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NAUJOJI RINGUVA, AB MARKET POSSITION:
CHALLENGES AND OPPORTUNITIES
1.1.
Overview of NAUJOJI RINGUVA, AB
1.1.1. Company's history
Company RINGUVA, AB was set up in 1920. The core activities at the set
up time were the production of oil from flax and hemps and production of solid soap
from beef tallow. The business model was based on tight cooperation with Lithuanian
farmers as they were the main suppliers of raw materials and main clients for the service
of oil extraction. Company was set up upon the decree of Lithuanian President A.
Smetona and had a strategic importance for Lithuania’s economy as was the only
producer of solid soap – the main product for hygiene maintenance – in the country. The
company had a dominant position in the local solid soap market, although there were
products from France, Italy on the market. Company's products were exported to Latvia,
but the part of export sales was insignificant.
Company was nationalized in 1941 and became private company only in
1993 during the initial stage of privatization. New owners gave company the name
NAUJOJI RINGUVA, AB (meaning “new” RINGUVA), which symbolized the rebirth
of the company and new stage in its activities influenced by economical transition from
planed to market economy. Company continued its activities in the production and sales
of personal care and laundry products.
1.1.2. Company's vision and strategic guidelines
Company’s vision is to become the biggest innovation-driven cleaning
products’ production and sales company in the Baltic region. Company’s mission is to
create and deliver innovative and effective cleaning products which would help people
easily maintain the cleanness. The core values of a company are reliability, responsibility
and innovation. The ambition to develop and produce innovative unique cleaning
products which would form a sustainable competitive advantage for a company in both
local and export market; sustain the leader’s position in the category of laundry soaps
(having not less than 90 percent of market by value); become the leader in terms of sales
in product categories of toilet soaps and stain removers in Lithuania; increase market
share in terms of value in category of liquid detergents up to 10 percent; consistently
increase own brands’ awareness and reconcilability in the Baltic States are Company’s
strategic guidelines.
1.1.3. Current situation: products, brands, sales, distribution
Currently NAUJOJI RINGUVA, AB is one of the biggest manufacturers
and sellers of personal care and laundry products in the Baltic region including Lithuania,
Latvia and Estonia.
Company sells its products in local and export markets. In 2011 company's
products were exported to 8 foreign countries: Russia, Finland, Latvia, Estonia, Norway,
Germany, United Kingdom, and France. Company’s sales structure based on data of year
2011 by the market is as follows: 54.6 percent of sales come from Lithuanian (local)
market, 45.4 percent from export sales.
Company produces fast moving consumer goods and has a product portfolio
led by four main brands: SMILĖ, TINDI, BALANCE and RINGUVA. Company’s
products include solid and liquid toilet soaps, shower gels, shampoos, laundry soaps,
liquid detergents, stain removers, cleaning products for professional use. The main part of
company’s sales comes from liquid detergents (44 %), toilet soaps (32 %) and stain
removers (9 %) as seen in Figure 1.
Source: Internal data.
Company’s brand portfolio comprises of four main brands: SMILĖ and
TINDI for personal care products; RINGUVA and BALANCE for laundry products.
Brand RINGUVA is umbrella type brand with sub-brands RINGUVA X and RINGUVA
Plius. It worth noticing that during the last three years the number of company’s own
brands presented in local market decreased from 9 to 4. Huge number of brands was
developed during the last two decades then company tried to adapt to changing market
situation and experimented a lot. As company does not have enough resources to manage
many brands and there is no actual need for so many brands to reach the pursued goals,
company optimized its brand portfolio. Company’s sales by brands based on data of year
2011 are presented in Figure 2. The biggest part of sales comes from brand SMILĖ.
Source: Internal data.
All of the abovementioned company’s brands except brand BALANCE are
presented on Lithuanian market for more than 10 years. Brand BALANCE was
introduced in 2008 as a response to the increasing customers concern regarding the
impact of aggressive chemical products on human health and on the environment. Special
completely biodegradable products all tested by clinical dermatologists and allergologists
were developed and introduced to the market for customers.
Company’s annual marketing budget ranges from 5 to 6 percent from total
sales. Company caries two big integrated marketing campaigns promoting its own brands
in local market every year.
Significant part of company’s sales of 76 percent in local market comes
from sales to major retail chains (modern trade) as shown in Figure 3. The local market is
dominated by big retail operators. According to Competition Council’s of the Republic of
Lithuania data the biggest three retail chains accounted for 74 percent of the Lithuanian
retail food market in 2009. Company evaluates that retail chains account for
approximately 80 percent of personal care and household cleaning products’ market.
Company’s products are presented in all food and specialized retail chains as well as in
most of traditional trade selling points which are served by distributor. The set of 4 topselling products is presented in more than one thousand four hundred selling points in
Lithuania.
Source: Internal data.
1.1.4. R&D activities and new product development
Company revised its business model, strengths and weaknesses, and
approved new business development strategy in the beginning of 2009. The major shift
was related with the plan to put great managerial efforts and financial resources for new
products’ and technologies’ development and implementation. The new structural
department “New products’ laboratory” was set up, new personnel with the background
in chemical technology, biotechnology and biochemistry was recruited and intensive
work in R&D field started. The decision to develop innovative products and technologies
was based on the evaluation that company has valuable expertise and exceptional knowhow in industrial chemical technology and this is a great opportunity for a company.
Company constantly works in tight cooperation with Lithuanian and foreign scientists on
several projects. Company is a member many association including Lithuanian
Biotechnology Association and Lithuanian chemical industry association.
Company introduces about 10-12 new products to the local market every
year. On the average the product development cycle due to long terms of stability,
dermatological, allergological, and biodegradability as well as product efficiency testing
takes from 12 to 18 months. In Figure 4 the main brands’ expansion in terms of new
products during the last three years is shown.
Source: Internal data.
It is planned that personal care products’ line SMILĖ will be expanded by a
range of new advanced shampoos in the beginning of 2013. The Company places a
priority on producing environment friendly products being responsive to the increasing
number of people with allergies and increasing chemical pollution.
Since 2000 the Company has been operating according to the Quality
Management System ISO 9001:2000 protocols since 2000.
1.1.5. Manufacturing of private labeled products
In terms of sales by company’s own and customers’ private brands, 57
percent of sales come from selling own branded products, 43 percent from selling
products with clients’ private brands. Company seeks to increase the sales of own
branded products as it is more profitable, increases the value of a company through the
brands value and builds sustainable competitive advantage. The average gross margins
from the sales of own branded products and products with clients’ private labels are
presented in Figure 5. Sales of own branded products’ are as much as twice more
profitable comparing with private labelled product. It is worth noticing, that net margin
would not differ twice, as a company invests in its own brands’ development and
promotion, but even taking into consideration all the costs related to marketing and
selling activities, it is obviously more profitable for a company to sell products with own
brands.
Source: Internal data.
Manufacturing of products with clients’ private labels allows Company to
reach higher economies of scale and utilize spare manufacturing capacity. According to
the company's strategic guidelines the Company is going to continue the manufacturing
of private labelled products for its customers while these products do not directly
compete with Company’s own branded products. Due to a short terms of contracts (up to
2 years), constant pressure from clients on lowering products’ prices and passing of all
additional and (or) start up costs to the manufacturer it would be difficult to assure
balanced growth and development of a Company if concentrating on contract
manufacturing activities as the alternative to sales of own branded products. The
manufacturing of private labelled products as the core business can be successful if two
main conditions: the exclusive operational excellence and significant effect of economies
of scale are achieved. NAUJOJI RINGUVA, AB does not have the sufficient
manufacturing capacity to develop competitive level of scale needed in production of
cleaning products.
Currently company’s customers in manufacturing private labelled products
include two companies from Fortune Global 500 list of 2011. Apparently, this fact
confirms company’s high level of technological and operational skills.
Company NAUJOJI RINGUVA, AB produces personal care and laundry
products both with own and private labels. Personal care and laundry products fall into
seven different product categories. Company has four main brands SMILĖ, TINDI,
BALANCE and RINGUVA represented by more than fifty different products on local
market. Company seeks to increase the sales of its own branded products as it more
profitable, allows company to benefit best from its achievements in new products and
technologies development, also to increase company’s value by increased value of
brands.
1.2.
Competitive landscape analysis: the assessment of current
market position
In order to have a better understanding of competitive landscape, analysis of
categories performance and brand awareness from customers’ perspective is needed.
1.2.1. Categories performance
As it was mentioned in the Company’s overview, the main two products’
categories in which company seeks for leader’s position in terms of sales in the
Lithuanian market are toilet soaps and stain removers. The goal in liquid detergents’
category is to increase market share in terms of value up to 10 percent accordingly 7
percent for liquid detergents branded Ringuva Plius and 3 percent for BALANCE line
products’. Company made significant investments in the development of innovative,
effective liquid detergents during the last three years and developed unique products for
the laundry.
The category of toilet soaps is represented by brands SMILĖ and TINDI,
liquid detergents by brands RINGUVA Plius and BALANCE, stain removers by brand
RINGUVA X. Company entered the stain removers’ category only in 2008, the first
liquid detergents’ product line under the brand BALANCE was introduced in May of
2011, liquid detergents under the brand Ringuva Plius were introduced in November of
2011.
Company’s toilet soaps under the brand SMILĖ have market share of 7
percent in terms of value. The toilet soap category by market share in terms of value is
shown in Figure 6. The leader’s position is held by Palmolive (owned by Procter &
Gamble) followed by Camay (owned by Colgate – Palmolive company), SMILĖ,
Safeguard (owned by Procter & Gamble) and others. The soaps under the name “Private
labels” represent the one retail chain’s private labelled products.
Source: Nielsen data.
The category of toilet soaps is represented by many brands, the leading three
brands account for 28 percent of market. Analyzing the competition dynamics in toilet
soap category during the last 12 months with respect to the data available, the leader’s
position is held by the brand Camay owned by Procter & Gamble, company’s brand
SMILĖ is in fierce competition for the 2nd position with the brand Palmolive owned by
Colgate – Palmolive company. The dynamics of market share in terms of value by
leading three brands in category of toilet soaps is shown in Figure 7.
Source: Nielsen data.
Analysing the market positions of the three leading brands in category of toilet
soaps by comparison of market share in terms of volume and value as shown in Figure 8,
the Camay and SMILĖ brands’ market shares in terms of volume exceed the market
shares in terms of value, Palmolive’s market share in volume is approximately equal to
value share. SMILĖ brand in terms of volume has 2nd position, in terms of value the 3rd.
Source: Nielsen data.
The analysis of the market of toilet soaps shows that the market is very
competitive and there is no obvious leader. The company faces competition of world’s
leading consumer and personal care goods’ companies Procter & Gamble, Colgate-
Palmolive, Unilever and Henkel. Competitor companies have superior marketing
experience and knowledge and invest a lot into marketing activities so it presses the
company to re-think its marketing strategies and programmes and look for
unconventional approaches in marketing.
The second product category for developing leader’s position is stain
removers. The stain removers’ market is much more concentrated comparing with toilet
soaps as the three leading brands account for 84 percent of the market in terms of value.
The stain removers market is shown in Figure 9.
Source: Nielsen data.
Company managed to double its market share in terms of value during the past 12
months. As market share of brand Fermenta was stable, the strong competition occurred
between the two brands Vanish owned by Reckitt Benckiser and Ringuva X. The
dynamics of leading three brands performance in the category of stain removers is shown
in Figure 10.
Source: Nielsen data.
The comparative analysis of stain removers market by volume and value reveals
that company is a leader by market share in volume, but its market share by value is
lower. This is determined by the different price categories of brands RINGUVA X and
Vanish. Vanish is a premium brand in terms of price. The top three stain removers’
brands market position in terms of volume and value is shown in Figure 11.
Source: Nielsen data.
The liquid detergents’ category is dominated by world leading consumer goods’
companies Procter & Gamble (brand Ariel), Henkel (brands Persil, Perwoll, Rex), Sara
Lee (Neutral). The liquid detergents’ market by brands is presented in Figure 12.
Source: Nielsen data.
Company has a leader’s position in category of laundry soaps with market
share in value and volume exceeding 90 percent. As a consumers’ behaviour and
consumption habits change, the company decided to enter liquid detergents’ market and
introduced liquid detergent lines BALANCE and Ringuva Plius in 2011. Brand
BALANCE has 0.8 percent and Ringuva Plius 0.3 percent of market in terms of volume
and are respectively in 11th and 13th position as shown in Table 1.
Table 1. Liquid detergent category brands by market share in volume and value,
2012.02, %
Rank by market
share
Brand
Market share, volume
(%)
Market share, value
(%)
1
2
3
4
5
…
11
…
14
15
ARIEL
PERSIL (HENKEL)
PERWOLL
REX
NEUTRAL
30.1%
22.2%
13.8%
12.5%
4.2%
32.1%
26.1%
13.8%
8.9%
6.7%
BALANCE
0.8%
1.0%
RINGUVA PLIUS
Other brands
0.3%
3.5%
0.3%
1.7%
Source: Nielsen data.
It is worth noticing, that top two brands in category of liquid detergents – Ariel
and Persil – accounting for more than 52 percent of market in terms of volume and 58
percent in terms of value. As the market value share exceed the market volume share
shows that companies Procter & Gamble and Henkel manage to achieve market
leadership with their branded products with above average market prices.
The comparative analysis of company’s category performance in local
market (modern trade) in toilet soaps and stain removers shows that company lacks
ability to sell its quality products with above average market margins as company’s
market share in volume significantly exceed market share in value.
1.2.2. Brand awareness from customers’ perspective
Company initiates opinion surveys of residents of Lithuania on the regular
basis in order to discover Company’s brands’ spontaneous awareness, the sociodemographic characteristics of the respondents and own brands’ image. The dynamics of
the abovementioned parameters are important for decision making and for the indirect
evaluation of marketing’s activities. The opinion surveys are carried out by competent
market research companies using omnibus method which is the representative Lithuania's
population survey, which surveys permanent 1,000 residents aged 15-74 years, which, by
sex, age, place of residence and education meets the Lithuanian population distribution
according to these characteristics. Selection is formed according to the latest Ministry of
Statistics Department’s information on the Lithuanian residents. Opinion survey
researches are carried out in accordance with the requirements of ESOMAR. Research
method used is direct (face-to-face) interviews at the respondent's home. The data’s
margin of statistic error is 3.1%. Correlation analysis is applied in investigating the brads’
image.
Brand SMILĖ is the main company’s brand in terms of sales (Figure 2).
This brand represents important product category of toilet soaps in which company seeks
for leadership. The last opinion survey carried in April of 2012 shows that best
spontaneously known brands are Palmolive, Camay, Dove, SMILĖ, Nivea. The survey
results are presented in Figure 13.
Figure 13. Spontaneous awareness of toilet soaps’ brands.
Source: RAIT opinion survey of residents of Lithuania (2012.04).
According to RAIT survey, all soap brands are better known by woman and
working people. Typically women are the decision makers choosing the personal care
and household cleaning products. The socio-demographic picture of respondents who
know brand SMILĖ is shown in Figure 14. The respondents who know brand SMILĖ are
women aged 25-34 having higher education, currently being on maternity leave or
housewives.
Figure 14. The socio-demographic characteristics of respondents who know brand
SMILĖ.
Source: RAIT opinion survey of residents of Lithuania (2012.04).
Survey’s results on brand SMILĖ image presented in Figure 15 reveals that
attributes attached to SMILĖ are “Made in Lithuania“, “Suitable to use daily” and
“Affordable price”.
Figure 15. Brand image of toilet soaps.
Source: RAIT opinion survey of residents of Lithuania (2012.04).
The category of stain removers is dominated by brand VANISH in terms of
first spontaneous notice. The stain removers’ brand awareness is shown in Figure 16.
Company’s brand RINGUVA has overall notice of 6.8 percent and 3 percent of
respondents named brand Ringuva first stain removers’ brand.
Total %
VANISH
36
ACE
16
ARIEL
RINGUVA
ULA
44,4
13
8
3
8
28,8
8
16,5
4
6,8
12
Bonux
01
Tide
01
BALANCE
00
2,7
1,6
Top of m ind
1,1
Other m entions
0,7
...
DK/ NA
28
0%
10%
20%
30%
40%
50%
60%
Figure 16. Spontaneous awareness of stain removers’ brands.
Source: RAIT opinion survey of residents of Lithuania (2011.09).
Exploring the stain removers’ brands’ image the respondents were asked how the
suggested features suit the concrete brand. The scale from 1 to 10 was offered there “1”
means that the feature does not suit the brand and “10” meaning that the feature suits the
brand very well. The respondents’ answers are shown in Figure 16.
Figure 17. Respondents’ opinion on stain removers brands’ image.
Source: RAIT opinion survey of residents of Lithuania (2011.09).
Respondents’ answers show that features attributed to brands RINGUVA and
RINGUVA X are “efficiently cleans stains”, “does not bleach the fabric”, “of good
quality”; “made from natural materials”, “convenient for use”, “affordable price”,
“trustworthy producer”.
The features more attributed to the best known stain removers’ brand
VANISH are “acceptable scent”, “attractive packaging” and “innovative/ new generation
product”.
Brand RINGUVA X is better known for respondents aged 25-34 years and
respondents having higher education. Brand VANISH is better known by woman aged
24-44 years and residents having higher education, public servants, specialists and
housewives.
The overall conclusion based on opinion surveys is that brands of NAUJOJI
RINGUVA, AB lack the awareness and respondents do not attribute the innovativeness
to company’s products despite the fact that company seeks to emphasize this feature
projecting the advertising of its products and communicating with customers.