Hand Sanitizers a tricky business

The Covid-19 pandemic has shone a spotlight on relatively small vertical in India’s FMCG  sector – Hand Sanitizers and Disinfectants. With no surprise market cap has skyrocketed by nearly 400% to Rs 43 crore as compared to 10 Cr a year ago.  

Clearly “Categories and Business are established in a crisis,”.

Let us explain:

New entrants and local brands now dominate India’s sanitizer market that swelled more than four fold after the novel coronavirus outbreak.

It is visible from the fall of the market share of the top three brands — Dettol, Lifebuoy and Pure Hands fell to 39 percent from 85 percent. A total of 152 new manufacturers started making sanitizers since the pandemic hit us, commanding 61 percent market.

Clearly, a pandemic has resulted in an overwhelming, nationwide demand for hand sanitizers. Today you can buy Hand Sanitizer everywhere: from paan walas to grocery stores. In the absence of licensing processes, there’s no way of knowing if they conform to quality standards.

Do you remember Ebola Outbreak in 2014, there was a rush for hand sanitizers. When it was believed that contact was the biggest cause of the spread of the disease. Soon, the use of sanitizers went back to normal and most people resorted to their older habits.

Well, clearly we don’t like to stick to hygiene brands for long.

The hand sanitizer market in India annually stood at about Rs. 10 crores and in no way, a big category for a country the size of India.

So, what’s the catch? Why so many brands are rushing towards launching their products in this category? 

Let’s assume there is a market, and here’s how:

India has a huge population of over 1.38 Billion people. Around 35% of this population is between the age of 15-35 years and around 40% population belongs to the middleclass. If you work with these numbers, you’d be looking at a potential 190million people of the right age group with the capability to have the disposable income.

It is as good as the8th largest country in the world by population.

Although the current category size is too small, there is a potential for this market to get huge. Imagine if each of these 190m people buys just 1 bottle of sanitizer in the whole year, the category would become a $120+ million, It is clearly a sizable industry.

The bigger question, is it sustainable? Porter’s 5 forces give a perfect well-rounded view of whether or not this industry is lucrative enough.

Clearly, the sanitizer market seems to be a game of: 

Low differentiation

Low margins

High marketing investment

Some games have too many players, some games are played by few. Irrespective of that, all games are won by those who understand the rules of the game and create a new rule of their own and control the game as per their new rules.

Let’s see how this game unfolds.