Unilever in India- Project Shakti

7/24/2019 Unilever in India- Project Shakti

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CASE CONCEPT NOTE

UNILEVER IN INDIA: HINDUSTAN LEVERS PROJECT SHAKTI- MARKETING

FMCG TO THE RURAL CUSTOMER

Shakti is a win- win initiative for micro enterprise and rural entrepreneurs. Unilever was worlds

largest FMCG Company with global turnover of USD55 bill. Its India subsidiary had revenues of INR

110 bill. Gross profit was 46% and net income was 11.4% of the revenues. Company had broad

product line with thousands of SKUs of its twenty product categories. Four major segments:

detergents, personal care, beverages and foods

HLL

Hindustan Unilever Limited is the Indian subsidiary of the worlds largest FMCG Company, Unilever.

As it entered India its growth varied with the political environment of the country. HULs

competition had two fronts, one at lower price segment and other at higher price segment. Lower

price competition came from large no of unorganized local players, while higher price competition

came from organised national and international brand.

1.

Between 1947 and 1980: license raj was prevalent which made it hard for HLL to obtain

licenses.

2.

Successive socialist governments imposed restrictions on expansion of capacity and use of

natural resources.

3.

FDI had many restrictions too.

4.

Early 1990s: saw the opening up the economy to a more liberalized one, which also brought

along major competitions

5.

Impressive economic growth post liberalization made India a lucrative market.

Competition

Since HLL was present across various categories, it faced immense competition.

1.

In lower-price segments, the local players who had no marketing cost, could give high

margins and still provided the product at lower price, were the major challenge

2. In higher-price segments, organized National players like P&G and Colgate Palmolive were

the major competition.

3. In 1980s, Nirma came in and swept across a major chunk of profits for HLL, in response of

which HLL launched Wheel and Breeze accompanied with a low cost supply chain and

transformed business model.

4. In 2003, HLL got into a price war with P&G, which adversely affected its profits.

5. HLL responded to competition by creating new brands. Its brand portfolio was downsized to

select power brands, a channel based sales system, supply chain efficiencies and product

innovations.

6. HLL believed in creating new markets and dominating them.

Sources of competitive advantage

1. Well established brands

2. Local manufacturing capacity and supply chain

3.

Vast sales and distribution network


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It was the third point that helped HLL gain an edge over its competitors. HLL leveraged its sales and

distribution network. Following were the ways adopted by HLL to establish that network

1.

Aggressively extended the system to depths. Unorganized retail instead of large chains gave

HLL a tough time. They treated individual retailers as customers and addressed them

individually.2.

They had at least one depot per state, the CFA who was a third party and not a customer

was sent to these depots

3.

In each town, Redistribution stockiest were employed to stock the products and distribute to

retailers and wholesalers.

4.

Each profit center had its own sales force and stockiest

This was the broad classification on the basis of geographies. Very well understanding the

limitations to this approach, HLL slowly transitioned to the channel approach. They appointed

same stockiest overall profit centres which helped reducing costs. Thus they started getting into

annual contracts for all its products. The redesigned model of sales and distribution was called

the damond model:

1. Top end: represented modern-trade encompassed self-service stores and retail chain

2. Middle end: Profit-centre-based sales team continued to grow markets and penetrate

3. Lower end: direct distribution to the rural market

Channel partners in distribution system:

1. Carrying and forwarding agent (CFA)

2. Redistribution Stockist (RS)Primary customer of HLL

3. Retail outlets

Sales organisation

Four regional offices: Delhi, Kolkata, Chennai, Mumbai

1. General Sales Manager

2. Regional Manager

3. Area Sales Manager

4. Sales officers

5. Territory sales in-charge

6. Stockist

Rural Indian Markets

About 70% of Indiaspopulation resides in rural areas, thus it was a great untapped market for HLL.

There were two major road blocks

1. Size: scattered markets and low per capita consumption rates


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2.

Reach:low road, air and rail connectivity; remote areas

On the basis of business potential and accessibility, HLL came up with different models

1.

Direct Coverage: accessible markets with high potential; one common stockiest was

appointed.

2.

Indirect Coverage: accessible markets close to urban areas; rigorously mapped routes were

given to ensure fortnightly service in nearby villages.

3.

Streamline: inaccessible high potential markets; brought in the concepts of rural distributor

and Star Seller. Proved to be quantum leap in coverage of the rural markets.

4. Project Shakti: it was meant for low potential inaccessible markets.

HLL identified rural India with 70% of country population as key source of growth and competition

and launched Shakti program with focus on self-help groups.

Average monthly household income in rural India was Rs 1000/-. The most common source of fundsinvested in Project Shakti was micro credit and repayments had to be in monthly instalments.

Under privileged women constituted most marginalized group in society. They were more likely to

be committed to project, they were likely to have greater access into the homes of potential

customers. Also it was thought that addressing women would have greater impact on entire

household.

Earlier women didnt have training and thus lacked confidence. HLL introduced RSP i.e. rural sales

promoters. These promoters would train women for sales.

Project Shakti

The need for the project rose from the fact that the competition was increasing and the urban

markets were soon reaching a saturation, thus to remain profitable, there was a need to open new

avenues, and what better than venturing into the untapped rural markets.

Problemsfaced by HLL in rural India:

Emulation of models by rivals

Restricted direct reach

Poor reach of electronic media

Lower literacy rates

Low brand consciousness

Low per capita consumption

Thus to deal with all these problems, the New ventures Division of HLL suggested to partner with

self-help groups. The idea was that 10-15 women will meet regularly and contribute a small amount

of money which would be invested and the profits will then be split.

MACTS started taking HLL products to untapped markets but no one person was held accountable,

thus to address this they started appointing 1 member in each village as the Shakti entrepreneur,

whose job was to sell these products. They got products at a discounted rate and were supposed to

sell it to the retailer and direct customer but the discount was controlled. This allowed her to gain


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more profit as she retained the retain margin in addition to the discount offered by HLL and also in

direct selling they were the key influencers impacting category and brand awareness and usage.

These women were extremely committed because of the value attached to the additional income.

They also had much higher access to these household and could easily influence purchase decision.

Rs. 10,000 was decided to be the minimum investment with which a Shakti entrepreneur could earn700 per month, out of which 200 could go towards loan instalment.

RSP

Selecting the women was easy, the problem began when the women who had not undertaken any

independent economic activity began stocking huge amount of stock and had to start repaying for

loans as well. To cater to these problems the RSP system was introduced. A rural sales promoter

was appointed to train them and help them grow. Also, HLL understood the fact that the first few

months are the toughest and hence incentivized by cash rewards for visiting a certain no. of homes

irrespective of the sale made.

Problems faced:

Every new district required 6 tasks to be completed for implementation

1.

Arrange permissions

2.

Identify and seal partner4ship with NGOs

3.

Identify markets available for the roll out of Shakti project

4.

Locate SHGs and convince them

5. Appoint the right woman as entrepreneur

6. Ensure steady supply from distributer

To overcome the hurdles of trust issues they came up with MART, Marketing and Research Team, a

rural consulting firm. The firm then followed the above 6 processes.

HLL pushed its key brands to get greater revenues. They also launched LPUs, low-unit-price packs,

which revolutionized the FMCG industry.

Shakti Vani: The communicator

To extend the impact of the Shakti project beyond sales, a social communication program was

started at rural level. A local woman was selected as Vani and was trained to be the voice of the

brand, she not only communicated the brand value and the need for that brand she also helped

people understand the basic need for hygiene and answered health related issues. Thus the need

arose as the awareness and sale of soaps and toothpaste in rural markets is low, so by improving the

quality of life HLL helped itself in the long run.

iShakti: The Portal

It was a rural community portal set up with the objective of providing access to information to the

rural audience by setting up a computer in the village. This helped increase connectivity, they also

partnered with AP Online, a partly state-owned e-governance portal.

Documents

Unilever in India- Project Shakti