PROJECT STRATEGY OF

Hindustan Unilever Limited

FAST MOVING CONSUMER GOODS

The Indian FMCG sector with a market size of US$13.1 billion is the fourth largest sector in the economy. Well-established distribution networks, intense competition between the organized and unorganized segments characterize the sector. FMCG Sector is expected to grow by over 60% by 2010. That will translate into an annual growth of 10% over a 5-year period. It has been estimated that FMCG sector will rise from around Rs 56,500 crores in 2005 to Rs 92,100 crores in 2010. With the presence of 12.2% of the world population in the villages of India, the Indian rural FMCG market is something no one can overlook. Increased focus on farm sector will boost rural incomes, hence providing better growth prospects to the FMCG companies. Better infrastructure facilities will improve their supply chain. FMCG sector is also likely to benefit from growing demand in the market. Because of the low per capita consumption for almost all the products in the country, FMCG companies have immense possibilities for growth. And if the companies are able to change the mindset of the consumers, i.e. if they are able to take the consumers to branded products and offer new generation products, they would be able to generate higher growth in the near future. It is expected that the rural income will rise in 2007, boosting purchasing power in the countryside. However, the demand in urban areas would be the key growth driver over the long term. Also, increase in the urban population, along with increase in income levels and the availability of new categories, would help the urban areas maintain their position in terms of consumption. At present, urban India accounts for 66% of total FMCG consumption, with rural India accounting for the remaining 34%. However, rural India accounts for more than 40% consumption in major FMCG categories such as personal care, fabric care, and hot beverages. In urban areas, home and personal care category, including skin care, household care and feminine hygiene, will keep growing at relatively attractive rates. Within the foods segment, it is estimated that processed foods, bakery, and dairy are long-term growth categories in both rural and urban areas.

Fast Moving Consumer Goods Includes:

Major FMCG players in Indian Market:

Market Share (%)

15% 4% 6% HLL 8% ITC NESTLE BRITANNIA 30% DABUR OTHERS 37%

HINDUSTAN UNILEVER LIMITED

MARKET LEADER IN INDIAN FMCG INDUSTRY

In the summer of 1888, visitors to the Kolkata harbor noticed crates full of Sunlight soap bars, embossed with the words "Made in England by Lever Brothers". With it, began an era of marketing branded Fast Moving Consumer Goods(FMCG). Soon after followed Lifebuoy in 1895 and other famous brands like Pears, Lux and Vim. Vanaspati was launched in 1918 and the famous Dalda brand came to the market in 1937. In 1931, Unilever set up its first Indian subsidiary, Hindustan Vanaspati Manufacturing Company, followed by Lever Brothers India Limited (1933) and United Traders Limited (1935). These three companies merged to form HUL in November 1956; HUL offered 10% of its equity to the Indian public, being the first among the foreign subsidiaries to do so. Unilever now holds 51.55% equity in the company. The rest of the shareholding is distributed among about 380,000 individual shareholders and financial institutions. The erstwhile Brooke Bond's presence in India dates back to 1900. By 1903, the company had launched Red Label tea in the country. In 1912, Brooke Bond & Co. India Limited was formed. Brooke Bond joined the Unilever fold in 1984 through an international acquisition. The erstwhile Lipton's links with India were forged in 1898. Unilever acquired Lipton in 1972, and in 1977 Lipton Tea (India) Limited was incorporated.

Pond's (India) Limited had been present in India since 1947. It joined the Unilever fold through an international acquisition of Chesebrough Pond's USA in 1986. Since the very early years, HUL has vigorously responded to the stimulus of economic growth. The growth process has been accompanied by judicious diversification, always in line with Indian opinions and aspirations.

MILESONES ACHIEVED
YEAR 1888 1895 1902 1903 1905 1913 1914 1918 1922 1924 1925 1926 1930 1931 1932 1933 1934 1935 1937 1939 MILESTONES Sunlight soap introduced in India. Lifebuoy soap launched; Lever Brothers appoints agents in Mumbai, Chennai, Kolkata, and Karachi. Pears soap introduced in India. Brooke Bond Red Label tea launched. Lux flakes introduced. Vim scouring powder introduced. Vinolia soap launched in India. Vanaspati introduced by Dutch margarine manufacturers like Van den Berghs, Jurgens, Verschure Creameries, and Hartogs. Rinso soap powder introduced. Gibbs dental preparations launched. Lever Brothers gets full control of North West Soap Company. Hartogs registers Dalda Trademark. Unilever is formed on January 1 through merger of Lever Brothers and Margarine Unie. Hindustan Vanaspati Manufacturing Company registered on November 27; Sewri factory site bought. Vanaspati manufacture starts at Sewri. Application made for setting up soap factory next to the Vanaspati factory at Sewri; Lever Brothers India Limited incorporated on October 17. Soap manufacture begins at Sewri factory in October; North West Soap Company's Garden Reach Factory, Kolkata rented and expanded to produce Lever brands. United Traders incorporated on May 11 to market Personal Products. Mr. Prakash Tandon, one of the first Indian covenanted managers, joins HVM. Garden Reach Factory purchased outright; concentration on building up Dalda

Vanaspati as a brand. 1941 1942 1943 1944 1947 1951 1955 1956 1957 1958 1959 1961 1962 1963 1964 1965 1966 1967 1968 1969 1971 1973 1974 1975 Agencies in Mumbai, Chennai, Kolkata and Karachi taken over; company acquires own sales force. Unilever takes firm decision to "train Indians to take over junior and senior management positions instead of Europeans". Personal Products manufacture begins in India at Garden Reach Factory. Reorganisation of the three companies with common management but separate marketing operations. Pond's Cold Cream launched. Mr. Prakash Tandon becomes first Indian Director. Shamnagar, Tiruchy, and Ghaziabad Vanaspati factories bought. 65% of managers are Indians. Three companies merge to form Hindustan Lever Limited, with 10% Indian equity participation. Unilever Special Committee approves research activity by Hindustan Lever. Research Unit starts functioning at Mumbai Factory. Surf launched. Mr. Prakash Tandon takes over as the first Indian Chairman; 191 of the 205 managers are Indians. Formal Exports Department starts. Head Office building at Backbay Reclamation, Mumbai, opened. Etah dairy set up, Anik ghee launched; Animal feeds plant at Ghaziabad; Sunsilk shampoo launched. Signal toothpaste launched; Indian shareholding increases to 14%. Lever's baby food, more new foods introduced; Nickel catalyst production begins; Indian shareholding increases to 15%. Statutory price control on Vanaspati; Taj Mahal tea launched. Hindustan Lever Research Centre, opens in Mumbai. Mr. V. G. Rajadhyaksha takes over as Chairman from Mr. Prakash Tandon; Fine Chemicals Unit commissioned at Andheri; informal price control on soap begins. Rin bar launched; Fine Chemicals Unit starts production; Bru coffee launched Mr. V. G. Rajadhyaksha presents plan for diversification into chemicals to Unilever Special Committee - plan approved; Clinic shampoo launched. Mr. T. Thomas takes over as Chairman from Mr. V. G. Rajadhyaksha. Pilot plant for industrial chemicals at Taloja; informal price control on soaps withdrawn; Liril marketed. Ten-year modernisation plan for soaps and detergent plants; Jammu project work

begins; statutory price control on Vanaspati and baby foods withdrawn; Close-up toothpaste launched. 1976 1977 1978 1979 1980 1982 1984 1986 1988 1990 1991 1992 Construction work of Haldia chemicals complex begins; Taloja chemicals unit begins functioning. Jammu synthetic Detergents plant inaugurated; Indian shareholding increases to 18.57%. Indian shareholding increases to 34%; Fair & Lovely skin cream launched. Sodium Tripolyphospate plant at Haldia commissioned. Dr. A. S. Ganguly takes over as Chairman from Mr. T. Thomas; Unilever shareholding in the company comes down to 51%. Government allows 51% Unilever shareholding. Foods, Animal Feeds businesses transferred to Lipton. Agri-products unit at Hyderabad starts functioning - first range of hybrid seeds comes out; Khamgaon Soaps unit and Yavatmal Personal Products unit start production. Launch of Lipton Taaza tea. Mr. S. M. Datta takes over as Chairman from Dr. A. S. Ganguly. Surf Ultra detergent launched. HLL recognised by Government of India as Star Trading House in Exports. HLL's largest competitor, Tata Oil Mills Company (TOMCO), merges with the company with effect from April 1, 1993, the biggest such in Indian industry till that time. Merger ultimately accomplished in December 1994; Launch of Vim bar; Kissan acquired from the UB Group. HLL forms Nepal Lever Limited, HLL and US-based Kimberley-Clark Corporation form 50:50 joint venture - Kimberley-Clark Lever Ltd. - to market Huggies diapers and Kotex feminine care products. Factory set up at Pune in 1995; HLL acquires Kwality and Milkfood 100% brandnames and distribution assets. HLL introduces Wall's. HLL and Indian cosmetics major, Lakme Ltd., form 50:50 joint venture - Lakme Lever Ltd.; HLL enters branded staples business with salt; HLL recognised as Super Star Trading House. Mr. K. B. Dadiseth takes over as Chairman from Mr. S. M. Datta; Merger of Group company, Brooke Bond Lipton India Limited, with HLL, with effect from January 1; HLL introduces branded atta; Surf Excel launched. Unilever sets up International Research Laboratory in Bangalore; new Regional Innovation Centres also come up. Group company, Pond's India Ltd., merges with HLL with effect from January 1, 1998. HLL acquires Lakme brand, factories and Lakme Ltd.'s 50% equity in Lakme Lever Ltd. Mr. M. S. Banga takes over as Chairman from Mr. K. B. Dadiseth, who joins the Unilever Board; HLL acquires 74% stake in Modern Food Industries Ltd., the first public sector company to be disinvested by the Government of India.

1993

1994

1995

1996

1997

1998

2000

2002 2003 2005

HLL enters Ayurvedic health & beauty centre category with the Ayush range and Ayush Therapy Centres.
Launch of Hindustan Lever Network; acquisition of

the Amalgam Group

Launch of "Pureit" water purifiers

HINDUSTAN LEVER LIMITED TO HINDUSTAN UNILEVER LIMITED

India's largest FMCG Company Hindustan Lever Ltd (HLL) has gone for a corporate makeover, unveiling a new name and a spanking new logo. The move is aimed at bringing in the Dutch parent company's brand portfolio to strengthen the firm's business in India. According to HLL, the proposed name change would provide the "optimum balance between maintaining the heritage of HLL and the future benefits and synergies of global alignment with the corporate name of Unilever." "The name change is a significant milestone. It retains the company's continued commitment toward its local roots while leveraging the global scale and reputation of Unilever with its consumers and other stakeholders in India." The new logo comprises 25 different icons representing the organization, its brands and the idea of vitality. Each of the icons, which make up the 'U', represent broadly product categories the group is in - for example, a tiny spoon in the logo is a symbol of nutrition, taste and cooking, while a chili indicates spice and flavors and lips represent beauty, looking good and great taste.

The new name and the new logo will leverage the positioning, scale and
synergy that comes with being part of Unilever globally.

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MARKETING STRATEGIES OF HLL

The biggest mistake any one can make is to focus on the competitor. You focus on the consumer and you will get it right. In this company we do not believe in price cutting. We believe in giving the consumers value products. The above statement was made by the then HLL chairman, Keki Dadiseth Underlined the companys marketing philosophy which revolves around consumers and not competitors. HLL focuses on providing customer value to its customers, they believe that if you can increase the value/benefit derived by the consumer after consumption of the product then you have achieved your marketing objectives. The strategy adopted by HLL not only helps in creating sales for the product but also increases customer loyalty and thus increasing the customer life time value, this helped the company to become the market leader in Indian FMCG industry. To a large extent the strategy adopted is correct as in FMCG sector where there is a cut throat competition it is not exactly viable to go for a price cut because each time you do so, the same will be replicated by competitors and sooner rather than later a point will be reached when the firm starts getting negative returns. Certainly a firm like HLL cant afford to do so; on the contrary if HLL follows the strategy proposed by the chairman then in that case the customers can be driven to buy the products over a long period of time without any qualms which, in all probabilities, will generate huge revenues for HLL.

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MAJOR STRATEGIES ADOPTED BY HLL

Promotional strategies: HLL is the largest media buyer in India. Due to its bulk purchases, HLL head the clout to negotiate hefty discount. HLL used lifestyle advertising in a big way LIRIL was identified with youth and a carefree style.LUX used a luxurious life style and was endorsed by film stars. The campaign projected the soap as a choice of film star. LIFEBUOY the largest selling soap in India was positioned on a health platform. The advertisements typically highlighted the germ killing properties of the soap. In rural areas, HLL promoted its products through demonstration vehicles, rural fairs and festivals, local entertainment forms were extensively used to advertise the products. HLL also adopts an impressive promotional strategy of giving a membership benefit to its valued customers. HLL provides membership card to customers who purchases its products worth Rs. 600 or more. A customer stands to benefit from this as HLL constantly offers them discounts on subsequent purchases etc. Distribution: As efficient distribution of products is the key to success in FMCG industry HLL distribution network spreads throughout the country including wholesalers, retailers, self help groups etc to ensure timely supply. Wholesalers were the key link in HLLs distribution system. They performed a whole range of marketing functions between the factory and the retailers shop. Wholesalers maintained close contracts with the retailers and were fully conversant with the local markets. The companys product were distributed through a network of 7500 redistribution stockists who sold to shops in urban areas and to

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villages accessible by vehicle and with a population of more than 2000. A satellite based communication network linking factories, depots and offices enabled the company to respond quickly to changing market needs and reduce inventory levels. This sophisticated network with its voice and data communication facility linked more than 200 locations all over the country, including the head office, branch offices, factories, depots and the key redistribution stockists. HLL used a combination of wholesalers and retailers to penetrate local markets. A fleet of motor vans covered small towns and villages. These vans induced retailers to stock HLLs products and display advertising materials in their shops. HLL used the strategy of encouraging self help groups(SHGs) to operate as rural direct to-home teams of sales women, who would accomplish several tasks by raising awareness and educating people about HLL products as well as selling the product directly within their community. Unit Packaging: Given the price-sensitivity of the Indian consumer who does not normally prefer to fork out a large sum at one time, HLL (followed by other companies) launched its products in smaller pack sizes to make them more affordable. HLL was the first to introduce small pack sizes. It introduced its small-range of 8 ml nail polishes and lipsticks, and was soon followed it its strategy by major Indian companies as well. Small pack sizes have proved to be very popular in the Indian market as it offers a consumer lower purchase cost and the opportunity to try new products. Launching New Products: Stiff competition in the cosmetics and toiletries market also saw an increase in the range of new products being introduced for newer application concepts in the last few years. In the skin-care segment, from just creams and moisturizers, there has been a upgrade to value-added products such as under-eye wrinkle removing creams, dark circle removing creams toners, sunscreen lotions, fairness creams, and many more. These specialized applications led to growth in volumes and also enabled HLL to price the products at a premium, driving up value growth.

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 Service Marketing Strategies: Service marketing strategies such as pointof-sale advice and beauty counseling have shown to boosts sales of cosmetics and personal care products and driven growth in the Indian market. Beauty counselors or advisors at retails outlets have been very successful in gaining attention, creating product awareness and overcoming consumers lack of familiarity with, and fears about many cosmetics and personal care products such as home hair permanents and color cosmetics. Some companies such as Lakme have even set up exclusive Lakme beauty parlors at major cities in India through the franchisee route. Innovative Selling Methods: Companies continue to innovate on selling methods. Popular Indian brand, Ponds established consumer advisory cells and through touch screen counters and telephone help-lines offers advice on skin care.

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SWOT ANALYSIS OF HLL MARKETING STRATEGIES STRENGTHS Formidable distribution network covering over 3400 distributors and 16 million outlets. This helps them maintain heavy volumes, and hence, fill the shelves of most outlets. 'One HLL' brings "Household and Personal Care" and foods distribution networks together, thereby aligning all the units towards the common goal of achieving success. Growth rate more than growth rate for FMCG Sector.

Project Shakti: Rural India is spread across 627,000 villages and possesses a serious distribution challenge for FMCG Cos. HLL has come up with a unique and successful initiative wherein the women from the rural sector market HLL products, and hence, are able to reach the same wavelength as of the common man in village. Apart from product reach, the initiative also creates brand awareness amongst the lower strata of society. This has brought about phenomenal results.

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WEAKNESSES Inability to transform its strategies at the right time. HLL's strategy remained focused on creating power brands and earning higher margins. Ignorance of basic economics law, If you earn abnormal profits in the industry then you are inviting competitors to enter into the industry and drive away the profit margin enjoyed by you. It was not left with any other option but to try cutting down the costs in order to protect volumes, if not increase it. Lack of pricing power in core business and absence of growth drivers

Due to HLLs continued focus on making their products a power brand lead to increase in competition in the industry which resulted in loss of pricing power of HLL. If a company doesnt have much pricing power then an increase in their prices would lessen the demand for their products.

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Opportunities Increasing Exports: India is one of the world's largest producers of FMCG goods but its exports are miniscule as compared to production. Though Indian Cos. has been going global, their focus is more towards Asian countries because of the similar preferences. Opportunity in Food Sector: The advent of modern trade has opened up greater opportunities for HLL to diversify its brand and strength its food division. It could look at introducing products from its parents stable like margarines and could also look at expanding its Knorr range of products.

Low Penetration levels for some major categories like skin-cream (22%), shampoo (38%), toothpaste (48%) and processed foods, but great growth opportunities products.

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Threats Loss of market share in the hands of competitors: Over a period of five years, ITC has extended its presence into areas like foods, retailing, hotels, greetings, agri, paper, etc. These are businesses that can give it growth impetus in the long run. With ITC gaining momentum in each of these businesses, it is turning into a consumer monolith, and hence, the greatest threat to HLL's Business.

ITC Has Overtaken HLL in Gross Sales

ITC Overtakes HLL in Bourses

Increase in growth of regional brands: New threat comes from smaller players who have embraced a different kind of business model with a different value proposition. These include regional brands and private labels. Regional brands typically take on well-known, established brands by pursuing a flanking strategy which can be of two types - geographical or need-based. 1. In a geographical attack, the challengers identify regions where the opponent is underperforming. 2. The other flanking strategy is to serve unfulfilled market needs Increase in Store Brands: As organized retailing gains momentum, private labels can be expected to become more popular, going by the trends in developed countries. Already, brands such as Nilgiris, Food World and Trinetra have started making an impact in the grocery segment.

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CHANGING MARKET TRENDS: Increasing Consumer Aspirations: The dynamic market forces the marketers to be on their toes always. Past few years we have seen customers have become over demanding and is looking for delights may be via better experience, new product categories which will satisfy their ever increasing needs. Some of the consumers are even ready to pay a premium for these differentiators for the aspiration brands and the upcoming luxury segment.

Increasing Brand Conscious: At the same time customers have become more brand conscious. They prefer going for branded commodities for an extra penny. In past we have seen many commodities and low involvement categories being branded and many are on their way to get branded. Increasing demand for convenience: These days customer care for convenience, which has forced marketers to go online for transactions and information dissemination of their companys product and services.Over a period of time marketers have understood that there are customers who have specific needs which need to be fulfilled by niche products. Marketers have traveled a journey from mass to micro marketing. Increasing importance of rural market: The Indian urban market though look attractive, the treasure lies at the bottom of the pyramid. HLL, the FMCG leader realizes more than 50% sales from rural market. Other big and some regional players have tried to take this root, to overcome the saturated urban markets. Shift in the consumer buying behavior: In 1999, the retail organized sector was 1% of total retail sales, which on date is 4% and is projected to be 10% in 2010. So we have seen a shift in consumer buying behavior, from Kirana stores to Malls. Disintegration of product while integration of market: As product spaces become modularized, componentized, and compartmentalized to address the individual, customized, targeted needs of markets, the correspondent market

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space, and the value chains in them become more integrated. In a sense, products become disintegrated while markets become integrated. The future belongs not only to the convergence of devices, but also to divergent (i.e., specialized) devices. Globalization: The forces that are causing and shaping all above are Globalization, Technological Development and Deregulation. Distances are dead and the advent of Internet finally administered coup de grace to technology based competitive advantages. Emergence of regional brands: The new threat comes from smaller players who have embraced a different kind of business model with a different value proposition. These include regional brands and private labels. Razor Sharp Focus of Regional Brands: A common thread that binds the strategy adopted by these brands is razor sharp focus. They clearly see their target market. They know their customers well. They are not targeting consumers who already have built-in perceptions. They are reaching out to untapped market within a well known product category.

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STRATEGY MATRIX:
Strategy matrix is developed by our group to show the effects of combination of customer focus and competitor focus in this matrix we have shown various combination of focus that a marketer can have , it is important to understand the effects of such focus by the marketer to gain both market share and product acceptance.

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 COMPETITOR Neglect CUSTOMER Neglect: If the marketer neglects

both customer and competitors in the market then sooner or later the market share held by the marketer will be eaten away by the competitors. In this strategy the marketer is mainly focused on the production of the products only which in the present competitive markets where the customers are aware of the substitutes of the products, marketer cant afford to neglect the customers and competitors.

COMPETITOR Neglect CUSTOMER Focus: Marketer focusing on the

customers can provide high value to its customers in terms of benefit/ satisfaction derived by the consumers of the product and can have high brand preference of its products leading to high brand loyalty. But by neglecting the competitors in the market, marketer is prone to the risk of losing its sales from the customers who are only soft core loyal for the marketers product; these types of customers can be easily lured by the competitors by offering some attractive offers.

COMPETITOR Focus CUSTOMER Neglect: When a marketer focuses

only on competitor, he just focuses on putting an idea in customers mind that his product is superior to that of the competitors. Marketer is only focusing on selling of its products by providing an edge over competitor. But, by neglecting the customer he is not doing any value addition to the customer. So the long time value or strategic value of customer is lost.

COMPETITOR Focus CUSTOMER Focus: This can be the most

desirable strategy that can be adopted by a marketer wherein the marketer can earn huge profits as he will be having high brand value in the market but all this comes at a cost so the marketer has to incur huge costs in terms of high advertisement cost, high cost on research and development, cost of market survey etc.

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Strategies that could have been adopted by the HLL:

Promotional strategies:
Communicating to Consumers: One of the important aspects of the promotional strategy that has to be adopted is effective communication about the product. The marketers should send just the right messages to the consumers. The advertisements of the brands instead of going for blitz should try to relate themselves with their target customers. Take the case of Dandi namak. The TV advertisement was bland and uninteresting. However, without any glitz, it was able to connect to its target customers because it talked in the language of its target customers. These brands send a powerful message to their target customers that they are made for each other. Dandi namak, Ujala, Ghadi detergent, and Chik, projected that they belonged to the lower middle class! And this worked wonders. Selecting a narrow terrain to fight: A marketer should select a specific terrain to fight. It may be a particular region, particular competitor, particular brand etc. The area which a marketer wants to target should be properly defined and all strategies should be based accordingly. Ujala applied this tactic to full advantage against Robin Blue and now it commands nearly three-fourth of the Rs2bn ultra marine blue market, Fairever did the same to Fair & Lovely, Ghadi detergent is doing it now to Nirma and Wheel, and Chik is going shoulder to shoulder with Clinic Plus, the market leader in shampoo. G-local promotion: Though being a global company HUL has to adopt the promotional activities on the basis of local sentiments, cultures, values, belief and expectations. The success of any promotional activity undertaken by the marketer lies in the fact that how closely a marketer can cater to the local environment. A marketer can promote local festivals sports etc. to create a separate position of his brand in the minds of the consumers and thereby achieving the promotional objective of differentiating the brand from that of competitors.

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Distribution strategies:

Getting as near as possible: Success of any FMCG company lies in its distribution network. As consumers of these products prefer convenience in the purchase of product the marketer should try to reach to the customer as nearer as possible. Customers generally have low involvement in the purchase of FMCG products, they have the tendency to make impulse purchasing in these kind of products thus a marketer can increase its sales by making the product available at the right place at right time. Own retail shops: Since there is an increase number of a store brand like food bazaar etc. the FMCG companies are facing a stiff competition in the markets and moreover, the consumer buying preference is changing from the local Kirana store to malls etc. to face such a situation HLL can open its own retail shops to distribute its products/ brands which will not only improve the companys distribution network but also help in promotion. Giving certain benefits to retailers: In present scenario people do not have enough time to go to market and purchase products, so home delivery is a very attractive option for creating more consumer base for marketers. In this case HLL can provide this option from its own retail shops for an order exceeding the certain amount, or the company can give certain benefits to other retailers, wholesalers and dealers to provide such facilities. In this way the company will have dual benefits both in terms of cost savings to provide such facility and also increased sales.

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