My Thoughts on Technology and Jamaica: How GraceKennedy and Hi-Lo can achieve 98% of soap powder market in 2 years

Friday, August 26, 2016

How GraceKennedy and Hi-Lo can achieve 98% of soap powder market in 2 years

What if I told you that almost 98% of the soap powder in Jamaica is imported?

That's the situation that currently exists, which GraceKennedy sees as an opportunity as pointed out in the article “GraceKennedy targets growth in import dominated detergent market”, published Wednesday, July 20, 2016   by Avia Collinder, The Jamaica Observer.

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GraceKennedy estimates the powdered detergent to be a JA$15 billion per annum business in Jamaica, based on estimates from their subsidiary Grocery chain, Hi-Lo Food Stores. Currently, GraceKennedy has a mere 2% of this market but hopes to eventually capture another 6% in the next four (4) years!

GraceKennedy currently owns three brands (3) in the playing in powdered detergent market:

1.      Spring Time
2.      Big Blu
3.      Freshness

Good to note that strictly speaking, Spring Time also includes other non-powdered laundry products:

1.      Liquid detergent
2.      All­purpose cleaner/disinfectant
3.      Fabric softener
4.      Dishwashing liquid
5.      Bleach

Also Big Blu is laundry detergent bars, with challengers Blue Power having an advantage thanks to their cheaper Blue Power Mosquito Repellent Laundry Soap and Castile Soap as detailed in my blog article entitled “Why the Blue Power Mosquito Repellent Laundry Soap and Castile Soap cannot stop Zika Virus Infections”.

GraceKennedy also has competition from ADA, a Chinese manufacturer based in Portmore, St Catherine.

So with approximately 90% of powdered soap powder estimated to be imported, offering a plethora of low-cost option to wash your clothes, why does GraceKennedy think they have a chance to capture this JA$15 billion per annum business?

Gracekennedy and powdered soap powder - How to achieve 98% marketshare in less than 2 years

Part of the reason has to do with fact that culturally, Jamaicans still prefer to wash their clothes by hand.

Unlike our North American counterparts who are addicted to their washing machines, 74% of Jamaicans still wash their clothes by hand. The typical method, which I use to wash my clothes, is to let them soak for 30 minutes and then rinse them out. 

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Most laundry detergents have active ingredients that basically remove the ground in dirt and grease after immersed in the detergent laced water for at least 30 minutes. This as physically rubbing clothing isn't necessary, as that will cause the colours to fade out of your clothes.

Gracekennedy plan to outsource the production of their powdered soap powder to China, as the currently do with Freshness, which is available in 200g, 1,000g and 4,000g packaging formats. But this isn't actually necessary, as competing on price alone would not work.

Rather Gracekennendy needs to compete by making the packaging of their soap powder cheaper, not the soap powder itself cheaper. Currently, powdered laundry detergent is package in branded plastic container and sold in Hi-Lo supermarkets.

By making it available in bulk for wholesalers to package out and sell, they can undercut their competition, in much the same way Hi-Lo already sell their own branded products on their store shelves.

They can also sell advertising space on the back of the soap powder packaging in much the same way Amazon makes their Tablets cheaper using ads as explained in my MICO Wars blog article entitled “How Amazon’s Special Offers means JA$5000 Samsung S7 from Digicel and FLOW Possible”.

Finally, they can also engage their customer in recycling the packaging to get GraceKennedy Reward Points, as if they regularly use laundry detergent, then like me they will probably have a ton of plastic packaging lying around the home.

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This can be recycled back into plastic for packaging, making the cost of packaging the powdered laundry detergent zero plus the cost of the recycling, manufacturing and transport. Combining all of these benefits, Gracekennedy could technically sell their soap powder for JA$1, as advertising and recycling would fully subsidize the cost of the product to the market!

Once done correctly, both GraceKennedy and the customer benefits; cheaper packaging and increased marketshare for GraceKennedy and GraceKennedy Reward Points that customer can accrue towards the purchase of more products in the Hi-Lo Stores. 

In so doing, they can actually achieve 98% marketshare in less than 2 years!

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