SUMMER TRAINING REPORT

On

A Study of Promotional Activities At HUL

Project Title :-
Done By Channel Member

Submitted in partial fulfilment of the requirements of

the two year
Post Graduate Programme (PGP).

Submitted by
………………………MANEESH
KUMAR……………………….

Roll No: PG 20090280

Batch: 2009-2011

IILM Institute for Higher

Education
 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).
Lifebuoy soap in 1895 and other famous brands like Pears, Lux and Vim. Vanaspati ghee
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. Unilever holds
52.10% equity in the company. The rest of the shareholding is distributed among about
360,675 individual shareholders and financial institutions.
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.
Deregulation permitted alliances, acquisitions and mergers. In one of the most visible
and talked about events of India's corporate history, the erstwhile 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 joint 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.
HUL formed a 50:50 joint venture with the US-based Kimberly Clark Corporation in
1994, Kimberly-Clark Lever Ltd, 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.
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 Icecream business from Cadbury 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).1994 witnessed 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 Icecream
Group families and in 1995 the Milkfood 100% Icecream marketing and distribution
rights too were acquired.
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
Chemicals 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 in domestic and export markets and enable it to fund investments
required for aggressively building new categories.

Hindustan Unilever Limited (‘HUL’), formerly Hindustan Lever Limited

(it was renamed in late June 2007 as 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. These products 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.
Hierarchy Of HUL :-
Chairperson - Harish Manwani

MD - Nitin Paranjpe

Directors - A Narayan, Ashok K Gupta, C K Prahalad, D S Parekh, D Sundaram,

Dhaval Buch, Douglas Baillie, Gopal Vittal, Harish Manwani, Nitin Paranjpe, Pradeep
Banerjee, R A Mashelkar, S Ramadorai

S.No Name Designation

1 Harish Manwani Non Executive Chairman

2 D S Parekh Independent Director
3 A Narayan Independent Director
4 S Ramadorai Independent Director
5 R A Mashelkar Independent Director
6 Nitin Paranjpe Managing Director &
Chief Executive Officer
7 Pradeep Banerjee Whole Time Director

Number of people:
Over 65,000 direct & indirect employees

Balance sheet

Sources of Funds Mar

Mar 10
Owner’s fund 09
Equity share capital 217.99
217.75
Share application money -
-
Preference share capital -
-
Sources of Funds Mar
Mar 10
Owner’s fund 09
Reserves & surplus 1,842.85
1,220.82
Secured loans 144.65
25.52
Unsecured loans 277.30
63.01
Total 2,482.79
1,527.10
Gross block 2,881.73 2,669.08
Less : revaluation reserve 0.67 0.67
Less : accumulated
1,274.95 1,146.57
depreciation
Net block 1,606.11 1,521.84
Capital work-in-progress 472.07 185.64
Investments 332.62 1,440.81
Current assets, loans &
6,040.04 3,681.12
advances
Less : current liabilities &
5,968.06 5,302.30
provisions
Total net current assets 71.98 -1,621.18
Miscellaneous expenses not
- -
written
Total 2,482.79 1,527.10
Book value of unquoted
317.30 1,364.36
investments
Market value of quoted
71.09 287.83
investments
Contingent liabilities 417.26 494.46
Number of equity
21798.76 21774.63
sharesoutstanding (Lacs)
Profit loss account
M
Mar ' 10
ar ' 09
Income
Operating income 20,504.28 13,880.56
Expenses
Material consumed 10,945.71 7,380.72
Manufacturing expenses 598.71 402.99
Personnel expenses 1,152.12 767.81
Selling expenses 3,277.74 2,160.38
Adminstrative expenses 1,565.05 1,092.23
Expenses capitalized - -
Cost of sales 17,539.33 11,804.13
Operating profit 2,964.95 2,076.43
Other recurring income 236.17 180.42
Adjusted PBDIT 3,201.12 2,256.84
Financial expenses 25.32 25.50
Depreciation 195.30 138.36
Other write offs - -
Adjusted PBT 2,980.49 2,092.99
Tax charges 572.94 417.14
Adjusted PAT 2,407.55 1,675.85
Non recurring items 40.37 247.95
Other non cash
48.53 1.67
adjustments
Reported net profit 2,496.45 1,925.47
Earnigs before
2,693.95 2,729.12
appropriation
Equity dividend 1,634.51 1,976.12
Preference dividend - -
Dividend tax 277.78 355.50
Retained earnings 781.66 397.50
 PRODUCTS OF HUL

Personal wash
Lux. Lifebuoy, Liril , Hamam, Breeze, Moti , Dove, Pears and Rexona
Laundry
Surf Excel, sun light, Rin ,Wheel & Ala bleech
Dishwasher
Vim
Disinfectants
Domex, cif
Foods
Kissan(Jam,Ketchup,Squashes), Annapurna(Aata and salt), Knorr Soups, Modern Bread
Ice-cream
Kwality Wall's
Bewerages:-
Tea
Brooke bond, Lipton, taj mahal
Coffee
Brooke bond bru
Beauty Products
Fair & Lovely, Lakme, Ponds, Vaseline and Aviance
Hair-Care
Sunsilk naturals, Clinic , Dove and Lifebouy
Oral-Care
Pepsodent and Close-up
Deo spray
Axe and Rexona
Water Purifier
Pureit
Ayurvedic Personal & health care
Ayush

But we are concentrating on few products like :-

Fair & Lovely (Gorepan se bhi jyada gorapan)

Lux (Purple)
Pepsodent (Kitanuo se suraksha 24 hrs tak)

Surf Excel (Daag achche hai)

HUL’s Competitors

Dabur India:

Colgate:
The oral care range
 Colgate Toothbrushes,
 Colgate Toothpastes, Colgate Toothpowder
 Colgate Whitening Products.
Personal care range
 Palmolive Aroma Bar Soap,
 Palmolive Relax Bar Soap,
 Palmolive Liquid Hand Wash and
 Palmolive Shower Crème
  Palmolive Aroma Shower Gel with three different fragrances:
 relax
 vitality and
 sensual
Household care product offered
 Axion Dish Washing Paste
 Men's Range of Colgate Palmolive
 The men's products of Colgate Palmolive
 Palmolive shaving cream is
 The Irish Sprig Icy Blast deodorant soap

Godrej Consumer
The company is popularly known for its Soaps, Toiletries, Hair Care, Household Care,
and Fabric Care solutions.

Hair color category

 Godrej Liquid & Powder Hair Dyes,
 Godrej Kesh Kala Oil,
 Godrej Renew Coloursoft Liquid Hair Colours, and
 Nupur based Hair Dyes.
Godrej Consumers Products
 Fairglow,
 Cinthol
 Godrej No. 1
 FAIRGLOW
 EZEE (the Liquid Detergent)

Marico
Marico's well-known brands are:
 Parachute
 Saffola
 Sweekar
 Hair & Care
 Nihar
 Shanti
 Mediker
 Revive
 Kaya
 Sundari
  Aromatic Fiancee
 HairCode.

P and G
Fabric Care
 Tide:
 Tide Detergent
 Tide Bar
 Ariel:
 Ariel Front-O-Mat
 Ariel 2 Fragrances
Hair Care
 Pantene
 Olay
 Head & Shoulders
 Rejoice
Baby Care
 Pampers

Emami
 Navratna Oil
 Navratna Lite
 Navratna Extra Thanda
 Navratna Cool Talc
 Boroplus Antiseptic Cream

Problem:-
HUL have 44% market share in rural market. But they want to grow
their market min. up to 55%. And the problem is that
• How should be the promotions in the rural market to grow the
market share.
• problem in supply chain

Objective:-
We have objectives: -
1. What is channel design of HUL
2. What is the Distribution Network of HUL
3. How channel member promotes the products in rural market

Distribution Network of
HUL

Evolution over Time

The HUL’s 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 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.
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 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 transshipment, bulk breaking,
and as a stockpoint to minimise stock‐outs 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 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 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.

Distribution System of HUL

HUL's products, are distributed through a network of 4,000
redistribution 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 self‐service stores and supermarkets. Around 2,000
suppliers and associates serve HUL’s 40 manufacturing plants which
are decentralized across 2 million square miles of territory.
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 sub‐stockists.
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 sub‐stockist distributes the company's products to
outlets in adjacent smaller villages using transportation suitable to
interconnecting roads, like cycles, scooters or the age‐old bullock cart.
Thus, Hindustan Unilever is trying to circumvent the barrier of
motorable roads. The company simultaneously uses the wholesale
channel, suitably incentivising them to distribute company products.
The most common form of trading remains the grassroots buy and sell
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 7
Coverage (IDC) method, company vans were replaced by vans
belonging to Redistribution Stockists, which serviced a select group of
neighbouring markets.

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 India's 638,000 villages .HUL's
partnership with Self Help Groups(SHGs) of rural women, is becoming
an extended arm of the company's operation in rural hinterlands.
Project Shakti has already been extended to about 12 states
Andhra Pradesh, Karnataka, Gujarat, Madhya Pradesh, Tamil Nadu,
Chattisgarh, 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 direct to home
distributors in rural markets. The model consists of groups of (15-20)
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 Shakti entrepreneur
usually service 6-10 villages in the population strata of 1,000-2,000.
The Shakti entrepreneurs are given HUL products on a `cash and carry
basis.'

Hindustan Lever Network (HLN) :-

It is the company's arm in the Direct Selling channel, one of the
fastest growing in India today. It already has about several lakh
consultants ‐ all independent entrepreneurs, trained and guided by
HLN's expert managers. HLN has already spread to over 1500 towns
and cities, covering 80% of the urban population, backed by 42 offices
and 240 service centres across the country. It presents a range of
customised offerings in Home & Personal Care and Foods.
The New Compensation plan for HLN partners provides new exciting
ways of earning substantial income in addition to offering rewards like
revenue sharing through the innovative concept of “pools” Mother
Depot and Just in Time System
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 as 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. The JITs draw
their requirements from the MD on a weekly or bi‐weekly basis.

RS Net Initiative :-
The RS Net initiative, launched in 2001, aims at connecting
Redistribution Stockists (RSs) through an internet based system. It
now covers stockists of the Home & Personal Care business and Foods
& Beverages in close to 1200 towns and cities. Together they account
for about 80% of the company's turnover. RS Net is one of the largest
B2B e‐commerce initiatives ever undertaken in India. It provides
linkages with the RSs’ own transaction systems, enables monitoring of
stocks and secondary sales and optimises RS’s orders and inventories
on a daily basis through online interaction on orders, despatches,
information sharing and monitoring. The IT‐powered system has been
implemented to supply stocks to redistribution stockists on a
continuous replenishment basis. Today, the sales system gets to know
every day what HUL stockists have sold to almost a million outlets
across the country. Information on secondary sales is now available on
RS Net every day.
RS Net is part of Project Leap. Project Leap begins with the supplier
runs through the factories and depots and reaches up to the RSs. This
ensures HUL’s growth by ensuring that the right product is available at
the right place in the right quantities and at the right time in the most
cost‐effective manner. Leap also aims at reducing inventories and
improving efficiencies right through the extended supply chain.
RS Net has come as a force multiplier for HUL Way, the company's
action‐plan to not only maximise the number of outlets reached but
also to achieve leadership in every outlet. RS Net has enabled
stockists to place orders on a Continuous Replenishment System. This
in turn has unshackled the field force to solely focus on secondary
sales from the stockists to retailers and market activation. It has also
enabled RSs to provide improved service to retail outlets.
Simultaneously, HUL is servicing the rural market, key urban outlets,
and the modern trade as a single concern.

Channel Design

Hindustan Lever Limited (HUL) has two types of channel selling :-

i. Regular (traditional) retail channel,

ii. 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 (as shown
earlier). Hindustan Unilever's distribution network is recognized as one
of its key strengths. Its focuses on Product availability, Brand
communication, and higher levels of brand experience.

HUL’s Sales Break up through different

channels:
Rural Areas – 33%

Modern Retail – 7%

Urban General Trade – 60%

The HUL management realized certain problems with the existing

sales model. First, the model was not viable for small towns with small
population and small business. HUL found it expensive to appoint one
stockist exclusively for each town. Secondly, the retail revolution in
the country has changed the pattern the customers shop. Large retail
self service shops are becoming commonplace. 13 In response of
these problems, HUL redesigned its sales and distribution channel and
the new system is known as 'diamond model' in the company. At the
top end of the diamond, there are the self service retail stores which
constitute 10% of the total FMCG market. The middle, fatter part of
the diamond represents the profit‐center based sales team. In the
bottom of the pyramid is the rural marketing and distribution which
accounts for 20% of the business. As a result of the new distribution
plan the company has planned to reduce the number of RS in small
towns.

Redistribution Stockists:
Total number of RS in Jamshedpur = 3 (at Sakchi, Bistupur, Parsudih).
This is going to be reduced to only one with effect from next month of
this year.
� Sales Margin: 4.76% 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 8.3
(Developed by IBM & CMC). This software needs to be
synchronized 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 Jamshedpur: Approximately 1070.
�Sales Margin: Depends on the product
o Soap, detergents ‐ 8% on MRP
o Cosmetics ‐ 10% on MRP
o Food items ‐ 8% on MRP

Incentive schemes:
Company programs (Scheme Discounts + Cash Discounts)
TPR schemes based on Sales (1 % to 4 %)
Vijeta scheme is not for retailers.

Promotional Strategies

Merchandising
Purchase Decisions of customers are affected by several set of factors. Marketers have
found Shelving and Arrangement of products can affect the decisions of customers to a
considerable extent. The consumer items such as the FMCG products can be placed in
the store in a manner to attract the attention of the consumer and hence generate more
sales. The intention of marketers is to sell maximum number of products to a customer
once he enters the store. This is carefully planned by placing the products at particular
(planned) positions that will gather maximum attention of the customer and will attract
the customer to buy it.

The findings were that-

A. 69% of all FMCG products are purchased on impulse.

B. 13% more money is spent by an average shopper when they are exposed to excellent
merchandising. This is over and above the amount they intend to spend on shopping trip.

C. 72% of all brand decisions are made in-store.

So when the decisions are made before the shelves there might be some attributes by
which purchase decisions are made in-store. Many marketers hence use the concept of
in-store merchandising by shelving and arranging the products in a store. This concept is
also used to increase awareness of company or brand image, to create or reinforce
perceptions of key brand image associations and to create experiences and evoke
feelings.
Retail stores hence concentrate on the impulse and planned purchases of the customer.
-Impulse purchases include purchase of goods such as Candy/gum, Beer, Carbonated
Soft Drink, Chips, Greeting cards, Desserts, Ice Cream, Newspapers/Magazines, etc.
-Planned purchase items include Baby food, Bread, Coffee, Eggs, Laundry Detergent,
Meat, Milk, Poultry, etc.
Thus retailers have found that placing butter at a shelf near to that of Bread had
increased the sales of both bread and butter. This works fine for impulse purchases. In
case of planned purchases retailers try to place the items far to each other and include
impulse goods in between as the customer will find the shelf where the planned good is
placed and at the mean time will be attracted towards the impulse goods. Hence
increasing the sales of the retail store as whole.

VISUAL MERCHANDISING
Definition:
Visual merchandising is creating merchandise display to communicate store's fashion Message to
prospective customers.
It involves activity of promoting the sale of goods, especially by their presentation in retail outlets. This
includes combining product, environment, and space into a stimulating and engaging display to encourage
the sale of a product or service, promotion of latest collection and to attract appropriate buyers.
The management decides as to the Image store design to reflect, products store is going to sell, movement
of customers and how to create warm, friendly and approachable atmosphere for its potential customers.
Visual merchandising is one of the final stages in trying to set out a store in a way that customers will find
attractive and appealing and it should follow and reflect the principles that underpin the store’s image.
Visual merchandising is the way one displays 'goods for sale' in the most attractive manner with the end
purpose of making a sale. "If it does not sell, it is not visual merchandising."

Initiatives taken to Improve the Distribution

Network :-
HUL has taken the following initiatives to improve its distribution
network:
1. Setting up of a full-scale sales organisation comprising key
account management and activation to impact, fully engage and
service modern retailers as they emerge.

2. Servicing Channel partners and customers with continuous daily

replenishment.

3. Leveraging scale and building expertise to service Modern Trade

and Rural Markets.

4. Delayering of sales force to improve response times and service

levels.

5. 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.

6. 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.

7. 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.

8. 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.

9. Starting of franchised Lakme Beauty Salons and Ayush Therapy

centres to offer standardised services, in line with the strategy to
leverage the equity of its brands through relevant services.

10. 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.

11. Launching the Unicare scheme with upmarket pharmacies and

retailers to sale its premium brands.

12. 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.

13. 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.

Suggestion & Analytical Framework :-

We tried to analyze HUL’s distribution network in the light of 20 most

significant variables that affect the distribution part of channel
management for any organization in the business of marketing &
selling of goods. The variables, their explanations and their impact on
the HUL’s distribution network are given below –
1. Number of Consumers
In retail business dominated by traditional stores like Kirana Stores
etc (Indian retail business falls in this category), higher the no. of
consumers, higher will be the no. of channel intermediaries. The
implication of this is that there will be many layers in the channel in
such a situation and managing such a complex distribution network
by keeping tabs on every player will be a huge task. Moreover,
Transport & Logistics (“T&L”) support provided by the organization
needs to be well organized.
Implication for HUL
HUL’s key strength lies in managing its distribution network in India.
HUL is India’s largest FMCG company with unmatched distribution
network, which is built over a century focusing on traditional retail.
HUL's distribution network comprises about 4,000 redistribution
stockists, covering about 6.3 million retail outlets reaching the
entire urban population, and about 250 million rural consumers in
India. It’s said that HUL is able to touch the lives of about 2 out of
every 3 Indian consumers. This achievement is due to the sheer
strength of its distribution network (products should be good as
always, otherwise they will find no buyers in the long run). For a
comparison, P&G, world’s largest FMCG major, does not find its
name in the list of top 5 FMCG majors in India as its strength lies in
managing modern retail (biggest example, Wal‐Mart), but not
traditional retail.

2. Geographic Dispersion of Consumers Again, this is closely related

with the previous variable, more so in a large, geographically
diverse country like in India. With the increase in this dispersion
level, more intermediaries and more layers are required in the
distribution network so as to effectively reach the length & breadth
of the country. Obviously the T&L management for such an
organization would be critical to accomplish this.
Implication for HUL
For a country as geographically diverse as India, pan‐Indian
presence & market leadership can only be possible when products
reach even the remotest parts of the country. HUL is very successful
in achieving and maintaining this reach due to its distribution
network.
3. Frequency of Purchase If the frequency of purchase is high,
then transport intensity in “the last mile” (i.e., from distributor to
retailers) increases manifold. For FMCG products, as a thumb rule
we can take that the mean time between two purchases is ~ 90
days. With the introduction of smaller form factor packaging for
FMCG goods (Re.1 /‐ shampoo sachets being a very good example),
the transport intensity increased further.
Implication for HUL
HUL has about 4000 redistribution stockists, who supply to approx.
6.3 million outlets across India. Since manufacturing is done at 40
plants around the country, rationalizing the logistics and planning is
a huge task. An innovative step in that regard 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 as 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. The JITs draw their
requirements from the MD on a weekly or bi‐weekly basis and
supply to stockists in that area, who, in turn, supply to retailers.
4. Tendency to Postpone Purchase
If the tendency to postpone purchase is lesser, then the product will
be easier to distribute. For example, products/services like Fire
Extinguishers, Life Insurance etc. are such that though these are
needed, the overall tendency for the consumers is to postpone the
purchases – these products/services can be termed as “necessary
evil”. For this kind of products, regular reinforcement in the minds
of consumers becomes necessary, sales field force becomes critical
and use of “expert” field force is commonplace.
Implication for HUL
Since FMCG products are used regularly and these products are not
“necessary evils”, distribution network of HUL does not require any
expert field force to sell its products. Only the recent diversification
of HUL into Home Water Purification business (“Pure It” brand)
needs dedicated field sales force.
5. Level of Familiarity/Knowledge (of consumer) about the Product
If the level of familiarity of consumer with the product is higher,
lower will be the importance of field sales force and higher will be
the importance of channel.
Implication for HUL
Since FMCG goods are very much familiar to consumers, channel
and its different members are very much important to HUL and field
sales force’s function is mostly limited to channel management and
ensuring availability of products.
6. Degree of Brand Loyalty
If the consumers are more brand loyal, then less “push” will be
required from the channel members to sell the products as there
will be sufficient “pull” or demand from the consumers. This implies
that for products with loyal customer base, efforts from the channel
members can be much lesser for final off‐take to happen which in
turn leads to lesser margins to the channel members for those
products. For faster moving products (mostly due to brand pull),
retailers may not be averse to slightly lesser margins as rotation of
the products is high and thus his/her ROI is protected.
Retailer’s ROI = Margin * Rotation
Investment
For a FMCG player with a non‐established brand, margins to
channel members and point of sale (POS) advertising are both
important.
Implication for HUL
As HUL enjoys leadership position in many FMCG segments like
Soaps, Detergents, Personal Care products etc with strong brands
 with continuous “pull”, HUL has less to worry about margins to
channel members or POS advertising. But this situation can change
considerably in the face of rise of a significant competitor having
almost the same reach as HUL has (e.g., ITC as it’s eating into
HUL’s market share continuously since it entered FMCG segment).

7. Level of Involvement (LOI) Level of involvement (i.e., time &

effort spent by the consumer) generally depends on the product
cost. If LOI is higher, lower is the importance of availability and
more critical is the
supply of information as consumer decision process depends more on
elaborate information search

Implication for HUL

As FMCG products are generally Low Involvement Products, HUL has
to bother more on ensuring availability of the products, rather than
supply of information.
8. Purchased as a Basket of Goods
The products which are generally bought together by consumers as
a basket of goods (e.g., Rice, Flour powder, Cooking oil etc at the
beginning of the month) are to be made available together for final
off‐take.
Implication for HUL
This aspect partly applies to HUL’s products as some products like
shampoos, soaps, detergents may fall in a basket. Efficient
distribution network of HUL ensures availability of all such products
at each selling point (individual retailer).

9. Present of Expert Influencer in the Decision Making Process Roles

of sales field force vary depending upon whether expert influencer
(e.g., doctors) is present in the process or not. If present, then
consumer buying behavior may become subcontracted and the
expert influencer becomes another customer of the network, apart
from the end‐user. In that situation two groups of sales force are
needed to cater to both the segments.
 Implication for HUL
For FMCG goods, role of expert influencer is limited. But companies
try to associate brands with regulatory bodies/authorities and show
advertising with experts commenting upon superior virtues of a
product in an attempt to make the buying behaviour shift from
picking/variety‐
seeking to subcontracted and make consumers more loyal to the
brand. These are true for HUL also (e.g., Pond’s Intitute).

10. Time Band Associated with the Purchase of the Product If there
is seasonality/cyclicity for the demand or purchase of the product
(examples – newspaper, milk are most on demand in the 1 st three
hours of the day; cooking oil, rice etc )

24 grocery items are most on demand in the 1st week of the

month), then high T&L and infrastructural requirements are
needed for the “last mile” for the time band when demand is
maximum. It is possible to have idle capacity in the areas
mentioned above outside the peak required time band.
Implication for HUL
For some of the products of HUL, the above stated variable is
significant. For example, in Food segment, Branded Atta –
‘Annapurna’; in segments like Laundry Detergents, Shampoo & Hair
Oil etc. this element of demand time band exist to a certain extent.
This underscores the importance of T&L for HUL as the transport
intensity between distributors and retailers increases in the 1st &
4th week of a month for the products mentioned above. This is over
and above the regular replenishment of stocks at retailers done by
distributors. Festivals like Holi etc. may also increase the demand
for personal care items like soaps, shampoos etc for a short period
and distribution network should be geared up not to miss any such
opportunity.

11.Negative or Positive Reinforcing Product Negative reinforcing

products are those which are bought to avoid/reduce the problem
(ex. – insurance, washing machine, car battery etc). Positive
reinforcing products are those which gratify the senses (ex. –
Perfumes, Chocolates, Vacation etc). Shopping experience becomes
a critical aspect for positive reinforcing products to reaffirm the
positive feelings.
Implication for HUL
“Axe” & “Rexona” deodorants are distinctly positive reinforcing
products from HUL, including others like Lux, Lakme etc. So these
are seen in most shopping malls etc. with high visibility displays to
reaffirm the feelings. Consumers are willing to pay higher for these
brands.