Case Analysis DIVERSEY in India

Submitted byNavdeep Jha (26NMP61) Anand Bajpai (26NMP62) Anirudh Singh (13EM01) Sudeshna Goswami (13EM02)

Executive Summary:

Diversey works in the niche area of cleaning & hygiene. The company focuses on providing end-to-end solutions for cleaning, sanitation and hygiene across 160 countries. Diversey launched its operations in India during 1998. By 2012, the persistent awareness efforts on Science of Cleaning in Indian market, coupled with superior quality products & services have helped Diversey to gain more than 30% share in the organized sector. However, the unorganized market players accounted for more than 70% of the total cleaning market share. With a vision of achieving a 3-fold increase in sales growth in India over the next 3 years, Mr. Himanshu Jain (MD & VP Diversey India) was facing hurdles in penetrating the cleaning market in India. Himanshu was not sure of the best way to generate awareness that can alter the cost conscious & one-sizefits-all mindset of customers. He was also looking for a systematic approach towards removing the inefficiencies in operational setup & inventory management so as to reduce overhead costs. The recommended plan for Diversey India is to invest in advertising campaigns in India where potential of mid-size unit customers is high. This would include awareness campaigns on science of cleaning, benefits of using high quality global standard products and services, and demerits of using cheap & low quality products made of harmful chemicals. Such campaigns would shift the large no of mid-size customers from unorganized market to organized market in which Diversey has no substantial competition, thereby increasing sales and revenue that will lead to a decrease in overhead costs.

Problems & Causes:

Problem:Diversey was facing a problem of benchmarking its products against the low quality & cheap products of the local unorganized market players. Cause:The high quality global standard products and services of Diversey they were overlooked by the cost conscious customers in India who preferred low cost cleaning products to do the daily chore of cleaning. Moreover there was no such Government policy in place that restricted usage of cheap harmful chemicals by unorganized market players in their cleaning products. Problem: Majority of Indian customers was relying on the traditional approach towards cleaning and hygiene. Cause: The social mindset of majority of Indian customers was that cleaning and hygiene was a day-to-day chore, which did not require anything else other than simple cleaning agent (phenyl) along with water and plain cloth. This mindset can be attributed to lack of awareness towards right cleaning program, process & product. Page 1 of 4

Problem: Most of the Indian customers had one-size-fits-all mindset, i.e. they expected a single product that met all their cleaning needs. Cause: Most of the Indian customers were not aware of the importance of applying right type of composition of chemical solution for each of the specific needs. Although Diversey was investing time & money in generating awareness, the results were unfavorable. Problem: Setting up the distribution channel to reach potential customers like ‘Dhobis’. Cause:Potential customers like ‘Dhobis’ purchased basic chemicals in need based quantities on credit from local contractors. Composition and mixing criteria for washing different clothes varies accordingly but this was immaterial to them. Such customers are more concerned about the flexibility of payment, which they get from such local contractors.

Problem: Inventory management of spare parts for the cleaning equipment. Cause: Diversey had to maintain almost 10000 different Stock Keeping Units, as the spares of the cleaning equipment were slow moving but time critical. The operational cost of warehouse maintenance was 3% of total operating cost and inventory accounted for more than 15% of sales. This contributed to significant overhead costs. Alternative Solutions: Awareness CampaignsDiversey should invest in launching awareness campaigns in areas where the potential of small unit customers is high, i.e. places where Dhobis, eateries etc. are in a large number. Free samples of products should be distributed in such campaigns, including live demonstrations. Such campaigns should also introduce policies like flexible payment options to attract such customers. Research & DevelopmentDiversey should invest in Research & Development department to come up with a cost effective cleaning consumables product to cater to the cost conscious customers of Indian market, while maintaining certain basic quality standards. Diversey is known for its high quality products but the majority of small unit customers are cost conscious and thus pricing plays a critical role in this market.

Inventory Management: Diversey should invest in more manufacturing units for spares of import nature in various HUBs. This will ease the availability of critical spares and will reduce the need for high number of stock keeping units, hence reducing overhead costs incurred in the maintenance of such SKU’s. Page 2 of 4

Plan of Action:

With the vision of achieving 3-fold sales turnover in next 3 years, Mr. Himanshu Jain should invest in marketing campaigns.     

Such campaigns should target small unit customers, by television & print media as well as live campaign set-ups in area having a large potential of such customers. Such campaigns should include distribution of free samples as well as live demonstrations emphasizing on importance of using right product in right way. Such campaigns should stress on negative impact of using local & cheap products comprising of harmful chemicals. Such campaigns should publicize about consumer friendly delivery models. Such campaigns should introduce flexible payment policies to attract small unit customers.

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