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
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[Rajani et. al., Vol. 5 (Iss.7 ): July, 2017] ISSN- 2350-0530(O), ISSN- 2394-3629(P) DOI: Http://www.granthaalayah.com ©International Journal of Research – GRANTHAALAYAH [280] Management Dr. N. Sree Rajani *1 , Dr. V. Bhargavi Reddy 2 *1, 2 Assistant Professor, Sri Padmavathi Mahila VisvaVidyalayam, , Tirupati – 517501, A.P. , India Abstract Hindustan Unilever Limited (HUL), formerly known as Hindustan Lever Limited (HLL), is the largest consumer products company in India. The name HUL came into vogue in late June 2007. The Head office of the company is located in Mumbai. There are in all 41,000 employees of different categories working in the company. The company is headed by a non-executive Chairman (presently Mr. Hareesh Manwani. HUL is number one Fast Moving Consumer Goods (FMCG) Company in India. Keywords: Marketing & Distribution ; HUL; Hindustan Unileve r Limited. Cite This Article: Dr. N. Sree Rajani, and Dr. V. Bhargavi Reddy . (201 MARKETING & DISTRIBUTION OF HUL: ITS RURAL ORIENTATION International Journal of Research – Granthaalayah, 5(7), 280-297. . 1.Introduction In the summer of 1888, visitors to the Kolkata harbour 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 52.10% equity in the company. The rest of the shareholding is distributed among about 360,675 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
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[ Rajani et. al. , Vol. 5 (Iss. 7 ): July , 201 7 ] ISSN – 2350 – 0530(O) , ISSN – 2394 – 3629(P) DOI: 10.5281/zenodo.837137 Http:// www.granthaalayah.com © International Journal of Research – GRANTHAALAYAH [ 281 ] 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. The liberal isat ion of the Indian economy, and deregulation in 1991 permitted alliances, acquisitions and mergers. Tata Oil Mills Company (TOMCO) merged with HUL, effective from April 1, 1993. In 1995, HUL and yet another Tata company, Lakme Limited, formed a 50:50 j oint venture, Lakme Unilever Limited, to market Lakme’s market – leading cosmetics and other appropriate products of both the companies. Subsequently in 1998, Lakme Limited sold its brands to HUL and divested its 50% stake in the joint venture to the company . In 1992, the erstwhile Brooke Bond acquired Kothari General Foods, with significant interests in instant coffee. In 1993, it acquired the Kissan business from the UB Group and the Dollops Ice cream business from Cadbury India. In 1994, HUL formed a 50: 50 joint venture with the US – based Kimberly Clark Corporation which markets Huggies Diapers and Kotex sanitary pads. HUL has also set up a subsidiary in Nepal, Unilever Nepal Limited (UNL), and its factory represents the largest manufacturing investment in the Himalayan kingdom. The UNL factory manufactures HUL’s products like soaps, detergents and personal products both for the domestic market and exports to India. As a measure of backward integration, Tea Estates and Doom Dooma, two plantation companies of Unilever, were merged with Brooke Bond. Then in July 1993, Brooke Bond India and Lipton India merged to form Brooke Bond Lipton India Limited (BBLIL), enabling greater focus and ensuring synergy in the traditional beverages business. The year 1994 witn essed BBLIL launching the Wall’s range of frozen desserts. By the end of the year, the company entered into a strategic alliance with the Kwality Ice Cream Group families and in 1995 the Milk food 100% ice cream marketing and distribution rights too were a cquired. Finally, BBLIL merged with HUL, with effect from January 1, 1996. The internal restructuring culminated in the merger of Pond’s (India) Limited (PIL) with HUL in 1998. The two companies had significant overlaps in personal products, speciality c hemicals and exports businesses, besides a common distribution system since 1993 for personal products. The two also had a common management pool and a technology base. The amalgamation was done to ensure for the group, benefits from scale economies both i n domestic and export markets and enable it to fund investments required for aggressively building new categories. In January 2000, in a historic step, the government decided to award 74 per cent equity in Modern Foods to HUL, thereby beginning the dives tment of government equity in public sector undertakings (PSU) to private sector partners. HUL’s entry into bread is a strategic extension of the company’s wheat business. In 2002, HUL acquired the government’s remaining stake in Modern Foods. In 2003, H UL acquired the cooked shrimp and pasteurised crabmeat business of the Amalgam Group of Companies, a leader in value added marine products exports. The scale of Hindustan Lever’s operations can be measured in many ways. HUL is an organisation of 36,000 e mployees and indirectly provides employment to a further 200,000; this is without considering
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[ Rajani et. al. , Vol. 5 (Iss. 7 ): July , 201 7 ] ISSN – 2350 – 0530(O) , ISSN – 2394 – 3629(P) DOI: 10.5281/zenodo.837137 Http:// www.granthaalayah.com © International Journal of Research – GRANTHAALAYAH [ 282 ] the one million retailers and who rely to a considerable extent on the sale of the company’s products for their income. HUL has 7,000 redistribution stockists and source raw materials from over 2,000 suppliers and associates. HUL has 346,000 local shareholders who have benefited from their investment in the company. Rs.1000 invested seven years ago, would have grown to over Rs.14,000 today. 2. Management a nd Mission Unilever, holds 52.10% of the equity. The rest of the shareholding is distributed among 360,675 individual shareholders and financial institutions. In terms of leadership, the HUL is referred to t that it has produced many business leaders for corporate India. The company has been ranked fourth in the Hewitt Global Leadership Survey considering its leadership building potential. 2.1. Mission Unilever’s mission is to add vitality to life. The public ised commitment to this given in their brochures is as follows: We meet everyday needs for nutrition, hygiene and personal care with brands that help people feel good, look good and get more out of life. Our deep roots in local cultures and markets aroun d the world give us our strong relationship with consumers and are the foundation for our future growth. We will bring our wealth of knowledge and international expertise to the service of local consumers – a truly multi – local multinational. Our long – ter m success requires a total commitment to exceptional standards of performance and productivity, to working together effectively, and to a willingness to embrace new ideas and learn continuously. To succeed also requires, we believe, the highest standards o f corporate behaviour towards everyone we work with, the communities we touch, and the environment on which we have an impact. This is our road to sustainable, profitable growth, creating long – term value for our shareholders, our people, and our business p artners. 2.2. Vision The vision of HUL is stated as follows. To meet everyday needs of people everywhere to anticipate the aspirations of our consumers and customers and to respond creatively and competitively with branded products and services which rai se the quality of life. 3. Operations, Sales a nd Exports The operations involve over 2,000 suppliers and associates. The products sold to the extent of about four million tones nearly account for Rs. 1,37,18 crores. HUL’s distribution network comprises abou t 2,500 redistribution stockists, covering 6.3 million retail outlets of Urban India.
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[ Rajani et. al. , Vol. 5 (Iss. 7 ): July , 201 7 ] ISSN – 2350 – 0530(O) , ISSN – 2394 – 3629(P) DOI: 10.5281/zenodo.837137 Http:// www.granthaalayah.com © International Journal of Research – GRANTHAALAYAH [ 283 ] About 250 million Urban India and another 250 million rural people are consumers of its 35 major Indian brands. The products marketed by the company range from food ite ms like flour, biscuits, ice creams etc., body products such as soaps, face creams, to cigarettes, beverages etc., which the consumers need in their day to day life. HUL’s brands like Lifebuoy, Lux, Surf Excel, Rin, Wheel, Fair & Lovely, Pond’s, Sunsilk, Clinic, 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. Table 1 shows the performance of the company during a decade from 1998 to 2007. The gross sales went up to Rs. 14757 crores from Rs.10215 crores registering about 1.4 times growth. The earnings /share have gone up to Rs.8.73 from Rs.3.76 during the perio d. Table 1 : Performance Indicators of HUL 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Gross Sales (Rs.Crores) 10215 10918 11392 11781 10952 11096 10888 11976 13035 14757 By Segment % of Sales Soaps, Detergents & Household Care 39 41 4 0 40 45 44 45 45 47 47 Personal Products 16 17 17 21 22 24 26 28 29 29 Foods 35 34 37 33 30 29 27 25 22 22 Chemicals, Agri, Fertilizers and Animal Feeds 6 6 4 3 2 2 1 1 1 1 Others 4 2 2 3 1 1 1 1 1 1 EBIT as % of Sales 9.5 10.7 12.3 14.0 17.6 18.4 13 .4 12.3 13.1 13.4 Fixed Assets Turnover (times) 9.7 10.0 9.5 8.9 8.6 8.1 7.2 8.1 8.6 8.6 Working Capital 45.2 58.3 – – – – – – – –
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[ Rajani et. al. , Vol. 5 (Iss. 7 ): July , 201 7 ] ISSN – 2350 – 0530(O) , ISSN – 2394 – 3629(P) DOI: 10.5281/zenodo.837137 Http:// www.granthaalayah.com © International Journal of Research – GRANTHAALAYAH [ 284 ] Turnover (times) Economic Value Added (EVA) Rs. Crores) 548 694 858 1,080 1,236 1,429 887 1,014 1,125 1,340 Earnings /sha re of Re.1 @ 3.67 4.86 5.95 7.46 8.04 8.05 5.44 6.40 8.41 8.73 Dividend /share. of Re.1 @ 2.20 2.90 3.50 5.00 5.1 5.50 5.00 5.00 6.00 9.00 Profit after taxes / Sales (%) 8.2 9.8 11.5 13.1 15.8 16.3 11.0 11.3 11.8 12.0 R.O.C.E. (%) 58.7 61.8 64.6 62.4 5 9.4 60.2 45.9 68.7 67.0 79.4 R.O.N.W. (%) 48.9 50.9 52.7 53.9 48.4 82.8 57.2 61.1 68.1 80.1 4. HUL Exports Goods). It has been recognised by the Government of India as a Golden Super Star Trading House. Unilever brands in Home & Personal Care (HPC) and Food and Beverages (F&B) for supplies to other Unilever companies. It also f ocuses on becoming a preferred supplier to both non – Unilever and Unilever clients in three categories in which India, as a country, has competitive advantage Branded Rice, Marine Products and Castor and its derivatives. HUL enjoys international recogniti on within Unilever and outside for its quality, reliability and speed of customer service. Australia, North America etc. The categories of products exported in clude Home and Personal care products, Food and Beverages, Marine products and rice. Much of the success of their exports business has been through working with foreign alliance partners through whom they access brands, markets, technology and skills. In return, they invest capital, management and manpower in a local manufacturing base which is run to international standards. Through this alliance model, they are, for example, manufacturing Pears soap, branded tea and several other products for Unilever co mpanies, Surimi fish products for Shinto Corporation of Japan, and Hush Puppies Shoes for Hush Puppies UK. One of the key learnings from their exports business that may be of wider relevance, is that in industry sectors where India has a global competitive advantage, building alliances with foreign partners can lead to a strong, growing and sustainable exports business.
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[ Rajani et. al. , Vol. 5 (Iss. 7 ): July , 201 7 ] ISSN – 2350 – 0530(O) , ISSN – 2394 – 3629(P) DOI: 10.5281/zenodo.837137 Http:// www.granthaalayah.com © International Journal of Research – GRANTHAALAYAH [ 285 ] 5. Technology a nd Innovation HUL 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. There is a strong in ter – dependence between Hindustan Lever and Unilever in research. In the early years, the R&D efforts were centred on import substitution and they have many significant achievements that continue to be of great relevance even today. The use of unconventio nal oils, such as neem, karanja, castor and rice bran, for soap making was pioneered by the company and enabled the substitution of imported oils. Cumulatively, we estimate that this has resulted in a saving of around $1.2 billion in foreign exchange since the 1970s. R&D was also used for substituting imported aroma chemicals and nickel catalysts. The next phase of research has been to improve the functional delivery of the brands, ensuring that they are able to fully satisfy consumer needs and remain ahea d of competition. This is done through the development of innovative products and new processes, applied across the entire spectrum of the company’s business. It is this development and application of technology that makes HUL the market leader in areas as diverse as Fair & Lovely Cream and hybrid maize seeds. Research finds its application as much in Lifebuoy soap, which is the brand leader in rural India, as it does in the development of their functionalised biopolymers which improve quality and productiv ity in the paper industry. It is often believed that the role of technology in the fast moving consumer goods (FMCG) area is limited. Their experience has been exactly the opposite; they find that technology in FMCG is critical. Skilfully applied it can result in fundamentally lower cost structures and the ability to deliver new and more exciting benefits to meet the growing aspirations of consumers. HUL developed a new process of manufacturing soap based on ‘Plough Share Mixer’ technology. This eliminat es the need for steam in soap – making. Since soaps are a sizeable part of our business, the new technology cuts carbon emissions by 15,000 tons per year. HUL believes in innovation as a tool of expansion and Exhibit 1 shows the product introductions of HU L from 1988 onwards. Exhibit 1: Brand Introductions YEAR Brands 1888 Sunlight soap introduced in India. 1895 Lifebuoy soap launched; Lever Brothers appoints agents in Mumbai, Chennai, Kolkata, and Karachi. 1902 Pears soap introduced in India. 1903 B rooke Bond Red Label tea launched. 1905 Lux flakes introduced.
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[ Rajani et. al. , Vol. 5 (Iss. 7 ): July , 201 7 ] ISSN – 2350 – 0530(O) , ISSN – 2394 – 3629(P) DOI: 10.5281/zenodo.837137 Http:// www.granthaalayah.com © International Journal of Research – GRANTHAALAYAH [ 287 ] A latest innovation is Pureit. Pureit, a breakthrough offering of Hindustan Unilever (HUL), comes with many unique benefits complete protection from all water – borne diseases, unmatched convenience and affordability. e Germkill Battery technology kills all harmful viruses and bacteria and removes 100% protection from water – borne diseases like jaundice, diarrhoea, typh Recently, they have begun to use research to support their export initiatives, thus ensuring that exports are both globally competitive and sustainabl e. For example, they have developed a cold water soluble instant tea powder which has become a major export product. They have been able to isolate and process a powerful ultraviolet ray absorbing sunscreen from an indigenous naturally occurring vegetable oil. This is being exported to Europe and has significant long – term potential. Research and its application in Hindustan Lever has come full circle; it began with import substitution and is now being used to develop export businesses. 6. Reinventing Distri bution benefited from a significantly wider reach than any other company. They are now reinventing distribution to strengthen their competitive advantage in the emergi ng consumer and market scenario. Their earlier focus was to drive wide availability, and enable easy access to their brands for consumers. They now seek to go well beyond this distribution paradigm. Their new approach is more holistic touching consumers in multiple ways at the point – of – purchase and, more importantly, creating opportunities for consumers to receive brand messages and experience their brands. They are redefining their approach to the current channels, and are also creating new distribution channels with these features. 6.1. Evolution of Distribution Network Phase 1: Wholesaler net work HUL has a large distribution network comprising 5000 redistribution stockists and 40 C & F agents (Clearing and Forwarding Agents). 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 an i ndent 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 compan y. Phase 2: Registered Wholesaler 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
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[ Rajani et. al. , Vol. 5 (Iss. 7 ): July , 201 7 ] ISSN – 2350 – 0530(O) , ISSN – 2394 – 3629(P) DOI: 10.5281/zenodo.837137 Http:// www.granthaalayah.com © International Journal of Research – GRANTHAALAYAH [ 288 ] in each market was appoint ed 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 throug h distribution units maintained by the company. The Registered Wholesaler system, therefore, increased the distribution reach of the company to a larger number of customers. Phase 3: Redistribution Stockist The highlight of the third phase was the concep t of “Redistribution Stockist” (RS) who replaced the Registered Wholesaler (RW) as shown in Figure 4 – 1. The RS was required to provide the distribution units to the company salesman. The RS financed his stocks and provided warehousing facilities to store t hem. The RS also undertook demand stimulation activities on behalf of the company. The second characteristic of this period they realised that the RS would be able to provide customer service only if he was serviced well. This knowledge led to the establis hment of the “Company Depots” system. This system helped in transhipment, bulk breaking, and as a stock point to minimise stock – outs at the RS level. Figure 1 : Rural Distribution Model Indirect Coverage 6.2. Present Scenario At present, HUL’s products, manufactured across the country, are distributed through a network of about 7,000 redistribution stockists covering about one million retail outlets. The distribution network directly covers the entire urban population. In addi tion to the ongoing commitment to the traditional grocery trade, HUL is building a special relationship with the small but fast emerging modern trade. Their scale enables them to provide superior customer service including daily servicing, improving their range availability whilst reducing inventories. They are using the opportunity of interfacing more directly with our consumers in this retail environment through specially designed communication and promotions. This is building traffic into the stores whil e yielding high growth for their business. The recent measures to make the system more effective are described here. Detergent s Village 1 Village 2 Village 3 Village 5 Village 4 Only motorable villages covered: 25% of rural population serviced Van
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[ Rajani et. al. , Vol. 5 (Iss. 7 ): July , 201 7 ] ISSN – 2350 – 0530(O) , ISSN – 2394 – 3629(P) DOI: 10.5281/zenodo.837137 Http:// www.granthaalayah.com © International Journal of Research – GRANTHAALAYAH [ 289 ] i) C& FAs as buffer stock points 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 stock – points to ensure that stock – outs 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 has also undergone changes over the years. Financing stocks, providing manpower, providing service to retailers, implementing promotional act ivities, extending indirect coverage, reporting sales and stock data, screening for transit damages are some of the functions performed by the RS today. ii) Formation of mother report HUL has grown manifold over the years. In the process, the number of facto ries and the number of SKUs too have increased. In order to rationalise the logistics and planning task, an innovative step has been the formation of the Mother Depot and Just in Time System (MD – JIT). Certain C&FAs were selected across the country to act a s mother depots. Each of them has a minimum number of JIT depots attached for stock requirements. All brands and packs required for the set of markets which the MD and JITs service in a given area are sent to the mother depot by all manufacturing units. Th e JITs draw their requirements from the MD on a weekly or bi – weekly basis. iii) RS Net An IT – powered system has been implemented to supply stocks to redistribution stockists on a continuous replenishment basis. Launched in 2001, RS Net is part of Project Leap – to – end supply chain initiative. Project Leap begins with the supplier, runs through the factories that the right product is available at the right place in the right quantities and at the right time. Leap also aims at reducing inventories and improving efficiencies right through the extended supply chain. RS Net is one of the largest B2B e – commerce initiatives ever undertaken in India. It provides linka from Gandhidham to Guwahati is now available on RS Net every day. RS Ne t covers about 80% of the company’s turnover. Today, the sales system gets to know every day what HLL stockists have sold to almost a million outlets across the country. RS Net is part of Project Leap, HUL’s end – to – end supply chain, which also includes a b ack – end system connecting suppliers, all company sites and stretching right upto stockists. 6.3. Retail Promotion Measures HUL is also emphasising on making their brands prominently visible in the crowded stores. Their outlet visibility programmes cover over 25,000 outlets in key cities, deploying a large number of third party merchandisers and agencies to ensure superior display of their products. Greater interaction is key to touching consumers and they are using the point – of – purchase for a
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[ Rajani et. al. , Vol. 5 (Iss. 7 ): July , 201 7 ] ISSN – 2350 – 0530(O) , ISSN – 2394 – 3629(P) DOI: 10.5281/zenodo.837137 Http:// www.granthaalayah.com © International Journal of Research – GRANTHAALAYAH [ 290 ] much higher level of direct contact. For example, Lakme Beauty Advisors in key outlets promote sales and provide specific information and product testing, facilitating an informed choice to women seeking beauty solutions. Encouraged by this, they are undertaking a similar initiative across many of their other brands where in – store facilitators offer promotions and provide product information. For many developing categories, in – store sampling, education and experience will play a major role in building their brand s. Self – service Stores Self – service stores and supermarkets, provide consumers with a great opportunity for brand interaction with consumers. Hindustan Lever has proactively developed new capabilities in customer management and supply chain for partnering this emerging channel. They now have a business system in place that delivers excellence in customer service, while driving growth for HUL. For example, recently Sunsilk mobile salons at stores provided consumers an opportunity to have a great hair wash and try the new relaunched product. mildness compared to other soaps. They also undertake in – store sampling for their range of Beverages and Food products like tea, c offee and soups. The self – service format is a great enabler for such increased interaction with consumers and they are fully leveraging this opportunity to drive trial and preference for their brands. Hindustan Lever Network Started in 2003, Hindustan Uni lever Network (HUN) is HUL’s Direct Selling arm. Through this th ey have presence in over 1,500 towns covering 80% of the urban population backed by 28 offices and over 130 service centres across the country. It already has about 7 lakh consultants – all i ndependent entrepreneurs, trained and guided by Hindustan Lever Network presents a range of customised offerings, covering 11 categories across Home & Personal Car e and Foods. The Aviance range, for example, has tailor – made solutions and regimes for different types of Hindustan Lever Network consultant recommends the best suited combination of sha mpoo and conditioner. Similarly, for new products in colour cosmetics, the consultant has the opportunity to demonstrate and teach consumers the best use of the new product. Out – of – Home Opportunity Growing out – of – home consumption is a global trend. In Europe, for example, food sales in out – of – home channels are growing three times faster than in grocery outlets.
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