2013 Integrated Project

Project Report On

Hindustan Unilever Ltd

(Soap and Detergents)

By Nejo Samuel Varghese

Post Graduation Diploma in Management E-Business (2012-14)

Welingkar Institute of Management Development & Research, Bangalore

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BONAFIDE CERTIFICATE

This is to certify that Project Entitled Hindustan Unilever Ltd-Soap and Detergent Sector is successfully done by Mr Nejo Samuel Varghese, during the Third Trimester as part of the course curriculum of the Post Graduate Diploma in Management (E-Business) through the Prin. L. N. Welingkar Institute of Management Development & Research, Bangalore. This project in general is done under my guidance, I wish him All the Best for future!

Prof. Murali Mohan HOD Operations, Welingkar Institute of Management, Bangalore

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ACKNOWLEDGEMENT

I would like to extend my deep sense of gratitude to Prof. Murali Mohan, Welingkar Institute of Management, Bangalore my project mentor. During the course of this study, many useful suggestions and constructive criticism came across which really helped me a lot in giving this project a professional look. I am indeed very thankful to her for giving me an opportunity to work on this project. I am sure the immense learning that I have had from this project would help me stand in good stead in the future. I extend my heartiest thanks to all those persons whose willing cooperation led to the timely completion of the project. Also I would like to thank all those who have helped me directly or indirectly in completing the project. In completing this study, I did my level best correcting my shortcomings to possible extent and I sincerely hope that this report will serve its purpose.

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TOPICS:
I. II. III. IV. V. VI. VII. VIII. IX. Perspective Management Individual in organization Business communication Business analysis Market Analysis Business process Surveys Costing and Financial analysis Conclusion

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Perspective Management

General Information
Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer Goods Company with a heritage of over 75 years in India and touches the lives of two out of three Indians. HUL works to create a better future every day and helps people feel good, look good and get more out of life with brands and services that are good for them and good for others. With over 35 brands spanning 20 distinct categories such as soaps, detergents, shampoos, skin care, toothpastes, deodorants, cosmetics, tea, coffee, packaged foods, ice cream, and water purifiers, the Company is a part of the everyday life of millions of consumers across India. Its portfolio includes leading household brands such as Lux, Lifebuoy, Surf Excel, Rin, Wheel, Fair & Lovely, Ponds, Vaseline, Lakm, Dove, Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe, Brooke Bond, Bru, Knorr, Kissan, Kwality Walls and Pureit. The Company has over 16,000 employees and has an annual turnover of around Rs. 21,736 crores (financial year 2011 - 2012). HUL is a subsidiary of Unilever, one of the worlds leading suppliers of fast moving consumer goods with strong local roots in more than 100 countries across the globe with annual sales of about 46.5 billion in 2011. Unilever has about 52% shareholding in HUL.

Vision & Mission

We work to create a better future everyday We help people feel good, look good and get more out of life with brands and services that are good for them and good for others. We will inspire people to take small everyday actions than can add up to a big difference for the world. We will develop new ways of doing business that will allow us to double the size of our company while reducing our environmental impact.

Soap and Detergent Brands

1. Soaps

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Soap Products

1. Variants

Since 1993, Indian women have relied on Dove for beautiful skin

Dove-Gentle Exfoliating Bar Dove-Fresh Moisture Dove-Crme Beauty

2. Lifebuoy has journeyed from humble beginnings of being a chunky red bar of soap to an evolved range of general and specialized products across formats, offering solutions in the health and hygiene space. Key facts Variants Lifebuoy Total 10 Lifebuoy Mild Care Lifebuoy Betel Leaf Lifebuoy Vita Protect Lifebuoy Cool Fresh Worlds No. 1 Selling Germ Protection Soap Distribution across 50 lakh + stores across the country

3. With the goodness of glycerine & natural oils, Pears is trusted for being gentle, and is recommended by doctors and paediatricians worldwide. Variants Pears Pure & Gentle Pears Germ shield Pears Oil Clear

4. Launched in 1931 as a mild, family soap.Perhaps the only Indian-made natural soap at the time, Hamam was embraced by mothers and doctors alike, for its purity and safety on skin.

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2013 Integrated Project Key Facts

A 300 Crore Herbal soap brand Market leader in Tamil Nadu

5. pleasure. Key facts

Lux is the worlds most iconic beauty bar & has a 90 year history of glamour and

The largest selling soap brand in the world The No.1 soap brand in India A $ 1 billion brand present in many countries across the globe

6. Launched as early as 1947, Rexona is a natural skin care soap that gives you silky soft skin through the use of natural ingredients.

7. Ayush Therapy range is endorsed by Arya Vaidya Pharmacy, one of Indias most reputed houses of Ayurveda and created by Hindustan Unilever Ltd., Indias leading FMCG Company.

8. .Key facts

One of the oldest soap brands in India A brand that has been consistent in bringing alive freshness A brand that has managed to create breakthrough advertising over the years

9. Key facts

Launched in 1988 as a family beauty soap with the promise of a fresh feeling of nature Comes in 3 attractive variants French Rose, Divine Sandal, Lemon Splash

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1.

A pioneer in the Indian detergent powder market, Surf Excel has constantly upgraded

itself over the years, to answer the constantly changing washing needs of the Indian homemaker.

2. Rin was launched in India as a bar in 1969 with the iconic lightning mnemonic. Over the years, the brand has grown to become synonymous with sparking white clothes for its consumers. Rin detergent powder was launched in 1994. This was the first product extension from the iconic brand that stood for whiteness in laundry.

3. Magic is Unilevers revolutionary Water-Saver that removes all lather from clothes in just the first rinse.

4. One of India's largest detergent brands, Active Wheel aims to bring delight into the lives of millions of women across the country by giving them a blissful laundry experience reminiscent of the fragrance of thousands of flowers.

5. Sunlight has the innovative colour guard technology that keeps your clothes colours as new as ever, even after 40 washes. The No. 1 brand in the states it is present in, Bengal and Kerala.

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Individual In Organization Company Details

Incorporation Year: 1933 Chairman: Mr.Harish Manwani CEO and Managing Director: Mr.Nithin Paranjpe Company Secretary: Mr.Dev Bajpai Chief Fiancial Officer: Mr.R.Sridhar Executive Director, Supply Chain: Mr.Pradeep Banerjee Auditor: Lovelock & Lewes Independent Directors: Mr.A.Narayan Mr.S.Ramadorai Dr.R.A.Mashelkar Mr.O.P.Bhatt Registered Office: Hindustan Unilever Limited, Unilever House, B. D. Sawant Marg, Chakala, Andheri (E), Mumbai - 400 099.

Managing Committee

Harish Manwani :( COO and non-executive chairman of HUL) Manwani joined the then Hindustan Lever Limited and became a member of the board and took the responsibility of Personal Products business as Director. He also took care of business group in Central Asia and Middle East. He became Senior Vice President of Global Hair Care and Oral Care in 2001 and moved to the UK. The next year he was appointed President of Home and Personal Care of the Latin America division. He was also made Chairman of Unilever's Latin America Advisory Council. He became President and CEO of HPC North America in 2004.He joined Unilever in 2005 as President of Asia and Africa division. He was also made non-executive chairman of Hindustan Unilever. He was appointed as the global COO for Unilever in June 2011.

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Nitin Paranjpe :( MD and CEO of Hindustan Unilever) In his early years in Hindustan Unilever, Paranjpe worked as Area Sales Manager - Detergents and then Product Manager - Detergents. In April 1996, he became the Branch Manager - Chennai and in February 1999 he was appointed as a member of the Project Millennium Team. In 2000, he moved to Unilever London, and was involved in a review of the organization structure. During 2001, he was an Executive Assistant to the Chairman and Executive Committee in Unilever London. On his return to India in 2002, Paranjpe became the Category Head - Fabric Wash and Regional Brand Director (Asia) for several Laundry and Household Cleaning (HHC) brands. In 2004, he became Vice President Home Care (Laundry & HHC) India, responsible for the Home Care business. He was appointed as the Executive Director for the Home & Personal Care business in March 2006.Paranjpe was appointed as the Managing Director and Chief Executive Officer of the Company in April 2008. He is also an Executive Vice President of Unilever Companies in South Asia.

Business Communication Internal Communication

Internal software program - Full factory and production activities are controlled by ERP System. Finished Goods dispatch is also controlled through ERP. The horizontal, upward and downward Communication also takes place through written medium (e-mail). Each employee is provided with the company email id which the employee uses to communicate company related matters with other employees in organization.

External Communication
External communication is the exchange of information and messages between the organization and other organizations, groups, or individuals outside its formal structure. The goals of external communication are to facilitate co-operation with groups such as suppliers, investors and shareholders, and to present a favourable image of an organization and its products or services to potential and actual customers and to society at large. All the C&F agents are interlinked with the companies ERP system using extranet service which helps the C&F agents to be in touch with the company all time. Other communications are done using the employee personal email id. Other modes of communication are through Annual Report Dealers Meet Exhibitions Media Internet Nejo Samuel Varghese

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Market Analysis Swot Analysis

Strengths:
Strong Brand Portfolio Pricing The Variety of Products Offered Strong Distribution Network: Hindustan Unilevers distribution network is recognised as one of its key strengths. Its focus is not only to enable easy access to but also to touch consumers with a three way convergence of product availability, brand communication, and higher level of brand experience.HUL products manufactured across the country , are distributed through a network of about 7000 redistribution stockiest covering about 1 million retail outlets. HUL distribution network in Rural India covers about 50000 villages, reaching about 250 million consumers through 6000 sub-stockists. Innovation and Strong R&D: HUL has strengthened their R&D units in Mumbai and Bangalore with integration with Unilever Global. R&D centres in India have over 200 highly qualified scientists and technologists .With strong support from their R&D HUL is ready to face the challenges arising from the increased competition intensity. Highly Skilled Human Resource: The ability to attract the best talents in the market and to retain it has become one of the key success factors of HUL. Currently HUL has an efficient manpower of 16000 employees and over 1300 managers.

Weakness:
High Competition: HUL is facing high competition from companies like ITC,P&G etc. P&G and HUL have entered into a price-war, as P&G is giving tough competition to HUL soaps and detergents brands. The 2010 price war, though lower in quantum, has just started and is likely to significantly impact HULs Earnings Losing Market share: HUL is steady losing its market share in segments including soaps, hair, oral & skincare due to its strong competitors. High Advertising Costs: HUL is incurring high advertisement costs in current fiscal year. There is 66% increase in the advertising budget.

Opportunities:
Large domestic market: There is huge market development opportunity in countries like India with population of over a billion, as consumption is still one-third that in Indonesia and one-seventh that in China. Changing Lifestyles: Per capita income of Indian customer is increasing and FMCG products are relatively elastic in nature hence the expected sale should increase. Increasing Consumption Pattern: People are more brand conscious now a days. And so HUL can keep on introducing innovative products which suits the customer needs

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2013 Integrated Project Diversification: HUL can enter into the new brand segments like confectionery, medicines etc. Untapped rural Market: With the presence of 12.2% of the world population in the villages of India, the Indian rural FMCG market is something of high importance for HUL.

Threats:
Increasing costs of raw material: Input costs have been on a rise. Prices of palm oil and coprakey components toilet soaps have surged. Every 10% change in palm oil prices affects Hindustan Unilevers operating profit margin by 60 basis points. Segment threat: Laundry is important business for HUL and we have strong share position.HUL faces competition not only from rival multinational company, Procter & Gamble, but also from a slew of new price-warrior brands that have emerged in the mass segment. There is an extraordinary situation in the laundry market, over 500 new brands of laundry and over 200 washing powders are posing a new threat to Hul. Tax & Regulatory Structure: Some FMCG products such as shampoos, processed food, soft drinks and toiletries containing alcohol attract high rates of excise duty and sales tax. Such high tax incidence hampers growth of these product categories.

PEST Analysis
PEST analysis provides more efficiency towards scan the environment for future strategic planning. PEST stands for Political, Economical, Socio cultural, Technological, and it is very useful tool for develop new planning. Political/Legal Analysis Political and legal factors have huge impact on the business for develop new strategies. Unilever is subject to local, regional and global rules, laws and regulations. These rules and regulations cover diverse areas such as product safety, product claims, trademarks, copyright, patents, employee health and safety, the environment, corporate governance, listing and disclosure, employment and taxes. Failure to comply with laws and regulations could leave Unilever open to civil and criminal legal challenge and may result in fines or imprisonment of personnel. Further, reputation could be significantly damaged by adverse publicity relating to such a breach of laws or regulations. Changes to taxation and measures to minimise unemployment have also affected Unilevers economic performance. In some regions Govt. has imposed heavy duties on imports and raw materials and it had a negative impact on production capacity. However, Unilever is quite good in managing relations with Governments. Economic Analysis Unilever market environment is becoming highly competitive with more number of competitive players in the market. Macroeconomic environment is highly uncertain. Consumers would not want to buy expensive product or brands due to current economic tide. Economic Decline in business during an economic downturn has resulted in customer and suppliers to default. Unilevers business is dependent on continuing consumer demand for its brands. Reduced consumer wealth driven by adverse economic conditions has resulted in consumers becoming unwilling or unable to purchase Unilever products, which has adversely affected cash flow, turnover, profits and profit margins. Adverse economic conditions have resulted in the impairment of some of intangible assets which are

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2013 Integrated Project in the form of brand names. However, recession has increased the demand for some of the home care products. Unilever is operating in different markets, which have reacted to recession in different ways. Social Analysis Unilever has developed a strong corporate reputation over many years for its focus on social and environmental issues, including promoting sustainable development and utilisation of renewable resources. It is very conscious about safety and health of its employees and accident rate is decreased every year. Unilevers vision is to help people feel good, look good and get more out of life with brands and services that are good for them and good for others. It has successfully maintained high social and environmental standards by designing and producing products that are safe for consumers. Unilever is working on so many social welfare projects like World food programme and safe drinking water. Unilever is using environment friendly materials and packing stuff. The Unilever brand logo now displayed on all products and advertising, increases its external exposure. Unilever has built its image as an environment friendly and socially responsible company. Technological Analysis Unilever has been spending on IT to improve its business especially in the area of e-business so as to improve brands image and quality of its products. Unilever know that failure to provide sufficient funding to develop new products, lack of technical capability in the R&D function and quickly roll out the products may adversely impact its cash flow, turnover, profit and profit margins and affect reputation. High level of automation is one of the critical success factors of Unilever that differentiates then from their competitors and serves as a source of competitive advantage. Today, Unilever is trying to minimize cost through IT efficiencies at global level. In addition, Unilever Technology Venture works in collaboration with Unilever R&D group to help Unilever meet consumers needs. Area of concern is genomics, advanced bioscience, advanced materials science and nano technology.

BCG MATRIX -HUL products

Cash cows are units with high market share in a slow-growing industry. These units typically generate cash in excess of the amount of cash needed to maintain the business. They are regarded as staid and boring, in a "mature" market, and every corporation would be thrilled to own as many as possible. They are to be "milked" continuously with as little investment as possible, since such investment would be wasted in an industry with low growth. Dogs are more charitably called pets, are units with low market share in a mature, slow-growing industry. These units typically "break even", generating barely enough cash to maintain the business's market share. Though owning a breakeven unit provides the social benefit of providing jobs and possible synergies that assist other business units, from an accounting point of view such a unit is worthless, not generating cash for the company. They depress a profitable company's return on assets ratio, used by many investors to judge how well a company is being managed. Dogs, it is thought, should be sold off. Question marks (also known as problem child) are growing rapidly and thus consume large amounts of cash, but because they have low market shares they do not generate much cash. The result is large net cash consumption. A question mark has the potential to gain market share and become a star, and eventually a cash cow when the market growth slows. If the question mark does not succeed in becoming the market leader, then after perhaps years of cash consumption it will degenerate into a dog when the market growth declines. Question marks must be analyzed carefully in order to determine whether they are worth the investment required to grow market share.

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2013 Integrated Project Stars are units with a high market share in a fast-growing industry. When growth slows, stars become cash cows if they have been able to maintain their category leadership, or they move from brief Stardom to Dogdom

Star Lux:

Enjoys a market share of 16%. This industry has a high growth rate of 10%. HUL comes with different varieties quite frequently to maintain their market position.

Surf Excel: Has a market share of 37 % in 9000 Cr Market. Cash Cow Axe:

Market share of 70% in 200 Cr market Major Competitors: Nike, Park Avenue

Vaseline Petroleum Jelly: Market share of 90% Major Competitor : Johnson & Johnson Question Mark Rin:

Hul has 35% market share in detergent industry. Rin has only 4.8% market share Major Competitors :Tide, Ariel

Domex: Market share is only 20 %. Major Competitor: Harpic (Market share of 70%)

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Dog Wheel: Mainly for low based income. Market share is falling. Major Competitors: Fena, Nirma

The % Expenses of HUL is shown below

Competitor Analysis
Detergents
Brief: The detergent market in India can be divided into premium (Surf, Ariel), mid-price (Rin, Henko,Tide) and popular segments (Ghari, Wheel, Nirma, Mr. White). They account for 15%, 40% and 45% of the market share, which is 60% of the total market. Regional and small unorganized players still account for the 40% market. Per-capita consumption of detergent in India at 2.7 kg is the lowest in the world. History: HLL entered India in 1957 and was the undisputed leader in detergent space. Surf was the most selling detergent in India. However in 1980's Surf suffered huge losses at the hands of a new and small firm, Nirma Chemicals. Nirma was launched in 1969 and its primary focus was to create a good, branded product at affordable prices. The product was priced far lower than the market leader Surf. Nirma caught the attention of the middle-class and lower middle class customers and had such great sales that it evicted HUL's Surf from the No. 1 position in 1985. HLL then had a look at the situation and found that there was a large market segmentation in detergent space and then came up with lower priced Wheel (green) and Rin (blue) detergent powders targeted at different market segments. This segmentation helped HLL regain part of its lost market. In late 2011 and early 2012, Ghari beats Wheel and takes the numero-uno spot in Indian detergent industry. Ghari was launched by RSPL (Rohit Surfactancts Pvt. Ltd.), the product was also less priced and targeted at the rural customers, middle class and lower-middle class customers. It also had more or less the same positioning strategy as Nirma

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Market Capitalization: Currently, Ghari is the market leader with a market share of 17.3%, Wheel is at number 2 with a share of 16.9%, and Tide is 3rd with a market share of 13.5%. Nirma has market share of less than 6% now. HUL is still the overall market giant with Wheel, Rin and Surf (one product for each segment) doing well. But Ghari is now the overall market leader. However dollar wise HUL is still the market leader. Ghari has grown from strength to strength with its target market segment and affordable pricing. Ghari has spread its distribution network to more states now and directly reaches rural markets, which is its biggest audience. The company has entered 10 more states in the last three years and now peddles its ware in 19 states, through more than 3,500 dealers. It has 21 manufacturing units, 15 of which were added since 2006.The company continues to target cheaper and unbranded local products to create more market for Ghari detergent powder. Villagers are persuaded to move to a branded detergent like Ghari which is well within their reach and has far better cleansing power than slabs of cheap local soaps. Combined with its great distribution network and a good product, the sales of the Ghari detergent have risen admirably.A one kg pack of Ghari detergent is priced at Rs 35 and a 2.5 kg pack is priced Rs 85 only.The company participates in exhibitions, melas and road shows mostly in rural India. That Ghari spends under 2% of sales on A&P - as against 12-14% spent by its MNC peers - helps it sustain its low-margin, high-volume strategy. HUL after losing out to Nirma, analyzed the situation carefully and instead of reducing the price of Surf, introduced flanking brands of the likes of Wheel, Rin and Sunlight to compete in customer segments that were being challenged by competitors like Nirma.

Soaps
Brief: Soap was introduced in India by the Lever Brothers during the British reign in the country. There after soaps were imported from England and marketed in India. However the first local soap manufacturing unit was set up by Mr. Jamshedji Tata in Cochin, Kerala around the period 1918. Since then soaps have become an important part of the lives of the people of the country. Today India has one of the most developed soap markets and is dominated by numerous multinational and also quite a few major domestic companies. Some of the most popular soap brands in India include Lux, Cinthol, Lifebuoy, Liril, Shikakai, Rexona, Nirma, Dettol etc.

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2013 Integrated Project The soap market in India which was once only restricted to the urban regions has now covered practically the remotest corners of the country. The ever increasing demand for personal care products in India is mostly due to the sizable population, greater hygiene concerns and the rising income levels of the people of the nation. But the per capita consumption of soap in India is 800 gms as against USA 6.5kgs,4 kgs in china and 2.5 kgs in Indonesia. Market Capitalization: The Indian soap market is ruled by three major giants; Hindustan Unilever Limited, Godrej and Nirma. These three companies alone account for 84% of the total market share in India. H.U.L. with its brands like Lux and Lifebuoy has dominated the Indian lather industry since the last few decades. Nirma another top soap brand in India is one of the major competitors of HUL and holds a 16% market share in the Indian soap market. The primary aim of the top soap brands in India today is to expand the number of rural consumers since the rural consumers consists of 70% of the total population of the country . The overall soap penetration in Indian households is 88%. The top soap brands in India are ranked according to usage and popularity since people belonging to different strata's of societies use different brands of soap.
80 60 40 20 0 HUL Godrej Nirma Others

Other tactics to fight a price war:

Compete on quality: HUL can increase product differentiation by adding features to a product, or build awareness of existing features and their benefits. They can emphasize the performance risks in low priced options and reveal their products' cost advantage. Co-opt contributors: HUL can form strategic partnerships by offering cooperative or exclusive deals with suppliers, resellers or providers of related services. Use complex price actions: HUL can offer bundled prices, two-part pricing, quantity discounts, price promotions, or loyalty programs for its products. Deploy simple price actions: A company can adjust the product's regular price in response to a competitor's price change or another potential entry into the market. ie: it can price the product attractively and reduce the quantity offered.

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Business Analysis Distribution Network of HUL

Evolution over time: The HULs distribution network has evolved with time. 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 intent with the Head Office. Goods were sent to these markets, with the company salesman as the consignee. The salesman then collected and distributed the products to the respective wholesalers, against cash payment, and the money was remitted to the company. The focus of the second phase, which spanned the decades of the 40s, was to provide desired products and quality service to the companys customers. In order to achieve this, one wholesaler in each market was appointed as a "Registered Wholesaler," a stock point for the companys products in that market. The company salesman still covered the market, canvassing for orders from the rest of the trade. He then distributed stocks from the Registered Wholesaler through distribution units maintained by the company. The Registered Wholesaler system, therefore, increased the distribution reach of the company to a larger number of customers. 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 second characteristic of this period was the establishment of the "Company Depots" system. This system helped in transhipment, bulk breaking, and as a stock point to minimize stockouts 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 (C&FAs). The C&FAs act as buffer stockpoints to ensure that stockouts did not take place. The C&FA system has also resulted in cost savings in terms of direct transportation and reduced time lag in delivery. The most important benefit has been improved customer service to the RS. The role performed by the Redistribution Stockists includes: Financing stocks, providing warehousing facilities, providing manpower, providing service to retailers, implementing promotional activities, extending indirect coverage, reporting sales and stock data, demand simulation and screening for transit damages. Detail Overview: The distribution network of HUL is one of the key strengths that help it to supply most products to almost any place in the country from Srinagar to Kanyakumari. This includes, maintaining favourable trade relations, providing innovative incentives to retailers and organizing demand generation activities among a host of other things. Each business of HUL portfolio has customized the network to meet its objectives. The most obvious function of providing the logistics support is to get the companys product to the end customer.

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Channel Design
Hindustan Lever Limited (HUL) has two types of channel selling Regular (traditional) retail channel, Direct Selling Channel in the name of Hindustan Lever Network (HLN) HUL has a well entrenched high distribution model which comprises of C&FAs, Redistribution Stockists, wholesalers and retailers. Hindustan Unilevers distribution network is recognized as one of its key strengths. It focuses on Product availability, Brand communication, and higher levels of brand experience.

HULs Sustainable Living Commitment

By 2015, HULs Lifebuoy brand aims to change the hygiene behaviour of 1 billion consumers across Asia, Africa and Latin America by promoting the benefits of hand washing with soap at key times. With Dove brand, HUL is helping millions of young people improve their self-esteem through educational programmes. By 2015 HUL aim to have helped 15 million young people. Half the greenhouse gas impact of our products across the lifecycle by 2020. HUL has set greenhouse gas reduction targets across their value chain from sourcing, manufacturing, transport and refrigeration all the way through to consumer use of our products. To achieve these targets HUL need to work with their suppliers as well as offer new products that can help people reduce greenhouse gas impact. Half the water associated with the consumer use of HULs products by 2020. HUL will develop comprehensive plans with its suppliers and partners to reduce the water used to grow our crops in water-scarce countries. By 2015 HUL intend to reach 200 million consumers with products and tools that will help them to use less water while washing and showering. HULs goal is to reach 400 million by 2020. Turning sachet waste into fuel through Pyrolysis: Over 40 billion sachets go out of Unilever every year. However, low recycling value and the lack of disposal facilities means sachets can end up as litter or landfill. To reduce the environment impact of sachets, Unilever has improved the design of its sachets. It has optimized the use of laminate material, significantly reducing solid waste by weight. HUL took the first step in this direction. It set up a taskforce to find solutions to dispose off sachets and flexible plastics in general more sustainably by recovery of its energy value. Pyrolysis is a process in which the plastic laminates, in general and sachets, in particular, are put in a reactor and de-polymerized to convert them into vapour state. This vapour is then condensed to general fuel oil, thus recovering energy embedded in the sachets. Currently, this oil is being tried in one of our factory for consumption in boiler. HUL will source 75% of the paper and board for packaging from certified sustainably managed forests or from recycled material by 2015. HUL will reach 100% target by 2020. HULs goal is to engage with at least 500,000 smallholder farmers in our supply network. This will help them improve their agricultural practices and thus enable them to become more competitive. By doing this will improve the quality of their livelihoods. HUL will increase the number of Shakti entrepreneurs that they recruit, train and employ from 45,000 in 2010 to 75,000 in 2015 thus provide more employment opportunities. Nejo Samuel Varghese

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Business Process Distribution System of HUL:

HULs products are distributed through a network of 4,000redistribution stockists, covering 6.3 million retail outlets reaching the entire urban population, and about 250 million rural consumers. There are 35 C&FAs in the country who feed these redistribution stockists regularly. The general trade comprises grocery stores, chemists, wholesale, kiosks and general stores. Hindustan Unilever provides tailor made services to each of its channel partners. It has developed customer management and supply chain capabilities for partnering emerging selfservice stores and supermarkets. Around2, 000 suppliers and associates serve HULs 40 manufacturing plants which are decentralized across 2 million square miles of territory. HUL C & F Agents Redistribution Stockists Wholesalers Rural Retailers Urban Retailers Consumers

Distribution at the villages:

The company has brought all markets with populations of below 50,000 under one rural sales organisation. The team comprises an exclusive sales force and exclusive redistribution stockists. The team focuses on building superior availability of products. In rural India, the network directly covers about 50,000 villages, reaching 250 million consumers; through 6000 substockists.

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HUL approached the rural market with two criteria the accessibility and viability. To service this segment, HUL appointed a Redistribution stockist who was responsible for all outlets and all business within his particular town. In the 25% of the accessible markets with low business potential, HUL assigned a sub stockist who was responsible to access all the villages at least once in a fortnight and send stocks to those markets. This substockist distributes the companys products to outlets in adjacent smaller villages using transportation suitable to interconnecting roads, like cycles, scooters or the ageold bullock cart. Thus, Hindustan Unilever is trying to circumvent the barrier of motor able roads. The company simultaneously uses the wholesale channel, suitably incentivising them to distribute company products. The most common form of trading remains the grassroots buyandsell mode. This enables HUL to influence the retailers stocks and quantities sold through credit extension and trade discounts. HUL launched this Indirect Coverage (IDC) in 1960s.Under the Indirect Coverage (IDC) method, company vans were replaced by vans belonging to Redistribution Stockists, which serviced a select group of neighbouring markets.

Distribution at the Urban Centres:

Distribution of goods from the manufacturing site to C & F agents take place through either the trucks or rail roads depending on the time factor for delivery and cost of transportation. Generally the manufacturing site is located such that it covers a bigger geographical segment of India. From the C & F agents, the goods are transported to RSs by means of trucks and the products finally make the last mile based on the local popular and cheap mode of transport.

New Distribution Channel-Project Shakti:

This model creates a symbiotic partnership between HUL and its consumers. Started in the late 2000, Project Shakti had enabled Hindustan Lever to access 80,000 of Indias 638,000 villages. HULs partnership with Self Help Groups (SHGs) of rural women is becoming an extended arm of the companys operation in rural hinter lands. Project Shakti has already been extended to about 12states Andhra Pradesh, Karnataka, Gujarat, Madhya Pradesh, TamilNadu, Chhattisgarh, Uttar Pradesh, Orissa, Punjab, Rajasthan, Maharashtra and West Bengal. The respective state governments and several NGOs are actively involved in the initiative. The SHGs have chosen to partner with HUL as a business venture, armed with training from HUL and support from government agencies concerned and NGOs. Armed with microcredit, women from SHGs become directtohome distributors in rural markets. The model consists of groups of (1520) villagers below the poverty line (Rs.750 per month) taking microcredit from banks, and using that to buy our products, which they will then directly sell to consumers. In general, a member from a SHG selected as a Shakti entrepreneur, commonly referred as Shakti Amma receives stocks from the HUL rural distributor. After being trained by the company, the Shakti entrepreneur then sells those goods directly to consumers and retailers in the village. Each 21 | P a g e Nejo Samuel Varghese

2013 Integrated Project Shakti entrepreneur usually service 610 villages in the population strata of 1,0002,000.The Shakti entrepreneurs are given HUL products on a `cash and carry basis.

The Shakti Model Initiated by HUL

Channel Structure (Special Focus is on Indore Rural Area)

Typically, the goods produced in each of the HULs 40 factories are sent to a depot with the help of a carrying and forwarding agent(C&FA). The company has its depot in every state of the country. The C&FA is a third party and gets servicing fee for stock and delivery of the products. In each town, there is at least are distribution stockist (RS) who takes the goods from the C&FA and sells them to retail outlets. In Madhya Pradesh the C&FA is in Indore and Jabalpur. Redistribution Stockists: Total number of RS in Indore is 2 at M/s Riddhi-Siddhi Sales and M/s Agrawal Sales. Sales Margin: 5.31% which includes cash discount, unloading expenses from depot, distribution expenses to retailers, incentive schemes & other incidental expenses. Modes of transport used: Rickshaw, tempo. Incentive schemes: Before 2000 holiday packages and tours but after 2000 no non monetary incentive for RS. Software systems and Information System: UNIFY, Developed by IBM and CMC. This software needs to be synchronised daily and the system updates any information /incentive schemes/sales figures etc to and from the common shared platform. Areas of Operations: Marked for each of the RS. Selling Operations: RSs sells the goods to o Wholesaler (gets 1.5 % max. discount from RS) o Retailers (gets 1.0% max. discount from RS)

Wholesaler: Gets cash discounts and other schemes promoted by HUL (gets points under Vijeta Scheme). Retailers: Total retailer base in Indore: Approximately 1135. Sales Margin: Soap, detergents-8% on MRP Incentive schemes: Company programs (Scheme Discounts + Cash Discounts)

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2013 Integrated Project TPR schemes based on Sales (1 % to 4 %) Vijeta scheme is not for retailers.

Field Sales Force: To meet the ever changing needs of the consumer, HUL has set up a distribution network that ensures availability of all their 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 important activities that HUL field sales force does are (i) Target chasing (ii) Reporting on a daily basis. All the Account information is maintained on palmtops given by HUL.

Initiatives taken to improve the Distribution Channel

Setting up of a fullscale sale organisation comprising key account management and activation to impact, fully engage and service modern retailers as they emerge. Servicing Channel partners and customers with continuous daily replenishment. Leveraging scale and building expertise to service Modern Trade and Rural Markets. Delay ring of sales force to improve response times and service levels. Revamping of its sales organisation in the rural markets to fully meet the emerging needs and increased purchasing power of the rural population. HULs distribution network in rural India already directly covers about 50,000 villages, reaching about 250 million consumers through about 6,000 sub stockists. Implementation of supply chain system that connects stockists across the country, and also includes a backend system connecting suppliers, all company sites and stretching right up to stockists. IT tools have been deployed for connectivity across the extended supply chains. Backend processes have been combined into a common Shared Service infrastructure. Launching of Project Shakti through which the company is able to extend its operations in villages. HUL has also included several NGOs and state governments as the initiative helps rural women to improve their financial position. Launching of HUL Network to leverage the channel of direct selling by presenting customized offerings in 11 home and personal care and food categories. Started in 2003, it already has a base of 300,000 consultants across the country. Starting of franchised Ayush Therapy centres to offer standardized services, in line with the strategy to leverage the equity of its brands through relevant services. Finding out Innovative ways to reach out to its consumers, particularly in rural areas by leveraging nonconventional media like wall paintings, cinema vans, weekly markets (haats), fairs and festivals. Undertaking several initiatives for traditional channels in orderto improve its capabilities at the frontend by developing skills for stockists sales force. Under Project Dronacharya, the FMCG major continuously imparted training to over 10,000 stockist salesmen. Launching of several promotional schemes for existing wholesalers and distributors. For instance, it has started theVijeta Rishta Jeet Ka scheme to provide a platform for the wholesaler and HUL to grow the business by earning points and redeeming them.

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Field Force Management

The working cycle of a typical HUL field force member is from 21stof every month to the 20th of the next month. During this period he is given various targets that helps to achieve company objectives and gives him a chance to prove his performance relative to other. To start with the field force member is given a particular area and his responsibility is to cater to all the retailers in that area. While deciding the area for each member of the field force, the company makes sure that the operating area of each field member doesnt overlap with his other colleagues. There are various methods used by the company to incentivize the field force Monetary and Nonmonetary. In HUL, the field force is evaluated using QOC (Quality of Contribution). It consists of 4 components:

1. Secondary Sale (Max points = 2.5) 2. Eco (Max points = 0.5) 3. Focus (Max points = 0.5) 4. FCS (Max Points = 0.5)

Secondary Sale: Based on the operating area, each member is given a specific target in terms of value (e.g., Rs. 15 lacs) for the operating month (21 20 of next month). If he achieves 100% of the target he gets 2.5 points, if he achieves 95% target he gets 1.5points. These points are used to add to the total QOC score as well as linked to monetary incentive. ECO/Width Target: This is used for the penetration/reach of certain products in the existing market. The following is a typical ECO target assigned to a field force agent: Lux International 105 outlets x 1 SKU Pears Soap-135 outlets x 1 SKU Rin-104 outlets x 1SKU Breeze Soap-100 outlets x 1 SKU The outlets mentioned are within the operating area of the person and 1 SKU=Rs. 27/-. Based on this the Field person calculates number of packs he should sell to the retailers. The concerned the agent receives this target around 25 of each month and has to complete this target within the 5 day of next month. Upon completion he gets additional 0.5 points added to his QOC score along with monetary incentive associated with it. However if this is not met within 5, he looses the opportunity.

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2013 Integrated Project Focus / Depth Pack target This is mainly used to increase the sales volume of certain products. A typical Focus target is given below: Lux International-Rs 20,640/- @ Rs 6/- per unit Life Buoy-Rs 70,220/- @ Rs 10/- per unit Wheel-Rs 99,000/- @ Rs 10/- per unit Breeze Soap-Rs 27,000/- @ Rs 10/- per unit This target needs to be achieved within 20 of next month. Upon achieving the target the field person is awarded 0.5 points which is then added to his overall QOC score. Field Capability Score (FCS) In this component, the field force persons are required to ensure that the scheduled visit/outlet billing is such that at least 15 items are demanded per order. If this is achieved the retailer gets a discount of 1% on the billed amount and on the other hand the field person gets an additional score of0.5 which is added to his QOC score. Each scheduled visit per outlet is one per week. For example if there are 100 outlets within the operating area of a field person then the number of visit per week is100 and total number of visit per month = 100x4 = 400.The sales person is required to achieve 90% success rate to get 0.5points for his QOC score and at least 65% for a satisfactory performance. Non Monetary Methods The other purpose of the QOC scores is to highlight the performance of the field person among his peers. Based on the QOC various awards are distributed to the field persons at the end of every month. These awards are also known as MOC Star awards. MOC stands for Monthly operating Cycle. If QOC score > 4.5 The person is eligible for 7 star award If QOC score > 4 The person is eligible for 5 star award If QOC score > 3.5 The person is eligible for 3 star award In the event of exceptional performance, management representatives from the regional office come to the zonal office to distribute the awards. The photograph of the award winners is displayed in the office as a source of inspiration for other salesperson. Target Setting Mechanism and Monitoring The regional office monitors the performance of various zones. A thorough analysis is done at the end of each month and based on that the weak products are identified or those for which the demand has weakened. This is the basis of setting ECO and FOCUS targets for the field persons. Each field person is given a palmtop wherein he can feed the entries on the spot where the transaction is done. This solves basically the two purposes. a) The field person is freed from the tedious task of maintaining cumbersome records and can then concentrate on the job (thus IT is replacing some of the field force or other channel members) b) The sold item is immediately updated in the company information system.

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Financial Analysis

Analysis:
There is a 94 % increase in investments from the year 2011 to 2012. This is mainly due to the current investments.HUL has invested in Government Securities, Certificates of deposits and in mutual funds substantially in 2012 compared to the previous year. HUL has increased their general reserves from 1147.18 to 1416.32 ie 23% in the year 2011 to 2012 which resulted in an overall increase in the reserve and surplus by 35%.

The Sales and Profit after taxation has increased from 2011 to 2012 by 13 % and 22% respectively

Segment Analysis:
Soaps and Detergent Sector fetches the maximum revenue for HUL and its revenue is almost constant over the past 10 years.

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Key Ratio, EVA and Share Price Analysis:

EBIT as % of sales of 2012 has increased by 12% as compared with 2011.A higher value is appreciated for this ratio as that would indicate that the company is able to keep its earnings at a good level via efficient processes that have kept certain expenses low. Fixed Assets turn over Percentage increased from 8.3% in 2011 to 9.3 % in 2012 .Fixed Assets Turn Over Ratio: Is a financial ratio of net sales to fixed assets. A higher fixed-asset turnover ratio shows that the company has been more effective in using the investment in fixed assets to generate revenues. When companies make these large purchases, prudent investors watch this ratio in following years to see how effective the investment in the fixed assets was. Net margin=PAT/SALES: Increased by 8% in 2012 compared to previous year. This is a very good indication. Economic Value Added: A measure of a company's financial performance based on the residual wealth calculated by deducting cost of capital from its operating Referred to as "economic profit. In 2012 the EVA grew by 29% compared to previous year Market Capitalization grew 44% in the year 2012 compared to 2011.Market Capitalization is the total market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share. The investment community uses this figure to determine a company's size, as opposed to sales or total asset figures. Share value grew from 285 Rs to 410 Rs during the years 2011 to 2012. This is the highest growth rate in the past 10 years.

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Performance Graphs

Income Statement of HUL

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Vertical Analysis
Even though the Total Revenues has increased to 2,34,363.30 from 2,00,225.50 during the year 2011 to 2012, the Cost of Production of Goods has increased from 1,12,007.10 to 1,36,145.70 this resulted in a decrease of Gross Profit from 44% in 2011 to 42% in 2012. Operating Expenses has reduced from 26 % in 2011 to 23% in 2012. This resulted in an increase in Total Operating Income from 12% to 14% in the years 2011 to 2012. Earnings Before Tax(EBT) has increased from 29,569.10 in 2011 to 36,216.80 in 2012.This is due to higher materials produced in 2012 and due to gain on the sale of investments is better in 2012 compared with 2011. The Net Income increased from 22,960.50 for the year 2011 to 27,906.60 for the year 2012, which indicates the companys growth.

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