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Product and Brand Management: Company Study of Hindustan Unilever Limited (HUL)
Product and Brand Management: Company Study of Hindustan Unilever Limited (HUL)
PROJECT
ON
Company study of
Hindustan Unilever Limited
(HUL)
Submitted to-
Prof. Pitamber Dwivedi
Submitted by-
Anish Bhattacharyya [FT-09-720]
who have directly or indirectly helped and contributed towards the completion
of this project.
for her constant guidance and support throughout this project. During the
imparted in the class is very high. The learning enabled us to get a better
We would also like to thank our batch mates for the discussions that we had
with them. All these have resulted in the enrichment of our knowledge and
their inputs have helped us to incorporate relevant issues into our project.
Last but not the least we would like to thank God and our parents for their
IILM-GSM-09-11_PBM_SEC-A_ 2|Page
TABLE OF CONTENTS
TOPICS PAGE
1. Introduction to FMCG/HUL 4
9. Financial Analysis 27
12. Bibliography 32
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INTRODUCTION OF 360675 individual shareholders
towards processed food. India needs Rs 28bn Ponds India ltd is working in India
investment in food sector. In the recession/ since 1947 and it is acquired by
slowdown period FMCG industry recorded a HUL in 1986 by an international
growth of 14.5%. Growth of FMCG sector and acquisition.
Growth of HUL in India is as follows… Tata oil Mills Company merged
with HUL in 1993.
FMCG came into in existence in
In 1996 Tata made 50-50% joint
1888 when Sun Light soap was
venture for LAKME with HUL and
firstly seen at KOLKATA harbor.
in 1998 it was completely sold to
It was made by Lever brothers in
HUL.
England.
HUL made 50-50% joint venture
After that in 1895 Lifebuoy and
with Kimberley Clark corp. in
after that Lux, Pears and Vim bar.
1994 as Kimberley clark lever ltd
In 1918 Vanaspati was launched.
which makes haggis diapers and
Dalda was launched in 1937.
kotex sanitary pads.
In 1931 Lever brothers made 1st
Unilever established its subsidiary
subsidiary in India
in Nepal as NEPAL UNILEVER
In 1933 they joint with Hindustan
LTD.
Vanaspati manufacturing company
In 2002 HUL launched AYUSH
In 1935 they joint with united
ayurvedic soap.
traders limited
In 2004 it came into the water
All these 3 players mixed together
purifier segment and launched
and form HUL in 1957.
PURE-it
HUL offers 10% of its equity to
In 2007 it formally formed as HUL
Indian public
from HUL that is HINDUSTAN
Unilever holds 52.10% shares and
UNILEVER LIMITED.
rest is distributed amongst about
IILM-GSM-09-11_PBM_SEC-A_ 4|Page
FMCG industry analysis
SUPPLIER POWER
Supplier concentration
Importance of volume to supplier
Low Differentiation of inputs
Impact of inputs on cost or differentiation
Switching costs of firms in the industry
Presence of substitute inputs
Threat of forward integration
Cost relative to total purchases in industry
.
OTHER
STAKEHOLDERS
High
Low to medium
Relative power of High
unions, govt DEGREE OF
RIVALRY
-Exit barriers
-Industry concentration
-Fixed costs/Value THREAT OF
added SUBSTITUTES
BARRIERS TO -Industry growth -Switching costs
ENTRY -Intermittent -Buyer inclination to
overcapacity Substitute
Absolute cost
-Product differences -Price-performance
advantages
-Switching costs Trade-off of
Proprietary learning
-Brand identity substitutes
curve
Access to inputs -Diversity of rivals
Government policy -Corporate stakes
Economies of scale
Capital requirements
Brand identity
Switching costs
Access to distribution
Expected retaliation
Proprietary products
BUYER POWER
Bargaining leverage
Buyer volume
Buyer information
Brand identity
Low
Price sensitivity
Threat of backward integration
Product differentiation High
Buyer concentration vs. industry
Substitutes available
Buyers' incentives
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Rivalry among Competing Firms: choices and needs give a sufficient room
In the FMCG Industry, rivalry among for new product development that can
competitors is very fierce. There are scarce replace existing goods. This leads to
customers because the industry is highly higher consumer’s expectation.
saturated and the competitors try to snatch
their share of market. Market Players use Bargaining Power of Suppliers:
all sorts of tactics and activities from The bargaining power of suppliers of raw
intensive advertisement campaigns to materials and intermediate goods is not
promotional stuff and price wars etc. very high. There is ample number of
Hence the intensity of rivalry is very high. substitute suppliers available and the raw
materials are also readily available and
Potential Entry of New Competitors: most of the raw materials are
FMCGIndustry does not have any homogeneous. There is no monopoly
measures which can control the entry of situation in the supplier side because the
new firms. The resistance is very low and suppliers are also competing among
the structure of the industry is so complex themselves.
that new firms can easily enter and also
offer tough competition due to cost Bargaining Power of Consumers:
effectiveness. Hence potential entry of new Bargaining power of consumers is also
firms is highly viable. very high. This is because in FMCG
industry the switching costs of most of the
Potential Development of Substitute goods is very low and there is no threat of
Products: buying one product over other. Customers
There are complex and never ending are never reluctant to buy or try new things
consumer needs and no firm can satisfy all off the shelf.
sorts of needs alone. There are plenty of
substitute goods available in the market
that can be re-placed if consumers are not
satisfied with one. The wide range of
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Key players of capture a market share of 10 per cent of
the Rs. 1,900 Crores malted food drink
FMCG industry market over the next two years.
IILM-GSM-09-11_PBM_SEC-A_ 7|Page
be doubling the investment in 2009 as part million from Rs 956.90 million in the
of its business strategy. Nestle same quarter, last year. The company
International is reinvesting and expanding posted earnings of Rs 12.56 a share during
in India and Nestle India will have all the the quarter, registering 26.61% growth
financial resources to expand and grow over prior year period. Net sales for the
from the parent company. quarter rose 23.45% to Rs 10,356.30
• Nestle India reported a good increase in million, while total income for the quarter
its standalone net profit for the second rose 23.78% to Rs 10,423.40 million,
quarter.During the quarter, the profit of the when compared with the prior year period.
company rose 26.54% to Rs 1,210.90
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HUL: Hindustan Unilever Limited
COMPANY - HUL
INDUSTRY - FMCG
MARKET CAP - 48571 Cr
BETA - 0.4
52 Week Hi/Lo - 306/215
Average daily volume - 431633
Face Value - Rs 1
ORGANIZATION STRUCTURE
VP
GM
SR SALES MANAGER
TEAM LEADER
SALES EXECUTIVE
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Distribution Channel of HUL
HUL
C&F Agents
Redistribution Stockiest
Whole sellers
CUSTOMERS
SKINKARE:
10%
SOAPS:
SAMPOOS: 43%
21%
TOOTHPASTE:
26%
Penetration
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HUL products in India
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Category wise sales growth of HUL in India:
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BCG ANALYSIS OF HUL
Soap & Detergent and Tea are CASH COW Only food is a segment which is a
for the company. It has high relative market
QUESTION MARK for the company. The
share and low growth rate. Personal Products
company have a low relative market share
and Coffee are STARS for the company as it
where as it is under high market growth rate.
have high relative market share as well as high
market growth rate. HUL is taking several steps to capture more
market share so that food segment can also be
a part of Star.
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Corporate Social called project SHAKTI which will serve the
Responsibility following purpose:
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Pradesh. This program was in tandem of the Project Shakti was that it was aimed
with HUL's dairy operations and covered to create income-generating capabilities
500 villages in Etah. Subsequently, the for underprivileged rural women, by
company introduced similar programs in providing a sustainable micro enterprise
adjacent villages. These activities mainly opportunity, and to improve rural living
aimed at training farmers, animal standards through health and hygiene
husbandry, generating alternative income, awareness. Most SHG women viewed
health & hygiene and infrastructure Project Shakti as a powerful business
development. The main issue in rural proposition and are keen participants in it.
development was to create income- There after it was extended in other states
generating prospects for the poor with the total strength of over 40,000
villagers. Such initiatives, linked with the Shakti Entrepreneurs.
company's core business, became
successful and sustainable and proved to HUL offered a wide range of products
be mutually beneficial to both the to the SHGs, which were relevant to
company ant its rural customers. However rural customers. HUL invested
much more remained to be done. significantly in resources who work
with the women on the field and
Project Shakti was conceived following provide them with on-the-job training
the pioneering work carried out by and support. HUL provided the
Grameen Bank of Bangladesh , Self necessary training to these groups on
Help Groups (SHGs) of rural women the basics of enterprise management,
were formed by several institutions, which the women need to manage their
NGOs and government bodies in villages enterprises. For the SHG women, this
across India. This group of usually 15 translated into a much-needed,
members contributed a small amount of sustainable income contributing
money to a common pool and then offered towards better living and prosperity.
a micro-credit to a member of the group to Armed with micro-credit, women from
invest in a commonly approved economic SHGs become direct-to-home
activity. Partnering with these SHGs, distributors in rural markets.
HUL started its Project Shakti in
Nalgonda district of Andhra Pradesh in 50
villages in the year 2000. The social side
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COMPETITION IN THE HUL has largest no of brands in most trusted
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Analysis of Both Companies Performance
HUL & ITC are major companies in FMCG After stagnating between 1999 and '04, the
market in India. When we compare both company is back on the growth track. In the
companies on the basis of their strategies i.e. , past three years, till 2008 HUL's net sales have
their competitive strategies in the present witnessed a CAGR of 11%, while net profit
market. When we look at the present segment has posted a CAGR of 17%.
breakup for both of the companies then we
came to know that their different products vary Despite diversification, ITC's reliance on
too much in the market. cigarettes is still huge. The tobacco business
contributes 40% to its revenues, and accounts
Now let us take a comparative analysis of both for over 80% of its profit. This cash-generating
the companies under some heads: business has enabled it to take ambitious, but
expensive bets in new segments and deliver
HUL
modest profit growth.
Hindustan Unilever (HUL) is the largest pure-
Overall Strategy:
play FMCG Company in the country and has
one of the widest portfolio of products sold via HUL always believes in customer friendly
a strong distribution channel. It owns and products with major emphasis on low cost
markets some of the most popular brands in overall without compromising on the quality
the country across various categories, of the product. They are leveraging the
including soaps, detergents, shampoos, tea and capabilities and scale of the parent company
face creams. and focusing on the value of execution. The
entire product portfolio is also being tweaked
ITC
to include premium offerings such as Pond's
ITC is not a pure-play FMCG company, since Age Miracle and dove shampoo in skin and
cigarettes is its primary business. It is hair care. HUL introduced Project Shakti to
diversifying into non-tobacco. FMCG penetrate the rural market.
segments like foods, personal care, paper
ITC is focusing on delivering value at
products, hotels and agri-business to reduce its
competitive prices. Its tremendous reach
exposure to cigarettes.
through extensive distribution chain has been a
competitive advantage. Additionally, the
company's e-choupal model for direct
IILM-GSM-09-11_PBM_SEC-A_ 17 | P a g e
procurement is well known under which ITC Being an MNC operating in India, HUL is
partners with over 100,000 farmers for spices more conservative in its strategies than its
and wheat procurement and an even larger Indian counterparts. Moreover, given
number for oilseeds. This kind of rural increasing competition, it faces the risk of
pedigree is hard to beat. being overtaken by domestic players in various
categories. Prolonged inflation may lead to
Growth Drivers
margin contraction, in case HUL is not able to
HUL has been launching new products and pass on this burden to consumers. The
brand extensions, with investments being company's large size also poses a problem,
made towards brand-building and increasing since it does not give HUL the agility to
its market share. HUL is also streamlining its address the competition it faces from national
various business operations, in line with the and regional players.
‘One Unilever' philosophy adopted by the
For ITC
Unilever group worldwide. Introduction of
premium products and addition of new Increased regulatory clamps on tobacco, along
consumers via market expansion will be with rising tax burden, pose a business risk for
HUL's growth drivers. ITC. So, it has started an ambitious
diversification plan, which has its own set of
ITC's backward integration to ensure that its
risks. With its foray into the conventional
products pass efficiently from the farms to
FMCG space, ITC has entered the high-clutter
consumers has helped it to cut down supply
branded products market. This will burden its
and procurement costs. ITC's non-cigarette
resources in terms of ad spend and brand-
FMCG business leverages the large
building. Creating brand recall and building
distribution network the company has
market share in new products are ITC's key
developed by selling cigarettes over the years.
challenges. Export ban and rising crop prices
A rich product mix, along with ramp-up of
pose a threat for its agri-business, taxing its
investments in its new sectors, will be
margins.
instrumental in charting ITC's growth path.
For HUL
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HUL AND P&G According to the Nielsen Company, in 2007
P&G spent more on U.S. advertising than any
Procter & Gamble was founded in 1837 by other company; the $2.62 billion spent by
William Procter, a British citizen who P&G is almost twice as much as that spent by
immigrated to the United States. The company General Motors, the next company on the
first sold candles. Procter & Gamble Co. Nielsen list.
(P&G, NYSE: PG) is a Fortune 500 American
P&G was named 2008 Advertiser of the Year
multinational corporation headquartered in
by Cannes International Advertising Festival.
Downtown Cincinnati, Ohio that manufactures
a wide range of consumer goods. As of mid Proctor & Gamble is a leading member of the
2010, P&G is the 6th most profitable U.S. Global Leadership Coalition, a
corporation in the world, and the 5th largest Washington D.C.-based coalition of over 400
corporation in the United States by market major companies and NGOs that advocates for
capitalization, surpassed only by Apple, Exxon a larger International Affairs Budget, which
Mobil, Microsoft, and Wal-Mart. It is 6th in funds American diplomatic and development
Fortune's Most Admired Companies 2010 list. efforts abroad.
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Major products of P&G
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STRATEGIES OF P&G industry. We are designed to lead in each
of these areas.
P&G focuses on five core strengths
required to win in the consumer products
Innovation
Consumer Understanding
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innovation coming from P&G today ranked by leading retailers in industry
includes at least one major component surveys as a preferred supplier and as the
from an external partner. The IRI New industry leader in a wide range of
Product Pacesetter Report ranks the best- capabilities including clearest company
selling new products in our industry in the strategy, brands most important to
U.S. every year. Over the past 14 years, retailers, strong business fundamentals and
P&G has had 114 top 25 Pacesetters— innovative marketing programs.
more than our six largest competitors
combined. In the last year alone, P&G had Scale
five of the top 10 new product launches in
Over the decades, we have also established
the U.S. and 10 of the top 25.
significant scale advantages as a total
Brand-Building company and in individual categories,
countries and retail channels. P&G’s scale
P&G is the brand-building leader of this advantage is driven as much by
industry. It has built the strongest portfolio knowledge-sharing, common systems and
of brands in the industry with 22 billion- processes, and best practices as it is by size
dollar brands and 20 half-billion-dollar and scope. These scale benefits enable us
brands. Eleven of the billion-dollar brands to deliver consistently superior consumer
are the #1 global market share leaders of and shareholder value.
their categories. The majority of the
balances are #2. P&G follows Connect + Develop strategy
which enables to bring innovations to life
Go-to-Market Capabilities faster, more economically and more
sustainably.
It has established industry-leading go-to-
market capabilities. P&G is consistently
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HUL AND P&G ADVERTIESMENT 7. Lady 1 gets astonished by the
WAR whiteness seen.
8. Lady 2’s kid reacts by asking he
The new campaign started by Rin, a
mother, as to why is the other lady so
product of Hindustan Unilever Limited. It
observant and amazed
is a direct attack on the Tide
9. There is a disclaimer during the ad
Naturals product by Procter & Gamble.
that the analysis has been done by an
Note that when It is said a direct attack – it
independent agency
means an uncensored visual shows the
10. It’s then claimed that now there is
competitor product and then highlights
promotional price of Rs. 25 on Rin as
how the other product is better then the
opposed to the earlier Rs. 35.
former. The sequence of the ad is as
As it can be noticed, there is a direct
follows
mention of the competitor product along
1. Two ladies are standing on a bus stop,
with the visuals. This one seems to be an
waiting to pick their kids from the
absolute direct attack. It is difficult to say
school bus.
if the ad will continue on TV. Tide would
2. Both are carrying their shopping
definitely come out with a protest.
basket/bag with them.
However, I think the damage is already
3. Lady 1 has Tide Naturals in her bag.
done. The main point about the reduced
4. Lady 2 has Rin in her bag
price of Rin would definitely catch the
5. Both ladies have a look at each other’s
consumer’s eye benefiting HUL.
bag and Lady 1 boasts that Tide has a
good fragrance and provide better
whiteness/brightness to the clothes
6. In the meantime, the school bus
arrives and it’s shown that the white
shirt of Lady 2’s kid is strikingly
brighter and whiter then the Lady 1’s
kid.
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PRICE WAR BETWEEN HUL AND P&G
IILM-GSM-09-11_PBM_SEC-A_ 24 | P a g e
Strategic growth Strategies -
summary of HUL market entry:
HUL prioritized opportunities (Kissan Annapurna
which build upon the existing
iodized salt)
assets and capabilities. It avoided
In 1995 HUL launched Kissan
spreading their management thinly.
Annapurna iodized salt at that time
For example: HUL first made its
only 10% of 6.5 million ton of salts
sales and distribution channel &
were branded and refined HUL
supply chain management in
identified it and launched the
manufacturing and selling wheat
KISSAN ANNAPURNA SALT.
flour and utilized it into the selling
Firstly it launched in the few cities
breads produced by wheat flour.
of the country for test marketing
HUL is more focused on the
and then for all.
innovations Example: In 1995
Shifted from “purity- a product
launched KISSAN ANNAPURNA
attribute” to “Health –consumer
staple foods with the message
benefit” (As a positioning strategy)
“staple food including iodized salt”
Tried to shift the consumers from
Serving Rural population: In 2000
unbranded to brand.
the 32% of the sales were from
Started Using IODINE as a
rural sector but in 2010 it is more
marketing strategy as there were
than 50%.
other salts including iodine but no
It follows direct communication
one was focused on that. HUL
from the customers.
started it.
It believes in expanding the
Started endorsement through
portfolio.
trusted government agencies.
Each category has a different set of
In 2002 it has made iodine patented
supply chain, production and
in 80 countries.
consumer decision making process
issuing associated with it.
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Strategic Shifts attainable for a larger section of
consumers (mass).
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Financial analysis of HUL
INCOME STATEMENT (RS MILLION)
Y/E MARCH 07 FY09 FY10 FY11E FY12E
Net Sales 136,754 202,393 173,844 190,848 213,504
Other Operating
Income 1,937 3,622 1,838 3,298 3,608
Total Revenue 138,691 206,016 175,683 194,147 2 17,112
Change (%) 13.0 48.5 -14.7 10.5 11.8
COGS 72,685 108,379 88,498 101,159 112,531
Gross Profit 66,006 97,636 87,185 92,987 104,581
Operating Exp 45,281 67,235 60,612 66,314 73,424
EBIDTA 20,724 30,402 26,573 26,673 31,157
Change (%) 13.7 46.7 -12.6 0.4 16.8
Margin (%) 14.9 14.8 15.1 13.7 14.4
Depreciation 1,384 1,953 1,814 2,006 2,132
Int. and Fin.
Charges 255 253 75 112 91
Other Income –
Recurring 2,379 2,056 1,692 1,457 1,623
Pro fit before
T axes 21,464 30,251 26,376 26,013 30,557
Change (%) 15.3 40.9 -12.8 -1.4 17.5
Margin (%) 15.7 14.9 15.2 13.6 14.3
Tax 3,643 5,244 5,644 5,463 6,417
Deferred Tax 389 0 475 468 550
Tax Rate (%) 18.8 17.3 23.2 22.8 22.8
Profit after Taxes 17,432 25,007 20,256 20,082 23,590
Change (%) 13.2 43.5 -19.0 -0.9 17.5
Margin (%) 12.7 12.4 11.7 10.5 11.0
Non-rec.
(Exp)/Income 1,824 -43 -144 0 0
Reported P AT 19,256 24,965 20,112 20,082 23,590
IILM-GSM-09-11_PBM_SEC-A_ 27 | P a g e
If we analyze this financial statement we getting full competition from the
can see that the performance of HUL has P&G and others like ITC,
decreased over the last two years and the AMUL,DABUR,NESTLE etc
possible reasons for that are-
One of most important factors is
the power branding strategy of
Higher expenses on the
HUL due to which it has ignored
advertisement part.
most of the brands and just
HUL is the king of distribution
focusing only on the power brands.
channel in India but now it is
IILM-GSM-09-11_PBM_SEC-A_ 28 | P a g e
Brand Management HUL has the objective of being a national
at HUL player (not a niche or a regional marketer)
and the leader therein. HUL also wants
HUL has a large brand portfolio consisting
about 30 per cent of the corporate income
of nearly 110 bands. In every product line,
to come from this line.
it has built a number of brands over a
period of time. Quite a few brands have So, HUL opted for the strategy of
come to its fold from the parent company. developing quite a few strong brands in
It has also acquired several ongoing brands this line, and among them they cover
from the market. HUL also vigorously different market segments and price points.
pursues brand extension strategy. And Dove, Lux, Liril, Rexona, Pears and
concurrently, HUL undertakes line pruning Lifebuoy are the outcome of such a well
and brand restructuring and consolidation, planned brand strategy implemented over
based on marketing compulsions. HUL is time. Lifebuoy is 100 years old and Liril
also playing the rejuvenation and re-launch 15 years old. In fact, HUL has about 10
game. With great benefit the corporate- brands of toilet soaps each having good
level endeavors at business expansion and volume of sale to its credit . The point is
diversification are also throwing new that decisions on brand portfolio are a
challenges on the brand strategy front. fundamental expression of the company’s
HUL lends itself for a proper objectives and strategy governing a given
understanding of the complexity of the business.
brand management task. We shall examine
how HUL handles the complex demands HUL Locates Positioning Opportunities:
in brand management. Such an array of
HUL methodically goes about the task of
brands is the outcome of a conscious
developing a brand portfolio across a
corporate strategy by HUL. As a corporate,
product category. It first identifies the
HUL wants to be a leader in every one of
various positioning opportunities across
its businesses and the strategy is to fight
benefits, target groups and price points.
on the strength of the competitive
Existing brads are mapped across these
advantage arising from the possession of
positioning opportunities, and gaps for
strong brands. It is this strategy that is
possible new offers are explored.The
getting reflected in the development of a
company then estimates the likely volumes
multitude of strong brands. If we take the
for each of the possible opportunity and
business of bathing soaps, as an example,
the financial viability and sustainability of
IILM-GSM-09-11_PBM_SEC-A_ 29 | P a g e
the propositions in the long term. If some origin to the success of the Dettol lotion,
of these gaps look promising, HUL goes HUL assessed that a Savlon antiseptic
ahead with the plans. It examines the soap could be successfully extended from
existing set of brands with the company, the Savlon lotion. It entered into an
the product technologies available, the agreement with J&J for the use of Savlon
benefits that can be provided and other brand name and the product formula, and
considerations that have a bearing on the launched the Savlon antiseptic soap. HUL
company’s long term interests in the very deftly managed successfully new
business. Finally, if the company decides brand launch and merged as a challenger
to go in for the new offer, a decision has to to Dettol soap. J&J secures a good royalty
be taken as to whether new brands should from HUL for lending the brand. It is a
be created or extensions if existing brands potentially win-win arrangement for both
should be preferred or ongoing brands companies.
from the market acquired.
Repositioning and rebranding
HUL hires brands to capture new
opportunities: Towards the close of the HUL has done the process of repositioning
1990s, HUL found that the germicide the brands. Few of them as follows;
IILM-GSM-09-11_PBM_SEC-A_ 30 | P a g e
Conclusion hotels, paper and agri-businesses. Investors
who want to bank on its execution ability
in FMCG can consider the stock with a
long-term horizon.
&
Recommendations According to us the companies should
continue with their CSR and also continue
with their strategies. The thing that needs
HUL's up-and-running business model is a
to be changed is that, ITC should go for
treat for investors seeking exposure in the
more diversification in Non cigarette
FMCG segment. The company has
segment (FMCG) while HUL should come
delivered in the past and has the potential
up with the new strategies that could take
to do better in future. In short term. HUL’s
the new product forward to create a new
growth story is evolving.
segment. A recommendation For HUL is
ITC is eyeing the pie which HUL and that it should focus on rural area more.
other FMCG players currently enjoy.
Though risky, the company's business
model will pay off in the long run. ITC has
proved its expertise in the cigarettes,
IILM-GSM-09-11_PBM_SEC-A_ 31 | P a g e
Bibilography
www.google.com
www.hul.com
www.projectshakti.com
www.wikipedia.com
www.youtube.com
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