1.

Hindustan Unilever Limited

Making Sustainable leaving commonplace

1.1 Introduction

Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer Goods
Company with a heritage of over 80 years in India and touches the lives of two out of three
Indians. HUL works to create a better future every day and helps people feel good, look good
and get more out of life with brands and services that are good for them and good for others.
With over 35 brands spanning 20 distinct categories such as soaps, detergents, shampoos, skin
care, toothpastes, deodorants, cosmetics, tea, coffee, packaged foods, ice cream, and water
purifiers, the Company is a part of the everyday life o f millions of consumers across India. Its
portfolio includes leading household brands such as Lux, Lifebuoy, Surf Excel, Rin, Wheel, Fair
& Lovely, Ponds, Vaseline, Lakm, Dove, Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe,
Brooke Bond, Bru, Knorr, Kissan, Kwality Walls and Pureit.
The Company has over 16,000 employees and has an annual turnover of INR 27408 crores
(financial year 2013-2014). HUL is a subsidiary of Unilever, one of the worlds leading suppliers
of fast moving consumer goods with strong local roots in more than 100 countries across the
globe with annual sales of 49.8 billion in 2013. Unilever has 67.25% shareholding in HUL.

1.2 Company vision

We meet every day needs for nutrition, hygiene and personal care with brands that help
people feel good, look good and get more out of life.Sustainability is at the heart of our business,
and through our brands, we seek to inspire people to take small everyday actions that can add up
to a big difference for the world. Our deep roots in local cultures and markets around the world
give us our strong relationship with consumers and are the foundation for our future growth. We
will bring our wealth of knowledge and internationa l expertise to the service of local consumers
a truly multi- local multinational.

Our long-term success requires a total commitment to exceptional standards of performance and
productivity, to working together effectively, and to a willingness to embrace ne w ideas and
learn continuously. To succeed also requires, we believe, the highest standards of corporate
behaviour towards everyone we work with, the communities we touch, and the environment on
which we have an impact. This is our road to sustainable, profitable growth, creating long-term
value for our shareholders, our people, and our business partners.

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1.3 Purpose & principles

Our corporate purpose states that to succeed requires "the highest standards of corporate
behavior towards everyone we work with, the communities we touch, and the environment on
which we have an impact."
Always working with integrity
Conducting our operations with integrity and with respect for the many people, organizations and
environments our business touches has always been at the heart of our corporate responsibility.
Positive impact
We aim to make a positive impact in many ways: through our brands, our commercial operations
and relationships, through voluntary contributions, and through the various other ways in which
we engage with society.
Continuous commitment
We're also committed to continuously improving the way we manage our environmental impacts
and are working towards our longer-term goal of developing a sustainable business.
Setting out our aspirations
Our corporate purpose sets out our aspirations in running our business. It's underpinned by our
code of business Principles which describes the operational standards that everyone at Unilever
follows, wherever they are in the world. The code also supports our approach to governance and
corporate responsibility.
Working with others
We want to work with suppliers who have values similar to our own and work to the same
standards we do. Our Business partner code, aligned to our own Code of business principles,
comprises ten principles covering business integrity and responsibilities relating to employees,
consumers and the environment.

1.4 Unilever Sustainable Living Plan

In an uncertain and volatile world, we cannot achieve our vision to double our size
without also reducing our environmental footprint and increasing our positive social impact.
Launched in 2010, the Unilever Sustainable Living Plan is our blueprint for sustainable growth.
The Plan is helping to drive profitable growth for our brands, save costs and fuel innovation. Our
Plan sets out three big goals

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. Underpinning these goals are nine commitments supported by targets spanning our social,
environmental and economic performance

1.5 HUL Businesses

Home Care

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Personal Care

Foods & Beverages

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Water Purifier

1.6 HUL Group of Companies

HUL Group Companies

Subsidiaries Unilever India Exports Limited India
Unilever Nepal Limited Nepal
Daverashola Estates Private Limited India
Ponds Exports Limited India
Levers Associated Trust Limited India
Levindra Trust Limited India
Hindlever Trust Limited India
Jamnagar Properties Private Limited India
Brooke Bond Real Estates Private Limited India
Lakme Lever Private Limited India
Aquagel Chemicals Private Limited
Trust HUL Securitization of Retirement Benefit Trust
Joint Venture Kimberly Clark Lever Private Limited

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 2. INDIAN TOBACCO COMPANY LIMITED

Creating enduring Value for India

2.1 Introduction
Indian Tobacco Company (ITC) is one of India's foremost private sector companies with a
market capitalisation of US $ 45 billion and a turnover of US $ 7 billion. ITC is rated among the
World's Best Big Companies, Asia's 'Fab 50' and the World's Most Reputable Companies by
Forbes magazine and among India's Most Valuable Companies by Business Today. ITC ranks
among India's '10 Most Valuable (Company) Brands', in a study conducted by Brand Finance
and published by the Economic Times. ITC also ranks among Asia's 50 best performing
companies compiled by Business Week.

2.2 Company Vision

Sustain ITC's position as one of India's most valuable corporations through world class
performance, creating growing value for the Indian economy and the Company's stakeholders
Core Principles.

2.3 Purpose & Principles

ITC's Corporate Governance initiative is based on two core principles. These are:

Management must have the executive freedom to drive the enterprise forward without undue
restraints; and this freedom of management should be exercised w ithin a framework of effective
accountability.

ITC believes that any meaningful policy on Corporate Governance must provide
empowerment to the executive management of the Company, and simultaneously create a
mechanism of checks and balances which ensures that the decision making powers vested
in the executive management is not only not misused, but is used with care and
responsibility to meet stakeholder aspirations and societal expectations.

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2.4 Multiple Drivers of Growth
ITCs aspiration to create enduring value for the nation and its stakeholders is manifest in
its robust portfolio of traditional and greenfield businesses encompassing Fast Moving Consumer
Goods (FMCG), Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business, and
Information Technology. This diversified presence in the businesses of tomorrow is powered by
a strategy to pursue multiple drivers of growth based on its proven competencies, enterprise
strengths and strong synergies between its businesses.

The competitiveness of ITCs diverse businesses rest on the strong foundations of institutional
strengths derived from its deep consumer insights, cutting-edge Research & Development,
differentiated product development capacity, brand-building capability, world-class
manufacturing infrastructure, extensive rural linkages, efficient trade marketing and distribution
network and dedicated human resources. ITCs ability to leverage internal synergies residing
across its diverse businesses lends a unique source of competitive advanta ge to its products and
services.

Within a relatively short span of time, ITC has established vital brands like Aashirvaad, Sunfeast,
Dark Fantasy, Delishus, Bingo!, Yippee!, Candyman, mint-o, Kitchens of India in the Branded
Foods space; Essenza Di Wills, Fiama Di Wills, Vivel, Vivel Cell Renew, Engage and Superia in
the Personal Care products segment; Classmate and Paperkraft in Education & Stationery
products; Wills Lifestyle and John Players in the Lifestyle Apparel business; Mangaldeep in
Agarbattis and Aim in the Safety Matches segment. This growth has been rated by a Nielsen
Report to be the fastest among the consumer goods companies operating in India. Today ITC is
the country's leading FMCG marketer, the clear market leader in the Indian Paperboard and
Packaging industry, a globally acknowledged pioneer in farmer empowerment through its wide-
reaching Agri Business, the second largest Hotel Chain in India and a trailblazer in 'green
hoteliering'. This portfolio of rapidly growing businesses considerably enhances ITC's capacity to
generate growing value for the Indian economy.

ITC's Agri-Business is one of India's largest exporters of agricultural products. The ITC
Groups contribution to foreign exchange earnings over the last ten years amounted to nearly
US$ 6.0 billion, of which agri exports constituted 57%. The Company's 'e-Choupal' initiative has
enabled Indian agriculture significantly enhance its competitiveness by empowering Indian
farmers through the power of the Internet. This transformational strategy has already become the
subject matter of a case study at Harvard Business School apart from receiving widespread
global acclaim.

As one of India's most valuable and respected corporations, ITC is widely perceived to be
dedicatedly nation-oriented. Chairman Y C Deveshwar calls this source of inspiration "a
commitment beyond the market". In his own words: "ITC believes that its aspiration to create
enduring value for the nation provides the motive force to sustain growing shareholder value.
ITC practices this philosophy by not only driving each of its businesses towards international
competitiveness but by also consciously contributing to enhancing the competitiveness of the
larger value chain of which it is a part."

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2.5 Global Exemplar in Sustainability

Acknowledged as a global exemplar in sustainability, ITC is the only enterprise in the

world, of comparable dimensions to be carbon-positive, water-positive, and solid waste recycling
positive. A testimony to its commitment to a low carbon growth path - over 41 % of the total
energy requirements of ITC is met from renewable sources. All ITC's premium luxury hotels are
LEED (Leadership in Energy and Environmental Design) Platinum certified making it the
"greenest luxury hotel chain" in the world. ITC's Paperboards and Paper business is an icon of
environmental stewardship.

ITC's production facilities and hotels have won numerous national and international awards for
quality, productivity, safety and environment management systems. ITC was the first company
in India to voluntarily seek a corporate governance rating.

The Company continuously endeavours to enhance its wealth generating capabilities in a

globalising environment to consistently reward more than 4,71,000 shareholders, fulfill the
aspirations of its stakeholders and meet societal expectations.

2.6 ITC Businesses

It is ITC's strategic intent to secure long-term growth by synergising and blending the
diverse pool of competencies residing in its various businesses to exploit emerging opportunities
in the FMCG sector.

The Company's institutional strength deep understanding of Indian consumer, strong trademarks,
deep and wide distribution network, agri-sourcing skills, packaging know- how and cuisine
expertise continue to be effectively leveraged to rapidly grow the new FMCG businesses.

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 ITC has rapidly scaled up presence in its newer FMCG businesses comprising Branded
Packaged Foods, Lifestyle Retailing, Education and Stationery products, Personal Care products,
Safety Matches and Incense Sticks (Agarbatti), at an impressive pace over the last several years,
crossing Rs. 7000 crore mark in 2013. Its FMCG portfolio consists of 7 portfolios:

2.7 ITC Group of Companies

ITC Group Companies

Subsidiaries ITC Infotech
Surya Nepal Private Limited
Landbase India Limited
King Maker Marketing Inc. USA
Technico Pty Limited. Australia
Russell Credit Limited
Wimco Limited
Srinivasa Resort Limited
Fortune Park Hotels Limited
Bay Islands Hotels Limited
Gold Flake Corporation Limited
Joint Venture Maharaja Heritage Resorts Ltd
ITC Essentra Limited
Associate Companies Gujarat Hotels Limited
International Travel House

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 3. RESEARCH METHODOLOGY

The objective of the project is to investigate the current strategy employed by HUL and
ITC and why it works for them. Fundamentally HUL and ITC are different business models as
HUL is a pure play FMCG Company whereas ITC is a conglomerate where FMCG happens to
be one small portion of the entire business.

Research comprises defining the problem statement, formulating hypothesis, probable solutions,
collecting, organizing and evaluating solutions and assessing the impact of the solutions
proposed.

3.1 Research Problem

HUL and ITC are two major players in FMCG industry. HUL happens to be a pure play
FMCG whereas ITC is a conglomerate. The objective of this report is to analyze and compare the
overall performance of these two companies. This performance comparison further boils down to
analyze their financial performance, market performance and supply chain performance. These
three sub angles together will fulfill and make the research comprehensive enough.

3.2 Sources of Data

As highlighted above most of the analysis would primarily be based on data points or facts
gathered through secondary research. The approach for each of the sub analysis is as follows:

1. Financial performance Since both the company happens to be a public listed

company, we have good set of information available through some of the major financial
websites. The challenge is more in terms of refining the data and brining them on the
same ground for comparison. Also since they are public listed company there websites
have their past annual reports which can be mined to get first hand information about the
company financials.

2. Strategy performance This analysis is more has to do with overall strategy analysis
which calls for a analyzing the company vision analysis, growth mindset, and overall
Risk which these companies have complied with to support their respective business
models. Again this analysis is primarily on secondary research which involves their
official websites, news websites, financial databases and discussion forums. I have also
gone ahead and contacted few officials from these two companies to get first hand
perception about the company as such.

3. Market performance The set of analysis was more to understand the positioning of
these two players in the market. Also how does consumer related to HUL and ITC
Company as a whole. This indirectly determines the lingering psyche of consumers about
each of the products of these companies. The main source of information for this taken
through secondary research which was done across set of 35 consumers picked up in
general.
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 4. FINANCIAL PERFORMANCE ANALYSIS LATEST
SHAREHOLDING PATTERN

Hindustan
Unilever ITC Limited
Limited

Others
Others (14.5) (45.8)
Promoter
Promoter (0)
(42.25)
Flls (19.26)
Flls (14.10)
Dlls
(34..67)
Dlls (4.12)

Stock Comparison

Curre nt Market
Company FaceValue EPS (TTM) P/E No of shares
Price BSE Capilization
ITC 355.85 283079.26 Rs. 1 Rs. 9.31 38.22 7955016340

HUL 757 163747.26 Rs. 1 Rs. 17.56 43.11 2163107800

Ratio Analysis

Company (in Rs Cr) ITC Limited Hindustan Unilever Limited

Particulars FY 2014 FY 2014
Operating Profit Margin Ratio 36.96 16.22
Net Profit Margin Ratio 25.46 13.53
ROCE 47.43 132.89
ROE / RONW 32.64 111.54
Price to Earnings 31.06 31.85

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Key Financial Figures

Company (in Rs Cr) ITC Limited Hindustan Unilever Ltd

Particulars FY 2014 FY 2014
Total Income from Operations 35,317.08 29,233.28
Expenses 22,265.19 24,491.60
Earnings Before Other Income, Interest,
13,051.89 4,741.68
Tax and Depreciation (Operating Profit)
Depreciation 964.92 295.54
Finance Costs 6.37 40.68
Other income 970.95 570.98
PBT 13,051.55 5,215.18
Tax 4,060.93 1,259.44
PAT (before Minority Interest and share
8,990.62 3,955.74
of Associates)
Profit/ (loss) attributable to Minority
109.81 10.17
Interest
Share of profit / (loss) of Associates -10.57
Consolidated Profit / (Loss) for the year 8,891.38 3,945.57

Key Balance Sheet Figures

Company (in Rs Cr) ITC Limited Hindustan Unilever Limited

Particulars FY 2014 FY 2014
Share Capital 795.32 216.27
Reserves & Surplus 26,441.64 3,321.02
Net worth (shareholders funds) 27,236.96 3,537.29
Minority Interest 203.03 22.28
Long term borrowings 76.4 8.44

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Financial Ratio Comparison

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 5. OVERALL STRATEGY COMPARISON

Category HUL ITC

Overview Hindustan Unilever (HUL) is the ITC is not a pure-play FMCG
largest pure-play FMCG company in company, since cigarettes is its
the country and has one of the widest primary business. It is diversifying
portfolio of products sold via a into non-tobacco. FMCG segments
strong distribution channel. It owns like foods, personal care, paper
and markets some of the most products, hotels and agri-business to
popular brands in the country across reduce its exposure to cigarettes.
various categories, including soaps,
detergents, shampoos, tea and face
creams.
Performance After stagnating between 1999 and Despite diversification, ITCs reliance
04, the company is back on the on cigarettes is still huge. The tobacco
growth track. In the past three years, business contributes 40% to its
till 2008 HULs net sales have revenues, and accounts for over 80%
witnessed a CAGR of 11%, while of its profit. This cash-generating
net profit has posted a CAGR of business has enabled it to take
17%. ambitious, but expensive bets in new
segments and deliver modest profit
growth.
Overall Strategy HUL always believes in customer ITC is focusing on delivering value at
friendly products with major competitive prices. Its tremendous
emphasis on low cost overall without reach through extensive distribution
compromising on the quality of the chain has been a competitive
product. They are leveraging the advantage. Additionally, the
capabilities and scale of the parent companys e-choupal model for direct
company and focusing on the value procurement is well known under
of execution. The entire product which ITC partners with over 100,000
product portfolio is also being farmers for spices and wheat
tweaked to include premium procurement and an even larger
offerings such as Ponds Age number for oilseeds. This kind of rural
Miracle and dove shampoo in skin pedigree is hard to beat.
and hair care.
Growth Drivers The Company has been launching ITCs backward integration to ensure
new products and brand extensions, that its products pass efficiently from
with investments being made the farms to consumers has helped it to
towards brand-building and cut down supply and procurement
increasing its market share. HUL is costs. ITCs non-cigarette FMCG
also streamlining its various business business leverages the large
operations, in line with the One distribution network the company has
Unilever philosophy adopted by the developed by selling cigarettes over
Unilever group worldwide. the years. A rich product mix, along
Introduction of premium products with ramp- up of investments in its

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 and addition of new consumers via
market expansion will be HULs
growth drivers.
Risk Being an MNC operating in India,
HUL is more conservative in its
strategies than its Indian
counterparts. Moreover, given
increasing competition, it faces the
risk of being overtaken by domestic
players in various categories.
Prolonged inflation may lead to
margin contraction, in case HUL is
not able to pass on this burden to
consumers. The companys large
size also poses a problem, since it
does not give HUL the agility to
address the competition it faces from
national and regional players.
new sectors, will be instrumental in
charting ITCs growth path.
Increased regulatory clamps on
tobacco, along with rising tax burden.
So, it has started an ambitious
diversification plan, which has its own
set of risks. With its foray into the
conventional FMCG space, ITC has
entered the high-clutter branded
products market. This will burden its
resources in terms of ad spend and
brand-building. Creating brand recall
and building market share in new
products are ITCs key challenges.
Export ban rising crop prices pose a
threat for its agri-business, taxing its
margins.
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 6. SUPPLY CHAIN PERFORMANCE ANALYSIS

Supply chain management plays a crucial role in building the competitive strategy of the
organization. It helps in enhancing the productivity and profitability of the organization. For a
successful supply chain management it is necessary that every organization measures its supply
chain performance using relevant metrics. The supply chain performance of any company can be
measured by analyzing the financial reports of the company. The performance measures used for
this purpose are as follows.

Financial Ratios
Total Length of the Chain

HINDUSTAN UNILEVER LIMITED (HUL)

HUL formerly known as Hindustan Lever Limited (HLL) is Indias largest FMCG
Company. HULs distribution network is its key strength that has helped HUL reaches the top in
the list. Their focus is on ease of product availability, brand communication and high levels of
brand experience.HUL has a network of about 7000 redistribution stockiest covering almost one
million retail outlets.

They are simultaneously creating new channels like Project Shakti:- HULs partnership with self
help rural women, Hindustan Unilever Network:- direct selling channel, Out of Home:-providing
vending machines for hot beverages and Health and Beauty Services:- Lakme salons and Ayush
Therapy Centers.

As per the Annual report of 2008-2009 of HUL, India the company had done fairly good in its
supply chain efficacy. Excellent customer service performance was achieved at a significantly
lower cost through operational efficiencies and cost reduction measures. Eliminating waste and
hidden costs of various operations helped business in tack ling inflationary pressures. Significant
reduction in procurement costs helped in leveraging the benefits of scale in the buying function.
Appropriate capital expenditure investments created capacity for future growth and proper
management of existing assets in accordance with the principle of TPM- Total Productive
Maintenance resulted in greater asset productivity.

Towards the end of 2008 the company took measures to improve its rural distribution system.
Changing scenario of rural customer demand and improved infrastructure enables the company
to offer new categories and product assortments in rural market.

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 Deployment of advanced IT solutions on the back of a strong suite of SAP application
systems led to significant improvements in planning and logistics.[2] In the changing face of
modern retail trade formats, the Company has committed resources to understand the changing
shopping habits and to deliver appropriate solutions to grow the business across categories. Many
initiatives were undertaken in customer service, category management and merchandising to win
at the point-of-purchase with shoppers and deliver highest quality service to Modern customers.

INDIAN TOBACCO COMPANY (ITC)

One of the toughest competitors for any other FMCG organization in India is Imperial
Tobacco Company (ITC). It has diverse categories of different products. The warehousing
capacity of ITC is more than 3.5 million Sqft over 55 locations. ITC follows direct distribution
from factories to distributors.

The distribution Network of ITC is given below:-

According to the Annual Report of ITC, the company has made significant investments to
scale up its trade marketing and distribution. Excellence in channel management, state-of-the-art
technology solutions and considerable investments in training and development of the sales team
has enhanced its competitive abilities.

The biscuit business (Sunfeast) focused on supply chain efficiencies to increase the product
freshness and improve logistic costs. Till requisite scale is achieved, the business will have to
bear a high cost base in the interim, as the benefits of distributed manufacture to service
proximal markets are yet to be fully exploited.

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 To develop quality differentiation across the value chain, they have developed farm-to-
factory spices supply chain that guarantee superior specifications and quality attributes. Some
impairment occurred in cigarette production in the Simra factory of the Terrain region owing to
frequent strikes and blockades. But it was minimized by the companys pro-active resource and
supply chain management. In the Agro-forestry mission of the company they have created a
source of long term sustainable supply of critical raw materials. In the paper and paperboard
business, the conventional nursery system was replaced by a novel technology that ensures
significant time reduction in raising eucalyptus saplings with improves survival rates. This has
positively impacted the fibre supply chain in the paper and paperboard business.

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 7. CONCLUSION

In recent years, the FMCG sector declined due to downtrading. Also because of presence of large
number of companies trying to seize this opportunity, this force the old HLL for the change and
thus, their transformation has resulted in a new HLL, which has successfully faced this challenge
and reversed this trend. It has done so by substantially strengthening their brands and building
capabilities. This has already begun to yield benefits and they are returning to growth. Volume
growth is being followed by value growth, which in turn is bringing profit growth.

Competitive strategies employed by HUL and ITC

HUL & ITC are major companies in FMCG market in India. When we compare both
companies on the basis of their strategies i.e. their competitive strategies in the present market.
When we look at the present segment breakup for both of the companies then we came to know
that their different products vary too much in the market. Now let us take a comparative analysis
of both the companies under some heads:

Performance

After stagnating between 1999 and '04, the company is back on the growth track. In the
past three years, till 2008 HUL's net sales have witnessed a CAGR of 11%, while net profit has
posted a CAGR of 17%. Despite diversification, ITC's reliance on cigarettes is still huge. The
tobacco business contributes 40% to its revenues, and accounts for over 80% of its profit. This
cash- generating business has enabled it to take ambitious, but expensive bets in new segments
and deliver modest profit growth.

Overall Strategy

HUL always believes in customer friendly products with major emphasis on low cost
overall without compromising on the quality of the product. They are leveraging the capabilities
and scale of the parent company and focusing on the value of execution. The entire product
portfolio is also being tweaked to include premium offerings such as Pond's Age Miracle and
dove shampoo in skin and hair care. HUL introduced Project Shakti to penetrate the rural market.
ITC is focusing on delivering value at competitive prices. Its tremendous reach through extensive
distribution chain has been a competitive advantage.

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 8. BIBLIOGRAPHY

BOOKS
Kothari, C.R., 2005 Research Methodology, Wishwa Prakashan, India.

Kotler, Philip. 2005, Marketing Management, Prentice hall India.

Marketing Management, ICFAI University Press.

MAGAZINES

Business Today

Investors India

Business World

Economic Times

Business Standard

WEBSITES

www.hll.com

www.fmcg.com

www.economictimes.com

www.marketwatch.com

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