Smilepad Hygiene India is not a typical business start-up. The Pune-based social enterprise is one of the few hygiene products companies in India that is using a supply chain model to offer branded products in smaller towns and villages that are underserved or ignored by the big names in FMCG.
Its portfolio includes over 70 products across ten product categories in healthcare consumer segments and the surgical segment. The consumer product basket includes sanitary napkins, panty liners, tampons, baby diapers, and adult diapers.
Its surgical products include maternity pads, underpads, examination gloves, face masks, and surgical belts. It follows a flat distribution model with just one distributor in the chain to reach end-users, enabling the company to offer 6% to 10% higher margins to the channel partners while keeping the sales price lower by 10% to 15%.
Beginning of the journey
Having worked in the FMCG sector selling products for 25+ years, Jairam Shetgaonkar, former Vice President of International Business Development of Godfrey Phillips India had started to feel that his contribution to society was not constructive. “I was feeling guilty about selling a product that was harmful and on my 50th birthday, I resolved to switch gears and do something that would help improve people’s health.”
“The biggest challenge in the feminine hygiene and diaper market is distribution since the product is voluminous but low-priced.”
As he started to dig for information on the healthcare sector, Shethgaonkar noted that consumer hygiene had a lot of opportunities. Also, within the hygiene segment, feminine hygiene continues to remain underserved due to the lack of a credible brand in smaller towns and villages.
“At any given point of time, there is a demand for a minimum of three Billion sanitary napkins per year in India,” he says pointing out that the big brands in the sector primarily reach out to Tier 1 and Tier 2 cities and very less beyond that because the price-conscious market makes it unviable to service. Similarly, in volume terms, the baby hygiene market is around 50% of the women’s hygiene segment with a demand of about 1.5 to 1.6 Billion diapers per year.
The third category, adult hygiene is a new phenomenon in India, which has evolved in the last decade. However, due to the overall socio-economic growth and aspiration for improving quality of life, the demand for adult care products has also been on the rise; estimated at 500 Million units per year.
Teething troubles and covid
With his experience in driving consumer product sales for global FMCG companies, Shetgaonkar was confident of his ability to quickly develop the sales channel and establish his brand with adequate digital marketing support. However, six months after launching Smilepads products in the market, he realised that there were no takers for the product at all in the cities. The company faced two other big challenges. One, the feminine hygiene segment was driven by brand loyalty, and two, Smilepad was the new player in the market with near-zero brand awareness.
This is when Shethgaonkar and his team decided to tap smaller towns and villages since their survey revealed that known brands were barely present in these markets. A quick review also helped them pinpoint the reason why the market beyond Tier 2 was underserved.
Within the hygiene segment, feminine hygiene continues to remain underserved due to the lack of a credible brand in smaller towns and villages.
“The biggest challenge in the feminine hygiene and diaper market is distribution since the product is voluminous but low-priced. Since these are bulky products, the cost of transportation is very high as compared to the selling price, which makes it commercially unviable for bigger brands to tap the Tier 3 and Tier 4 towns and villages,” says Shethgaonkar.
He adds that non-existence of big FMCG players in these markets meant that there were no credible brands in the smaller cities, towns and villages.
“That is the space we decided to focus on,” he says adding that the purpose and vision of the company were suddenly becoming clearer, thanks to the initial rude shock from the market. “We decided to become the credible brand of the underserved and neglected markets by providing world-class hygiene products that are more environmentally friendly at a cost lower than the most competitive brand.”
While the initial six months were a period of disappointment, COVID came as an opportunity and the company quickly moved to the manufacturing of PPE kits, face masks, and gloves. The company also got into the marketing of hand sanitisers. This not only helped Smilepad survive the tough 18 months, but it also helped it make inroads in the markets because the demand for such products was very high.
The supply chain solution
Transportation, distribution, and branding are the three major costs that jack up any product price. The Smilepad team now had a unique problem at hand: the only way to reduce the consumer selling price without compromising on the quality was to reduce the transportation, distribution, and branding cost. The company soon identified a 20-year-old brand Prasuti with a strong recall among consumers in Maharashtra, Goa, and parts of other western and some southern states.
Prasuti manufactured maternity pads and was the first company in the country to make them using wooden pulp. It also had a network of over 120 distribution partners and had good support from gynaecologists since the wooden pulp made it safer than other maternity pads available in the market. The acquisition of Prasuti gave Smilepad the much-needed distribution network.
Shethgaonkar and his team soon met the channel partners to understand their needs. “Since most of them were surgical product distributors, they indicated that there was a demand for underpads, surgical masks, examination and nitrile gloves. We started manufacturing these products along with sanitary napkins focusing on only catering to their needs,” he explains.
Having solved part of the problem, the team decided to address the transportation cost issue. While it was difficult to negotiate with known logistics players to drive down costs, the smaller players were not reliable. The team then decided to explore the reverse trucking approach. The idea was to use vehicles that would be otherwise returning empty after delivering a consignment. For truckers, this was an additional income.
Adult hygiene is a new phenomenon in India. The demand for adult diapers has been on the rise during the decade; estimated at 500 Million units per year.
Soon the company was able to tie up with multiple truck owners and create a fleet that would pick up products from its distribution centre in Goa and Pune and deliver it across the region at a much lower cost. Shethgaonkar is now exploring technology tools to strengthen this unique supply chain network and improve the trackability of his consignment as the volume increases in the days to come.
The micro-distribution model
The final piece of the puzzle was to solve the branding issue. While a part of the branding problem was taken care of by riding the Prasuti brand, there was still a lot to be achieved in terms of gaining consumer awareness for the Smilepad brand. “It was important that women use our products, without which they would not be able to understand the benefits of our offerings,” he explains. Hence the company launched its micro-distribution programme aiming to economically empower women by making them local distribution partners with an investment of INR 5,000.
“The Smile Distribution Programme serves two purposes. It empowers women from the weaker section to become entrepreneurs and gain additional income. It also solves our problem of getting them to use and appreciate our brand. Once they are confident, they can easily recommend and sell the product to peers,” he elaborates.
“The three-pronged strategy has worked for us and we are aiming to become the biggest regional brand across Maharashtra, Goa, and Southern India in five years. We have also started exporting to nine countries in Latin America and Africa and aim to strengthen our presence in these markets,” Shethgaonkar concludes.
Key Takeaways
- The biggest challenge in the feminine hygiene and diaper market is distribution
- The product is voluminous but low-priced while the transportation cost is high.
- The company acquired Prasuti, a regional brand in Western and Southern India.
- Smilepad reduced its product transportation costs through reverse trucking – making use of vehicles that would be returning empty after delivering a consignment.
- It introduced a micro-distribution model that enables women to earn additional income.
Smilepad is using reverse trucking and micro-distribution to create a supply chain for branded products in smaller towns and villages.
