Hindustan Unilever –A preliminary study of the giant’s

penetration into rural markets of India

“The future lies with those companies who see the poor as their customers."

- C. K. Prahalad

Addressing Indian CEOs, Jan 2000

1. What is Rural?

Rural areas are large and isolated areas of a country, often with low population density.

Thus, rural areas comprise open country and settlements with fewer than 2,500 residents,

areas designated as rural can have population densities as high as 999 per square mile or

as low as 1 person per square mile.

Rural India presents a baffling dichotomy of images: poverty and growing potential of

rural markets. The importance of rural sector has been on decline. Proportion of the GDP

accounting from agriculture, industry and services have changed from 59: 13:28 (1947)

to 24: 25: 51 (2008).Proportion of the workforce accounting from agriculture, industry

and services have changed from 74: 11:15 (1947) to 57:18:25 (2008); Relative

productivity ratios of 1:3.4:4.2 per unit of labor in agriculture.

Fig 1: Estimated annual size of the rural market -

    FMCG Rs. 65,000 Crore    

    Durables Rs. 5,000 Crore    

    Agri-Inputs (including tractors) Rs. 45,000 Crore    

    2 / 4 Wheelers Rs. 8,000 Crore    

In 2001-02, LIC sold 55% of its policies in rural India. Of two million BSNL mobile

connections, 50% are in small towns / villages. Of the 6.0 lakh villages, 5.22 lakh have a

Village Public Telephone (VPT). 41 million Kisan Credit Cards have been issued

(against 22 million credit-plus-debit cards in urban), with cumulative credit of Rs. 977

billion resulting in tremendous liquidity.

The interim Budget's focus on extending the National Rural Employment Guarantee Act

(NREGA) to all states with a US$ 5.83 billion outlay for 2009-10 would benefit the rural

economy. The rural economy got a further boost with the farmer loan waiver of US$

13.86 billion and the ambitious Bharat Nirman Programme with an outlay of US$ 34.84

billion for improving rural infrastructure.

Enhanced access to quality roads, power and water supplies remains a pipedream, despite

all the promises made by successive governments, living conditions in rural India seem to

have been improving in recent years, as highlighted by the recent NSSO Survey (59th

Round). The Common Minimum programme (CMP) should be seen as a package that

promises to make growth more sustainable by addressing a key variable – rural demand.

After a decade and a half of reform, we seem close to arriving at the right growth-welfare

mix (2). India’s increasing urban-rural divide can be effectively dealt with only through

the provision of urban facilities in rural areas (PURA), as stressed by the President Dr.

Abdul Kalam. The UNCTAD’s World Investment Report (WIR), 2005 says developing

countries are emerging as favored locations for the conduct of R&D by MNCs so as to

tailor, and dovetail, products and processes that would integrate local production into the

MNC’s global value added systems. India is sitting on the blitzkrieg of becoming a super

power and it is the Indian rural sector that is going to drive that super growth. The

Government of India has made rural economic development in general, and rural

infrastructure development in particular, is a key priority. India has launched the “Bharat

Nirman” (Building India) program, which entails investing over US $ 40 Billion,

equivalent to 5 per cent of FY 2005 GDP, in six critical areas of rural infrastructure over

four years starting from 2005 ITC’s partnership with the Khadi and Village Industries

Commission (KVIC) to source and distribute KVIC’s agarbattis, signifies a lot more than

the lofty ideal of a private corporation supporting a predominantly rural enterprise. To

boost manufacturing, organized retail must grow. Lessons from ITC’s Khadi tie-up are

that ITC shall become Wal-Marts and the Tescos, epitome of modern retailing, in India.

Foreign Direct Investment (FDI) in retail is welcome and the benefits of organized retail

far outweigh the costs: millions of jobs, lower prices and greater tax compliance that the

organized retail would create. Modern retailing sharply reduces the intermediation costs

of connecting the producer to the consumer. This saving, even if shared by many, means

that the consumer pays less while the producer gets more (Editorial column, The

Economic Times, 9 February 2005). At present, developing a retail distribution network

is an expensive, risky business in India.

2. What is a Rural Market?

Rural Markets are defined as those segments of overall market of any economy, which

are distinct from the other types of markets like stock market, commodity markets or

labor economic.

As per Raj et al (1) the Indian Fast Moving Consumer Goods (FMCG) industry began to

shape during the last fifty odd years. The FMCG sector is a cornerstone of the Indian

economy. This sector touches every aspect of human life. Indian FMCG market has been

divided for a long time between the organized sector and the unorganized sector. Unlike

the US market for FMCG which is dominated by a handful of global players, India’s Rs.

460 billion FMCG market remains highly fragmented with roughly half the market going

to unbranded , unpackaged home made products. This presents a tremendous opportunity

for makers of branded products who can convert consumers to buy branded products.

Globally, the FMCG sector has been successful in selling products to the lower and

middle income groups, and the same is true in India. Over 70% of sales is made to middle

class households today and over 50% is in rural India. The sector is excited about a

burgeoning rural population whose incomes are rising and which is willing to spend on

goods designed to improve lifestyle. Also with a near saturation and cut throat

competition in urban India, many producers of FMCGs are driven to chalk out bold new

strategies for targeting the rural consumer in a big way. MART, the specialist rural

marketing and rural development consultancy, has found that 53 per cent of FMCG sales

and 59 per cent of consumer durable sales lie in the rural areas. Of two million BSNL

mobile connections, 50 per cent went to small towns and villages; of 20 million

Rediffmail subscriptions, 60 per cent came from small towns; so did half the transactions

on Rediff's shopping site. According to a study by Chennai-based Francis Kanoi

Marketing Planning Services Pvt Ltd, the rural market for FMCG is worth Rs.65,000

crore, for durables Rs 5000 crore, for tractors and agri-inputs Rs.45,000 crore and two-

and four-wheelers, Rs.8000 crore There are many reasons that has urged the FMCG

companies to enter the uncharted territory of rural India. Some of the attractions are

discussed below:

2.1 Large Population

The rural Indian population is large and its growth rate is also high. Over 70% India’s

one billion plus population lives in around 627,000 villages in rural areas. This simply

shows the great potentiality rural India has to bring the much needed volumes and help

the FMCG companies to bank upon the volume driven growth.

2.2 Rising Rural Prosperity

India is now seeing a dramatic shift towards prosperity in rural households. To drive

home the potential of rural India just consider some of these impressive facts about the

rural sector. As per the National Council for Applied Economic Research (NCAER)

study, there are as many ‘middle income and above’ households in the rural areas as there

are in the urban areas. There are almost twice as many ‘lower middle income’ households

in rural areas as in the urban areas. The purchasing power in rural India is on steady rise

and it has resulted in the growth of the rural market. The market has been growing at 3-

4% per annum adding more than one million new consumers every year and now

accounts for close to 50% of volume consumption of FMCG. The growth rates of lot of

FMCG are higher in rural markets than urban markets.

An important tool to reach out to the rural audience is through effective communication.

``A rural consumer is brand loyal and understands symbols better. This also makes it easy

to sell look - alike", says Mr. R.V Rajan, CMD, Anugrah Madison Advertising. The rural

audience has matured enough to understand the communication developed for the urban

markets, especially with reference to FMCG products. Television has been a major

effective communication system for rural mass and, as a result, companies should

identify themselves with their advertisements. Advertisements touching the emotions of

the rural folks, it is argued, could drive a quantum jump in sales.

2.3 IT Penetration in Rural India

Today there are over 15 million villagers in India who are aware of the Internet and over

300,000 villagers have used it! Ten years back, history was created with Public Call

Office phone booths (essentially manually operated payphone facilities), opening in

every corner of the country. This experiment was an instant success and contributed to

hundreds of thousands of jobs. Over the next two years, WorldTel is expected to provide

1000 centres in Tamil Nadu with 2 to 20 terminals in each centre. If successful, this

experiment can be replicated easily to all 27 states leading to over half a million Internet

users through this experiment alone! The existing 600,000 public call offices in India will

soon be transformed into public 'tele-info-centres' offering a variety of multimedia

information services. The rural consumers spend time and money to access higher level

information. Studies have indicated that if the content has direct relevance and will result

in commercial gains, people in rural areas are willing to pay for information services.

Consumerism has altered rural buying behavior in recent years. Spending patterns of

those who spend are now adapting to face the technology bug. Today's rural children and

youth will grow up in an environment where they have 'information access' to education

opportunities, exam results, career counseling, job opportunities, government schemes

and services, health and legal advice and services, worldwide news and information, land

records, mandi prices, weather forecasts, bank loans, livelihood options. If television

could change the language of brand communication in rural India, affordable Web

connectivity through various types of communication hubs will surely impact the

currency of information exchange. As the electronic ethos and IT culture moves into rural

India, the possibilities of change are becoming visible.

2.4 Impact of Globalization

The impact of globalization will be felt in rural India as much as in urban. But it will be

slow. It will have its impact on target groups like farmers, youth and women. Farmers,

today 'keep in touch' with the latest information and maximize both ends. Animal feed

producers no longer look at Andhra Pradesh or Karnataka. They keep their cell phones

constantly connected to global markets. Surely, price movements and products'

availability in the international market place seem to drive their local business strategies.

On youth its impact is on knowledge and information and while on women it still

depends on the socio-economic aspect. The marketers who understand the rural consumer

and fine tune their strategy are sure to reap benefits in the coming years. In fact, the

leadership in any product or service is linked to leadership in the rural India except for

few lifestyle-based products, which depend on urban India mainly.

3. The mode of reaching the market: Distribution Channels

Marketing channel is ‘an organized network of agencies and institutions which, in

combination, perform all the activities required to link producers with users to

accomplish the marketing task’ (Bennett 1988). This channel must be designed such that

it delivers a level of value to the customer that creates a sustainable competitive

advantage for the supply chain. This ‘value’ can take many forms depending upon the

requirements of the customer. The relationship between the value of the product and the

shopping experience is particularly important and the skill of the value chain is in the

positioning of the total offer.

Distribution is all about getting your product/service to the right people at the right time

with special consideration for profit and effectiveness. Successful marketing does not end

when a business has developed a product/service and has found its appropriate target

audience with a view to selling it at the 'right price'.

Known as intermediaries or Chain of intermediaries, each passing the product down the

chain to the next organization, before it finally reaches the consumer or end-user. This

process is known as the 'distribution chain' or the 'channel.' Each of the elements in these

chains will have their own specific needs, which the producer must take into account,

along with those of the all-important end-user.

The following explains the different types of intermediaries that are used in the

distribution channels.

               - Direct (on-site)

               - Direct Mail

               - Telemarketing

               - Internet (e-commerce)

   - Agents

   - Wholesalers

   - Retailers

3.1 Direct (on-site) 

Very common for small businesses, products/services can be sold directly to the

consumer on-site i.e. directly from your shop, office or home by consumers physically

coming into the premises to make a purchase. This can be related with, for example, a

village baker or a hand made furniture business where the products are made and sold at

the same place. This type of distribution works only when your target consumers are

within the local region and are not based on a wide geographical area.

3.2 Direct Mail 

Also known as a mail shot, this type of marketing can produce sales on a local, national,

or even global, scale. Your business would send out, say, flyers, leaflets, brochures or

catalogues (often targeted to particular consumers) selling your product/service. Any

interested receivers of the mail would make an order through the contact details/order

form that would be included.

Although very effective, there is some cost involved but is considerably cheaper

compared to other sources of marketing such as advertising. Poorly targeted mail shots

can also damage the image of your business, so be sure that you obtain/build appropriate

mailing lists before you adopt the idea. Direct mail can be complied and sent directly

from your business, or you can use a professional service to distribute your information:

at a much higher expense.

3.3 Rural Marketing Channels

The Indian rural market with its vast size and demand base offers great opportunities to

marketers. Two-thirds of countries consumers live in rural areas and almost half of the

national income is generated here. It is only natural that rural markets form an important

part of the total market of India. Our nation is classified in around 450 districts, and

approximately 630000 villages which can be sorted in different parameters such as

literacy levels, accessibility, income levels, penetration, distances from nearest towns,

etc.

The success of a brand in the Indian rural market is as unpredictable as rain. It has always

been difficult to gauge the rural market. Many brands, which should have been

successful, have failed miserably. More often than not, people attribute rural market

success to luck. Therefore, marketers need to understand the social dynamics and attitude

variations within each village though nationally it follows a consistent pattern.While the

rural market certainly offers a big attraction to marketers, it would be naive to think that

any company can easily enter the market and walk away with sizable share. Actually the

market bristles with variety of problems. The main problems in rural marketing are:

Physical Distribution

Channel Management

Promotion and Marketing Communication

The problems of physical distribution and channel management adversely affect the

service as well as the cost aspect. The existent market structure consists of primary rural

market and retail sales outlet. The structure involves stock points in feeder towns to

service these retail outlets at the village levels. But it becomes difficult maintaining the

required service level in the delivery of the product at retail level.

One of the ways could be using company delivery vans which can serve two purposes- it

can take the products to the customers in every nook and corner of the market and it also

enables the firm to establish direct contact with them and thereby facilitate sales

promotion. However, only the bigwigs can adopt this channel. The companies with

relatively fewer resources can go in for syndicated distribution where a tie-up between

non-competitive marketers can be established to facilitate distribution.

As a general rule, rural marketing involves more intensive personal selling efforts

compared to urban marketing. Marketers need to understand the psyche of the rural

consumers and then act accordingly. To effectively tap the rural market a brand must

associate it with the same things the rural folks do. This can be done by utilizing the

various rural folk media to reach them in their own language and in large numbers so that

the brand can be associated with the myriad rituals, celebrations, festivals, melas and

other activities where they assemble.

One very fine example can be quoted of Escorts where they focused on deeper

penetration .In September-98 they established rural marketing sales. They did not rely on

T.V or press advertisements rather concentrated on focused approach depending on

geographical and market parameters like fares, melas etc. Looking at the 'kuchha' roads

of village they positioned their mobike as tough vehicle. Their advertisements showed

Dharmendra riding Escort with the punchline 'Jandar Sawari, Shandar Sawari'. Thus, they

achieved whopping sales of 95000 vehicles annually.. A year back HLL started

'Operation Bharat' to tap the rural markets. Under this operation it passed out low–priced

sample packets of its toothpaste, fairness cream, Clinic plus shampoo, and Ponds cream

to twenty million households. Thus looking at the challenges and the opportunities which

rural markets offer to the marketers it can be said that the future is very promising for

those who can understand the dynamics of rural markets and exploit them to their best

advantage.

4. Insight in to the giant’s wardrobe: Products under HUL

Hindustan Unilever, formerly Hindustan Lever Limited is the biggest FMCG player in

India. It has almost 130 brands encompassing various product lines and product mixes.

This organization has reach into the lives of a huge chunk of Indian population. Out of

the total brands, only about 30 of the brands are profitable and these are the brands on

which the company focuses its marketing efforts. These brands are as follows:

A. Personal wash:- Lux. Lifebuoy, Liril , Hamam, Breeze, Moti , Dove, Pears and

Rexona.

B. Laundry:- Surf Excel, Rin ,Wheel & Ala bleech

C. Dishwasher :- Vim

D. Disinfectants:- Domex

E. Foods:- Kissan (Jam,Ketchup,Squashes), Annapurna(Aata and salt), Knorr

Soups, Modern Bread

F. Ice-cream:-Kwality,Wall's

G. Bewerages:- Tea:- Brooke bond, Lipton Coffee:- Brooke bond bru

H. Water:- Pureit Water purifier.

I. Beauty Products:- Fair & Lovely, Lakme, Ponds, Vaseline and Aviance

J. Hair-Care:- Sunsilk naturals, Clinic , Dove and Lifebouy

K. Oral-Care:- Pepsodent and Close-up

L. Deo spray:- Axe and Rexona

M. Water Purifier:- Pureit

N. Ayurvedic Personal & health care:- Ayush

Almost all the marketing money that is spent by HUL is spent on these products. These

are the performers of this organization and hence are nurtured by the same. However we

know that a supplier has to have price differentiation if he wants to extract the consumer

surplus from the consumers. So, HUL has many products which are priced differently

and positioned differently in order to cater to different sections of the market so that all

sections use one or the other of its products. Thus it reaches out to everyone to embrace

its product offerings, from the low income groups to high income people seeking beauty

and value additions like glycerine soaps and moisturises enriched soaps. So even though

most of its products are not profitable it continues to produce and sell them in the market.

Another reason is that it does not want its distributers to keep and sell products of its

competitors which are in the same category but in different segment. When asked for a

product which is not profitable for the company to produce but in demand in that part of

the market, the company does not want to tell its distributers to take products of some

other company. It wants that its distributers to sell only their product offering and hence

they also put in the contract that those distributers will not sell the products of any other

brand in the same segment as the one in which they are selling the products of HUL.

Also, the organisation knows that even if the people move into a higher income group,

they generally keep to the same organisation but try to move to a higher value added

product from the same stable. So, they don’t want the situation to occur whereby a

consumer wanting to move to a different product offering of the company finds that there

is no product in the value or price category that he is seeking to move into. Additionally it

wants to impression its brand loyalty in the minds of everyone so even if due to their

changing economic or behavioural status they don’t jump to products of any other

organisation but rather stay in only their own stable if on a different offering.

So considering these factors the company does not shelve their loss making brands and

continues to produce and sell them.

5. The Distribution Network of Hindustan Unilever Limited

HUL is one of the few companies that have penetrated the Indian rural market to a much

greater extent than any competitor. This has happened purely because it has focused on

improving its distribution network over the years further and further. Today it is one of

the few companies in India which actually generates more than 50% of its revenues from

the rural market in India.

However the penetration of the rural market has been slow to say the least. The success

of HUL is a result of painstakingly hard work done by the company over a period of

decades after conducting market research and understanding the psyche of rural

customers. Very early on the company realized that it needed to focus on the rural market

in order to grow at a fast pace. Even while rejigging the distribution channel several

unique initiatives were launched like Project Shakti and Lifebuoy Swasthya Chetana

which will be elaborated in greater detail in the following pages. All these measures have

combined to give HUL the enviable market-share it commands in rural India today. The

distribution network of HUL today already covers about 50000 villages, reaching about

250 million rural customers through about 6000 sub-stockists.

In the following pages the evolution of the company’s rural distribution network is

examined following which there is a description of the unique and successful schemes

that the company has launched from time-to-time to specifically target the rural market

and how all these factors have combined to make HUL a household name in rural India.

6. Evolution of HULs distribution model

To meet the ever-changing needs of the customers HUL has tried to set up an efficient

distribution network that caters to all customers’ needs by providing the entire basket of

products of the company at all times under a single roof. It has followed a strategy of

building its distribution network in a transitional phase wise manner with evolution of the

model in each phase. This strategy together with providing the right incentives to

retailers, organizing demand-generating activities and maintenance of favorable trade

relation among other factors have enabled it to penetrate deep into the rural market.

6.1 Phase-1

In the first phase (from the time of the company’s inception) there were only 2 types of

distributors-wholesalers and large retailers. Wholesalers placing bulk orders directly with

the company. Large retailers also placed direct orders, which comprised almost 30

percent of the total orders collected.

After grouping all the orders the company salesmen placed an indent with the Head

Office. Goods were then sent to these markets, with the company salesmen as the

consignee. The salesman then collected and distributed the products to the respective

wholesalers, collected payment in cash, and the remitted the money back to the company.

6.2 Phase-2

Phase 2 spanned the decade of the 40s where the focus was to provide desired products

and quality services to the company’s customers. To achieve this, there was one

wholesaler in each market who was appointed as a “Registered Wholesaler,” a stock

point for the company’s products in that market. The company salesman however still

covered the market, and canvassed for orders from the rest of the trade. Then he would

distribute stocks from the Registered Wholesaler through distribution units which were

maintained by the company. A margin of 1 per cent was given to the Registered

Wholesaler to cover the cost of warehousing and financing the stocks held by him. The

Registered Wholesaler system, therefore, increased the distribution reach of the company

to a larger number of customers.

6.3 Phase-3

Here came the concept of “REDISTRIBUTION STOCKIST” (RS) who replaced the

Registered Wholesalers. The RS was now required to provide the distribution units to the

company salesman. He financed his own stocks and also provided warehousing facilities

to store them. Also he undertook demand stimulation activities on behalf of the company.

Another characteristic of this period was the changes brought in as the company realized

that only if the Redistribution Stockist himself was serviced well would he be able to and

willingly provide customer service. Thus the “Company Depots” system was introduced.

This system helped in transshipment, bulk breaking, and acted as a stock point to

minimize stock-outs at the RS level.

The model has continued to evolve so as to foster greater efficiency as the company

keeps on fine-tuning its distribution model. Recently the “Company Depot” system has

been replaced by a third-party system popularly known as the Carrying and Forwarding

Agents (C&FAs). These agents act as buffer stock-points to ensure that stock-outs at the

Redistribution Stockist level did not take place. The system has also resulted in savings in

cost because of direct transportation and reduced time lag in delivery. Customer service

to the RS has also vastly improved which is the most important benefit.

Over the years the Redistribution Stockist’s responsiblites have increased with more

functions being included. Providing service to retailers, screening for transit damages,

undertaking and implementing promotional activities, reporting sales and stock data are

some of the additional functions performed by the Redistribution Stockist today.

As the company has grown in size sot has been the number of factories and

manufacturing units. Hence in order to rationalize the logistics an planning tasks there

has been introduction of a Mother Depot (MD) and Just-In-Time (JIT) Depots system.

Under this certain C&FAs have been selected across the county to act as mother depots

with each Mother Depot having a certain minimum number of JIT depots attached to it

for stock requirements. First the Mother Depots receive the brands and packs required for

the type of markets the MD services from the manufacturing units. The JIT Depots then

draw their requirements from the MDs on a weekly or bi-weekly basis.

7. Focus on the rural markets

While rural markets presented a great potential to the company, reaching the rural

customers also entailed undertaking many challenges and overcoming obstacles. The

company has been at the forefront of experimenting with innovative methods to reach the

rural consumer and undertaking several ambitious projects which are given below.

7.1 Operation Bharat

The pioneering effort of HUL to reach rural homes and increase awareness among rural

customers was Operation Bharat launched by its personal products division in 1998-a 13

crore direct-consumer reach program which reached an estimated 2.2 crore homes. Under

this project each home was given a box of products, at a special price of Rs.15,

comprising low unit-price pack of different categories of products-dental-care (Pepsodent

toothpaste), skin-care (Fair & Lovely cream) ,hair-care (Clinic shampoo) and body-care

(Pond’s Dream flower talc) products along with educational leaflets , audio-visual

demonstrations, film songs and mythological serials interspersed with ads of Uni-Lever

products. Almost 160 vans ,each equipped with a TV and VCR, were used in this

operation with over a thousand promoters (which included distributors and other private

operators). The project strengthened the visibility of both the particular brands and

categories and helped eliminate barriers to trial by increasing awareness among potential

rural customers.

7.2 Operation Streamline

In 1998, the company launched Project Streamline to extend their distribution network in

the rural markets. Here, the goods are distributed from the C&F Agents to the Re-

distributors, who in turn pass it on to the Star Sellers who sells everything from

detergents to personal products. The project opened up a new distribution channel beyond

the territories that were covered by HUL’s 7,500 odd distributors. In less than two years,

it doubled’ the company’s reach in rural India. The company’s distribution network now

covered 60 per cent of the villages with population greater than 2,000, and having motor

able roads. To service the additional villages the company created a super-stockist, sub-

stockist hierarchy with the sub-stockist essentially being the stock-point for servicing

retailers in his area. The ultimate aim of this program is to have a Single Distribution

Channel for rural markets by consolidating across categories.

7.3 Indirect Coverage

Under the Indirect Coverage (IDC) method, company vans were replaced by vans

belonging to Redistribution Stockist, which serviced a select group of neighboring

markets.

7.4 Operation Harvest

Since the reach of conventional media in rural markets is low, awareness of different

products was weak. Although it was not feasible for the Redistribution Stockist to cover

all these markets due to the high costs involved these markets were heavily important due

to their untapped potential. Therefore this operation was launched to supplement the role

of conventional media in rural markets and in the process increase awareness and forge

loyalty with rural customers. To do so the company initiated mobile van operations in a

focused manner to create awareness and point-of-purchase access. As the company

demonstrated with Operation Harvest, such an exercise whose primary aim was to

increase brand awareness, is best done through van operations. During this exercise, vans

from HUL and its distributors did the rounds of 30,000 villages giving promotional

packs, showing products ads and identifying key retail and distribution points

7.4 Cinema-Van Operations

Cinema Van Operations are typically funded by the Redistribution Stockist and have

films and audio cassettes with song and dance sequences from popular films, also

comprising advertisements of HUL products. They have however been used for dual

purposes-to regularly service retailers in deeper and less accessible markets in addition to

making contact with the end customers. The company recognized early in its rural

distribution initiative that market share would be created only when demand is built up

through awareness, trial and consistent availability. The company literally had to build

up’ the market village by village in its rural initiative. But in the end-result it managed to

do achieve its objectives-achieve penetration in the rural market-far greater in fact that

any other company. Cost-effective distribution solutions were first attempted by HUL,

and many other companies are learning from its model today.

7.5 Project Shakti

An unique initiative launched by the company- Project Shakti is a low-cost distribution

network HUL launched in 2001 in tie-up with rural women’s self-help groups. In 15

states, it has worked with self-help groups and non-governmental organizations to

identify underprivileged women and train them to be saleswomen. These women

entrepreneurs, or Shakti Ammas, as they are called act as the end-point in HUL’s rural

distribution chain. A woman from a SHG selected as a Shakti entrepreneur receives

stocks at her doorstep from the HUL rural distributor and sells direct to consumers as

well as to retailers in the village. Each Shakti entrepreneur services 6-10 villages which

have a population of less than 2000.

The Shakti model trains women from SHGs to distribute HUL products of daily

consumption such as detergents, toilet soaps and shampoos - the latter’s penetration being

only 30 per cent in rural areas. The women avail of micro-credit through banks. On

average, a Shakti amma records monthly sales of Rs10,000, on which she earns Rs600-

800; those earnings come out of a 3% discount that HUL gives her on its products, as

well as a trade margin of approximately 10%. A really outstanding Shakti amma—a

Diamond Shakti amma—can even book Rs30,000-40,000 of sales every month, often

turning her house into an HUL store.

There are now 45000 Shakti entrepreneurs serving over 1,35,000 villages in India across

15 states. So resoundingly successful has been this program in increasing rural

penetration that the parent company of HUL-Unilever is now thinking of replicating

Project Shakti globally.

7.6 Lifebuoy Swasthya Chetana

This rural awareness program launched by HUL in 2002 endeavors to induce adoption of

hygienic practices among rural Indians and aims to bring down the incidence of

diarrhoea. Launched with the objective of spreading awareness about the importance of

washing hands with soap the company simultaneously introduced a smaller bar (18 gram)

of Lifebuoy soap priced at two rupees, to encourage people with low incomes to use

soap. In a single stroke the company identified itself with the needs of the rural customer

where health and hygiene is the primary concern and managed to establish its Lifebuoy

soap as the most popular soap in rural India.

7.8 Recent Developments

In an attempt to further increase efficiency and cut costs HUL has further fine-tuned its

distribution model with the elimination of one layer-that of the Star Sellers. Previously

the Rural Distributors serviced these Star Sellers which in turn serviced the rural outlets

in every village. Now with the elimination of Star Sellers the distributors service the rural

outlets directly leading to increased efficiency and better quality of service.

HUL has successfully penetrated the rural market using its many flagship initiatives and

constantly fine-tuning its distribution model. The company continues to grow with its

mission of identifying itself with the needs of the Indian customer. Today it has

successfully tapped into 250 million households in rural India. But considering that rural

India comprises nearly 72% of the total population in India with 720 million people

(according to the 2001 Census), a lot more needs to be done to increase the penetration of

HUL in the rural market.

8. Rural Marketing: The Road Ahead

To succeed in the rural markets companies will need to adapt the 4 Ps of the marketing to

the 4 As in the strategy – Awareness, Acceptability, Availability and Affordability. Due

to limited reach of the mass media (television, radio and the press), marketers have to

come up with creative and effective ways of marketing with traditional media – melas,

haats, jatras, puppetery – to create in the media dark markets.

The rural consumers are getting better day by day and they have more money to spend

these days, thanks to government programs like NREGS and Pradhan Mantri Gram

Sadak yojana, the villages have better accessibility these days and the villagers

consuming power is also improving. And when we see into FMCG goods, the urban

market is more or less saturated. So the companies would grow if they have good

distribution channels in place and come up with innovative marketing strategies for the

rural masses. Another important aspect of many rural families these days is that they have

one or more member working in a town or city and sends the bulk of his savings to his

family thereby improving their spending power. Microfinance also helps in laying money

in the hands of the poorest of the poors.

8.1 Rural Psyche:

There’s a gamut of things that differentiate the rural masses from their urban

counterparts. So in order to have better impact on rural India, the companies need to

understand the rural consumers mind. The same thing might arouse different feelings in

the minds of the rural consumers because of their upbringing. The rural consumer, unlike

his urban counterpart, is quite content to satisfy his basic needs, relevant to his

environment. He is less adventurous, averse to taking risk and prefers to stay with the

tried and tested. A lot of persuasion by an influence, whose achievements he respects, is

required to convince him to try new products. For products which are higher on the

involvement scale (not necessarily more expensive), opinion leaders too play a significant

role.

Unlike the urban consumer, peer group pressure is not very significant in initiating

product trial. He is not driven by ‘status symbols’ acquired by his neighbors in order to

upgrade to a better lifestyle.

Though high in self-esteem, he is quite content with his everyday life, resigned to adverse

circumstances and less ambitious about comfort and material possessions, except those

those seem to provide security.

Fig 2: A case in example is cited below:

Rural Taste Subject Urban Taste

Bold and Primary Colours Colours Liked Shades of colours, Light Hues

Cinema, ‘Nautanki’,

‘Dangals’, ‘Melas’

Entertainment Theme Parks, Internet, Travel

Synthetics, colourful Clothes Denim, Cottons, Designer

Red – Happiness, Auspicious,

Green – Prosperity

Colour Relevance Red – Danger, Green – Safety

Source: (4)

8.2 Word-of- Mouth

Revital, a pill positioned as an energy booster and health supplement for all-round well-

being, is now being consumed by farmers in rural Punjab and even by the labour working

in the fields in Bihar(perhaps by word of mouth from Bihari labours returning from

Punjab) because it is said to improve the productivity. Each pill costs Rs. 6, which is 10

percent or more of their average daily wages.

On the other hand, consumers in urban India consume this pill believing that it increases

their sexual performance because it contains ginseng.

We wonder if Ranbaxy would have thought it would sell quite a sizeable proportion of

these tablets to people whose daily income is not even 10 times of the cost of the tablet.

9.0 Conclusion

HUL over the years has been pursuing the ‘Power Brands’ strategy. This means that

some brands which show potential growth are developed and promoted more than other

brands which have low potential attractiveness in future. The power brands are invested

in and promoted such that they can skim large revenues and generate cash flows that can

compensate for weaker brands as well.

The first half of the 2000s represented a difficult period for the company, which was

faced with an economic slowdown in its core Indian markets. At the same time, HLL

underwent a dramatic restructuring as part of the parent company's global "power brand"

strategy. The company began streamlining its brand portfolio, which had grown to some

110 brands by the beginning of the decade, cutting that number back to just 35 brands by

mid-decade. As part of this refocus, HLL also began selling off its noncore operations,

including its chemicals businesses. That process was completed in large part with the

sell-off of the last of HLL's tea plantation and production units, Tea Estates India, which

was sold to a subsidiary of the Woodbriar Group in 2006.

In 2001, Hindustan Lever Limited (HLL), the Indian arm of the Unilever group,

restructured its strategy to concentrate on its core brands – brands that add to the bottom

line of the company. This was because the FMCG segment, which accounts for most of

HLL's business, witnessed lower growth rates in comparison to the double digit growth

rates in the nineties.

Besides, the company's core competence was in these consumer brands where the top 30

of its brands contributed to 75% of its sales. Based on these factors, HLL identified 30

national power brands and 10 regional brands from its portfolio of around 110 brands and

directed its entire marketing efforts at developing and building them. Focus on select

brands helped HLL to increase the scale of resources and spend more per brand.

According to Mr. M. S. Banga, Chairman, HLL, "Our objective is to deliver directionally

with the focus on certain key products.

By undertaking a power brand strategy, HLL exited from certain segments. This enabled

regional players to operate and develop their brands. Besides, some of the sub-brands

were repositioned under mother brands in different segments

Some problems of power branding strategy-

1. Execution is difficult as a lot of brands need to be phased out gradually.

2. Regional players come in to fill up the void left by withdrawl of brands which

increase competition.

3. Penetration is difficult to achieve with a power brand strategy. Segmentation is a

problem.For exmple,people in rural India have a completely different set of

preferences, so a company like HUL which is trying to improve its reach in rural

India can face a problem due to this strategy.

4. Power branding adds to the bottomline of the company but less to the topline.

References

1. S John Mano Raj and K Govindaswamy International Marketing Conference on

Marketing & Society, 8-10 April, 2007, IIMK

2. Editorial, The Times of India, 30th May 2005.

3. Editorial column, The Economic Times, 9 February 2005.

4. The Rural Marketing Book by Pradeep Kashyap & Siddhartha Raut, 2007 edition

5.