STRATEGY BEHIND THE LATHER

Text by - Avant Shrestha and Ankita Jain

Out of all the ‘Made in Nepal’ products, natural and organic soap bars are gaining attention in local and international markets. And the competition is such that every other day, a new brand is born. One of the oldest in the market is Wild Earth. Commercially registered in 1990, the brand started transactions in 1998 as a manufacturer and supplier. It was started by an American Medical Anthropologist who visited Nepal for a project and ended up establishing her venture in natural soap bar and skincare products. Being in the industry for more than 25 years, Wild Earth sets an example for every new comer. With over 300 plus products, it has soap bars for every age group from a newborn baby to a senior citizen. Further, they also recently introduced soap bars for pets which isn’t clinically approved but they claim the ingredients used are natural and pet-friendly. Wild Earth majorly sources ingredients from all across Nepal and then the soap bar is handcrafted by its ‘all women team’.

Koseli is another company dealing in natural soap bars under foreign direct investment business model. Koseli, meaning ‘gift’ in Nepali, was established in late 2015 and is an herbal product branch of Herb Nepal. Simone Alexander and Benjamin van Ooij, the two Directors of Herb Nepal, call these products a gift from farmers across Nepal. The products have been made using organic herbs that have been grown, cultivated and processed by small-scale farmers in the country. They also use the herbs grown in their own farm which was established in late 2014 and is located in Bhaktapur. Herb Nepal is a social, creative and innovative organic farm and training centre. Here, farmers are regularly trained in organic, sustainable land-use and herbal processing. Though the herbs used in the Koseli soap bars are grown using organic farming principles, the brand is not certified as organic. “The certification comes with an additional cost of Rs 3-5 lakhs a year. Also, our consumers aren’t ready to pay an extra amount for the organic stamp. Hence, we are labelled natural,” shares Ooij. Alexander and Ooij have been in the country for the past eight years. While Ooij, a Dutch, landed in Nepal for an eco-village project; Alexander, his partner and wife, used to work for a charity organisation in the UK. Koseli earns the trust of its buyers through its feel good story and the fact that the ingredients used are traceable to its farm. From beard to hair conditioning soap bars, Koseli deals in seven unique varieties.

Luniva Soap Industries is a six-year-old company specialising in organic soaps; surf and other house hold products like toilet cleaners, glass cleaners and dishwashers. Her father initially started the company and Sushmita Manandhar later joined the family business. Luniva consists of a wide variety of organic soaps but are primarily focused on soaps that are ideally for people suffering from dry and itchy skin. Manandhar expresses, “90% of our ingredients and raw materials are sourced in Nepal and the rest from aboard. Luniva generally produces their soaps in small batches to perfect their recipe and consequently their products. Some may consider us expensive but we believe that price is justified by the quality of our products. Luniva has received positive feedbacks in the market”.

Manandhar claims, “we have lots of return customers and based on the response we are happy to claim that the sales are positive.” They do not have a specific target market but claim that anyone suffering from dry skin would have positive effect if they use their products. In the future they are trying to enter the pharmaceutical market as their products would be ideal in that segment.

Saloni Rajbhandari started Laali initially as a hobby, and after receiving positive feedback in the market decided to start her own skin essential business in 2015. Laali Natural is a brand with an array of products like natural soaps, body butter, shampoo bars, lip balm and face scrubs. Laali’s ingredients consist of factors like oil and herbs added with fragrances which are good for the body. For a new comer in the market, Laali has a loyal customer base. However Rajbhandari explains, “There is a big struggle for small scale or artisanal soap makers like me to compete against those who manufacture on larger scales.” 

Process

Natural soap is a compound made of natural oils or fats with sodium hydroxide or any other strong alkali (known as lye). “People aren’t aware that there are certain chemicals used in natural soap as well. So to claim it completely chemical free would be unethical. Rather informing people that no harmful chemicals are used in the making would be appropriate,” states Alexander.

The harmful chemicals like parabens and lathering agents like Sodium Lauryl Sulphate are avoided in the making of a natural soap bar. Wild Earth uses natural preservatives like Vitamin E, citric acid and others which preserve the quality of the product and extends its life. “No harmful chemicals are used in the process,” assures Rabi Kandel, Head of Operations, Wild Earth.

The market here has natural soaps made from two different methods: the melt-and-pour and cold-press. Melt-and-pour is better suited for quick orders because the base ingredients like aloevera or goat milk are available online from certified dealers. “You just melt that base, put in an additive, such as neem, honey or essential oils and set it. The soaps will be ready in three-four hours in the mould,” says Manandhar. While cold-pressed soaps take a month to cure but you have full control over the oils which makes it ideal for people with skin problems like acne or eczema. “Cold-pressing also allows the addition of fresh fruit pulp or any other ingredients, even though the soap takes 24 hours to set, and a further four weeks for the lye to evaporate,” says Kandel. Further cold pressing increases the shelf life of the natural soap, agrees both Kandel and Alexander. The shelf life of Wild Earth and Koseli soap bars are more than two years whereas Luniva and Laali soap bars last for a few months to a year.

Price & Packaging

The challenge is that a bar of hand-made soap costs more than the factory-produced one. “I know it pinches the consumers’ pocket, so we have priced the products between Rs. 127 and Rs. 550 a bar,” informs Kandel. On the other hand, Koseli is one of the most expensive natural soaps in the market with the starting price at Rs 500 and targets people in their 30s. “We strategically are less available in the local market because of the pricing. We do not want to compete over pricing. However, the feel good story of the brand helps in growing our clientele,” claims Ooij. Koseli’s profit margin varies between 10-40% depending upon the clientele and quantity.

The price of the soap bar also depends upon the ingredients used. If the brand uses essential oils which are imported then the price automatically rises. “Not every soap bar claiming to be made with only Nepali ingredients is authentic. When you read the ingredients used, there is the mention of several essential oils which aren’t available in the country,” claims Kandel.
While Wild Earth is moving from plastic to biodegradable paper for packaging, Koseli uses paper since its inception. “We turned business as a model to serve back to the community and created a cycle which is sustainable,” says Alexander.

Market Strategies & Challenges

Wild Earth being one of the oldest in the market enjoys a bigger market share. “Every month we sell around 50,000 soap bars,” says Kandel. Wild Earth was also one of the suppliers of Body Shop UK and currently exports to European countries, China, Middle East and America. On the other hand Koseli is available at Timro Concept Store and a few other outlets in the capital. “The market size is small here. Hence, we are more focused on the international market. Currently, we are directly supplying to 26 stores in the Netherlands and are keen to tap into the European market as well,” shares Ooij. Both brands agree that the local market has a lot of potential with the success of farmer’s market and awareness about ‘Made in Nepal’ products but the export volume is larger. “The brand value of Nepali products is much more than the products available in the neighbouring countries. There is a demand for Himalayan products in the international market,” adds Ooij. He says competing over price factor with the neighbouring countries would be silly as they have cheaper labour, availability of all the raw materials required and hence a cheaper price tag.
Additional challenges for the locally manufactured soaps is the price factor and the fact that people are hesitant to trust organic soaps. Lack and proper information and false marketing can be attributed to this problem.

Rajbhandari claims that it is very difficult to compete with the larger manufactures, instead the local artisanal soap makers are more focused in their own niche market. “The price factor always arises; simply put organic and natural soaps are not affordable. Our products are comparatively more expensive because of the ingredients we use but in hindsight they have various benefits as well. Manandhar claims, “The market prefers mass produced foreign soaps as to the organic and natural ones made in Nepal. But once a consumer uses the soap, it is easy to gain their trust.”

Niche Marketing

During a meeting with hotel giants, Alexander was told that they would prefer an internationally recognised brand rather than opting for a Nepali brand. Talking in terms of pricing as well, it is difficult for any hospitality chain to shift from mere Rs 9 to Rs 150 a soap bar, informs Alexander. She further adds, “Rather than buying these products from neighbouring countries and bringing in carbon emission, hotels can consider buying a local product and sustain the farmers.”

Today hotels use the placements of homegrown brands to identify oneself as authentic Nepali, sustainable, eco-friendly and more. “It acts as a marketing tool these days which is a win-win for both the parties,” says Ooij. Presence in hotels and resorts help in growing clientele.

Koseli soap bars are present in hotels like Yak &Yeti, 3 rooms by Pauline, Cosy Nepal, Barahi Jungle Lodge Chitwan and more. Similarly, Wild Earth products are present in Hyatt, Dahlia Boutique Hotel Pokhara, Ayatana Spa in Hotel Shambala, etc. Earlier, Wild Earth was also present in Shangri La chain of hotels worldwide.

Future

The natural soap companies are gradually expanding towards complete skincare products and essential oils. “The demand for essential oils in the international market is huge,” says Alexander. Koseli is planning to limit the soap varieties to seven and start manufacturing essential oils. Alexander and Ooij are further planning to build a factory in their farm which will only concentrate on manufacturing various essential oils. On the other hand, Wild Earth already sells 50-60 varieties of essential oil out of which 25 are sourced locally and the rest are imported from India. The brand is currently working to grow its digital presence, local market share and eco-friendly packaging.

As for the future of the industry, a proper monitoring system is vitally needed for better regulation and for consumers to build trust on organic and natural soap manufacturers in the country. Basically, the companies that manufacture soaps have to be classified in the fast moving consumer goods (FMCGs) sector. However, the monitoring system is very minimal and not very strict. “There is a governmental agency that monitors these aspects but the only classification quote is that the soaps need to have PH8, which is a natural alkaline in them,” explains Manandhar.

All in all, the natural and organic soap industry is gradually expanding as both local and international demand continues to rise.