HINDUSTAN UNILEVER LIMITED

About the company

Hindustan Unilever Limited (abbreviated to HUL), formerly Hindustan Lever

Limited, is India's largest consumer products company and was formed in 1933

as Lever Brothers India Limited. It is currently headquartered in Mumbai, India

and its 41,000 employees are headed by Harish Manwani, the non-executive

chairman of the board. HUL is the market leader in Indian products such as

tea, soaps, detergents, as its products have become daily household name in

India. The Anglo-Dutch company Unilever owns a majority stake in Hindustan

Unilever Limited.

The company was renamed in late June 2007 to "Hindustan Unilever Limited"

to provide the optimum balance between maintaining the heritage of the

Company and the future benefits and synergies of global alignment with the

corporate name of "Unilever". This decision will be put to the Shareholders for

approval in next "Annual General Meeting". HUL is one among those companies

in the country that derives huge revenues (over 50 per cent) from the rural

areas. Hindustan Unilever Limited (HUL) is India's largest Fast Moving

Consumer Goods company, touching the lives of two out of three Indians with

over 20 distinct categories in Home & Personal Care Products and Foods &

Beverages. They endow the company with a scale of combined volumes of about

4 million tonnes and sales of nearly Rs.13718 crores.

HUL is also one of the country's largest exporters; it has been recognised as a

Golden Super Star Trading House by the Government of India. The mission

that inspires HUL's over 15,000 employees, including over 1,300 managers, is

to "add vitality to life." HUL meets everyday needs for nutrition, hygiene, and

personal care with brands that help people feel good, look good and get more

out of life. It is a mission HUL shares with its parent company, Unilever, which

holds 52.10% of the equity. The rest of the shareholding is distributed among

360,675 individual shareholders and financial institutions.

HUL's brands - like Lifebuoy, Lux, Surf Excel, Rin, Wheel, Fair & Lovely, Pond's,

Sunsilk, Clinic Plus, Pepsodent, Close-up, Lakme, Brooke Bond, Kissan, Knorr-

Annapurna, Kwality Wall's are household names across the country and span

many categories - soaps, detergents, personal products, tea, coffee, branded

staples, ice cream and culinary products. They are manufactured over 40

factories across India. The operations involve over 2,000 suppliers and

associates. HUL's distribution network, comprising about 4,000 redistribution

stockists, covering 6.3 million retail outlets reaching the entire urban

population, and about 250 million rural consumers.

HUL has traditionally been a company, which incorporates latest technology in

all its operations. The Hindustan Unilever Research Centre (HURC) was set up

in 1958, and now has facilities in Mumbai and Bangalore. HURC and the

Global Technology Centres in India have over 200 highly qualified scientists

and technologists, many with post-doctoral experience acquired in the US and

Europe.

HUL believes that an organisation's worth is also in the service it renders to the

community. HUL is focusing on health & hygiene education, women

empowerment, and water management. It is also involved in education and

rehabilitation of special or underprivileged children, care for the destitute and

HIV-positive, and rural development. HUL has also responded in case of

national calamities / adversities and contributes through various welfare

measures, most recent being the village built by HUL in earthquake affected

Gujarat, and relief & rehabilitation after the Tsunami caused devastation in

South India.

HUL has changed its strategy towards rural markets in order to tackle its

somewhat flat growth in these areas. As against its earlier strategy of each

business division dealing with the rural market on an individual basis, the

multinational has now adopted a single organisational-push approach to

achieve greater penetration and sales. HUL derives over 40 per cent of its sales

from rural India, which makes this part of the market a critical growth aspect

for the company.The company is now looking at the rural market from an

organizational point of view rather than from the individual businesses point of

view. This approach is expected to lead to better cohesion, greater push and

deeper penetration, which would eventually lead to better sales. Several of

HULs major business categories such as fabric wash, personal wash and

beverages already get over 50 per cent of their sales from rural areas.

However, officials say that it is not enough that individual business divisions

push their own strategies for the rural market, adding the company would have

to work in unison in order to achieve a balanced growth.

Example of HULs rural marketing strategy:-

A unique example is Hindustan Lever's Lifebuoy soap. In rural India, health

is of paramount importance, because indisposition is very directly related to

loss of income. Lifebuoy, whose core equity is health and hygiene, has for

decades now been synonymous with soap in rural India.

At the same time, if products have to come up the order in the rural purchase

hierarchy, they have to be affordable. If rural India today accounts for about

half of detergents sales, it is because HUL has developed low-cost value-for-

money branded products, like Wheel. The company has also taken initiatives to

create markets even for apparently premium products, by offering them in pack

sizes, like sachets, whose unit prices are within the reach of rural consumers.

For example, initiated in the 1980s, sachets (Rs.2, Re.1, or 50 paise) today

constitute about 55% of Hindustan Lever's shampoo sales. With media reach

gradually increasing, rural consumers today, where the media has its

footprints, share the same aspirations with their urban counterparts. HUL has

responded to the trend with low unit price packs of even other products - Lux

at Rs.5, Lifebuoy at Rs.2, Surf Excel sachet at Rs.1.50, Pond's Talc at Rs.5,

Pepsodent toothpaste at Rs. 5, Fair & Lovely Skin Cream at Rs.5, Pond's Cold

Cream at Rs.5, Brooke Bond Taaza tea at Rs.5.

HUL Penetration in Rural Market:-

The First major step taken by HUL to penetrate the rural market is that it

evolved its distribution model. Secondly in 1998 HULs personal products unit

initiated Project Bharat, the first and largest rural home-to-home operation to

have ever been prepared by any company.

The project covered 13 million rural households by the end of 1999. Along with

Operation Bharat, HUL conceptualized Project Streamline to enhance its

control on the rural supply chain through a network of rural sub-stockists

based in these villages. This gave the company the required competitive edge,
and extended its direct reach to 37 per cent of the countrys rural population.

Then HUL started Operation Harvest which was used as a medium of

communication with the villagers. During these exercise, vans from HUL and

its distributors did the rounds of 30,000 villages giving promotional packs,

showing products ads and identifying key retail and distribution points.

The principal issue in rural development is to create income-generating

opportunities for the rural population. Such initiatives are successful and

sustainable when linked with the companys core business and is mutually

beneficial to both the population for whom the programme is intended and for

the company.

Based on these insights, HUL launched Project Shakti in the year 2001, in

keeping with the purpose of integrating business interests with national

interests. Today Hindustan Unilever Ltd has more than doubled its direct rural

reach with 30,800 `Shakti' entrepreneurs covering 1-lakh villages in 15 States

at the end of 2006 through its project shakti. The next stage of Project Shakti

was even more ambitious. HUL has piloted `I-Shakti', an IT-based rural

information service that provides solutions to key rural needs in the areas of

agriculture, education, vocational training, health and hygiene. The project has

been set up in 8 villages in Andhra Pradesh, and is functional since August

2003.

EVOLUTION OF HULS DISTRIBUTION MODEL

To meet the ever-changing needs of the consumer, HUL has set up a

distribution network that ensures availability of all their products, in all

outlets, at all items. This includes, maintaining favorable trade relations,

providing, innovative incentives to retailers and organizing demand generation

activities among host of other things.

HUL has followed a strategy of building its distribution channels in a

transitional manner; and in different successive phases of the evolution of its

distribution system, has penetrated well into the rural market.

Phase I

The first phase of the HUL distribution network had wholesalers placing bulk

orders directly with the company. Large retailers also place direct orders, which

comprised almost 30 percent of the total orders collected.

The company salesman grouped all these orders and placed an indent with the

Head Office. Goods were sent to these markets, with the company salesman as

the consignee. The salesman then collected and distributed the products to the

respective wholesalers, against cash payment, and the money was remitted to

the company.

Phase II

The focus of the second phase, which spanned the decades of the 40s, was to

provide desired products and quality service to the companys customers. In

order to achieve this, one wholesaler in each market was appointed as a

Registered Wholesaler, a stock point for the companys products in that

market. The company salesman still covered the market, canvassing for orders

from the rest of the trade. He would then distribute stocks from the Registered

Wholesaler through distribution units maintained by the company. The

Registered Wholesaler was given a margin of 1 per cent to cover the cost of

warehousing and financing the stocks held by him. The Registered Wholesaler

system, therefore, increased the distribution reach of the company to a larger

number of customers.
Phase III

The highlight of the third phase was the concept of Redistribution Stockiest

(RS) who replaced the REGISTERED WHOLESALERSs. The REDISTRIBUTION

STOCKIST was required to provide the distribution units to the company

salesman. The REDISTRIBUTION STOCKIST financed his stocks and provided

warehousing facilities to store them. The REDISTRIBUTION STOCKIST also

undertook demand stimulation activities on behalf of the company.

The second characteristic of this period was the changes brought in as the

company realised that the REDISTRIBUTION STOCKIST would be able to

provide customer service only if he was serviced well. This knowledge led to the

establishment of the Company Depots system. This system helped in

transshipment, bulk breaking, and acted as a stock point to minimise stock-

outs at the REDISTRIBUTION STOCKIST level.

In the recent past, .significant change has been the replacement of the

Company Depot by a system of third party; the Carrying and Forwarding

Agents (C&FAs). The C&FAs act as buffer stock-points to ensure that stock-outs

did not take place. The C&FA system has also resulted in cost savings in terms

of direct transportation and reduced time lag in delivery. The most important

benefit has been improved customer service to the REDISTRIBUTION

STOCKIST.

Operation Bharat HULs Rural Distribution Effort

HLL implemented a major direct consumer programme called Project Bharat,

which covered 2.2 crore homes. Each home was given a box, at a special price

of Rs.15, comprising a low unit-price pack of hair-care (Clinic shampoo), dental

(Pepsodent toothpaste), skin-care (Fair & Lovely) and body-care (Ponds Dream

flower talc) products along with educational leaflets , audio-visual

demonstrations, film songs and mythological serials interspersed with ads of

Lever product. Close to 160 vans and over thousand promoters (sales staff of

the distributors or some other private operators) were pressed into Operation.

The cost came upto roughly Rs.13 crore. Each van, equipped with a TV arid

VCR, had six promoters. The project helped eliminate barriers to trial, and

strengthened salience of both particular categories and brands.

Operation Streamline

In 1998, HUL launched Operation Streamline to extend their distribution.

Operation Streamline is one of the major initiatives undertaken by HUL in

recent times to penetrate the rural markets. In the case of Operation

Streamline, the goods are distributed from the C &F Agents to the Re-

distributors, who in turn pass it on to the Star Sellers. Being a cross-functional

initiative, the Star Seller sells everything from detergents to personal products,

etc. Operation Streamline opened up a new distribution channel beyond the

territories that were covered by HULs 7,500 odd distributors. In less than two

years, it has doubled the companys reach in rural India. Levers distribution

network now covers 60 per cent of the villages with population greater than

2,000, and having motor able roads. Example:- Penetration levels for its Fair &

Lovely cream shot up nearly three times in just three months of launch of

project. Interestingly, there appears to be a convergence around the

prescription that HUL has created to crack opens the rural markets. For the

additional 30,000 villages that HUL wanted to reach, it created a super

stockiest; sub-stockiest structure. The super-stockiest in the bigger towns

service these sub-stockiest, who are paid 1-2 per cent more margins that the

retailers. This is to cover the sub-stockests costs in servicing retailers in his

area. Since the distributor cannot cover these retailers regularly, these sub-
stockiest are essentially stock points. Then, once dealers do the necessary

demand creation exercises and as such off takes increases.

Indirect Coverage

Under the Indirect Coverage (IDC) method, company vans were replaced by

vans belonging to distribution Stockiest, which serviced a select group of

neighbouring markets.

Operation Harvest

The reach of conventional media and, therefore, awareness of different products

in rural markets in weak. It was also not always feasible for the distribution

Stockiest to cover all these markets due to high costs involved. Yet, these

markets are important since growth opportunities are high. The company

decided to initiate mobile van operations in a focused manner to create both

awareness and point of purchase access. Operation harvest endeavored to

supplement the role of conventional media in rural India and, in the process,

forge relationships and loyalty with rural consumers. Operation Harvest also

involved conducting product awareness programmes on vans. There are 1.2

million urban retail outlets, and another 3.6 million shops in rural areas.

Depending on their business objectives, marketers use varying definitions for

what is rural. Whatever be the case, to extend their reach, marketers begin by

seeding the new territory, mostly through a brand awareness exercise. As HUL

demonstrated with Operation Harvest, this exercise is best done through van

operations. During this exercise, vans from HUL and its distributors did the

rounds of 30,000 villages giving promotional packs, showing products ads and

identifying key retail and distribution points.

Cinema Van Operations

The Redistribution Stockiest typically funds these. Cinema Van Operations

have films and audio cassettes with song and dance sequences from popular

films, also comprising advertisements of HUL products. But over a period of

time, van operations (usually run by the distributor or a third party) have also

been used to regularly service retailers in these smaller markets rather than

only making contact with the end consumer. These successive Operations
have enabled the company far deeper penetration levels than other companies.

HUL recognized early in its rural distribution initiative that market share would

be created only when demand is built up through awareness, trial and

consistent availability. The company literally had to build up the market village

by village in its rural initiative. Cost-effective distribution solutions were as first

attempted by HUL, and many other companies are veering around to that

option today. It has been working well for HUL, so others are beginning to

experiment with it.

Life Swastiya Chetana

In 2002, HLL has launched a similar large- scale direct contact, called Lifebuoy

Swasthya Chetana, which will cover about 5 crore people in 15,000 villages of

10 states. The project aims to generate awareness about good health-and-

hygiene practices. It is a multi-phased activity which works towards effecting

behaviour change amongst the rural population it touches. It demonstrates

that visible clean is not really clean thereby proving the importance of

washing hands with soap. It targets children as they are the harbingers of

change in society and mothers since they are the custodians of health.
The campaign has been divided into various phases. In the initial phase, a

Health Development Facilitator (HDF) and an assistant initiates contact and

interacts with students and influencers of the community, i.e. village

community representatives, medical practitioners, school teachers etc. The

programme has touched 27000 villages and 80 mn people over the last four

years. In 2006 alone LBSC contacted 10,000 villages in UP, MP, Jharkhand and

Bihar. This on-going project is committed to spreading the message of health

and hygiene and touching more lives in rural India over 2007.

Being Indias leading personal wash health brand, Lifebuoy saw a role for itself

in propagating the message of hygiene and health in villages. We launched our

Lifebuoy Swasthya Chetna initiative keeping this rationale in mind.

HULS PROJECT SHAKTI

HUL has been proactively engaged in rural development since 1976 with the

initiation of the Integrated Rural Development Programme in the Etah district

of Uttar Pradesh, in tandem with the companys dairy operations. This

Programme now covers 500 villages in the district. Subsequently, the factories

that HUL continued establishing in less-developed regions of the country have

been engaged in similar programmes in adjacent villages

These factory-centered activities mainly focus on training farmers, animal

husbandry, generating alternative income, health & hygiene and infrastructure

development.

The company has acquired a wealth of experience and learning from these

activities. In addition to money, there is a marked change in the woman's

status within the household, with a much greater say in decision-making. This

results in better health and hygiene, education of the children, especially the
girl child, and an overall betterment in living standards.

The most powerful aspect about this model is that it creates a win-win

partnership between HUL and the consumers, some of whom will depend on

the organization for their livelihood, and builds a self-sustaining cycle of growth

for all. It has since been extended to in Andhra Pradesh, Bihar, Chattisgarh,

Gujarat, Haryana, Jharkhand, Karnataka, Madhya Pradesh, Maharashtra,

Orissa, Punjab, Rajasthan, Tamilnadu, Uttar Pradesh and West Bengal with

the total strength of over 40,000 Shakti Entrepreneurs.

Shakti has three initiatives.

The Shakti Entrepreneur, a microenterprise initiative

the Shakti Vahini program which translates as the voice of Shakti, training

women to be communicators in the villages

IShakti, a group community portal that enables users to access information

in a variety of areas. The software is voice enabled for illiterate users.

HLL starts with the route sales person who identifies the Shakti entrepreneur

for village. HLL then provides the products and helps her understand what to

do and how to realize maximum income. Through the Shakti Vani program

women are trained in health and hygiene issues then teach what they have

learned to the village communities. In 2004, Shakti Vani covered 10,000

villages and the vision is to cover 50,000 villages in 2005.

iShakti, the Internet-based rural information service, has been launched in

Andhra Pradesh. It provides information and services to meet rural needs in

medical health and hygiene, agriculture, animal husbandry, education,

vocational training and employment and women's empowerment. The vision is

to have 3,500 kiosks across the state by 2005.

SHAKTI ENTREPRENEUR

The Shakti Ammas are the wealth creators for their villages. They learn about

products, prices, returns, and being and advisor and helper to their customers

in the village. Often they have simple goals, by Western standards, for their

earnings wishing to buy a telephone, a scooter for transportation, or education

for their children. Nearly as important as the money they are earning is the

improved social standing for the women. As a Shakti Amma, each woman is
looked up to by villagers, approached for advice, and fulfilled by the knowledge

that she is helping other people as well as her own family.

Shakti is HUL's rural initiative, which targets small villages with population of

less than 2000 people or less. It seeks to empower underprivileged rural

women by providing income-generating opportunities.

In general, rural women in India are underprivileged and need a sustainable

source of income. NGOs, governmental bodies and other institutions have been

working to improve the status of rural women. Shakti is a pioneering effort in

creating livelihoods for rural women, organised in Self-Help Groups (SHGs),

and improving living standards in rural India. Shakti provides critically needed

additional income to these women and their families, by equipping and training

them to become an extended arm of the company's operation.

A Shakti entrepreneur sets off with 4-5 chief brands from the HUL portfolio -

Lifebuoy, Wheel, Pepsodent, Annapurna salt and Clinic Plus. These are the core

brands that they layer it with whatever else is in demand like talcum powder or

Vaseline during winters.

The Shakti model trains women from SHGs to distribute HUL products of daily
consumption such as detergents, toilet soaps and shampoos - the latter's

penetration being only 30 per cent in rural areas. The women avail of micro-

credit through banks. The established Shakti dealers are now selling Rs

10,000-Rs15,000 worth of products a month and making a gross profit of Rs

700-Rs1,000 a month. A typical Shakti entrepreneur earns a sustainable

income of about Rs.700 -Rs.1,000 per month, which is double their average

household income. Shakti is thus creating opportunities for rural women to live

in improved conditions and with dignity, while improving the overall standard

of living in their families.

SHAKTI VANI

Fair And Lovely(FAL) Vani operates under the aegis of Hindustan Unilevers

Project Shakti, a network spread across 18,624 villages in the states of Tamil

Nadu, Andhra Pradesh, Maharashtra, Uttar Pradesh, Bihar and West Bengal.

FAL Vani is engineered to empower rural women in earning a livelihood, while

improving the distribution and reach of FAL.

The job of identifying villages for activation programmes rests with the HUL

sales team. Once a village has been selected, HUL team meets key opinion

leaders (KOLs) like the sarpanch, the school principal, an important

businessman or anyone who is highly regarded by the villagers. It is always

better to meet and inform them that we are planning a programme in the

village, lest there be trouble in the future, Punjabi informs. The KOLs also help

the activation team in selecting a local FAL didi for that particular kasbah or

mohalla.

The FAL didi is someone of a friendly disposition, is well-known in the village

and in the good books of most villagers. Her role is to help gather the crowd for
the presentation.

The baithak is at Baniyapara, where about 30-35 women in the age group of 25

to 30 have assembled. The crowd also comprises young teenaged girls and

children. Here, Im introduced to FAL Vani, 19-year-old Rakhiba Khatoon. The

FAL Vani is a trained HUL employee who conducts the programme. Khatoon

uses a flip-chart to tell the story of Moon Moon, a village girl who goes to town

to study and wants to participate in a dance competition. But Moon Moon lacks

in confidence because of her complexion. On the advice of her roommate she

starts using FAL, and doesnt just win the competition, but also returns to her

village and starts a dance-school for kids. Khatoon then invites a girl from the

crowd and demonstrates the right method of applying FAL. This is followed by

an application challenge, where a dozen women from the crowd are given a

minute to apply FAL: the one who applies it the fastest and in the right way

wins.

I-SHAKTI

I-Shakti kiosks have been set up in 8 villages in Andhra Pradesh, and have

been functional since August 2003. The kiosks have received an overwhelming

response from the local populace. During the launch of these kiosks, important

village members like the sarpanch, schoolteacher and doctor are invited to help

reinforce relationships with the villagers. The kiosks remain open from 9 a.m.

to 7 p.m., six days of the week. To enable access to the services, users have to

register themselves first and obtain the unique registration number. An id card

with the registration number is provided for use every time they visit the kiosk.

The kiosks offer information chiefly in the form of audio-visuals in the following

areas:
 Health & Hygiene

E-Governance

Education

Agriculture

Employment

Legal services

Veterinary services

The information provided in the above areas is called from the best available

resources, taking additional care to ensure that information, especially in areas

like agriculture, is locally relevant and includes inputs from home-grown

experts. These experts are also available on request, to help provide solutions

to problems raised by users through a query mailing system. A farmer from the

village can obtain a quick solution to a pest problem with his crops. People can

also send queries on health and hygiene to a local doctor for a speedy response.

Villagers can avail of discount coupons from the kiosk for medical treatment

from doctors operating in local areas. 'I-shakti has also tied up with Azim

Premji Foundation to deliver innovative educational modules to students of

classes VIII-XII through the kiosk. Local school teachers have also been

involved in the process. A similar partnership is in place with Tata Adult

Literacy for adult education.

Partnership Opportunities of HUL

HUL is keen to work with Corporates, State Governments and NGOs with the

common goal of rural development.HUL is looking to engage in mutually

beneficial partnerships with other corporates on both the Shakti as well as the

i-Shakti platforms. As per plans to extend Project Shakti into other states, HUL
seeks the support of State Governments, through their rural development

departments to establish contact with SHG NGOs in their respective states.

HUL is working with over hundred NGOs across the country and would like to

collaborate with more NGOs who are interested in extending the Shakti

initiative amongst their SHGs in different states.

HUL IN FOREIGN MARKET

The project has emerged as a successful low-cost business model and

enhanced HULs direct rural reach in the so-called media-dark regions. Armed

with micro-credit, r ural women become direct-to-home distributors of Unilever

brands in rural markets. The Fortune 500 transnational which sells foods and

home and personal care brands in about 100 countries has stepped up focus

on the project given that emerging markets now contribute around 44%

to global revenues.

The effort is expected to help Unilever tap fresh growth avenues in emerging

markets in the face of recessionary trends in the US and Europe. Also, given

the saturation of urban markets, companies try to re-engineer their business

models to derive growth from rural consumers.

The project is being customised and adapted in other Unilever markets such as

Sri Lanka, Vietnam and Bangladesh. It is being considered for other Latin

American and African markets. In Bangladesh and Sri Lanka, it is being

promoted as Joyeeta and Saubaghya, respectively. There is a similar initiative

in Vietnam as well.

COMPANY SUCCESS IN RURAL MARKET

The rural micro-enterprise has helped the Rs 13,717-crore Hindustan Unilever

in pushing growth rates in several categories such as personal wash, fabric

wash, shampoos, oral care and skin care. Brands like Annapurna, Lux,

Lifebuoy, Breeze, Wheel, Fair & Lovely, Lakme, Ponds, Clinic Plus and

Pepsodent have sold good numbers in smaller markets, company sources said.

Overall, around 50% of Hindustan Levers revenues came from the rural

markets in India.

HUL sources said the project currently contributes handsomely to the

companys sales. The project was started in 2001 to empower underprivileged

rural women by providing income-generating opportunities, health and hygiene

education. Shaktis ambit already covers about 15 million rural populations.

Several rural pockets are populated by less than 2000 individuals but are seen

as unreachable and remain untapped by consumer goods makers.

Industry officials say the awareness level of rural consumers about products

and brands are lesser than the urban markets. Also, urban business models

are not really successful in tapping the full potential of several small clusters of

consumers across remote markets.