Digitally Transforming Business Practices

Focus : Mobile Internet and Distribution

Rapid Environment Change
● New entrants
● Patanjali
● Flipkart, Amazon

● Uber, Ola

● Technology shifts
● Mobile device penetration

● Cultural shifts
● The gig economy
 The Patanjali Phenomenon
● Just 10 years to top 5 FMCG club
● Estd. 2006
2017 FMCG REVENUES
● Projected Sales 10K crores in 2017 ITC 55k Cr

HUL 34K Cr (est)

● 800+ products
● Food : (cow ghee, etc.) GCMMF 26K Cr

● FMCG :(cosmetics, home-care) COKE IND 12 K Cr

● Health :(Ayurvedic)
PATANJALI 10K Cr (est)

● Distribution via 200K+ outlets

Flipkart / Amazon / Ecommerce
● Sales of Flipkart + Snapdeal + Amazon > Sales of top 10
traditional retailers

● India Ecomm Annual growth is 51% (world's highest)2

● $30 BN → $120 BN (2016 → 2020) 2

● Paytm: 120m accounts, 6X of credit cards

● ~50% Flipkart and Snapdeal’s customers in small towns.

● Marketplace vs Inventory model

● Amazon claims helping 6,000+ businesses sell abroad.

(2: ASSOCHAM-Forrester study paper.)
Mobile first Ride Sharing
● Ola ● Uber
● Founded 3rd December 2010 ● Launched San Francisco 2011
● 150,000 bookings per day. ● Cab services in over 66
● 450,000+ vehicles countries and 545 cities
● Ola Pragati initiative to get worldwide
drivers on board. ● 350,000+ drivers on its platform
● Best performers are called ● Uber initiative called Uber Dost.
OlaStars and are awarded with
benefits

http://www.iosrjournals.org/iosr-jbm/papers/Conf.17001-2017/Volume-1/11.%2073-78.pdf
Enabler : mobile devices
● Obvious for E-commerce and ride sharing
● Subtle for FMCG,impacts product placement (distribution)

2012
 Discussion Focus
● Impact of mobile device penetration on FMCG
market
● Two case studies :
− Patanjali
− HUL

● Focus on product placement (distribution) shifts

driven by mobile device penetration

● 2012 → Turning point

Patanjali : mobile enabled
● Growth curve tracks mobile internet
● 2012 was the turning point

● Easy telecommunication enabled low cost model

● Low inventory

● Micro distribution, direct fulfilment

● Social media buzz (low advt. Cost)

● Bold product mix and Swadeshi positioning

● Aggressive pricing enabled by lower cost

● Zoom from Zero to top-5 FMCG in 10 years

Patanjali’s store
Patanjali’s store
Patanjali’s store
HUL : A giant in transition
● 1960 → 2000 : Asset heavy distribution model
● Physical inventory dominated

● 2000 →recent : Transition to Asset lite distribution

model, driven by:
● Emergence of rural market

● Penetration of mobile internet

● Competition from regional players and

Patanjali
 HUL timeline
● YEAR PRODUCT DISTRIBUTION
STRATEGY STRATEGY
1960 Various product launches Registered Wholesaler consolidation
<Anik Ghee,Sunsilk>
1970 Various product launches Company depots, Redistribution
<Rin,Bru,Close-up,Liril> Stockists
1980 Increased manufacturing C & F Agents
capacity
1990 Scorching revenue growth Mother Depots, JIT
<ROC-60%, 37% growth>
2000 Regional challenges Shakti, Direct Marketing
Ponds, etc.
2010 Rural market priority Online (project sangam, leap)
I-Shakti
RECENT Challenge from Patanjali Lakme Salons, Ayush therapy,
Sunsilk mobile salons
HUL in Local stores
Lakme Salons
Ayush Therapy Centres
Shakti Ama’s
 HUL vs Patanjali
● Placement
● Promotion
● Price
● Product
● Revenue
● Profits
Inventory (Heavy vs Lite)

●
HUL inventory flat to declining since 2012
●
Patanjali started asset-lite, but shifting gears toward traditional retail in
2015
Advertising: free social media
● HUL – 4526.17 Crore 1
● Patanjali - 300 Crore
2

● PR around Baba Ramdev fills the gap

● Social media a powerful enabler for Patanjali

1- https://www.hul.co.in/Images/annual-report-2015-16_tcm1255-482421_en.pdf
2- https://www.pressreader.com/india/economic-times/20170131/281870118163625
Price: passing thru low cost

● Avg 25% discount in personal-care and home-

care (Pears, VIM, RIN)
Product Mix
● HUL gaps :
Food (ghee)
● Toothpaste

● Patanjali gaps
:
Soap
Beverages

(tea/coffee)
Revenue
EBITDA
Some Conclusions
● Mobile internet → easier communications
● Micro distribution

● Rural markets

● Patanjali
● asset lite growth with mobile internet

● Bold product mix (food + personal + home)

● Integrated product placement under one roof

● But shifting now toward traditional retail channel

● HUL
● Started shifting gears in 2000 toward rural market

● Emerging responses on product mix and positioning

● Shakti channel program enabled by mobile internet

More conclusions ...

● FMCG will see more upstarts

● Enabled by growth of mobile internet
● Driven by strong affinity groups on social media
● Traditional distribution channels are becoming
obsolete
● Micro distribution with online fulfillment is the
future
Summary
● Mobile internet is a fundamental shift
● Enables new industries
● Ecommerce, Ride sharing

● Transforms traditional industries

● FMCG distribution channels

● And promotion (social media ...)

WHAT'S YOUR PLAN ?