Fair & Lovely Marketing Assignment

Date of Submission 30th September 2012.

Project Background

A friend works with HUL and in one of our conversations there was a casual reference that Fair & Lovely (F&L) as a brand is so huge for HUL, that it covers the entire salary cost of the company. We were intrigued by this fact. We checked the HUL annual report and collected some primary data and were surprised to see this was partially true. Employee Benefits Expenses for 2010-11 was Rs. 961.26 Cr and for 2011-12 was 1107.28 Cr. Market share of F&L is on an average 80% in the 'Mass Skin Lightning' segment and translates to around Rs. 1500 to 1700 Cr in Sales. When the opportunity for picking up a marketing project came up we thought of picking up F&L.

In the initial days of our research through the internet we found F&L has been picked up by many MBA schools, authors and students as a project and were initially discouraged to pursue this product as a subject for the project. However, the very reason that so many projects have been done on this product suggests that it is a very interesting topic/product to apply and understand the concepts of marketing. Hence, we still decided to pursue with this product as we believe we shall be able to portray a perspective and analysis that is different.

Define the Product.

Fair & Lovely - Fairness cream and associate brand products.

Company - Hindustan Unilever Ltd. (Formerly HLL)

History of the product

Scientists at the Unilever Research Laboratories in India were the first to discover the skin lightening action of Niacinamide (Vitamin B3) that led to the development of a unique and patented formulation of Fair & Lovely in 1972. Fair & Lovely was launched in 1978 in India.

How does it work?

Fair & Lovely's formulation contains a unique fairness system that combines active agents and sunscreens. It works by gently controlling the dispersion of melanin and preventing the sun induced effects of melanogenesis. Melanin is the predominant factor in determining skin colour and is produced in the lower layers of the epidermis and then distributed to the upper layers. The dispersion/aggregation of melanin largely contributes to skin colour.

Fair & Lovely is formulated with optimum levels of ultra violet (UV) sunscreens and niacinamide, which is known to control the dispersion of melanin in the skin. It is a patented and proprietary formulation developed at the Unilever Research Centre. Niacinamide (Vitamin B3) is a water-soluble vitamin and is widely found in cereals, fruits and vegetables. The UV components of the formulation are scientifically chosen and used at optimum levels to provide wide spectrum protection from the UV rays of the sun. All the active ingredients in the Fair & Lovely formulation function synergistically to lighten skin colour through a process that is natural, reversible and totally safe.

Fair & Lovely products are designed to deliver benefits within and on the surface layer only.

1. Aggregate market factors

a. Market Size

F&L and its family of fairness products are categorized in a segment known as 'Mass Skin Lightening'. The other segment is referred to as 'Premium Skin Lightening', which includes the likes of Garnier, Nivea, Olay etc. In its segment Fair and Lovely has been the market leader at around 80% market share since 2009. For Aug'12 F&L share against market competitors clearly shows the brands dominance. A 'packman'; looking at biting off the competitors share. Company Brand / Product % Share HUL FAIR & LOVELY 81.0 EMAMI EMAMI 8.2 CAVINKARE FAIREVER 2.2 I T C VIVEL 2.6 ELDER PHARMA FAIR ONE 0.3 MAZA COSM VI-JOHN 0.9 ZYDUS EVER YUTH 0.1 HIMALAYA HIMALAYA 0.2

FAIR & LOVELY 81%

EMAMI 8%

FAIREVER 2%

VIVEL 3%

FAIR ONE 0%

VI-JOHN 1%

EVER YUTH 0%

HIMALAYA 0%

Others 5%

% Share

b. Growth

Specific data on the growth of the product over the years could not be obtained. Since HUL was the first to launch such a product, it obviously enjoyed 100% market share till such time the competition entered. The product seemed to have lost the market share over the years and at a given point in time went down to nearly 50%. Subsequent players like P&G, Nivea, Neutrogena, Garnier also entered the segment and that's when a 'Premium Skin Lightening' segment came into being. With a split in the segment F&L started enjoying a bigger share in this segment (which is considered non premium).

HUL annual report for year ending 2011 states "Skin Care category had a strong year, led by strong growth in the core brands. Fair & Lovely, Pond's and Vaseline grew strongly in double digits."

Going by the company's statement in the annual report at its level of market share, the product has grown in double digits in the last year.

c. Seasonality

Generally for this product there is no influence of season change. However F&L has been smart in marketing its products and created a variant of the product F&L 'Winter Fairness' cream, and also introduced the concept of a fairness meter along with this product.

d. Profits

Profits of a company for a specific product, was not possible to obtain.

2. Macro Environmental Factors

a. Technological

HUL continues to benefit from the strong foundation and long tradition of Research & Development (R&D) which differentiates it from many others. These benefits flow not only from work done in research centers in India, but also from the centers of Unilever's global research work. With the world class facilities and a superior science and technology culture, HUL are able to attract the best of talent to provide significant technology differentiation to their products and processes. The R&D labs in Mumbai and Bangalore are aligned significantly to Unilever's global R&D. Many of the projects which are run out of these centers are of global relevance