Rural Marketing

Introduction

Hindustan Unilever Limited (abbreviated to HUL), formerly Hindustan Lever Limited, is

India's largest consumer products company and was formed in 1933 as Lever Brothers India
Limited. It is currently headquartered in Mumbai, India and its 41,000 employees are headed by
Harish Manwani, the non-executive chairman of the board. HUL is the market leader in Indian
products such as tea, soaps, detergents, as its products have become daily household name in
India. The Anglo-Dutch company Unilever owns a majority stake in Hindustan Unilever Limited.

The company was renamed in late June 2007 to "Hindustan Unilever Limited" to
provide the optimum balance between maintaining the heritage of the Company and the future
benefits and synergies of global alignment with the corporate name of "Unilever". This decision
will be put to the Shareholders for approval in next "Annual General Meeting". HUL is one
among those companies in the country that derives huge revenues (over 50 per cent) from the
rural areas. Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer Goods
company, touching the lives of two out of three Indians with over 20 distinct categories in Home
& Personal Care Products and Foods & Beverages. They endow the company with a scale of
combined volumes of about 4 million tonnes and sales of nearly Rs.13718 crores.

HUL is also one of the country's largest exporters; it has been recognised as a Golden
Super Star Trading House by the Government of India. The mission that inspires HUL's over
15,000 employees, including over 1,300 managers, is to "add vitality to life." HUL meets
everyday needs for nutrition, hygiene, and personal care with brands that help people feel good,
look good and get more out of life. It is a mission HUL shares with its parent company, Unilever,
which holds 52.10% of the equity. The rest of the shareholding is distributed among 360,675
individual shareholders and financial institutions.

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HUL's brands - like Lifebuoy, Lux, Surf Excel, Rin,

Wheel, Fair & Lovely, Pond's, Sunsilk, Clinic Plus,
Pepsodent, Close-up, Lakme, Brooke Bond, Kissan,
Knorr-Annapurna, Kwality Wall's– are household
names across the country and span many categories -
soaps, detergents, personal products, tea, coffee,
branded staples, ice cream and culinary products.
They are manufactured over 40 factories across India.
The operations involve over 2,000 suppliers and
associates. HUL's distribution network, comprising
about 4,000 redistribution stockists, covering 6.3
million retail outlets reaching the entire urban
population, and about 250 million rural consumers.

HUL has traditionally been a company, which incorporates latest technology in all
its operations. The Hindustan Unilever Research Centre (HURC) was set up in 1958, and now
has facilities in Mumbai and Bangalore. HURC and the Global Technology Centres in India have
over 200 highly qualified scientists and technologists, many with post-doctoral experience
acquired in the US and Europe.

HUL believes that an organisation's worth is also in the service it renders to the
community. HUL is focusing on health & hygiene education, women empowerment, and water
management. It is also involved in education and rehabilitation of special or underprivileged
children, care for the destitute and HIV-positive, and rural development. HUL has also
responded in case of national calamities / adversities and contributes through various welfare
measures, most recent being the village built by HUL in earthquake affected Gujarat, and relief
& rehabilitation after the Tsunami caused devastation in South India.

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HUL has changed its strategy towards rural markets in order to tackle its somewhat
flat growth in these areas. As against its earlier strategy of each business division dealing with
the rural market on an individual basis, the multinational has now adopted a single
organisational-push approach to achieve greater penetration and sales. HUL derives over 40 per
cent of its sales from rural India, which makes this part of the market a critical growth aspect for
the company.The company is now looking at the rural market from an organizational point of
view rather than from the individual businesses’ point of view. This approach is expected to lead
to better cohesion, greater push and deeper penetration, which would eventually lead to better
sales. Several of HUL’s major business categories — such as fabric wash, personal wash and
beverages — already get over 50 per cent of their sales from rural areas.

However, officials say that it is not enough that individual business divisions push
their own strategies for the rural market, adding the company would have to work in unison in
order to achieve a balanced growth.

Example of HULs rural marketing strategy

A unique example is Hindustan Lever's Lifebuoy soap. In rural India, health is of

paramount importance, because indisposition is very directly related to loss of income. Lifebuoy,
whose core equity is health and hygiene, has for decades now been synonymous with soap in
rural India.

At the same time, if products have to come up the order in the rural purchase
hierarchy, they have to be affordable. If rural India today accounts for about half of detergents
sales, it is because HUL has developed low-cost value-for-money branded products, like Wheel.
The company has also taken initiatives to create markets even for apparently premium products,
by offering them in pack sizes, like sachets, whose unit prices are within the reach of rural
consumers. For example, initiated in the 1980s, sachets (Rs.2, Re.1, or 50 paise) today
constitute about 55% of Hindustan Lever's shampoo sales. With media reach gradually
increasing, rural consumers today, where the media has its footprints, share the same
aspirations with their urban counterparts. HUL has responded to the trend with low unit price
packs of even other products - Lux at Rs.5, Lifebuoy at Rs.2, Surf Excel sachet at Rs.1.50,
Pond's Talc at Rs.5, Pepsodent toothpaste at Rs. 5, Fair & Lovely Skin Cream at Rs.5, Pond's
Cold Cream at Rs.5, Brooke Bond Taaza tea at Rs.5.

HUL Penetration in Rural Market

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The First major step taken by HUL to penetrate the rural market is that it evolved
its distribution model. Secondly in 1998 HUL’s personal products unit initiated Project Bharat,
the first and largest rural home-to-home operation to have ever been prepared by any company.

The project covered 13 million rural households by the end of 1999. Along with
Operation Bharat, HUL conceptualized Project Streamline to enhance its control on the rural
supply chain through a network of rural sub-stockists based in these villages. This gave the
company the required competitive edge, and extended its direct reach to 37 per cent of the
country’s rural population. Then HUL started Operation Harvest which was used as a medium of
communication with the villagers. During these 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.

The principal issue in rural development is to create income-generating

opportunities for the rural population. Such initiatives are successful and sustainable when
linked with the company’s core business and is mutually beneficial to both the population for
whom the programme is intended and for the company. Based on these insights, HUL launched
Project Shakti in the year 2001, in keeping with the purpose of integrating business interests
with national interests. Today Hindustan Unilever Ltd has more than doubled its direct rural
reach with 30,800 `Shakti' entrepreneurs covering 1-lakh villages in 15 States at the end of 2006
through its project shakti. The next stage of Project Shakti was even more ambitious. HUL has
piloted `I-Shakti', an IT-based rural information service that provides solutions to key rural needs
in the areas of agriculture, education, vocational training, health and hygiene. The project has
been set up in 8 villages in Andhra Pradesh, and is functional since August 2003.

Evolution of HUL Distribution Model

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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 items. This includes, maintaining
favorable trade relations, providing, innovative incentives to retailers and organizing demand
generation activities among host of other things.

HUL has followed a strategy of building its distribution channels in a transitional

manner; and in different successive phases of the evolution of its distribution system, has
penetrated well into the rural market.

 Phase I

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The first phase of the HUL distribution network had wholesalers placing bulk
orders directly with the company. Large retailers also place direct orders, which comprised
almost 30 percent of the total orders collected. The company salesman grouped all these orders
and placed an indent 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.

 Phase II

The focus of the second phase , which spanned the decades of the 40s, was
to provide desired products and quality service to the company’s customers. In order to achieve
this, one wholesaler in each market was appointed as a “Registered Wholesaler,” a stock point
for the company’s products in that market. The company salesman still covered the market,
canvassing for orders from the rest of the trade. He would then distribute stocks from the
Registered Wholesaler through distribution units maintained by the company. The Registered
Wholesaler was given a margin of 1 per cent 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.

 Phase III

The highlight of the third phase was the concept of “Redistribution Stockiest”
(RS) who replaced the REGISTERED WHOLESALERSs. The REDISTRIBUTION STOCKIST
was required to provide the distribution units to the company salesman. The REDISTRIBUTION
STOCKIST financed his stocks and provided warehousing facilities to store them. The
REDISTRIBUTION STOCKIST also undertook demand stimulation activities on behalf of the
company. The second characteristic of this period was the changes brought in as the company
realised that the REDISTRIBUTION STOCKIST would be able to provide customer service only
if he was serviced well. This knowledge led to the establishment of the “Company Depots”
system. This system helped in transshipment, bulk breaking, and acted as a stock point to
minimise stock-outs at the REDISTRIBUTION STOCKIST level.

The Distribution Strategy in Rural Market

The strategy of distribution should take into account the purchasing habit of the rural
people. While consumables are purchased in the village shop or Shandies or in bigger villages,

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the consumer durables are purchased only in Mandi centers, large towns or nearby cities.
Hence the distribution centre has to take the purchasing habit of the rural people into account,
so that product may be available at the appropriate location.

In villages beyond the reach of the distribution system, the shopkeepers make their
own arrangement for the procurement. Most of them commute to the nearby town to get the
supply. But the expenses incurred resulted in the village shopkeepers charging consumers more
than the maximum retail price. Generally, the village shopkeeper invest their funds in purchases
and rarely ever get credit facilities, which if available is made available for very short duration
only. Since the quantum of purchase by the village shopkeeper is very small, the margins are
also very meager. The ultimate consumer product reflects the lack of distribution network.

 Distribution Strategies in Rural

1. Coverage of Villages: With improved communication facilities, it is possible to reach

distribution van to the villages. The frequency of visits may be fixed, depending upon the
off- takes or sales realization, so that the distribution cost can be minimized, but not at
the cost of cutting down or rural population. These distribution cabs can be used for
promotion works also. For villages with very less population, the distribution can be left to
the initiative of the shop keepers and dealers in larger villages and to the shopkeepers of
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the small villages. The distribution arrangement requires serious consideration by

manufacturing and marketing men, if they have to exploit the potential of the rural
market.

2. Use of Cooperative: Over three lakh cooperative society operate in the rural areas for
or different purposes like, marketing cooperatives, dairy corporative, farmer service
corporative societies, consumer corporative and other multipurpose corporative. Given
the number of such societies, there is at least one corporative society of one form or
another for every two or three villages. These societies are linked to higher level of
society like taluk, district or state level. Thus these corporative have an arrangement for
centralized procurement and distribution through their respective state level federation.
Such state level federation can be motivated to procure and distribute consumables
items and low level durables items to the member societies for selling to the rural
consumers

3. Utilization of Public Distribution System: The Public Distribution System (PDS) in

the country is fairly well organized. The revamped PDS places more emphasis on
reaching remote rural areas like hills and tribal areas. Effective utilization of the PDS
system should be explored by the manufacturing and marketing men, since they already
have a distribution set up.

4. Distribution to Feeder Markets / Mandi Towns: The villagers visit these town at
regular intervals not only for selling the agricultural produce but also for the purchase of
cloth, jewellery , hardware, radios, torch cells and other durables and consumer product.
Lux has established a good distribution network in the identified feeder market and
mandi towns. From the feeder market and mandi town, the stockiest or wholesaler
arranges for distribution to the village shop in the interior places.
Initiatives taken to Improve the Distribution Strategy

HUL has taken the following initiatives to improve its distribution strategy:

 Setting up of a full‐scale sales organization comprising key account management and

activation to impact, fully engage and service modern retailers as they emerge.

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 Servicing Channel partners and customers with continuous daily replenishment.

 Leveraging scale and building expertise to service Modern Trade and Rural Markets.

 Delayering 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. HUL’s 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 back‐end 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

customised 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.

 Finding out Innovative ways to reach out to its consumers, particularly in rural areas by
leveraging non‐conventional media like wall paintings, cinema vans, weekly markets
(haats), fairs and festivals.

 Launching the Unicare scheme with upmarket pharmacies and retailers to sale its
premium brands.

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 Undertaking several initiatives for traditional channels in order to improve its capabilities
at the front‐end 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 the ‘Vijeta ‐ Rishta Jeet Ka’ scheme last year to provide a
platform for the wholesaler and HUL to grow the business by earning points and
redeeming them.

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