Unilever in India: Hindustan Levers Project Shakti

Marketing Management 1

Case: Unilever in India: Hindustan Levers Project Shakti

Submitted by: Ramandeep Singh PGP/21/288

1. How is HUL placed in the Indian Consumer market?

Hindustan Lever Limited is the Indian subsidiary of world’s largest FMCG company Unilever.HLL had revenues of approximately 110 billion Rs in 2004 with a gross profit of 46% and net income of 11.4%. Company’s product line covered nearly thousand Stock Keeping Units(SKU) across 20 categories and thus HLL enjoyed an overall market share of 40-45% positioning it as the market share leader. Having established itself in 1933, HLL was able to compete in Indian Market without much of competition during the period from Independence till 1991 when India adopted policy of liberalization and opened up its market for foreign companies to invest in India. HLL’s FMCG business was organized into four profit centers: detergents, personal products, beverages and foods.

                In lower price segment, HLL has to compete with unorganized local players which offered products at lower price while at higher price segments they had to compete against organized national brands like Procter & Gamble, Colgate-Palmolive, TOMCO. The competition from these companies to Indian market affected the margin. With an estimated population of 1.02 billion in 2003 with having 25% of population below poverty line and with over 70% of population residing in rural villages HLL sought to reach rural markets. HLL plans to tap into rural India, as it is a key source of growth and a factor of competitive advantage in future which they are trying to achieve using Project Shakti.

2. What was the motivation for the Shakti initiative? Was it a CSR initiative?

The key motivation for the Shakti initiative was to extend HLL’s reach into untapped markets and to develop its brand through local influencers. The target was rural markets that are inaccessible and have business potential.

Project Shakti is a sales and distribution initiative that delivers growth, a communication initiative that builds brands, a micro-enterprise initiative that creates livelihoods, a social initiative that improves the standard of life and catalyses affluence in rural India. This makes Shakti uniquely scalable and sustainable because it contributes not only to HLL but also to the community it is part of. Its social objective was to provide sustainable livelihood opportunities for underprivileged rural women. It was partially a CSR initiative such that it caters to the need for tapping the potential rural markets while also contributing to the economic empowerment of the rural women.

 3. How will Project Shakti influence distribution in rural markets?

Project Shakti aims to penetrate the rural markets to the maximum possible extent because rural markets provide them with the opportunity to create new, markets with minimal competitor’s presence. What makes Shakti scalable and sustainable is the fact that it contributes not only to the business, but also to the community it is a part of the distribution approach in rural areas based on accessibility and Business potential was mapped as follows:

The Shakti project appointed Shakti entrepreneurs in villages who purchased HLL products and sold those products to their villagers either directly or through local outlets. The entrepreneurs had the incentive of earning higher profits by directly selling to consumers. The Shakti Project made various efforts in overcoming the difficulties in the project. They offered credit to the entrepreneurs to increase sales of their products. RSP or Rural Sales Promoter was hired to coach Shakti entrepreneurs in understanding the economic aspect and create business.

In order to increase local government support, Shakti hired marketing and research team(MART) to study and explore the potential and viability of a village for project shakti.

Sachets and LUPs -  The introduction of sachets revolutionized the FMCG industry and made their products affordable in rural areas. Using sachets and LUPs they were able to target a large mass of consumers who had been unable to use products of this category. The benefits offered to consumers were personalized service, doorstep delivery and assurance of quality.