FMCG majors have evinced interest in acquiring Hindustan Lever's oil brand Nihar. Some of these companies, including Marico, already have a presence in the hair oil segment.
In terms of market penetration for the hair oil segment, Nihar commands the largest rural consumer base at 74 per cent. In comparison, Marico's Parachute, its closest competitor, has 47.5 per cent share.
Nihar's huge rural penetration can be attributed to the success of HLL's Shakti, the project that was exclusively targeted at rural India.
Marico, which has brands like Parachute and Shanti Amla, is the market leader with more than 50 per cent share in the branded coconut oil market. Acquiring Nihar will not only work as a good flanking strategy for Marico's core brand Parachute but also give it increased penetration into the rural markets.
Another reason why companies may look at adding this brand, which is valued at around Rs 70-80 crore (Rs 700-800 million), to their portfolios is that though its market share nosedived from 22 per cent a few years ago to less than 8 per cent now, it is still among the top three brands in the country, after Marico and Dabur.
Also, it has a sizeable market share in the east, second only to Shalimar, which is not much of a national player. Dabur and Marico are strong in the north, the south and the west markets, but their - especially Dabur's - market share is not high in the east.
These factors assume importance in favouring the acquisition decision as they provide strength - both rural and zonal - whether the brand is acquired by an existing player in the segment or a company like Emami and Godrej, which are looking at entering new product areas.
Analysts point out that the brand is essentially good, and the only reason why its market share declined so drastically is that HLL stepped down the advertising and marketing support to the brand as it did not fit into the company's power brand strategy. Once the brand is given proper visibility, it is quite likely to do well.
HLL had acquired the brand as part of the Tomco acquisition from the Tatas in 1993.The hair oil market in India, currently estimated at Rs 550-750 crore (Rs 5.5 7.5 billion), has the potential to grow as more people move from unbranded to branded commodities.