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Hindustan Unilever Limited Geographical Coverage

Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer Goods company, selling household name products across India. To maintain their market leadership, HUL pursues innovative distribution mechanisms to reach millions of potential consumers in both urban and small remote villages. HUL realized that its sales and distribution network gave it an edge, but that rivals would try to match it, so HUL has aggressively extended into smaller towns and areas. The unorganized nature of Indian markets requires a tailored approach. HUL launched a unique four-tier rural distribution system, from appointing common stockists to serve towns, to Project Shakti which taps women's self-help groups to sell products directly in small villages.

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Harish Chandra Joshi
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1K views3 pages

Hindustan Unilever Limited Geographical Coverage

Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer Goods company, selling household name products across India. To maintain their market leadership, HUL pursues innovative distribution mechanisms to reach millions of potential consumers in both urban and small remote villages. HUL realized that its sales and distribution network gave it an edge, but that rivals would try to match it, so HUL has aggressively extended into smaller towns and areas. The unorganized nature of Indian markets requires a tailored approach. HUL launched a unique four-tier rural distribution system, from appointing common stockists to serve towns, to Project Shakti which taps women's self-help groups to sell products directly in small villages.

Uploaded by

Harish Chandra Joshi
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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Hindustan Unilever Limited (HUL) is India’s largest Fast Moving Consumer Goods company,

touching two out of three Indians with their large brand portfolio. HUL’s 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.

Modern Trade

Photo Credit: Hindustan Unilever

Modern trade, or retail chains, is characterized by standardized store formats, air-conditioned


ambiance, and a variety of goods and typically lower pricing. Global retail chains such as Walmart and
Carrefour fall under this category. In India, modern trade comprises roughly 10% of all commercial
transactions and is growing rapidly.

General trade
Photo Credit: CGAP

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 HUL’s sales.

Rural Markets

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 today’s 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.
1. 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.
2. 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.
3. 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).
4. Project Shakti: Project Shakti targeted the very small villages (<2,000) and tapped into pre-
existing women’s self help groups (SHG). Underprivileged rural women were invited to become
direct-to-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.

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 Shakti’s success in other markets such as Sri Lanka and
Bangladesh.

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