A REPORT

ON

Distribution network of HUL

By

Akshay Babu (20FMUCHH010679)

ICFAI Business School, Hyderabad

A report submitted in partial fulfillment

Of

The requirements of

BBA program of

IBS Hyderabad

Distribution list:

1. Santosh Kumar alreddy (faculty)

Date of submission: 17 April 2023

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 Authorization:

“The report is submitted as partial fulfillment of the requirement of the BBA program of IBS
Hyderabad”

Acknowledgments:

We would like to take this opportunity to express my sincere gratitude to my faculty Santhosh for
his endless guidance, support, and cooperation without which this report would not have been
possible.

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 HINDUSTAN UNILEVER LTD

Hindustan Unilever (HUL) is India’s largest FMCG company with leading brands in home and
personal care products and food and beverage. HUL’s products span 20 different consumer
segments and touch the lives of two-thirds of Indians. In the summer of 1888, visitors to the port
of Calcutta found boxes filled with Sunshine soap decorated with the inscription “Made in
England by Lever Brothers.” With that, the era of the branded FMCG business began. This was
followed in 1895 by Lifebuoy and other popular brands such as Pears, Lux and Vim.
With 50+ brands spanning 15 distinct categories such as fabric solutions, home and hygiene, life
essentials, skin cleansing, skin care, hair care, colour cosmetics, oral care, deodorants, tea,
coffee, ice cream & frozen desserts, foods and health food drinks, the company is a part of the
everyday life of millions of consumers across India.
Its portfolio includes leading household brands such as Lux, Lifebuoy, Surf excel, Rin, Wheel,
Glow & Lovely, Pond’s, Vaseline, Lakmé, Dove, Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe,
Brooke Bond, Bru, Knorr, Kissan, Kwality Wall’s, Horlicks and Pureit. HUL is a subsidiary of
Unilever, one of the world’s leading suppliers of Food, Home Care, Personal Care and
Refreshment products with sales in over 190 countries.

HUL Distribution Network

The HUL’s distribution network has evolved with time. The first phase of the HUL distribution
network had wholesalers placing bulk orders directly with the company. Large retailers also
placed direct orders, which comprised almost 30 per cent 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. 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 then

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distributed stocks from the Registered Wholesaler through distribution units maintained by the
company. The Registered Wholesaler system, therefore, increased the distribution reach
of the company to a larger number of customers. The highlight of the third phase was the concept
of “Redistribution Stockist” (RS) who replaced the RWs. The RS was required to provide the
distribution units to the company salesman. The second characteristic of this period was the
establishment of the “Company Depots” system. This system helped in transhipment, bulk
breaking, and as a stock point to minimise stock‐outs at the RS level. In the recent past, a
significant change has been the replacement of the Company Depot by a system of third party
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 RS.
The role performed by the Redistribution Stockists includes:
1. Financing stocks
2. Providing warehousing facilities
3. Providing manpower
4. Providing service to retailers
5. Implementing promotional activities
6. Extending indirect coverage
7. Reporting sales and stock data
8. Demand simulation and screening for transit damage

Distribution System of HUL

Distribution at the Villages:
The company has brought all markets with populations of below 50,000 under one rural sales
organisation. The team comprises an exclusive sales force and exclusive redistribution stockists.
The team focuses on building superior availability of products. In rural India, the network
directly covers about 50,000 villages, reaching 250 million consumers, through 6000 sub‐
stockists. HUL approached the rural market with two criteria ‐ the accessibility and viability. To
service this segment, HUL appointed a Redistribution stockist who was responsible for all
outlets and all business within his particular town. In the 25% of the accessible markets with
low business potential, HUL assigned a sub stockist who was responsible to access all the
villages at least once in a fortnight and send stocks to those markets. This sub‐stockist
distributes the company’s products to outlets in adjacent smaller villages using transportation
suitable to interconnecting roads, like cycles, scooters or the age‐old bullock cart. Thus,
Hindustan Unilever is trying to circumvent the barrier of motorable roads. The company
simultaneously uses the wholesale channel, suitably incentivising them to distribute company
products. The most common form of trading remains the grassroots buy‐and‐sell mode. This
enables HUL to influence the retailers stocks and quantities sold through credit extension and
trade discounts. HUL launched this Indirect Coverage (IDC) in 1960s. Under the Indirect
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Coverage (IDC) method, company vans were replaced by vans belonging to Redistribution
Stockists, which serviced a select group of neighbouring markets.

Distribution at the Urban centres:

Distribution of goods from the manufacturing site to C & F agents take place through either the
trucks or rail roads depending on the time factor for delivery and cost of transportation.
Generally the manufacturing site is located such that it covers a bigger geographical segment of
India. From the C & F agents, the goods are transported to RS’s by means of trucks and the
products finally make the ‘last mile’ based on the local popular and cheap mode of transport.
New distribution channels Project Shakti This model creates a symbiotic partnership between
HUL and its consumers. Started in the late 2000, Project Shakti had enabled Hindustan Lever to
access 80,000 of India’s 638,000 villages. HUL’s partnership with Self Help Groups(SHGs) of
rural women, is becoming an extended arm of the company’s operation in rural hinterlands.
Project Shakti has already been extended to about 12 states ‐ Andhra Pradesh, Karnataka,
Gujarat, Madhya Pradesh, Tamil Nadu, Chattisgarh, Uttar Pradesh, Orissa, Punjab,
Rajasthan, Maharashtra and West Bengal. The respective state governments and several
NGOs are actively involved in the initiative. The SHGs have chosen to partner with HUL as a
business venture, armed with training from HUL and support from government agencies
concerned and NGOs. Armed with micro‐credit, women from SHGs become directto‐home
distributors in rural markets. The model consists of groups of (15‐20) villagers below the poverty
line (Rs.750 per month) taking micro‐credit from banks, and using that to buy our products,
which they will then directly sell to consumers. In general, a member from a SHG selected as a
Shakti entrepreneur, commonly referred as 'Shakti Amma' receives stocks from the HUL rural
distributor. After being trained by the company, the Shakti entrepreneur then sells those goods
directly to consumers and retailers in the village. Each Shakti entrepreneur usually service 6‐10
villages in the population strata of 1,000‐2,000. The Shakti entrepreneurs are given HUL
products on a `cash and carry basis.'

Project Streamline
To cater to the needs of the inaccessible market with high business potential HUL initiated
a Streamline initiative in 1997. Project Streamline is an innovative and effective distribution
network for rural areas that focuses on extending distribution to villages with less than 2000
people with the help of rural sub‐stockists/Star Sellers who are based in these very
villages. As a result, the distribution network directly covers as of now about 40 per cent of the
rural population. Under Project Streamline, the goods are distributed from C & F Agents to Rural
Distributors (RD), who has 15‐20 rural sub‐stockists attached to him. Each of these sub‐
stockists / star sellers is located in a rural market. The sub‐stockists then perform the role of
driving distribution in neighboring villages using unconventional means of transport such
as tractor and bullock carts. Project Streamline being a cross functional initiative, the Star
Seller sells everything from detergents to personal products.

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Hindustan Lever Network (HLN) It is the company’s arm in the Direct Selling channel, one of
the fastest growing in India today. It already has about several lakh consultants ‐ all independent
entrepreneurs, trained and guided by HLN’s expert managers. HLN has already spread to over
1500 towns and cities, covering 80% of the urban population, backed by 42 offices and 240
service centres across the country. It presents a range of customised offerings in Home &
Personal Care and Foods. The New Compensation plan for HLN partners provides new exciting
ways of earning substantial income in addition to offering rewards like revenue sharing through
the innovative concept of “pools” Mother Depot and Just in Time System In order to rationalise
the logistics and planning task, an innovative step has been the formation of the Mother Depot
and Just in Time System (MD‐JIT). Certain C&FAs were selected across the country to act as
mother depots. Each of them has a minimum number of JIT depots attached for stock
requirements. All brands and packs required for the set of markets which the MD and JITs
service in a given area are sent to the mother depot by all manufacturing units. The JITs
draw their requirements from the MD on a weekly or biweekly basis.

Major Stakeholders in the distribution channel

 HUL
Unilever India is the largest FMCG (fast moving consumer goods) firm in India and has
the widest reach in the nation with a retail network of 4 million outlets. Levers are
implementing an IT system to connect 3,500 stockists in 1200 towns who account for 80
per cent of company sales. Sourcing: HUL promotes sustainable agricultural practices by
working with external agencies, farmers/small growers. They have developed a
programme that ensures:
1. Farm owners and workers can earn an income they can live on and also improve their
living conditions
2. Fertility of soil is maintained
3. Efficiency in water consumption
4. Certification from independent agencies
Manufacturing: In their manufacturing processes they intend to reduce the carbon footprint of
our operations through:
1. Developing energy efficient production technologies like Ploughshare Mixer
Technology
2. Increasing the use of carbon neutral fuels
3. Implementing a strategy for water is based on the 4-R principle wherein they
reduce at source, reuse within process, recycle wherever possible and renew
ground water through rain water harvesting.
 Carrying and Forwarding Agents (CNFs) CFAs’ act as gatekeepers
between the manufacturers and end-users. They are considered as an important
asset of a company in the overall company’s marketing & positioning strategy and
can serve as a key differentiator. Channel experience strongly affects end-user’s
overall perception of the brand’s image. They help in the routing of transactions,

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 adjustment of assortment discrepancy and sortingbreaking down a heterogeneous
supply into separate stocks that are relatively homogeneous.
1. ACCUMULATION-BRINGING SIMILAR STOCKS from different suppliers
2. ALLOCATION- breaking down a homogeneous supply into smaller slots &
3. ASSORTING-Building assortments that are readily consumable.
 Transportation and Logistics partners Distribution of goods from the
manufacturing site to C & F agents take place through either the trucks or rail
roads depending on the time factor for delivery and cost of transportation.
Generally the manufacturing site is located such that it covers a bigger
geographical segment of India. From the C & F agents, the goods are transported
to RS’s by means of trucks and the products finally make the ‘last mile’ based on
the local popular and cheap mode of transport.
 Redistribution Stockists
The role performed by the Redistribution Stockists includes: Financing stocks,
providing warehousing facilities, providing manpower, providing service to
retailers, implementing promotional activities, extending indirect coverage,
reporting sales and stock data, demand simulation and screening for transit
damages.
 Wholesaler
Wholesaler is an intermediary who buys goods for resale usually from company
distributors or stockists. He buys from various companies and stocks all major
brands in the category in which he operates. He has the ownership of the goods he
sells and the operations are run like a typical store where the resellers (could be
retailer’s themselves or bulk buying individual customers) who come to him with
an elaborate list and buy. To answer the question why he survives as an
intermediary, he is willing to provide smaller lots of goods, provide credit if
needed and is a one stop shop for all the brands in that category. HUL considers it
a necessary evil, in an ideal situation they would like to avoid them totally , but
the fact is that in spite of the negatives like loss of control, and lack of
transparency, they have an important role to play in Indian distribution channels.
They are the ones who provide substantial reach for various companies (though
the degree of dependence wholesale varies across product categories, like very
high in FMCG high volume and low value products) especially in rural markets. .

 Retailers
These consist of Urban and rural consumers. While a traditional distribution
chain is followed in the urban markets, the rural areas have a new strategy
implemented for catering to the rural customers. In recent years, rural markets
have acquired significance in countries like China and India, as the overall growth
of the economy has resulted into substantial increase in the purchasing power of
the rural communities. On account of the green revolution in India, the rural areas
are consuming a large quantity of industrial and urban manufactured products. In

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 this context, a special marketing strategy, namely, rural marketing has taken
shape.

 End User/Consumers
They are committed to responsible marketing and have clearly defined principles
which guide their communications. Advertising is a way for them to engage with
consumers on issues that matter to them. At the same time, we recognise the
influence of marketing and advertising on consumers and take our responsibilities
seriously. This means ensuring that all claims they make have a sound scientific
basis and that all such communication passes the baseline test of being ‘legal,
decent and honest’. They also carry out scientific assessments of all their products
to ensure they are safe.The products are developed as per the guidelines set by
Unilever globally. All risk assessments are undertaken by the Safety and
Environmental Assurance Centre (SEAC). SEAC’s role is to provide independent
scientific evidence and guidance so that they can identify and manage:
1. Risks for consumers, workers and the environment with regard to the safety of
products and supply chain technology, and
2. Environmental impacts, with regard to the sustainability of Unilever’s brands,
products and supply chain

 Key challenge faced in the distribution network The main challenge

of HUL is to cater to the needs of seven million distinct outlets across India and
59 percent of these stores are in rural India. HUL directly serves over 1 million
stores and has a network of over 7000 stockists and distributors. HUL caters to a
huge audience for which it has to route its goods through C&F, Stockists and
Retail outlets. The main challenge lies in maintaining a consistent Demand and
Supply so that the customers do not face any problem.
 Steps taken by the company to tackle challenges

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 HUL has taken the following initiatives to improve its distribution network: Setting up of a
full‐scale sales organisation comprising key account management and activation to impact,
fully engage and service modern retailers as they emerge.
1. Servicing Channel partners and customers with continuous daily replenishment.
2. Leveraging scale and building expertise to service Modern Trade and Rural
Markets.
3. Delayering of sales force to improve response times and service levels.
4. Revamping of its sales organisation in the rural markets to fully meet the
emerging needs and increased purchasing power of the rural population. HUL’s
distribution network in rural India already directly covers about 50,000 villages,
reaching about 250 million consumers through about 6,000 sub stockists.
5. Implementation of supply chain system that connects stockists across the country,
and also includes a back‐end system connecting suppliers, all company sites and
stretching right up to stockists. IT tools have been deployed for connectivity
across HUL
6. Launching the Unicare scheme with upmarket pharmacies and retailers to sale its
premium brands.
7. Undertaking several initiatives for traditional channels in order to improve its
capabilities at the front‐end by developing skills for stockists’ sales force. Under
‘Project Dronacharya’, the FMCG major continuously imparted training to over
10,000 stockist salesmen.
8. Launching of Project Shakti through which the company is able to extend its
operations in villages. HUL has also included several NGOs and state
governments as the initiative helps rural women to improve their financial
position.
9. Launching of HUL Network to leverage the channel of direct selling by
presenting customized offerings in 11 home and personal care and food
categories. Started in 2003, it already has a base of 300,000 consultants across the
country.
10. Starting of franchised Lakme Beauty Salons and Ayush Therapy centres to offer
standardized services, in line with the strategy to leverage the equity of its brands
through relevant services.

RECCOMENDATIONS

Pure It needs a dedicated sales force

Pure it, the water purifier from HUL has a very big service component attached to
it, which they are not able to provide customers. HUL needs to manage the
distribution of this workforce better and needs to ensure up to the mark

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 performance. Pure it being a low cost water purifier has a lot of potential
customers waiting in rural areas; HUL should market it effectively in rural areas
in order to tap that market. Non conventional marketing strategies should be used
like installing a free purifier in Sarpanch’s house in the village which will give
them a champion who will help them further increase the sales.

Co-Creation

P&G has a customer connect initiative, which it exercises all over the world in
order to ensure their House of Quality. HUL also should come up with some such
strategy, which will help it to satisfy customer needs in a better manner.

Basket Sales
When we look at all the above brands, most of us would be using more than 60 %
of these brands in their respective categories. Have we ever wondered where do
the remaining 40% brands in our consumption come? They come from HUL
competitors i.e. P&G, ColgatePalmolive. When we were discussing about HUL
for the project, we were wondering if there is anything wrong with the FMCG
giant. After some brainstorming, when we couldn’t find anything drastically
different, we paid attention to devising a new strategy which could help us
increase HUL’s revenue and give it an edge over intense competition sprawling
up. The organized retail, as many recent researches have pointed out, are growing
at a rapid rate. HUL covers maximum portion of shelves at these retail stores and
has products for all income segments. We would suggest HUL to start bundling
its products in a big way and kill the competition. HUL should create a package
for Upper Middle Class, another one for Semi-urban areas and one for the lower
income group or for rural areas.

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