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Hindustan Unilever Ltd.

Vision

To earn the love and respect of India, by making a


real difference to every Indian
HUL
 India’s largest F.M.C.G. company with turnover of over Rs.20,000 cr. per
annum.
 80 factories across India
 HUL has 15,000 employees
 HLL is organized into two self-sufficient divisions - Home & Personal Care &
Foods
 Has 35 power brands, HUL’s Power Brands, which account for 80-85 per cent
of the company's domestic consumer business .
 HUL’s brands are present in more than three million retail outlets in India.
 HLL's distribution network in rural India directly covers about 50,000
villages, reaching about 250 million consumers, through 6000 sub- stockists.
HISTORY
 Sunlight soap bars in 1888
 Lifebuoy in 1895
 Pears, Lux , Vanaspati in 1918
 Dalda brand came to the market in 1937
 In 1931, Unilever set up its first Indian subsidiary, Hindustan Vanaspati
Manufacturing Company, followed by Lever Brothers India Limited (1933) and
United Traders Limited (1935). These three companies merged to form HLL in
November 1956
 HLL offered 10% of its equity to the Indian public, being the first among the foreign
subsidiaries to do so. Unilever now holds 51.55% equity in the company. The rest of
the shareholding is distributed among about 380,000 individual shareholders and
financial institutions.
 Brooke Bond joined the Unilever fold in 1984 through an international acquisition.
 Unilever acquired Lipton in 1972, and in 1977 Lipton Tea (India) Limited was
incorporated.
 Pond's (India) Limited had been present in India since 1947. It joined the Unilever
fold through an international acquisition of Chesebrough Pond's USA in 1986.
History Cont…

 Liberalization marked an inflexion in HLL’s growth.

 Deregulation permitted alliances, acquisitions and mergers.

 Tata Oil Mills Company (TOMCO) merged with HLL in 1993.

 In 1995, HLL and Lakme Limited, formed a 50:50 joint venture.

 HLL formed a 50:50 joint venture with the US-based Kimberly Clark

Corporation in 1994
BUSINESS
 Home & Personal Care Foods
• Personal Wash • Tea
• Fabric Wash • Coffee
• Home Care • Branded Staples
• Oral Care • Culinary Products
• Skin Care • Ice Creams
• Modern Foods ranges
• Hair Care
• Deodorants & Talc
• Colour Cosmetics

New Ventures Exports


• Hindustan Lever Network • HPC
• Ayush ayurvedic products • Beverages
& services • Marine Products
• Pureit water purifiers • Rice
• Castor
IT Infrastructure
 An IT-powered system has been implemented to supply stocks to redistribution
stockists on a continuous replenishment basis.
 Stockists connected with the company through an Internet-based network, called
RSNet, facilitating
 online interaction on orders
 Dispatches
 information sharing
 Monitoring

 RS Net covers about 80% of the company's turnover.


 RSNet is part of Project Leap, HLL's end-to-end supply chain, which also
includes a back-end system connecting suppliers, all company sites and
stretching right upto stockist.
HLL vs. Nirma
 For more than 50 years, HLL had served India’s small elite who could
afford to buy MNC products

 Nirma created a new business system that included a new product


formulation, low-cost manufacturing process, wide distribution
network, special packaging for daily purchasing, and value pricing.

 Initial Response of HLL was to dismiss Nirma’s strategy, however , after


the latter’s growth started affecting the share of the former, HLL saw its
vulnerability and its opportunity
Reasons for Nirma’s Success
 Targeting disruptive products at non-consumers: By targeting non-
consumers of existing laundry detergents, Nirma was able to stay 'below the
radar' of Hindustan Lever, giving them time to experiment with their sales
strategy, refine their business model and then grow rapidly - all while
avoiding competition.
 
 Creating a compelling solution by considering Gives and Gets relative to
existing solutions: Nirma offered a compelling solution allowing consumers
to make a simple trade-off relative to existing products. Get a far cheaper
alternative to Surf, but Give up a fraction of the cleaning power, which was
already more than sufficient for most laundry occasions.
 
 Thinking expansively about defining your market. Rather than categorizing
it along traditional dimensions, consider definitions using a jobs-based
segmentation. Had HLL thought of their market in this way, it would have
been far clearer that Nirma was a disruptive threat at an earlier point in
time.
HLL: Countering the competition
 1995- HLL launched Wheel, created specifically for low end consumers

 Contained a high percentage of oil to water

 HLL decentralized the production, marketing and distribution of the


product to leverage the abundant labor pool in rural India, specially the
network of local rural women, quickly creating sales channels through
the thousands of small outlets where people at the bottom of the
pyramid shop.

 A change in structure of its detergent business enabled HLL to introduce


Wheel at a low price point.
HLL’s rural penetration: Ansoff’s
Matrix
Current Products New Products

Current
markets

New HLL’S Market


markets development
strategy:
Rural areas
HLL’s gains …
 HLL stimulated by its emergent rival and its changed business model,
registered a 20% growth in revenues/year and a 25% growth in profits/year
between 1995 to 2000.

 Also, HLL’s market capitalizaton grew to $ 12 billion – a growth rate of


40%/year

 Unilever has benefited from HLL’s experience in India

 HLL’s business principles helped create a new detergent market among the
poor in Brazil- ALA is a huge success

 Unilever has adopted the bottom of the pyramid as a corporate strategic


priority.
HLL vs P&G
 P&G target was top end of the organized detergent sector, where HLL
was the major player

 P&G launched Ariel Microsystem – a detergent concentrate superior to


HLL’s Surf and with an enzyme based technology

 Response of HLL

1. Advertising for Surf was stepped up and prices were cut


2. National roll out of Rin concentrate powder was expedited to capture
the concentrate image
3. A new ‘Ultra’ product was developed which utilized a compressed
method of product development
The result- HLL was able to limit the progress of Ariel and also increase
its market share
HLL Development process-
Conventional
Formulation

Testing

Packaging fragrances

Test markets

Wait for results

If successful, capacity
New Process
Surf Ultra

Capacity Formulation Color Perfume Packaging

Market by September
1991
Revamping the company
processes
 Elaborate segmentation and positioning exercise carried out

 The different segments of each of its product categories were analyzed to


identify Gaps/Vacuums

 New products were launched to fill that gap

 Emphasis was laid on competitive pricing, enabled by HLL’s new


methods and cost reductions down the line

 Period between 1988-1992, saw HLL broadening its strategic approach

 HLL went on top become the lowest cost and highest quality producer in
a variety of products, both within existing categories and in new areas
ANALYSIS OF FINANCIALS
Year
Particulars
1982 1983 1984 1985 1986 1987 1988 1989 1990 1991

Fixed assets 8202 8114 8432 9472 10828 12556 14747 17126 18770 20113

Net current assets 8585 8530 11023 12956 11983 17879 17603 18545 22674 25471
Total capital employed 16787 16644 19455 22428 22811 30435 32350 35671 41444 45584

Shareholders's funds 11498 11333 12425 14281 16522 18349 20607 22852 25538 29110

Sales ( with excise) 52623 58240 63424 72586 84459 95331 102106 121642 146027 177529
Profit before tax 4455 4222 4401 5556 6507 7829 7938 8961 11074 13770

Profit available for distribution 2331 1913 2128 2551 3429 3775 5264 6015 7403 10000

Retained earnings 1602 863 1008 1151 1843 1442 2278 2749 3438 4610
Dividends 729 1050 1120 1400 1586 2333 2986 3266 3920 5390

Dividend % 25 22.5 24 30 34 25 32 35 42 38.5

No. of shareholders 91549 93694 98313 104780 111849 119912 129010 127761 129505 136404

• Fixed assets increased by 145%


• Capital investment also increased at the same pace by 171 %
• Sales has more than tripled from sales in 1982
• Dividend paid out to shareholders peaked at 42 % in 1990
• Gross sales have gone up by 59.9 % in the last decade
• Earning per share has increased to double is value from 2000
• 2007 saw a peak in dividends at Rs. 9 per share of Re. 1
• Fixed assets have doubled and investments have fallen to a low of 1264 crores
• 2003-04 saw borrowing on a large scale Source : HUL annual report 2009-10
Year 1991 1990
Turnover 23163 22734
Operating profit 1990 2051
Profit on ordinary activities before tax 1792 1782
Net profit on ordinary activities 1152 1112
Extraordinary items 1 -195
Net profit after extraordinary activities 1153 917
     
Key ratios(in percentages)    
     
Operating margin 8.6 9
profit after tax as a % of turnover 5.2 5.1
Return on capital employed 16.4 17.3
Net gearing 27.9 36.7
Net interest cover(times) 7.5 6.4

• Marginal increase in turnover from 1990 to 1991 which did not translate into an
increase in operating profit
• Return on capital employed fell from 17.3 % in 1990 to 16.4 % in 1991
• Net gearing declined drastically by over 30% from 36.7 % in 1990 to 27.9 % in 1991
• Net interest cover increased by 17% to 7.5
• The sales for soaps and detergents has remained same,personal products has almost
doubled
• The foods portfolio sales have almost halved
• HUL has exited the chemicals, agri, fertilizers and animal feeds market
• EBIT as a % of sales has fallen from a peak of 18.4 % and stagnated at around 13 %

Source : HUL annual report 2009-10


Segment-wise sales(%)
Revenue from foods has drastically reduced, with soaps and detergents providing
almost double the revenue and revenue from newer avenues like exports

Source: HUL Annual report 2009-2010


HUL’s Power Branding Strategy
 Eight major brands in HUL were merged into two major segments:

 Home and personal care(HPC) segment

 Foods portfolio

 Objective
 To enhance the value of the products and the brand

 To play a bigger role in the lives of the customer

 To increase brand recall


HUL’s Power Branding Strategy(cont.)
 Integration of the various brands such that strategy is focussed on growth

 Various brands in the food and beverages portfolio are integrated into one
segment - Foods portfolio

 Steps in strategy implementation


 Consequences

 The power branding strategy resulted in consolidation which resulted in


a lean and empowered organization

 Greater stress on nutrition, hygiene and personal care to establish itself in


the personal care space

 Reinvention of the distribution network and customer management

 Product innovation in each of the segments with new products and


innovations being churned out every year
The Mother Branding Concept
 A Mother Brand also called an umbrella brands encompasses disparate brands with
distinct identities under it from a variety of segments and product categories

 Consolidation of the brands in the minds of the consumers to ensure higher brand
recall and to increase the bottom line

 Segregation of the gamut of tea brands into two mother brands, Lipton and Brooke
Bond each catering to a different segment of the market

 Consolidation of the tea portfolio with 23 brands under the mega-brand Brooke Bond
and reinvention of the supply chain management

 The business units are set up based on the brands and the 30 stock keeping units
are flushed to ensure quick turn around time and easy availability
Sales & Distribution Strategies Of
Business Strategies -
 “The company will compete with low price competitors by playing to their
strengths - using strongest brands backed by superior technology and the
lowest cost supply chain”.

 “Company will continue investment in technology, both to make better


products and secure cost advantage”.

 “There is a big opportunity to grow processed foods, which are still a very
small proportion of the overall largely, commoditized foods market”, HLL
chairman M S Banga said
Corporate Strategy -

 HLL enjoys a formidable distribution network covering over 3400


distributors and 16 million outlets.

 The new sales organization named 'One HLL' brings "Household and
Personal Care" and foods distribution networks together, thereby aligning
all the units towards the common goal of achieving success.

 HLL has been continuously able to grow at a rate more than growth rate
for FMCG Sector, thereby reaffirming its future stronghold in Indian
market.
HUL’S DISTRIBUTION
NETWORK
 Hindustan Unilever covers the consumers mainly with the
combination of C&F and stockists who indirectly deal with
the retail outlets .

 C&F agents can be classified into 2 types, one with


investment and the other without investment. The without
investment C&F agents are mere forwarding agents and act
as the transporter to the company.
 The stockists are also classified into 2 categories called U1 & U2 :
 The stockists are classified into U1 & U2 on the basis of the products
they stock.
 U1 stockists generally stocks products like surf and ponds while U2 deal
with high profile products of HUL like Lakme and Dove
 Each stockist is then responsible for distributing the goods to the retail
counters in the region.
 The retailers then provide the goods to the consumers.
 Depending upon the types of products ,sales, turnover and the number
of retail counters a stockist is dealing with, the company has classified
the stores into

 Super Value Stores


 Smart/FLO
 Unicare
 Vijeta
 U2
 Traditionally HLL’s distribution network consisted of wholesalers and
retailers. HLL had presence in 80 lakhs retail outlets and there was ‘one
size fit for all’ distribution strategy to serve all those outlets.

 Urban customers wanted products with unique, value added and


customized offerings with convenient shopping. Apart from this,
emergence of rural market also forced HLL to change its distribution
system.
 For urban market it developed different distribution system cater to
different type of customers. Along with this, it provided value added
service, convenience and customized offering to urban customers.
 On the other hand, in rural markets, to increase brand awareness and
product availability, it introduced alternative distribution systems.
 Through these changes, HLL brought its brands closer to customers.
 HLL’s approach to distribution was holistic and developed a three-way
convergence of product availability, brand communication and brand
experience.
Project “Shakti” -
 Rural India is spread across 627,000 villages and possesses a serious
distribution challenge for FMCG Cos.

 HLL has come up with a unique and successful initiative wherein the
women from the rural sector market HLL products, and hence, are able
to reach the same wavelength as of the common man in village.

 Apart from product reach, the initiative also creates brand awareness
amongst the lower strata of society.
Functional Strategy -
 Consider Sunsilk - To perk up volumes, HLL occupied various price points:

 8 ml sachet for Rs 2.50.


 50 ml bottle for Rs 35
 100 ml bottle for Rs 55 and the 200 and 300 ml bottles.

 It also introduced 100-ml “smart packs” targeted at small towns with a price tag
of Rs 35.
(The cost of a 50 ml bottle of Sunsilk).
 This was a ploy targeted at the heavy sachet users to upgrade them into bottle
usage.

 Recently, HLL launched a mega promotion which offers prizes ranging from 2.5
kg of gold to gold coins to those who collect sachets of shampoos.

 Clearly, hair-care has come of age at HLL.


‘THE GO-TO MARKET
PROGRAMME’
 Hindustan Unilever is facing pressure on volume growth. And, with its
hands tied on the pricing front, it is restructuring its distribution
strategy to bring in cost efficiency.
 It is rationalising its own sales force and adding more muscle to its
distributors on the field.
 First tried out in Mumbai, this will now be implemented across all towns
and cities with a population above eight lakh, starting with Chennai.
 Earlier, HUL had different distributors for its home and personal care
division and food division in the same area. Now, all the products would
be sold by the same distributor in any one area.
 Also, earlier, products from different divisions used different
distributors, even in the same city. Now, products across divisions will
be fed to retailers through unified distributors.
 “The Go-to-Market model also helps to remove the enormous logistics
hitherto faced by the distributors in their back-end operations, thus
removing significant costs from the system. More importantly, enabling
them to focus on the front-end to deliver better services to end-retail
E-COMMERCE MARKETING
PRACTICES
 The company heavily relies on Electronic means of communications for
running the business .The entire Sales and distribution channel is
integrated through eCRM software called “UNIFY” which are installed
in every PC system of the C&F, Stockiest . The company has up to date
record of the inventory position of all the stockiest . A stockiest is
required to maintain a minimum level of inventory. If the stock position
goes below a critical level order is automatically triggered and the
company sends the goods to the stockiest. All operations thus take place
online.
SWOT Analysis
Strengths
 Strong and well differentiated brands with leading share positions
 Consumer understanding and systems for building consumer insight
 Strong R&D capability well linked with business
 Integrated supply chain and well spread manufacturing units
 Distribution structure with wide reach, high quality coverage and ability to leverage
scale
 Access to Unilever global technology capability and sharing of best practices from
other Unilever companies
 High quality manpower resources
SWOT Analysis
Weaknesses
 Increased consumer spends on education, consumer durable, entertainment, travel
etc. resulting in lower share of wallet for FMCG.
 Limited success in changing eating habits of people.
 Complex supply chain configuration, unwieldy number of SKU’s with dispersed
manufacturing locations.
 Price positioning in some categories allows for low price competition, like Amul
captured Kwality’s market.
 High Social costs (housing, food grains & firewood, health and other welfare
measures) in the Plantation business
SWOT Analysis
Opportunities

 Market and brand growth through increased penetration especially in


rural areas.
 Brand growth through increased consumption depth and frequency of
usage across all categories.
 Upgrading consumers through innovation to new levels of quality and
performance.
 Emerging Modern Trade can be effectively used for introduction of
more upscale Personal Care products.
 Position HUL as a sourcing hub for Unilever companies in various
countries.
SWOT Analysis
Opportunities Cont…

 Growing consumer base due to increasing income levels and new consumers
from lower strata of the society
 Growing consumption in Out of Home categories.
 Leveraging the latest IT technology
 Untapped market in branded Ayurvedic medicines and other such consumer
products.
 Opportunity in Food sector: changing consumer tastes- Expansion of horizons
towards more and more countries
SWOT Analysis
Threats

 Low priced competition now present in all categories.


 Grey imports.
 Spurious/counterfeit products in rural areas and small towns.
 Unfavorable raw material prices in oils, tea commodity etc.
 Heavy onslaught of competition in the core categories from emerging players
like ITC will result in higher advertising expenditure
 Reduction in real income of consumers due to high inflation.
THANK YOU

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