CASE 1: HINDUSTAN UNILEVER LIMITED
In order to enlighten a non-traditional retail structure we chose the multi retailer Hindustan Unilever Limited that within India is a legendary company. What really drew our attention to this outsider was their unique formula for sustainable competition, coming from the ability of keeping their costs down.
Hindustan Unilever Limited is India’s largest Fast Moving Consumer Goods company, touching two out of three Indians with their large brand portfolio. HUL’s products are household names across the country and span a host of categories such as soaps, detergents, personal products, tea, coffee, ice cream, and culinary products. Today, there are over 7.7 million retail outlets in India with an average of 6.8 stores per thousand people – the highest store density in the world. Growth of HUL in India is as follows…
FMCG came into in existence in 1888 when Sun Light soap was firstly seen at KOLKATA harbor. It was made by Lever brothers in England.
After that in 1895 Lifebuoy and after that Lux, Pears and Vim bar.
In 1918 Vanaspati was launched.
Dalda was launched in 1937.
In 1931 Lever brothers made 1st subsidiary in India
In 1933 they joint with Hindustan Vanaspati manufacturing company
In 1935 they joint with united traders limited
All these 3 players mixed together and form HUL in 1957.
HUL offers 10% of its equity to Indian public
Unilever holds 52.10% shares and rest is distributed amongst about 360675 individual shareholders and financial institutions
Brooke bond is present in India back to 1900 and its Red Label band was launched in 1903. In 1912 it joined with lever brothers.
Unilever acquired LIPTON in 1972
Ponds India ltd is working in India since 1947 and it is acquired by HUL in 1986 by an international acquisition.
Tata oil Mills Company merged with HUL in 1993.
In 1996 Tata made 50-50% joint venture for LAKME with HUL and in 1998 it was completely sold to HUL.
HUL made 50-50% joint venture with Kimberley Clark corp. in 1994 as Kimberley clark lever ltd which makes haggis diapers and kotex sanitary pads.
Unilever established its subsidiary in Nepal as NEPAL UNILEVER LTD.
In 2002 HUL launched AYUSH ayurvedic soap.
In 2004 it came into the water purifier segment and launched PURE-it
In 2007 it formally formed as HUL from HUL that is HINDUSTAN UNILEVER LIMITED.
To maintain their market leadership, HUL pursues innovative distribution mechanisms to reach the millions of potential consumers in both urban areas and small remote villages where there is no retail distribution network, no advertising coverage, and poor roads and transport. HUL realized from the onset that its sales and distribution network gave it an edge over the competition, but that rivals would try to match it over time. To maintain their competitive
advantage, HUL has aggressively extended more deeply in India, moving from large to small towns, and from urban to semi-urban areas.
In the past, HUL’s sales forces were separated by geographies and product categories. However, this organizational structure was ill equipped to manage modern trade, as one regional team negotiating the terms of trade with an individual franchisee of a national retail chain could never be as effective as HUL entering a long-term comprehensive contract spanning all product categories and outlets of the retail chain. Today, HUL has specific account managers dedicated to large modern trade customers.
General trade consists of the thousands of independent retail and wholesale outlets across the country. Often called “mom and pop” shops, each of these stores is considered a distinct customer and has to be addressed individually. HUL services these outlets through a network of 2,900 stockists. Goods are sent to a local warehouse or carrying and forwarding agent (CFA), and are then stocked and dispatched to specific retailers upon orders from the HUL stockists. The stockists are responsible for servicing all the small retail outlets in a specific geographic area. General trade makes up the majority of HUL’s sales.
While general trade encompasses both urban and rural markets, serving customers in more remote areas of India poses unique challenges. Rural markets are scattered over large areas with low per capita consumption rates. While the aggregate potential of rural markets is large, the potential of each of the 600+ dispersed markets is very low. As well, rural markets are not connected to urban centers by air or rail, with road connectivity poor at best. Accessing these markets, even when feasible, means additional logistics costs to HUL.
Despite the roadblocks, conquering the rural markets is a must for HUL. One out of every eight people on this planet lives in an Indian village. In comparison to the urban market, which
consists of roughly 250 million people, the rural market is 775 million people across 638,000 villages. Within ten years, per household consumption in rural India is forecasted to equal today’s urban levels.
To penetrate the rural markets, HUL launched a unique four tier distribution system. Markets were segmented based on their accessibility and business potential. 1.Direct Coverage: HUL appointed a common stockist to service all outlets within a town and sell a limited selection of the brand portfolio. Towns consisted of populations of under 50,000 people.
2.Indirect Coverage: HUL targeted retailers in accessible villages close to larger urban markets. Retail stockists were assigned a permanent route to ensure that all accessible villages in the vicinity were served at least once a fortnight.
3.Streamline: Streamline leveraged the rural wholesale channel to reach markets inaccessible by road. Star Sellers were appointed among wholesalers in a particular village. Star Sellers would purchase stock from a local distributor and then distribute stock to retailers in smaller villages using local means of transport (e.g. motorcycles, rickshaws). 4.Project Shakti: Project Shakti targeted the very small villages (
By the end of 2009, Project Shakti network comprised of 45,000 Shakti Ammas covering 100,000 villages across 15 states in the country, cumulatively reaching over 3 million households
every month. Unilever has replicated Project Shakti’s success in other markets such as Sri Lanka and Bangladesh.
Hindustan Unilever Limited value Proposition
Hindustan Unilever Limited, Unilever's $3.9 billion subsidiary in India. Unilever is the corporation that produces Axe deodorant, Vaseline, Surf detergent, and Lipton tea, among many other everyday products.
India is the second largest country in the world in terms of population. India has also a large number of villages; more than 600.000 villages with poor transport infrastructure making shipments of goods extremely difficult. Most of these villagers don’t have access to the very basic hygiene products like soap, toothpaste, shampoo, etc. Many of them have even never used a tooth brush or washed their hairs with shampoo. Instead of investing in costly infrastructure, the Indian government decided to promote entrepreneurship in these villages, targeting women particularly. Hindustan Unilever saw an opportunity in this program and decided to develop a business model accordingly. Within their established organization Hindustan Unilever has created a leadership organization with total freedom for developing the business model. Hindustan Unilever launched the so-called Shakti Entrepreneurship Program. The value proposition was to create in each village and surrounding a chain of entrepreneurs for Hindustan Unilever products. These entrepreneurs (who are selected women) will not only distribute but also educate these villagers on the use of the different corporal hygiene products provided by Hindustan Unilever.
NGO’s have supported Hindustan Unilever with selecting these underprivileged women, to become the new Hindustan Unilever distributers and the new promoted entrepreneurs. According
to Hindustan Unilever, at the beginning, there was a lot of hesitation, since these women were often illiterate or had no math skills. It turns out they were very quick to learn and smart-within 48 hours they would get it. Their motivation was so high that it compensated for any lack of ability.
Today H. Unilever employs between 60,000 and 70,000 women entrepreneurs in villages to sell Unilever products at affordable prices to the Base of the Pyramid (BoP). For the first time, villagers had access to soap, detergent, and toothpaste. The women entrepreneurs were also educating their communities on hygiene issues while selling their products - for example, by explaining how to brush children's teeth - and through community wide health awareness days.
Shakti is a good example of CSR. it created a whole new way of life for 60.000 to 70.000 women, with the opportunity to gain a good living. It had a direct effect on their social stature. And millions of people had access to personal care and home products. In terms of distribution and marketing, the business model is using the BoP to distribute products; so the BoP is definitely part of the solution. And it's self-sustaining from the business it generates. Hindustan Unilever has managed to create a sustainable business for itself and for the women distributers, to reach untapped market and to reinforce its brand and its company internal and external culture. All this by using the BoP in a CSR business model. Image 1.5 Business Model Picture
How Hindustan Unilever Limited deliver its value proposition
We assume Hin...