Anatomy of a Handwash

I first came across Dettol Foaming handwash at a friend’s house in Sep 2023, when I shifted to Gurgaon. I was pleasantly surprised by the richer experience provided by the product. Later, when I moved into my own house, I bought a few of them for the kitchen and washrooms. A Palmolive dispenser that I had carried from Mumbai also found a place adjoining one of the basins.

Months later, the need to refill the pumps arose and I diligently bought a couple of 700ml Dettol Foaming handwash packs. The Palmolive dispenser also ended up getting some soap from the rival brand but when I tried to use it, only the solution came out. No foamy lather that I had gotten used to. Of course, I was disappointed. While I have always bought refills for dispensers, this time around I would have to buy a dispenser for the refill. Perplexed I realised that unknowingly I just got premiumised.

Now, the FMCG industry has been plagued with low volume growth over the last few years. Experts have highlighted multiple potential reasons for this:

• Price increase, especially in staples
• Lack of innovation in category development
• Implementation of Demonetisation and GST, and the subsequent COVID pandemic happening within a few years of each other.
• The shift in consumer spending from food to consumer durables and other aspirational products

…and a few more

Despite the above, the revenue and profit margins of large FMCG companies don’t seem to be shrinking at all. What I believe, and doesn’t get spoken about with the same gusto, is the gradual premiumization happening in the industry. Obviously targeted to the most affluent consuming class. Here, I would like to highlight two surveys and studies from different bodies.

The Government of India in its recently published Household Consumption Expenditure Survey (HCES) ended up highlighting the massive income inequality in the Indian populace. The average monthly per capita expenditure of the top 5% of households averaged Rs. 21k in Urban and Rs. 10.5k in rural centers. The divide in Urban is far starker than in Rural with the top 95-100% fractile spending 67% more than the 90-95%. To compare the top 5% vs the bottom 5% is a nightmarish story and I do not wish to go there.

?The second data point I would like to mention is from Kantar’s FMCG Pulse (Mar ’24). While the edition also talks about volume stagnation, it does mention the fastest-growing large categories

One look and you’ll realise that half of these categories are aspirational in nature- Instant Coffee, Fabric Softeners, and Washing Liquids. Chocolates and Biscuits are indulgences and their penetration is far more in the affluent class than in the true middles. In each of the instances, the spend growth is more than the consumption- while there might’ve been some MRP changes, premiumisation cannot be denied.

Funnily enough, the handwash category, as per Kantar is seeing a slower value growth vs volume indicating that there is some downgrading happening in the category. Clearly, my purchase behaviour has been an aberration, or maybe the slew of cheaper handwash liquids available in the market are pulling the spends down.

The low volume growth is definitely a cause of concern for our industry. While premiumisation is happening at the top, and the margins remain intact for companies, any slowdown in consumption by the larger populace doesn’t bode well for the country at large. While we might enjoy the rich lather of the foaming handwash, but if our fellow countrymen who packed, transported, unloaded and delivered the pack to our doorstep don’t get to indulge in it a bit themselves, the great Indian consumption story might just get washed away.