HUL Project

Submitted By: Sarvesh Singh ( B13112) Suprabhat Tiwari (B13119)

Rural Marketing in India


Abstract:

Rural areas in India are large and open with sparse population compared to urban cities. These areas

are relatively untouched by technological advancements in almost all spheres of socio-economic,

political and cultural life. Recently, rural markets have gained a lot of significance in the consumer

goods as well as durable goods, due to a holistic growth of economy. This growth has led to a

massive increase in the purchasing power of the rural communities. India as a nation has now come

a long way from the place where the urban demographic which comprises only 20 per cent of

consumer base, are responsible for 80 per cent of the revenues. The companies are now looking for

newer opportunities and avenues, as they are faced with a sustained decline in their growth rates in

urban markets due to market saturation while at the same time they do have a huge, untouched and

untapped rural Indian market. Hence the current strategy of many companies has shifted towards

tapping the rural markets.

Rural areas in India are large and open with sparse population compared to urban cities. These areas

are relatively untouched by technological advancements in almost all spheres of socio-economic,

political and cultural life. Recently, rural markets have gained a lot of significance in the consumer

goods as well as durable goods, due to a holistic growth of economy. This growth has led to a

massive increase in the purchasing power of the rural communities. India as a nation has now come

a long way from the place where the urban demographic which comprises only 20 per cent of

consumer base, are responsible for 80 per cent of the revenues. The companies are now looking for

newer opportunities and avenues, as they are faced with a sustained decline in their growth rates in

urban markets due to market saturation while at the same time they do have a huge, untouched and

untapped rural Indian market. Hence the current strategy of many companies has shifted towards

tapping the rural markets.

In past few years, rural markets have significantly gained prominence as purchasing power of rural

population has increased substantially due to growth of the economy. After the advent of Green

Revolution in 1967, village population has started consuming a large chunk of manufactured and

industrial products. Now the FMCG companies are devicing rural marketing strategies to tap the vast

rural market.

Hindustan Unilever (HUL) is the largest player in India’s FMCG market and one of the pioneers of

this industry in India. HUL has been one leader in FMCG industry since past 5 decades. It started its

efforts towards harnessing the potential of rural Indian markets in 1960’s onwards, through indirect

coverage of accessible rural market through its urban network stockists and distributors. It started

Integrated Rural Development Programme in districts of Uttar Pradesh in 1976 carrying on with its

strategy of rural marketing. Later in 1990, HUL launched its famous ‘Operation Streamline’ for

distribution of products to remote areas of rural markets using avant-garde transport systems like

tractors, bicycles and even bullock carts. The company also appointed rural distributors and star

sellers in various locations. In 2000, HUL started Project Shakti in order to reach inaccessible low

potential rural markets of India. This project has reached more than 100,000 villages in less than 5

years. In 2003, HUL boarded on Project Samuriddhi to create sustainable villages in the regions of

Dadra and Nagar Haveli. As of now, HUL’s products touch the lives of almost 70% of Indian

population and ranks a pioneer in rural marketing penetration in the country.


INTRODUCTION

The rural markets has emerged to be one of the most lucrative markets with growing per capita

income due to rise in the economy and better distribution channels. Large population base and

growing awareness has lured the FMCG firms to latch upon this untapped market.

We have listed a few reasons why the rural markets have become a favourable destination for

marketing companies :

Competition in Urban Markets – Due to intensification of competition in urban markets,

most of the companies have started to feel that potential of urban markets are nearing its

saturation and hence they need to search for themselves an untapped market. It is but

inevitable that next level of marketing competition lies in exploring and utilising the rural

market potential. The sustainable business growth for next few years will be possible only

through penetration of rural markets where business growth possibility is more.

Changing Consumption Pattern in Rural Areas – During the last decade or so, the

purchasing power of rural population has increased significantly which has been

instrumental in changing the consumption pattern of rural India. The FMCG firms have been

encouraged by new consumption pattern and also demand for new products in villages.

Now many companies including HUL are witnessing a rising share of their total sales from

village areas. The table below captures how rural markets are contributing to total portfolio

of firms.

Percentage of Rural Sales to Total Sales


Improved Lifestyle – There was a time when rural population was expected to use generic products

only and companies didn’t use to consider them target groups for most of their products. But times

have changed and now increasing number of rural population likes to use products, earlier perceived

to be meant for urban markets only. The rural consumer is no longer dependent only on traditional

products. E.g. shampoos have substantially replaced the traditional product shikakai which they used

over the years. Similarly, village people are not reliant on traditional chulhas but are using gas

cylinders for cooking purposes. Today, the consumption basket of rural people is not limited to

agricultural and allied products. They are keen to buy modern products to augment their style of

living.

Huge Population Base – The urban population are a bit conscious about family planning due to

higher cost of living in the cities. But rural population is still unchecked and has created a hughe

population base and hence a massive opportunity for companies. The large population combined

with modern technologies has attracted a large number of firms to sell their products and services

on a sizeable scale.

Rapidly Growing Market – Rural markets are growing at twice the pace of what urban markets are

growing. The total number of rural households has risen from 135 million in 2001-02 to 153 million

in 2009-10 giving a tremendous push to the rural retail opportunity. Not only they purchase

products of basic necessity but now the people in the villages are buying luxury products that can

offer some comfort. Therefore, the opportunities in these markets are quite large and need to be

explored by firms.

The Marketing Mix (THE FOUR P’s IN RURAL MARKETING)

The 4 Ps of marketing might have to be modified as per the requirements and expectations of the

rural people.

Rural Product Strategy: The rural markets are not very sophisticated in terms of their

requirements and basically use simple and easy to use products in their day to day life. To be

successful in rural markets companies need to employ convenient and cost-eefective packaging. We

have seen that sachet revolution has brought about a great deal of change in rural markets dynamics

in last few years. More and more products are now finding themselves becoming popular in villages

due to packaging being done in form of sachets. Sophisticated packaging that does not provide any

addes benefit to village people and only adds to cost to the firm. Village people prefer value for

money products. Also the information on the pack should be clear and transparent so that target

group understands them witout any ambiguity.

Examples: HUL developed a combined soap and shampoo that was cost-effective and also less

harsh on hair than ordinary soaps. HUL launched the new soap-cum shampoo ‘Breeze 2-in-1’

Rural Pricing Strategy: The rural customers are very highly price sensitive, way more than their

urban counterparts. Due to limited income resources they value each buying properly and seek

value for money products. Marketers have to device a strategy to attract the rural consumers by

providing them affordable products which are viable for rural markets. Most of the firms these days

apply value engineering in products they sell to rural markets. They use cheaper raw materials which

provide comparable quality and satisfaction. However, in order to sell premium or costly products in


rural markets, the firms need to position their products in such a way that they make the consumers

realise the utility of the products.

However mostly the products in rural markets are low priced or packed in small sachet to render

them affordable for village people. For example : Godrej has introduced its Cinthol, Fair Glow and

other Godrej products in 50 gram packs that are priced at Rs. 4-5, particularly for the markets of

Uttar Pradesh, Madhya Pradesh and Bihar.

Pricing strategy of HUL

HUL has taken many initiatives and launched programs over the the past few decades to create markets in the rural hinterlands. They offer the products at prices which are affordable for village population. HUL adopts low unit pricing to target the village population. In India, most of the products they offer to rural population range from Re 1 to Rs 10. HUL has adopted a strategy to offer village market consumers packages ( volume point to Price Point) prized within Rs 15 so that it finds itself better associated to rural market.

Hindustan Unilever’s strategic point is the offering of Rs 5 and Rs 10 and they don’t hike this price

even during higher costs of products. They believe that affordability is key to success in rural areas. If

rural India today accounts for about half of detergents sales, it is because HLL has developed low-

cost value-for-money branded products, like Wheel. The company has also taken initiatives to create

markets even for apparently premium products, by offering them in pack sizes, like sachets, whose

unit prices are within the reach of rural consumers. Pricing helps in synchronizing the expenditure of

the Indian consumers with his daily stream of income.

For example, initiated in the 1980s, sachets (Rs.2, Re.1,or 50 paise) today constitute about 55% of

Hindustan Lever's shampoo sales. With media reach gradually increasing, rural consumers today,

where the media has its footprints, share the same aspirations with their urban counterparts. HLL

has responded to the trend with low unit price packs of even other products as follows;-

Lifebuoy at Rs 5, Surf Excel sachet at Rs 2, Fair&Lovely skin cream at Rs 5.

Rural Place Strategy: The most important aspect of place strategy is to arrange for the products to

reach the consumers easily. The product should be available at doorsteps or within easy reach of

customers. Companies focus to maintain direct contact with local vendors and retailers. Cooperative

societies, public distribution system, feeder markets, village weekly markets, fairs and festivals can

be utilized to ensure adequate distribution of one's products. Formulating an integrated and

efficient channel of distribution remains a challenge for the marketers. In our case Hindustan

Unilever uses vans to deliver its products to local vendors and retailers in rural areas, thus vastly

improving its reach. The delivery vans serve as mobile warehouses.

HUL covers mass markets in villages and caters to provide products for hinterlands of India. They are

known to provide direct selling channels to reach the depths of rural markets. The retail and

wholsesale distribution of HUL is very strong and through them it covers the majority of rural

markets. One of the major strategies of HUL is strengthening of already existing markets where it

exists through intensive distribution network.

We have covered the distribution channels and innovations employed by HUL in next section.


Rural Promotion Strategy: The promotional activities should be undertaken through media that

are comfortable and appropriate for the rural areas. Positive word-of-mouth through local reference

groups and opinion leaders is considered as the key to success in the rural markets. Traditional art

forms such as puppet shows and street plays or creating awareness through village panchayat

members can prove to be fruitful. Other methods like distribution of pamphlets, use of mobile

publicity vans and advertising on walls can also assist in establishing a relationship with the rural

masses.

Example: In 1998-99, Hindustan Lever implemented a major direct consumer contact, called Project Bharat, which covered 2.2 crore homes. Each home was given a box, at a special price of Rs.15, comprising a low unit price pack of shampoo, talcum powder, toothpaste and skin cream, along with educational leaflets and audio-visual demonstrations. The project has helped eliminate barriers to trial, and has strengthened salience of both particular categories and brands.

In 2002, Hindustan Lever has launched a similar large-scale direct contact, called Lifebuoy Swasthya

Chetana, which already covers 70 million people in 18,000 villages of 8 states. The project is

intended at generating awareness about health and hygiene practices and specifically how a simple

habit of washing hands is essential to maintaining good health. The initiative involves interaction

with students and senior citizens who act as change agents or opinion leaders that influence rural

consumer. The programme has as of now covered about 15000 villages in 8 states - Uttar Pradesh,

Bihar, Jharkhand, West Bengal, Orissa, Madhya Pradesh, Chattisgarh and Maharashtra; it has already

touched about 70 million people, imparting hygiene education to over 25 million children.

“Khushiyon ki Doli” was a rural marketing initiative of HUL launched in year 2010 in three states – Uttar Pradesh, Andhra Pradesh and Maharashtra.

The main objective of the campaign was to reach out to media dark villages with HUL brand messages and to engage with consumers deeply to rapidly change brand adoption metrics. The main aim was to change attitudes of the rural mass to inculcate good personal hygiene and through this create greater preference for the company brands by association to daily hygiene habits.

Through a multi-brand approach, Khushiyon ki Doli also helped to create a cost efficient rural activation module. It involved various personal care and home care brands of HUL including Wheel, Surf Excel, FAL, Sunsilk, Vim, Lifebuoy and Closeup. The module followed a 3-step process, starting with awareness, moving on to consumer engagement and finally retail contact. The first step of spreading awareness is achieved through a team of promoters who head to each village and invite the villages to what is known as ‘Mohallas’ to make them aware of the company


and its products. In every village, there are about 4-5 teams who conduct these events in local language for small focused groups so that it allows for greater engagement and involvement for the consumers. During this activity, brands are introduced with the help of TVCs that are played continuously. And the promoters by way of ‘live’ demonstrations bring alive the hygiene benefits of using such brands and improving the quality of daily life. To increase the ‘fun’ element and enhance involvement, promoters also conduct simple quizzes and games around the brands and daily hygiene habits. As part of this activation, we offer schemes both for the participating consumers and also local retailers for generating trial among consumers as well enhancing availability at retail.

Post the mohalla activity, the promoters go home to home and conduct consumer home visits to generate trial where they offer attractive promotions to the consumers. Similarly, there is another team which visits all the shops in the village which ensures improved availability and visibility of HUL brands.

One of the unique aspects of this initiative is the use of technology to bring alive the benefits of our brands in a simple and compelling manner. The other unique characteristic feature of this initiative is the effective use of popular traditional symbols with technology to create more acceptance. For example, the brand films and hygiene messages are shown to the consumers through the use of Palki.

From Four P's to Four A's:

The traditional four P's of marketing -- product, price, place and promotion, as outlined above have

been replaced by a different framework for analysis. "A number of companies have worked on

various elements of the marketing mix to improve the four A's -- affordability, awareness, availability

and acceptability -- for rural markets," he says. "FMCG companies innovated on package sizes to

introduce low price points. They have customized promotional strategies for rural markets using

local language and talent. Some FMCG players continue to expand rural penetration (HUL's Project

Shakti, Tata Tea's Gaon Chalo). Coca-Cola's Parivartan program has trained more than 6,000 retailers

to display and stock products. Dabur has created a training module ASTRA (Advanced sales training

for retail ascendance) in several regional languages. A number of auto companies have launched

rural-specific campaigns."


Highlights of HUL Marketing Strategy

Mission of HUL:

To make it products reach to the consumer where he wants it. The product must be such that impacts daily life and change their living standards. Their main purpose is to provide hygienic conditions to rural consumers and upgrade their standards with their products. HUL has been at the forefront of experimenting with innovative methods to reach the rural consumer.

INDIRECT COVERAGE APPROACH

HUL started its first effort towards going rural 1960’s onwards by indirect coverage of accessible

rural market with high business potential through its urban network of stockists and distributors.

Under this approach company vans were replaced by vans belonging to Redistribution Stockists,

which serviced a select group of neighbouring markets. Rural areas with lower business potential but

accessible were assigned to retail stockist accessing all villages on fortnightly basis.

OPERATION HARVEST

The reach of conventional media and, hence awareness of different products in rural markets was

weak. It was also not always feasible for the Redistribution Stockist to cover all these markets due to

high costs involved. Yet, these markets were important since growth opportunities were high.

Operation Harvest endeavoured to supplement the role of conventional media in rural India and, in

the process, forge relationships and loyalty with rural consumers. Operation Harvest also involved

conducting of product awareness programmes on vans.

CINEMA VAN OPERATIONS

These are typically funded by the Redistribution Stockists. Cinema Van Operations had films and

audio cassettes with song and dance sequences from popular films along with also comprising of

advertisements of HUL products.

PROJECT STREAMLINE

In 1998, HUL took its first tentative step to expand rural distribution. The target was to reach

inaccessible rural markets with high business potential. Through Project Streamline, HUL created a

hub and spoke system and appointed sub-dealers who had the opportunity to serve villages in their

vicinity. This project covered villages with population of 2000. The pivot of Streamline is the Rural

Distributor (RD), who has 15-20 rural sub-stockists attached to him.

Each of these sub-stockists is located in a rural market. The sub-stockists then performs the role of

driving distribution in neighbouring villages using unconventional means of transport such as tractor,

bullock cart, etc and transport suitable to interconnecting roads, like cycles & scooters . The sub

stockist is known as the Star seller for that area. Hindustan Lever is thus trying to circumvent the

barrier of motor able roads.

While the model served the company well, HUL had little or no control over the distribution chain.

Smaller regional brands would come along, offer better mark ups and sell goods on credit and take


away a significant portion of business in a short span. Significantly, the shopkeeper who stocked HUL

products felt no loyalty to the company and could switch sides overnight.

DISTRIBUTION STRATEGIES OF HUL

In rural India particularly, availability determines volumes and market share, because the consumer

usually purchases what is available at the outlet, influenced very largely by the retailer. Hindustan

Lever Limited has a distribution network which is one of their key strengths that helps them reach

their products across the length and breadth of our vast country. To meet the ever-changing needs

of the consumer, HUL has set up a distribution network that ensures availability of all its products, in

all outlets, at all times. This includes, maintaining favourable trade relations, providing innovative

incentives to retailers and organizing demand generation activities among a host of other things.

THE EVOLUTION OF HUL'S DISTRIBUTION NETWORK

The first phase of the HUL distribution network had wholesalers placing bulk orders directly with the

company. Large retailers also placed direct orders, which comprised almost 30 per cent of the total

orders collected. The company salesman grouped all these orders and placed an indent with the

Head Office.

The focus of the second phase, which spanned the decades of the 40s, was to provide desired

products and quality service to the company's customers. In order to achieve this, one wholesaler in

each market was appointed as a "Registered Wholesaler," a stock point for the company's products

in that market. The company salesman still covered the market, canvassing for orders from the rest

of the trade. He would then distribute stocks from the Registered Wholesaler through distribution

units maintained by the company.

The highlight of the third phase was the concept of "Redistribution Stockist" (RS) who replaced the

RWs. The RS was required to provide the distribution units to the company salesman. The RS

financed his stocks and provided warehousing facilities to store them. The RS also undertook

demand stimulation activities on behalf of the company. HUL soon realized that the RS would be

able to provide customer service only if he was serviced well.

This knowledge led to the establishment of the "Company Depots" system. This system helped in

trans-shipment, bulk breaking, and provided a stock point to minimize stock-outs at the RS level. In

the recent past, a significant change has been the replacement of the Company Depot by a system of

third party Carrying and Forwarding Agents.


Introduction of IT powered system: An IT-powered system has been implemented to supply

stocks to redistribution stockists on a continuous replenishment basis. The objective is to catalyse

HUL’s growth by ensuring that the right product is available at the right place in right quantities, in

the most cost-effective manner. For this, stockists have been connected with the company through

an Internet-based network, called RS Net, for online interaction on orders, despatches, information

sharing and monitoring. RS Net covers about 80% of the company's turnover. RS Net has come as a

force multiplier for HUL Way, the company's action-plan to maximise the number of outlets reached

and to achieve leadership in every outlet, by unshackling the field force to solely focus on secondary

sales from the stockists to retailers and market activation. HUL Way has also led to implementing

best practices in customer management and common norms and processes across the company.

Powered by the IT tools it has further improved customer service, while ensuring superior availability

and impactful visibility at retail points.

Recent Initiatives and Projects by HUL

Project Shakti

Project Shakti is an initiative that tries to combine aspects of social responsibility, sustainability, and business strategy. The Shakti model is very strong and sustainable as it targets on strong way that can give back most to the community by supporting the cause of bringing about an ‘empowering of underprivileged rural women' while making business sense.

Whar started with handful of women in one state, today touches garners income enhancing opportunities to about 50000 women also providing an access to good quality products in more than one lakh villages and 30 lakh households every month.

Business Model :

In this rural initiative, which targets small villages with population of less than 2000 people or less. It gives power to underprivileged rural women by providing income, health and hygiene education through the Shakti Vani programme. Thereafter it also tries to create an access to all relevant information through the iShakti community portal.

Shakti is a pioneering effort in creating livelihoods for rural women, organised in Self-Help Groups (SHGs), and improving living standards in rural India. Shakti provides critically needed additional income to these women and their families, by equipping and training them to become an extended arm of the company's operation.

Shakti Vani is a social communication programme. Women, trained in health and hygiene issues, address village communities through meetings at schools, village baithaks, SHG meetings and other social fora. In 2009, Shakti Vani has covered 100,000 villages in Madhya Pradesh, Chattisgarh and Karnataka. The vision is to cover 120,000 villages in 2013.


Project Telecalling and Columbus

Recently HUL have started a project each for both urban areas and rural markets to double its direct reach and ensure it retains its advantage of having the largest distribution network in the country even as rivals inch closer.

Project Telecalling for urban areas and Project Columbus for rural areas aim to double the country's top consumer products firm's direct reach to four-million outlets over the next two years.

Project Telecalling targets to tap the uncovered outlets via telephone calls and deliver the ordered quantity, reducing the cost of additional salesmen to reach such outlets. This initiative has the potential to change the distribution paradigm of the consumer product industry.

HUL’s distribution will extend its reach to over 150-million rural consumers directly in 2013. This move comes at a time rivals such as Procter & Gamble and ITC have been aggressively expanding their reach.

Project Bharat for connecting to rural India


In words of an market analyst this “urban initiative has the potential to change the distribution

paradigm of the consumer product industry. Project Telecalling aims to tap the uncovered outlets via

telephone calls and deliver the ordered quantity, reducing the cost of additional salesmen to reach

such outlets,” Anand Mour of ICICI Securities was sounding convinced. Project Columbus seeks to

expand Hindustan Unilever’s distribution reach to over 150-million rural consumers directly in 2013.

HUL had launched various multi-brand rural activation programmes

In August of 2010 “Khushiyon ki Doli” a rural marketing initiative of HUL was launched. It was launched in three states – Uttar Pradesh, Andhra Pradesh and Maharashtra. During the year itself, over 14 million consumers would be contacted through this initiative in over 35,000 villages across these three states.

The main objective of the campaign is to reach out to media dark villages with HUL brand messages and to engage with consumers deeply to rapidly change brand adoption metrics. The main aim is to change attitudes of the rural mass to inculcate good personal hygiene and through this create greater preference for the company brands by association to daily hygiene habits.

http://nicheiima.files.wordpress.com/2013/09/11.jpg


Through a multi-brand approach, Khushiyon ki Doli also helps to create a cost efficient rural activation module. It involves various personal care and home care brands of HUL including Wheel, Surf Excel, FAL, Sunsilk, Vim, Lifebuoy and Closeup. The module follows a 3-step process, starting with awareness, moving on to consumer engagement and finally retail contact.

The first step of spreading awareness is achieved through a team of promoters who head to each village and invite the villages to what is known as ‘Mohallas’ to make them aware of the company and its products. In every village, there are about 4-5 teams who conduct these events in local language for small focused groups so that it allows for greater engagement and involvement for the consumers. During this activity, brands are introduced with the help of TVCs that are played continuously. And the promoters by way of ‘live’ demonstrations bring alive the hygiene benefits of using such brands and improving the quality of daily life. To increase the ‘fun’ element and enhance involvement, promoters also conduct simple quizzes and games around the brands and daily hygiene habits. As part of this activation, we offer schemes both for the participating consumers and also local retailers for generating trial among consumers as well enhancing availability at retail.

Post the mohalla activity, the promoters go home to home and conduct consumer home visits to generate trial where they offer attractive promotions to the consumers. Similarly, there is another team which visits all the shops in the village which ensures improved availability and visibility of HUL brands.

One of the unique aspects of this initiative is the use of technology to bring alive the benefits of our brands in a simple and compelling manner. The other unique characteristic feature of this initiative is the effective use of popular traditional symbols with technology to create more acceptance. For example, the brand films and hygiene messages are shown to the consumers through the use of Palki.

Hindustan Unilever has initiated a project each for urban areas and rural markets to double its direct reach and ensure it retains its advantage of having the largest distribution network in the country even as rivals inch closer.

Competitor’s Initiatives :

P&G – Parivartan - Improving the unhygienic practices among rural women in Rajasthan

Procter & Gamble joins hands with Smile for developing hygienic practices in rural women. Being

one of the largest FMCG companies in the world, P&G functions with the purpose of providing

branded products and services of superior quality and value that improve the lives of the world's

consumers. P&G has demonstrated its commitment to the community not just through the quality of

its products and services, but also through socially responsible initiatives for the community.


For P&G, it was the Sangeeta Bhabhi revolution. Sangeeta Bhabhi has no relation to an infamous online character, but an icon created by consumer goods major Procter & Gamble to sell its goods in rural India. The character called Sangeeta Bhabhi is a dedicated housewife. The personality was conceived to push P&G's leading brands, Tide and Head & Shoulders as a dual proposition called 'kamyab jodi' in rural areas of the country. After much deliberation over the eight to nine categories that P&G operates in, marketers picked the detergent brand Tide and shampoo Head & Shoulders as the focus in this particular rural initiative.

Considering that the rural markets has been a battle field with national players like HUL, Dabur and

even regional players like Ghari looking to penetrate further, P&G has its task cut out. When

contacted, Sumeet Vohra, marketing director, P&G India says that the company's endeavour has

always been to not only improve lives but also continue to touch as many more lives as possible.

"Ours is a consumption driven economy and we are cognisant of the importance of the growing rural

segment in that context," says Vohra, adding P&G is constantly evaluating growth opportunities not

just in this segment, but across India and will use the right brand portfolio and marketing techniques

to do so. The move underscores the point that rural market is important considering rural India

comprises 12.2 % of the world population.

Through this initiative, P&G is attempting to generate user trials for both SKU pack size as well as

satchets. While Vohra refused to comment on future plans citing company policy, it is understood

that after studying the initial response to the pilot programme, the company is planning to roll the

initiative further to cover nearly 5,000 villages across the state of UP. Also, to ride on the demand

generated from this exercise, P&G is simultaneously beefing up its distribution network to ensure

reach and availability of the products. But P&G's rural march takes on established rivals like

Hindustan Unilever that has over the years added to its rural distribution muscle through dedicated

programmes like Project Shakti.

Similarly, cigarette major ITC through its echoupal network has been able to create a network to

further its FMCG ambition by pushing brands like Superia soaps and shampoos in smaller SKU pack-

sizes. Anand Shah, FMCG analyst from Angel Broking says P&G has been a late entrant in the Indian

market and it's only in the last two years that the company is looking to probe further. "The

company is playing catch up given that rural markets for categories like shampoos has been a huge


growth driver," says Shah. Surely, P&G's hoping Sangeeta Bhabhi will tide over the competition. And

also keep her head firmly over her shoulders.

ITC - e-Choupal The e-Choupal model has been specifically designed to tackle the challenges posed by the unique features of Indian agriculture, characterized by fragmented farms, weak infrastructure and the involvement of numerous intermediaries, among others. Appreciating the imperative of intermediaries in the Indian context, 'e-Choupal' leverages Information Technology to virtually cluster all the value chain participants, delivering the same benefits as vertical integration does in mature agricultural economies like the USA. 'e-Choupal' makes use of the physical transmission capabilities of current intermediaries - aggregation, logistics, counter-party risk and bridge financing, while dis-intermediating them from the chain of information flow and market signals. With a judicious blend of click & mortar capabilities, village internet kiosks managed by farmers - called sanchalaks - themselves, enable the agricultural community access ready information in their local language on the weather & market prices, disseminate knowledge on scientific farm practices & risk management, facilitate the sale of farm inputs (now with embedded knowledge) and purchase farm produce from the farmers' doorsteps (decision making is now information-based).

Real-time information and customized knowledge provided by 'e-Choupal' enhance the ability of farmers to take decisions and align their farm output with market demand and secure quality & productivity. The aggregation of the demand for farm inputs from individual farmers gives them access to high quality inputs from established and reputed manufacturers at fair prices. As a direct marketing channel, virtually linked to the 'mandi' system for price discovery, 'e-Choupal' eliminates wasteful intermediation and multiple handling. Thereby it significantly reduces transaction costs. 'e-Choupal' ensures world-class quality in delivering all these goods & services through several product / service specific partnerships with the leaders in the respective fields, in addition to ITC's own expertise. While the farmers benefit through enhanced farm productivity and higher farm gate prices, ITC benefits from the lower net cost of procurement (despite offering better prices to the farmer) having eliminated costs in the supply chain that do not add value.


Launched in June 2000, 'e-Choupal', has already become the largest initiative among all Internet-based interventions in rural India. As India's 'kissan' Company, ITC has taken care to involve farmers in the designing and management of the entire 'e-Choupal' initiative. The active participation of farmers in this rural initiative has created a sense of ownership in the project among the farmers. They see the 'e-Choupal' as the new age cooperative for all practical purposes. Business strategies of companies to leverage the deep-rooted FMCG firms' network in rural India In process of understanding and reaching the scattered rural markets of India, FMCG majors HUL and ITC have formed a strong rural distribution network over the years. These networks reach out to the billion dollar consumer market which companies from various sectors aim to connect with. Hence, companies across sectors such as telecom, pharmaceuticals, banking and even cosmetics are queuing up to join forces with FMCG firms to leverage the entrenched network. Pharmaceutical giants Ranbaxy and Pfizer recently tied up with the FMCG Company, ITC in order to distribute their over the counter (OTC) products across 6,500 e-Choupal centers spread across 40,000 villages. The e-Choupal initiative by ITC is by far one of the most successful initiatives in empowering the rural farmers thus building a healthy rural network across 40,000 villages in 9 states. The initiative currently empowers 4 million farmers while the number is growing fast. The alliance will open windows for the less equipped consumers in rural areas and provide them with better medical and healthcare products currently available only in urban cities and towns. As corporate partnerships to push rural growth are on an upswing, the recent Reserve Bank of India (RBI) decision to allow "for profit" companies to be business correspondents of banks has encouraged such tie-ups. For instance, in a step to promote financial inclusion, SBI bank has tied up with HUL. HUL's 'Shakti Ammas' network, the self-help groups that distribute the company's products in remote villages with a population of 2,000 and less, will now be opening SBI bank accounts for people. The alliance will ensure that the rural folks not only get access to capital, but also generate savings. While multiple banks can use a company as a business correspondent, more than one bank cannot be in the same village. Hence, the wide spread network of consumer product companies is the most effective way to gain access to scattered rural market of India. The Hindustan Unilever (HUL) board also recently announced its strategic alliance with Tata Teleservices for distribution of latter's telecom products by leveraging company's distribution network in rural markets in India. Creating a distribution network from scratch is a costly affair and hence arrangements with FMCG players are a win-win for both parties as network costs are shared. However, companies leveraging the FMCG's network will be successful only if they come up with a differential pricing mechanism, keeping in mind the sensitivity of the market. Nonetheless, such tie-ups will induce further consumer brand engagements giving further exposure to the rural folks and also make them aware of various products and services available in the market.


Lifebuoy Case

HUL began a program called Swasthya Chetna, which means 'Health Awakening'. It is an activity that

is phased out at multiple levels focusing on working towards bringing out a hand washing behaviour

change in rural houses. The motto of the campaign was that "What is visibly clean is not really clean"

Lifebouy, which is major soap brand in Rural households got a big boost from this programme. This

was a very responsive movement as it led to the exponential rise in consumption of the brand in

rural and semi-urban populace. We can look at the Marketing mix of HUL in bringing about this

effect:

Place

As two thirds of India's population is living in the rural areas, almost half of the soaps that are sold

are sold actually in the rural markets. Lifebuoy has many variants like Lifebuoy plus, Lifebuoy total,

lifebuoy active. Active was specially positioned for reaping success in the rural market.

The strategy was that in all small or big shop customer will be able to find the product available

readily. Thus, It has engaged more than 5000 sub- stockists. Powering the distribution network

directly improved the reach to more than 50,000 villages, toucing almost 200 million consumers. The

swasthya chetna project costs were covered providing great value and return from the villages and

was being extended.

Promotion:

Lifebuoy soap is an omnipresent brand and has been promoted through various forms like

Television, Radio, and Newspaper. But that was not enough, HUL began promoting lifebuoy through

local government like ‘Panchayat', the ‘Swasthya Parishad' body in the villages began offering

consulting for buying good and germicidal product. HUL’s focus on the promotions and campaigns in

rural households came to the forefront. The concentration on promotion through radio and

sponsoring programmes like serials on tv ‘Krishi Darshan' and ‘Aap ka Swasthya' helped pushing up a

greater number of audience.

In rural areas, Walls bore the brand name ‘LIFEBUOY’


HUL used mass appeal of a big budget film in rural and semi urban households to market its

product . The movie `Krrish' was roped in to market its successful soap brand — Lifebuoy.

HUL was involved in a co-branding, promotion in the film, and also printing pictures of

Krrish's character on packs, also giving away goodies and merchandise based on the theme

of the film. As a result Lifebuoy was preferred over the other product brands since Lifebuoy

brand is all about protection , Krrish's character is al about protecting the world from

enemies.

Price:

Lifebuoy falls in the economy category which has the target in Rural and semi urban households.

HLL’s premium category soaps include Pears, Dove, Moti & Liril whereas Hamam, Rexona & Lux falls

in the popular category. It can be diagrammatically shown as follows:

Premium (Priced at Rs.15 and more)

Popular (Priced at Rs.11 to Rs. 14)

Economy (Priced at Rs.10)

Sustainable Business strategies of HUL

HUL has set forward sustainable model for reducing any long term impact on the environment.

They are consistently working on reducing their environmental footprint through their supply chain.

The major concern however is encouraging consumers to change their habits when using their

products. The largest part of their ecological footprint lies with the consumer. As a result, HUL

should target on influencing how people consume the products and dispose of the rest. This can be

done by innovating extensively and developing new products and modifying the existing ones.

Issues at hand is reducing the greenhouse gases along their value chain and considering employing

of climate-friendly manufacturing techniques and processes in their factories, thereby reducing

GHG’s from their transport systems along with developing climate-friendly refrigerators for their ice

cream business and other storage purposes. Work needed to be done in reducing water usage in

manufacturing by optimising operation, recycle of treated waste water and rainwater harvesting.

The focus should remain on reducing, reusing and recycling our waste material. There has been

newer technology available to process waste generated from sachets. Syncing with our suppliers,

government and farmers for sustainable sourcing of their agricultural raw materials which includes

tea, fruits, vegetables and spices needs to be done.

The strategy for sustainable growth has been covered under three aspects.

Green House Gases

HUL should plan to cut down dependence on GHG’s from current values based on 1995

standards. It can be controlled by taking many initiatives such as employing biomass boilers,

thermic fluid heaters and hot air generators at its factory sites across the country. By setting

up a cogeneration power unit combined with the use of sky light pipes which allow natural

sunlight for illumination on the shop-floor and the use of LED lights and energy efficient

motors.

Reduce Green House Gases from Transportation – HUL need to buy newer trucks that have

greater capacity with more height and since they can carry more volume, number of trips


can be significantly reduced. By installing new lighting systems with CFL bulbs they can

reduce power consumption by 50%

Reduce Green House Gases from Refrigeration – HUL promises to use only climate-friendly

Hydrocarbon (HC) refrigerant variants for storage of its perishable items. They should

employ energy efficient refrigerator with less emissions.

Reduce Employee Travel – HUL has used technology as an enabler by installing 30 video

conferencing facilities at all their major locations in India. There has to more such

innovations to reduce the need to travel thus saving on costs and energy wastage.

Water

Reduce water wastage in Laundry process – HUL, as an industry leader should find solutions

which can assist consumers waste less water for rinsing, while providing the same

effectiveness in terms of cleaning performance. This solution should be professed

extensively.

Reduce water wastage in Manufacturing - HUL’s products are water intensive products and

thus an onus lies on them to reduce dependencies on water. What they can do is take a

initiatives which includes collecting and recycling of harvested rainwater, recycling the

treated waste water through new Osmosis technology, streamlining process operations and

other initiatives.

Waste

Reduce wastage in Packaging – HUL should plan to reduce more of the tonnes and tonnes of

plastic and paper that are consumed in packaging. Recent development in thin industrial

paper and plastic should be looked into.

Recycle Packaging– HUL has started a programme named 'Go-Recycle'. In this initiative,

consumers were encouraged to submit the empty bottles and pouches of any brand from a

few given FMCG product lines. Post that the consumers were given coupons for future

purchase discounts. More of such incentives should be given to the consumers to recycle the

waste.

Biodegradable packaging & tackling sachet wastage – Although smaller in size, the sachets

and pouches usually create less wastage on weight per litre of product consumed and are

hence deemed more preferred for packaging than bottles. HUL should design sachets with

more capacity and refills for bottles that can be used again and again.

Limit wastage from packaging—HUL has developed waste incinerating plant in Nashik, and

the gas that is generated can be used up for cooking. The wastewater treatment sludge of

the Karnataka’s factories are co-processed through the ACC Limited, a cement manufacturer

who use the sludge as fuel in its cement kiln. It is a model which can be followed by other

plants in the country, where ‘energy from waste’ is a reality.

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