Rural Marketing

Case Analysis: Unilever in India: Hindustan Lever’s

Project Shakti – Marketing FMCG to the Rural Consumer

Group -3

Submitted to: Dr. Nisha Bharti

Submitted by:

Abhi Patel (20020242003)

Agna Maria Paulose (20020242005)
Nishika Gupta (20020242034)
Rahul Patel (20020242047)
Ram Islam IS (20020242049)
Sanorita Avon (20020242052)
Shruti Rawat (20020242060)
 Introduction

Shakti is a win- win initiative for micro enterprise and rural entrepreneurs. Unilever was the
world's largest FMCG Company with a 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 a broad product line with thousands of SKUs of its twenty product categories.
Four major segments: detergents, personal care, beverages and foods

HLL background

Hindustan Unilever Limited is the Indian subsidiary of the world’s largest FMCG Company,
Unilever. As it entered India its growth varied with the political environment of the country.
HUL’s competition had two fronts, one at lower price segment and other at higher price segment.
Lower price competition came from a large number of unorganized local players, while higher
price competition came from organised national and international brands.

• Because of license raj made it hard to obtain licenses before 1991.

• Socialist governments restrictions on business operation & expansion of capacity and also the
uses of natural resources.
• Foreign direct investment had many restrictions too
• Liberalization time company saw the opportunities and came in India.

Situation Analysis
• HUL is India‟s largest FMCG Company.
• More than 70% population of India resides in villages. So, it was untapped this market, to convert
this opportunity into success company need to develop economically viable and efficient
distribution channels in villages.
• Main problems are poor connectivity & infrastructure among villages and widely scattered
consumers.
• Recently it has launched a project called “Shakti” to penetrating the rural market for FMCG
products. Around 12000 women entrepreneurs had been appointed, which ultimately covers
nearly 50,000 villages in partnership with nearly 300 NGO‟s.
• Company wants to scale up its operation so that to achieve a consumer base of around 100
million by year 2006. For that it is estimated that will require a network of about 25000
entrepreneurs.
• HLL has also introduced Shakti Vani to create awareness in villages about personal health and
community hygiene.
• For awareness villages about personal health and community hygiene HLL has launched Shakti
Vani initiative.
 Project Shakti

Challenges:
• Education level in indian women and cultural differences in the different regions
• Very less microfinance companies are interested in rural areas, because of low-income level
of population & high risk to get back money.
• Scaling was possible but it involves high process costs
• Huge human resource needed to maintain people & train people to become entrepreneurs
• Government support needed in various sectors
• Cultural issues like language barrier and communication
• Around 10-15% of Shakti’s revenues belonged to human resource costs, it was a major
concern
• Lack of confidence among the entrepreneurs to invest in it because of past failures
• Not much SHGs to collaborate with Shakti initiative
Advantages:
• Untapped market can be touch
• Without the direct retail outlet channel, we can reach to the final customer
• A personalized service
• Preference to Entrepreneurs
o Credit was also given to regular entrepreneurs
o iShakti and Shakti Vani help to created a loyal customer base and improved market
penetration and visibility of HLL‟s products increased
o Consumers were getting discounts
o By creating a network, passing on part of profit to another person who sells your
goods at another place

Problems

1. Increase in the revenues exponentially without increasing the costs proportionately. Grow
viably and sustainably.
2. Increase the sales. Reach 100 Million consumers by 2006 and have 25000 entrepreneurs.
3. Increase in Competition post liberalization.
4. In the process of standing up with the competitors, profit margins were compromised.
5. Rural markets were scattered as well as their per capita consumption was low.
6. Accessing rural markets was heavy on pockets.
7. Problems in marketing in rural areas due to less awareness of electronic media and also,
illiteracy.
8. Income generated through MACTS was very low.
9. Avoiding channel conflicts when providing products to the women entrepreneurs at
discounts greater than the general market.
10. RSPs were hired, they added to the costs
11. Small teams were ill equipped
 12. Implementing projects in any district required exhaustive tasks to be undertaken.
13. Human Resource costs ballooned with scale which led to additional overheads.
14. Scale of SHG movement in a state was another issue, as some states did not have SHGs
with which partnership could be made.
15. Cultural issues included: status of women in rural societies, change of language and
dialect
16. On facing rejections, some shakti entrepreneurs would quit, which led to them becoming
debt ridden.
17. Issue of familiarity with local retailers who gave credit and a wider range of products was
also a barrier.
18. Convincing brand managers to pick up promotion and build brand building costs
19. To build the brand without compromising on the social objectives.

Managing Project Shakti in long term

In the long run HLL will need to take the following steps –
• Expansion into new markets – HLL must expand their operation to other villages within the
state and in the other states also.
• Involve other agencies – HLL can also invite more microfinance companies in the market,
which can provide money to village entrepreneurs. So, people can buy an LIC policy with their
regular HLL products.
• iShakti – Make use of IT information exchange among village entrepreneurs. This IT portal can
be used to communicate information about community hygiene and personal health.
iShakti and Shakti Vani

• Both initiatives were created to supply rural India with access to information and social
communication.
• Although the setup costs are very high and funds are often generated thus Shakti can finance itself
• Vani itself doesn't generate revenues directly, but it's a strong tool to extend hygiene awareness in
rural India, as a result indirectly increase HLL sales at future
• Briefly , iShakti and Vani are going to be workable and scalable to assist Shakti success.
Social Impact and Role of Business

• HLL should have to make a social impact on rural India.

• HLL can continue to enjoy the competitive advantages because the main company to
participate in rural social development.
• The connection between business and rural communities will develop lifetime customers
for HLL. This involvement may not be crucial role of business, but as far as it is valuable
& profitable to company without compromising moral and legal issues. So, it will be a
good move for company to increase the reputation as a socially responsible organization.
Recommendations:
● Giving a clear picture of the Shakti Vani project to villagers will help them to buy more
products.
● New products need to be there to come up in the market, because currently the market is
becoming saturated.
● Workshops and webinars should be organized for the employees for better performance
and increasing in sales.
● Shakti should continue to work will HLL, due to which company growth will boost up as
HLL has competitive edge over others and is recognised as Socially responsible
Organization.
● Project Shakti should increase its market share, as it has opportunity in the market for its
availability at low cost.
● Shakti Vani should also join with NGO for better performance and reduce its cost.

EXHIBIT ANALYSIS
 ● EXHIBIT 1

Its gross profit margin in 2003 was about 50% and net income about 17%. The profit of the
company was constantly increasing with the company dominating the market and registering
revenue of approx 110 billion rupees in 2004.

● EXHIBIT 2

The most profitable segment of HUL was the Detergents category with 48% of annual turnover.
The company has the most number of variants in the personal care category but it is not the one
bringing maximum revenue. Detergents were registering maximum sales across india.

● EXHIBIT 3

Company had a steady rise in turnover as well as in profits till 2003. But a fall in profits can be
seen in 2004. This was due to tough competition from Nirma in lower pricing segments like
detergents which were the most selling segment of HUL and competition from Procter and
Gamble in higher pricing category to all the personal care products.

● EXHIBIT 4
HLL had four regional sales offices, one each in Delhi (north), Kolkata (east), Chennai (south),
and Mumbai (west). Regional sales offices were headed by a regional manager, or RM. Each
profit center also had its own sales force spread across these four regional offices. Exhibit 5
shows the organization of the selling division. In each profit center, a general sales manager
(GSM) headed sales for the country. Reporting to him were the four regional sales managers
(RSMs) of each of the profit centers. Each RSM headed a team of four to six area sales managers
(ASMs).On average, an ASM was responsible for his profit center’s business in his area. ASMs
headed sales teams consisting of sales officers (SOs) and territory sales in-charge (TSIs). A TSI
typically managed 6 to 10 stockists, and the average sales officer managed seven TSIs.

● EXHIBIT 5
 • Exhibit 8

Surf excel contributed maximum in the shakti project with 100% increase in its sales in 2004, while Super
501 and nihar contributed lowest with a decrease in 50% sales.
Share analysis can show that they are continuously falling from 2003 to 2004 in all segments.
This was due to competition from Nirma and other competitors in all the segments as major
brands operated and opened in india.