade customers who were used to popular brands (such as Surf and Ariel) to try out a completely new product. The company's poor distribution and retail network too hampered the sales prospects of Henko...
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