Unilever in India: Hindustan Lever’s Project Shakti

Marketing FMCG to the Rural Consumer

Executive Summary

HLL has enjoyed a competitive advantage as a sole provider of personal hygiene care products before
the liberalization of India’s economy. However, with the entry of foreign MNC, HLL is suffering
from stagnant growth and lower profit margin. Project Shakti was created to address these issues. The
high growth of Shakti has created managerial challenges to the project management team. As Shakti
grows, the current management structure has become inefficient to make it profitable with minimum
costs. Thus, restructuring management measure is crucial to sustain Shakti in the long run and to
provide HLL with competitiveness.

Challenges of Project Shakti

Rural market is already giving HLL a competitive advantage. But competitors are also tapping into
the rural market with existing HLL direct channels. Thus to continue HLL competitive edge, Project
Shakti is essential. Until 2004, Shakti is contributing 3.5% (pg 6 & 17: 15 x 20 / 85) towards HLL
total revenues and it still has potential to continue growing. This is because personal hygiene
awareness is in the increase. Shakti may be able to achieve the founder’s dream of 15%-20% of total
revenues, assuming that Shakti can increase the usage rate of current consumer. However it will not
achieve the market penetration of over 500 million rural population as this figure signifies that HLL
will nearly monopolize the rural market with 80% penetration rate. The greatest challenges that Shakti
face are costs and management control to make it profitable.

Managing Project Shakti in the long term

The Shakti system in the beginning of the project was good but not sufficient to handle the growth it
had obtained. Thus changes are needed to make it more cost effective and profitable. As Shakti
matures, there are a number of entrepreneurs who are more successful than the others. HLL’s RSP can
organize a monthly gathering for all entrepreneurs in the same district, encouraging interaction and
communication among entrepreneurs. By doing so, the experience and knowledge of the successful
entrepreneurs will motivates others. This will increase the efficiency of each entrepreneur (profit
increase) and also decrease the amount of time spent by RSP to visit individual entrepreneur, giving
RSP more time to explore untapped villages in the same district. Thus the current 500 RSP is
sufficient to manage 25,000 entrepreneurs. Also, HLL should be focus only in states with SHG
movement to increase its cost effectiveness. HLL should also cultivate more successful entrepreneur
from existing entrepreneur as organic growth of these entrepreneur is faster and easier to give profit.
As HLL penetration to rural market is only a mere 16% (1 entrepreneur in 5 villages, pg 12), the
market potential and market size is big enough to give a fair share to every player, thus the conflict
between Shakti entrepreneurs and direct sales channel, if ever arise will be minimal. Moreover, a
control measure can be applied by limiting the number of entrepreneur in each district thus
minimizing conflict.

iShakti and Shakti Vani – survivals for Shakti

iShakti and Shahti Vani are Shakti’s initiatives created to provide rural India with access to
information and social communication. Although the setting up costs for those two programs are quite
high, Rs 150 million, funding is likely to be achievable because this cost occupies about 3.6% of
Shakti’s revenues (150 / 3.5% x 120,000 (pg 2)) and therefore Shakti itself can finance these
programs. Funding is also possibly receivable by persuading other profits centers to invest in the
programs and by using the revenues of iShakti to finance Vani. Furthermore, iShakti will have high
potential revenues from selling MR to the internal customers and to sell the channel to other
interested, non-competitor parties, e.g: banks, insurance companies, farm equipment etc. Vani itself
does not generate revenues directly, but it is a powerful tool to increase hygiene awareness in rural
India, as a result indirectly increase HLL sales at long term. In short, iShakti and Vani will be
workable and scalable to help Shakti success.

Social Impact and Role of Business

HLL should make a social impact on rural India. By involving in the improvement of rural living
conditions, HLL can and will continue to enjoy the competitive advantages as the main company to
participate in social development. The connection between business and communities will develop
lifetime customers for HLL. This involvement may not be the typical role of business, but as long as it
is profitable to HLL without compromising moral and legal issues, it will be a good move for HLL to
increase its reputation as a socially responsible organization.

Conclusion

Project Shakti started to suffer from growing so big that the current structure needs to be adjusted.
Restructuring the managing measure of RSP to entrepreneurs, focusing Shakti in selective districts
and prioritizing efforts in existing entrepreneurs, Shakti will generate higher revenues with minimal
increase in costs. Shakti should continue as it is providing HLL a distinct competitive edge and
increase HLL’s profits and growth. Moreover, Shakti helps to position HLL as socially responsible
organization.

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Questions for discussion:

1. How can project Shakti make a contribution to HLL's bottomline?

2. What are the critical challenges facing HLL in Making Shakti work?
3. If Shakti cannot become profitable, should HLL continue the program?

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Hindustan Lever’s Project SHAKTI – Marketing FMCG to he Rural Consumer
FACTS OF THE CASE:
 Intense competition from International as well as local players in 2000.
 Necessary for HLL to penetrate the untapped rural with urban markets saturated.
 Rural Markets were scattered over large areas and per capita consumption was low.
 Shakti was promoted as a CSR activity.
 Project Shakti was a unique sales channel due to the reasons apart from its scale and deep
rural reach was that it reached the final consumer rather than an outlet which would then sell to
consumers.
 Shakti created a vast local, credible, one-to-one endorsers.

CHALLENGES:
 To expand into rural market while continuing its CSR activity.
 To reduce costs on training and HR related activities.
 To expand the Shakti program in more states.
 To attract investments from the brand houses.
 To increase confidence and motivation of the enterpreneurs.

S.W.O.T:

STRENGTHS
 Shakti is scalable and sustainable due to socially beneficial aspect
 Backing of huge Brand House
 Government and NGO support
 Difficult to imitate model for
 competitors and especially in a short time

WEAKNESSES
 Rural markets were scattered over large areas and per capita consumption rates were low.
 Unequal acceptance of the role of women Entrepreneurs in different states.
 Poor reach of electronic media and significantly lower literacy levels

OPPORTUNITIES
 Recognition of the role of women by society.
 Huge untapped rural market
 Support from government.

THREATS
 Scattered rural markets.
 Competitors are aping the strategy.
 High need for training of the entrepreneurs.

RECOMMENDATIONS:
 Select entrepreneurs with some basic level of education.
 Increase the product variety available with the entrepreneurs
 Concentrate more on “VANI” as it acts as a advertising platform & can generate revenues
 Offer more discount to the entrepreneurs and rely on economies of scale.
 Entrepreneurs from close proximity can form groups and HLL can sell products to them at a
cheaper rate. This would increase their margins.
 Mobile has become quite popular and hence can be used to promote and market the Shakti
campaign. Also it can be used for Brand building exercise of HLL.
 Presence of Government’s National Channel- Doordarshan can used to promote and create
mass awareness about the Project SHAKTI.