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 HUL’s 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 HUL’s 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
country’s 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
company’s 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 company’s customers. In order to achieve this,
one wholesaler in each market was appointed as a “Registered Wholesaler,” a stock point
for the company’s 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 — HUL’s 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 (Pond’s 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 HUL’s 7,500 odd distributors. In less than two years, it has doubled’ the
company’s reach in rural India. Lever’s 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-stockest’s 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, marketer’s 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. A number of tools such as a pictorial story in a flip chart
format, a "Glo-germ demonstration" and a quiz with attractive prizes to reinforce the
message are used. The "Glo-Germ demonstration" is a unique tool to make unseen germs
visible and emphasize the need to use soap to wash hands and kill germs. The first
interaction with students is then replicated with the women and finally the rest of the
community. The various stages reinforce the message and learnings, which is crucial in
order to effect awareness and behaviour change in favour of hand wash hygiene.
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 India’s 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.

HUL’S 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 company’s 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 Amma’s 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 Unilever’s 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, I’m
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 doesn’t 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 HUL’s
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 Lever’s revenues came from the rural
markets in India.

HUL sources said the project currently contributes ‘handsomely’ to the company’s sales. The
project was started in 2001 to empower underprivileged rural women by providing income-
generating opportunities, health and hygiene education. Shakti’s ambit already covers about
15 million rural population. 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.