PRODUCT INNOVATION IN VINI

COSMETICS
Submitted by:
Aayush Sharma (B14126)
Akshay Pandita (B14129)
Karan Chhabra (B14149)

Table of Contents
DARSHAN PATEL AND THE JOURNEY OF PARAS AND VINI PRODUCTS................................................ 2
BACKGROUND ......................................................................................................................................... 2
IMPORTANT PRODUCT INNOVATIONS IN NICHE CATEGORIES............................................................... 3
PRODUCT FAILURES ................................................................................................................................ 7
EXIT FROM PARAS AND BIRTH OF VINI PRODUCTS LTD ......................................................................... 7
FOGG DEODORANT ................................................................................................................................. 7
FINANCIAL VALUATION OF PARAS PHARMACEUTICAL ........................................................................ 9
VALUATION MODEL ................................................................................................................................ 9
QUICK GLANCE AT COMPANY PERFORMANCE ..................................................................................... 10
FCFE MODEL .......................................................................................................................................... 11
RESULTS ................................................................................................................................................ 11
BRAND EQUITY ...................................................................................................................................... 13
BRAND EQUITY V/S BRAND VALUE ....................................................................................................... 16

DARSHAN PATEL AND THE JOURNEY OF

PARAS AND VINI PRODUCTS

BACKGROUND
This company from Gujrat started off in 1962. Paras name has its origins in the small pebbles
that looked like Paras mani or wealth stone near the Mahanadi River. The company started
its operations with manufacturing a painkiller with the name of Stopache. Then 1985
witnessed entry of Darshan Patel, the maverick marketer with no formal management degree
to his name. He first repositioned Moov as a specialist in dealing with back pain and increased
it market share to 30% and revenues to 50 Crores. He considers his insight into consumer
behavior as his forte, which according to him he acquired during his long trips from
Ahmedabad to Orissa in childhood. He walks the talk, that successful brands cannot be
created by sitting in a boardroom, but by travelling extensively in a diverse market as India
which is inundated by local players at every inch. He is a self-taught marketer who loves to
read books on the subject to keep him updated with the latest trends in the industry. He used
this marketing insight to create from scratch almost two dozen consumer brands across the
two companies Paras and Vini he has worked at. His vision was the reason Brand Experts
gives credit to for the phenomenal rise of the Paras from late Eighties to Nineties. Paras
launched over 15 OTC (Over the counter) personal healthcare and personal care brands such
as Moov, Krack, D- Cold, ItchGuard, Livon, RingGuard, Recova, DermiCool and SetWet. It
expanded to almost fifty countries and revenue touched 500 Crores worth 50 Crores in Profits.

IMPACT OF HIS VISION

Competing with global MNCs such as GlaxoSmithKline, wit deep pockets and global funding
is never an easy task. Paras roped in Ad agency Mudra to nurture its brand. Repackaged in a
tube with white cream base, Moov displaced Iodex as the Indias leading back pain relief
ointment. Such was the impact that GlaxoSmithKline changed its product strategy and relaunched it in a different color.

IMPORTANT PRODUCT INNOVATIONS IN

NICHE CATEGORIES
KRACK CREAM
Getting inspiration from his wife, built on Krack Cream. Indians increasingly faced problems
of cracked heels for which no product existed before. Currently held by Reckitt Benckiser, the
product description on their site is: Dry skin (xerosis) is common and can get worse with
wearing open-back shoes, increased weight, or increased friction from the back of shoes,
prolonged exposure to water. Dry cracking skin can also be a subtle sign of more significant
problems, such as diabetes or loss of nerve function (autonomic neuropathy). Krack cream is
an antiseptic cream that relieves severely damaged and cracked heels. It is fortified with the
power of 7 herbs trusted in Ayurveda. Krack cream repairs and relieves dry skin disorders such
as rough and cracked heels, chapped hands, fissures and chilblains.
(TAKEN FROM RB WEBSITE)

LIVON HAIR CONDITIONER

Idea for Livon struck Patels mind when he watched women in apartments had tangled hairs
after washing them. It was the first leave-in hair serum at that time. Marico has further gone
into line extension and introduced Livon Hair growth tonic too, capitalizing the high brand

pull.
Product description on Maricos site:
Livon Silky Potion is a hair serum that puts an end to tangled, dry and unmanageable hair. It
promises protection of hair cuticle with its unique 'Cutisoft' Formula. The CutiSoft Formula
softens the cuticle by forming a coat on the hair strand and sealing in the moisture with a layer
of protection giving you silky, smooth and manageable hair. Enriched with Vitamin E, Livon
Silky Potion smoothens and softens your hair so you can let your hair down anytime and
anywhere.
(INPUTS FROM MARICOS WEBSITE)

RING GUARD & ITCHGUARD

India witnesses acute moisture laden and warm climate in its many parts and for extended
periods sometime. Skin areas then not exposed to sun and atmosphere then typically develop
fungal infections, which cause irritation. Itch guard was specifically formulated to alleviate
this problem.
In the lower socio- economic segment, ringworm or tinea causes problems due to excessive
sweating due to high humidity combined with unhygienic conditions leads to skin erosion.
Paras Formulate Ring guard for this in 1998.

Product Description on site:

Ringguard
Prolonged exposure to water, humid environment and excessive heat, results in a skin
affliction called ringworm, commonly known as 'Daad'. RingGuard cream provides fast relief
from ringworm and other skin infections. It has double action formula - having active
ingredients like miconazole nitrate which acts as anti-fungal & neomycin sulphate, which
acts as an anti-bacterial.
Ring Guard cream provide fast and complete relief from:
Ringworm
Athletes foot
Other fungal skin infections
Skin infections caused by bacteria

Itchguard
ItchGuard cream provides fast relief from itching. It contains clotrimazole, which acts as
antifungal and menthol, which soothes the skin and gives a cooling effect.
Itch Guard cream provides fast relief from:
Jock Itch (Dhobi Itch)
Itching & rashes
Infections between toes & fingers
Itching at waist area, folds of inner thighs, buttocks, underarms and underside of breasts
(INPUTS FROM RBS SITE)

DERIMICOOL
Till the launch of Dermicool in year 1999, Nycil had a whopping share of close to 65% along
with Shower to Shower with a distant 17%. Armed with Consumer Research with the help of
Mudra, Paras Pharmaceuticals launched Dermicool. The only differentiating factor of it was
the cooling it provided from the burning sensation in heat along with being a prickly heat
powder. This was followed by the innovative advertisement campaign of cooling van, which
helped Dermicool garner product share of 8% in its first
year. With the launch of swathes of new brands in
prickly heat category, the only differentiating factor
Dermicool maintained was that of cooling sensation it
provided which through its advertisement campaign, it
deemed make necessary. Dermicool now enjoys 30 %
market share with Nycil leading with 37% market share
in 200 crore Prickly heat powder category.
Paras also launched Dermicool in 50gm packets for rural market at 20Rs. This strategy worked
favorably as it contributed 15% to the top line in 2010.
Paras Pharmaceuticals also launched its variants over the time Regular, Scandal, Lavender and
Lime.

SET WET
One of the distinguished feature which marketers
always confer on Darshan patel is the simplification and
conveying brand promise through the name of the
product itself. Be it krack cream for cracked heels or
LIVON for leave- it-on. And then there is Set Wet. The
styling gel that has been market leader in its category.

PRODUCT FAILURES
Well like with all successful ventures, not all his brands succeeded like Moov or Krack cream.
Q-Co, a hair fragrance from Paras stable was taken out from the market, as consumers were
wary of using hair fragrances. But there were not

EXIT FROM PARAS AND BIRTH OF VINI

PRODUCTS LTD
Darshan Patel unceremoniously left Paras and started Vini in year 2010.He first tried to launch
Vini (named after the pet Turtle of his family) in year 2006, but was convinced by his family
to not go for it and to be remain seated on the board of Paras. But the family feud with his
elder brothers relating to his controlling stake to be passed on to his daughter, he sold of his
share to private equity firm Actis capital for 43 Million $ and exited the firm. In 2010, British
Consumer goods giant Reckitt Benckiser purchased Paras for 3250 Crores, which was almost
three times its valuation.
19 Million $ for starting Vini Products was pumped by American venture capitalist firm
Sequoia Capital.

FOGG DEODORANT
A company can differentiate its product from the competition on the basis of any 1 or more
variable in the marketing mix i.e. 4Ps Product, price, place and promotion. Being a FMCG
product; Fogg played the first P i.e. Product card quite well.

CONSUMER NEED GAP LEADING TO INNOVATION

They found out that the deodorant can be differentiated by having less gas and more
perfume. Thus providing more value to the customers. The customers were guaranteed to
have 800 sprays from a bottle of Fogg Royal priced at Rs. 170/-. Thus the functionality of

having more number of sprays in a bottle worked wonders for Fogg and it became the leader
in the market.

COMMUNICATING THE INNOVATION

The functionality was also adopted well in the promoting the product with the tagline No
Gas, Only Deo. This kind of positioning was also different from the competition including
Axe, which emphasized only on the seduction aspect to sell their deodorants.

SWOT ANALYSIS OF FOG

STRENGTHS

Differentiated value proportion from all its competitors.

Excellent promotions, campaigns and distribution for its customers.

Wide range of products available.

Effective advertising and branding, targeting youth.

WEAKNESS

Promotions effective only in Urban Market Phenomenon.

Slightly controversial advertisements which may lead to legal issues.

OPPORTUNITY

No monopoly or strong presence of any brand.

Can Tie-up with large organizations like hotels, gym, restaurant chains.

THREATS

Seasonal sales of deodorants affect sales.

Heavy competition in premium segment.

FINANCIAL VALUATION OF PARAS

PHARMACEUTICAL
We have attempted to get a financial valuation of Paras pharmaceutical in 2010 using FCFE
(Free cash flow to equity).We aim to compare this with the actual amount paid by RB. The
difference between the two should be a close proximity to the brand equity of the company.
The revenue stream of Paras was very robust and the balance sheet figures revealed positive
earnings.

VALUATION MODEL
Model assumptions and values:

CAGR on the basis of Profit after tax of the last 4 years evaluates to 20%.In our model
we have assumed continuation of this high growth model for next 5 years. A robust
distribution system, well developed brand loyalty, well-structured marketing plan
should continue to drive this growth forward.

With high competition and presence of substitutes, the company is expected to enter
a stable state of growth for next 10 years. Empirical data of peer-companies suggest
that in the decade 2015-2025 growth rate should have stabilized at 5 %(ceteris
paribus).

Peer-group analysis gives a WACC of 18.5%.

QUICK
GLANCE
PERFORMANCE

AT

COMPANY

Units in Thousands (other than percentage figures and ratios)

Net sales revenue

3804500

Operating profit(EBIT)

3849600

EBITDA

1054800

Net Profit

1170400

Total Assets

713000

Total Equity

1607600

Operating profit Margin

27.73%

Return on Sales

24.69%

Return on Equity

45.45%

Debt to equity

N/A

Quick Ratio

0.87

Cash Ratio

0.43

Source: EMIS, EMIS Company Database

FCFE MODEL
FCFE is often used by analysts in an attempt to determine the value of a company. CFE is
defined as the amount of free cash flow the firm has after meeting all its obligations. This
includes debt obligations, capital expenditure to maintain existing assets, and new asset
purchases to maintain the growth rate assumed. This is the cash that can be paid to
shareholders after paying for all expenses, debt repayments, and reinvestments.

RESULTS
Final valuation of the company as per our model (made through our learning of FM-1 at
XLRI) is coming out to be Rs. 1,49,81,169. Cash flow statement figures have been sourced
from emis.com. Reckitt Benckiser actually scooped Paras Pharma for Rs. 3,260 crore.More
than twice its financial valuation. In the next section of this report we discuss the possible
reasons behind this difference from a marketing point of view and the role played by Brand
Equity in creating such a difference.

BRAND EQUITY
Brand equity helps in distinguishing one brand from another and effect customers
perceptions of knowledge about a brand. It consists of elements such as the brand
associations, market fundamentals and marketing assets.

Loyalty
Perception/Image

Quality
Brand association
Relevance

Brand Equity

Awareness
Value proposition

IP
Buisness asset

Network
Reach
PESTEL

Market fundamentals

Pricing
Benchmarks

It can be both positive and negative. Positive associations lead to stronger and more impactful
customer association. However sufficient investments need to be made for appropriate brand
management. Brand equity is a moderator and estimator of marketing activities
(communication, customer engagement, assurance) on consumers actions (choice,
consideration, attitude, action, etc.).

HOW PARAS ACHIEVED IT?

Paras through its assurance of quality built a loyal base for itself. Its products provided the
utility they promised which helped built a strong image in the eyes of customer. The
communication strategy was very efficient and the message clearly communicated the values
provided by their product thereby increasing their relevance. The entire communication
strategy was integrated and the marketing techniques as discussed earlier helped develop
awareness and a positive perception. Their balance sheet shows a higher than industry
average spending on R&D, this was a deliberate step to ensure high quality products.

HOW WAS BRAND EQUITY BENEFICIAL TO PARAS PHARMA?

The positive brand equity of Paras helped it in

Generate constant revenue and maximise the cash flows.

Create Goodwill

Demand price premium (although to a limited extend)

Allow for brand extension

Attracting and retaining more valuable customers

Reducing the costs of customer acquisition

To summarise, positive brand equity pushes forward customer value, which lead to increase
in shareholder value.

Differentiation
Brand vitality
Relevance
Brand value
Esteem
Brand structure
Knowledge

MILLWARD BROWN MODEL

If we apply this model to Paras Pharma, it tells us that paras built its brand equity by improving
customer loyalty towards its products and thereby focusing on more profitable customers.
The Millward brown model consists of five blocks, indicating increasing customer value, each
stacked over each other to form a pyramid. This explains why some customers are more
valuable than others. These blocks indicatewith increasing brand loyaltypresence,
relevance, performance, advantage and bonding. The aim is to motivate and give reasons to
customers to move from lower to higher levels in the pyramid.

Bonding

High Loyalty

Advantage
Performance
Relevance
Presence

Low Loyalty

REASONS FOR RBS BID BEING HIGHER THAN PARASS FINANCIAL

VALUATION
RB acquired Paras Pharma for Rs. 3,260 crore, more than two times its financial valuation.
Why this difference? The answer is brand equity. Actually the financial valuation of Paras is a
representation of its Brand value while RBs bid was based on Parass Brand equity. So we
need to understand the difference between Brand equity and Brand Value.

BRAND EQUITY V/S BRAND VALUE

Brand value and brand equity stand for two related yet different concepts. Brand value is the
net present value of discounted future cash flows of a firm. This figure represents what the
brand is worth to management and shareholders. On the other hand brand equity, as
discussed is what the customer thinks of the brand, their perception, knowledge and that
leads to demand and/or a price premium. Simply put it represents what the brand is worth to
the customer. While measuring brand value is important and has its utility, the act of
measurement by itself is not sufficient to make a brand more valuable or less risky. The
quantification and management of brand equity is critical to transfer value to the
corporations shareholders. During the past 15 years, brand equity has been a priority topic
for both practitioners and academics.
The acquisition gave Reckitt Benckiser an immediate customer base in the highly attractive
Indian market, at the same time it provided it with a support system in the form of a partner
who had spent many years developing its own unique products as per the customer needs
and demands.
Parass targets customers were believed to be highly receptive to RBs offerings, i.e, seeking
basic, effective products focused on hygiene. This market strength, enabled RB to increase its
overall reach in India, gaining approximately 60 percent more outlets in semi-urban and rural
areas. This expanded market reach in India positioned the company for a significant upside
especially given the fact that developing markets account for nearly a quarter of RBs sales
and were growing quickly. Paras had a strong presence in personal care and healthcare
segments.
For RB, the acquisition signified a direct entry into fast-growing personal care categories such
as deodorants, hair care products, anti-ageing creams and over-the-counter health care
products.
Little wonder then that Reckitt paid almost seven times Paras annual turnover and manifolds
its profits to gain full control.