Hindustan Unilever Case Study On The Social Marketplace
Hindustan Unilever Case Study On The Social Marketplace
http://thesocialmarketplace.org/casestudy/hindustan-unilever/
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Hindustan Unilever Limited (HUL) is Indias largest Fast Moving Consumer Goods company,
touching two out of three Indians with their large brand portfolio. HULs products are household
names across the country and span a host of categories such as soaps, detergents, personal
products, tea, coffee, ice cream, and culinary products. Today, there are over 7.7 million retail
outlets in India with an average of 6.8 stores per thousand people the highest store density
in the world.
To maintain their market leadership, HUL pursues innovative distribution mechanisms to reach
the millions of potential consumers in both urban areas and small remote villages where there
is no retail distribution network, no advertising coverage, and poor roads and transport. HUL
realized from the onset that its sales and distribution network gave it an edge over the
competition, but that rivals would try to match it over time. To maintain their competitive
advantage, HUL has aggressively extended more deeply in India, moving from large to small
towns, and from urban to semi-urban areas.
The unorganized and scattered character of markets in India means sales and distribution
requires a different tactic from that of more developed economies. Like Coca-Cola, HUL knew
it needed to tailor its approach for the different markets.
General trade consists of the thousands of independent retail and wholesale outlets across the
country. Often called mom and pop shops, each of these stores is considered a distinct
customer and has to be addressed individually. HUL services these outlets through a network
of 2,900 stockists. Goods are sent to a local warehouse or carrying and forwarding agent
(CFA), and are then stocked and dispatched to specific retailers upon orders from the HUL
stockists. The stockists are responsible for servicing all the small retail outlets in a specific
geographic area. General trade makes up the majority of HULs sales.
While general trade encompasses both urban and rural markets, serving customers in more remote areas of India poses unique challenges. Rural
markets are scattered over large areas with low per capita consumption rates. While the aggregate potential of rural markets is large, the
potential of each of the 600+ dispersed markets is very low. As well, rural markets are not connected to urban centers by air or rail, with road
connectivity poor at best. Accessing these markets, even when feasible, means additional logistics costs to HUL.
Despite the roadblocks, conquering the rural markets is a must for HUL. One out of every eight people on this planet lives in an Indian village.
In comparison to the urban market, which consists of roughly 250 million people, the rural market is 775 million people across 638,000 villages.
Within ten years, per household consumption in rural India is forecasted to equal todays urban levels.
To penetrate the rural markets, HUL launched a unique four tier distribution system. Markets were segmented based on their accessibility and
business potential.
Direct Coverage: HUL appointed a common stockist to service all outlets within a town and sell a limited selection of the brand portfolio.
Towns consisted of populations of under 50,000 people. Indirect Coverage: HUL targeted retailers in accessible villages close to larger urban
markets. Retail stockists were assigned a permanent route to ensure that all accessible villages in the vicinity were served at least once a
fortnight. Streamline: Streamline leveraged the rural wholesale channel to reach markets inaccessible by road. Star Sellers were appointed
among wholesalers in a particular village. Star Sellers would purchase stock from a local distributor and then distribute stock to retailers in
smaller villages using local means of transport (e.g. motorcycles, rickshaws). Project Shakti: Project Shakti targeted the very small villages
(<2,000) and tapped into pre-existing womens self help groups (SHG). Underprivileged rural women were invited to become directto-consumer sales distributors for HUL products. Termed Shakti Ammas (literally strength mothers), these women represent HUL and sell its
home-care, health, and hygiene products in their villages.
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http://thesocialmarketplace.org/casestudy/hindustan-unilever/
By the end of 2009, Project Shakti network comprised of 45,000 Shakti Ammas covering
100,000 villages across 15 states in the country, cumulatively reaching over 3 million
households every month. Unilever has replicated Project Shaktis success in other markets
such as Sri Lanka and Bangladesh.
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