Hindustan Unilever –A preliminary study of the giant’s

penetration into rural markets of India

“The future lies with those companies who see the poor as their customers."

- C. K. Prahalad
Addressing Indian CEOs, Jan 2000

1. What is Rural?

Rural areas are large and isolated areas of a country, often with low population density.
Thus, rural areas comprise open country and settlements with fewer than 2,500 residents,
areas designated as rural can have population densities as high as 999 per square mile or
as low as 1 person per square mile.

Rural India presents a baffling dichotomy of images: poverty and growing potential of
rural markets. The importance of rural sector has been on decline. Proportion of the GDP
accounting from agriculture, industry and services have changed from 59: 13:28 (1947)
to 24: 25: 51 (2008).Proportion of the workforce accounting from agriculture, industry
and services have changed from 74: 11:15 (1947) to 57:18:25 (2008); Relative
productivity ratios of 1:3.4:4.2 per unit of labor in agriculture.

Fig 1: Estimated annual size of the rural market -

FMCG Rs. 65,000 Crore

Durables Rs. 5,000 Crore
Agri-Inputs (including tractors) Rs. 45,000 Crore
2 / 4 Wheelers Rs. 8,000 Crore
In 2001-02, LIC sold 55% of its policies in rural India. Of two million BSNL mobile
connections, 50% are in small towns / villages. Of the 6.0 lakh villages, 5.22 lakh have a
Village Public Telephone (VPT). 41 million Kisan Credit Cards have been issued
(against 22 million credit-plus-debit cards in urban), with cumulative credit of Rs. 977
billion resulting in tremendous liquidity.

The interim Budget's focus on extending the National Rural Employment Guarantee Act
(NREGA) to all states with a US$ 5.83 billion outlay for 2009-10 would benefit the rural
economy. The rural economy got a further boost with the farmer loan waiver of US$
13.86 billion and the ambitious Bharat Nirman Programme with an outlay of US$ 34.84
billion for improving rural infrastructure.

Enhanced access to quality roads, power and water supplies remains a pipedream, despite
all the promises made by successive governments, living conditions in rural India seem to
have been improving in recent years, as highlighted by the recent NSSO Survey (59th
Round). The Common Minimum programme (CMP) should be seen as a package that
promises to make growth more sustainable by addressing a key variable – rural demand.
After a decade and a half of reform, we seem close to arriving at the right growth-welfare
mix (2). India’s increasing urban-rural divide can be effectively dealt with only through
the provision of urban facilities in rural areas (PURA), as stressed by the President Dr.
Abdul Kalam. The UNCTAD’s World Investment Report (WIR), 2005 says developing
countries are emerging as favored locations for the conduct of R&D by MNCs so as to
tailor, and dovetail, products and processes that would integrate local production into the
MNC’s global value added systems. India is sitting on the blitzkrieg of becoming a super
power and it is the Indian rural sector that is going to drive that super growth. The
Government of India has made rural economic development in general, and rural
infrastructure development in particular, is a key priority. India has launched the “Bharat
Nirman” (Building India) program, which entails investing over US $ 40 Billion,
equivalent to 5 per cent of FY 2005 GDP, in six critical areas of rural infrastructure over
four years starting from 2005 ITC’s partnership with the Khadi and Village Industries
Commission (KVIC) to source and distribute KVIC’s agarbattis, signifies a lot more than
the lofty ideal of a private corporation supporting a predominantly rural enterprise. To
boost manufacturing, organized retail must grow. Lessons from ITC’s Khadi tie-up are
that ITC shall become Wal-Marts and the Tescos, epitome of modern retailing, in India.
Foreign Direct Investment (FDI) in retail is welcome and the benefits of organized retail
far outweigh the costs: millions of jobs, lower prices and greater tax compliance that the
organized retail would create. Modern retailing sharply reduces the intermediation costs
of connecting the producer to the consumer. This saving, even if shared by many, means
that the consumer pays less while the producer gets more (Editorial column, The
Economic Times, 9 February 2005). At present, developing a retail distribution network
is an expensive, risky business in India.

2. What is a Rural Market?

Rural Markets are defined as those segments of overall market of any economy, which
are distinct from the other types of markets like stock market, commodity markets or
labor economic.

As per Raj et al (1) the Indian Fast Moving Consumer Goods (FMCG) industry began to
shape during the last fifty odd years. The FMCG sector is a cornerstone of the Indian
economy. This sector touches every aspect of human life. Indian FMCG market has been
divided for a long time between the organized sector and the unorganized sector. Unlike
the US market for FMCG which is dominated by a handful of global players, India’s Rs.
460 billion FMCG market remains highly fragmented with roughly half the market going
to unbranded , unpackaged home made products. This presents a tremendous opportunity
for makers of branded products who can convert consumers to buy branded products.
Globally, the FMCG sector has been successful in selling products to the lower and
middle income groups, and the same is true in India. Over 70% of sales is made to middle
class households today and over 50% is in rural India. The sector is excited about a
burgeoning rural population whose incomes are rising and which is willing to spend on
goods designed to improve lifestyle. Also with a near saturation and cut throat
competition in urban India, many producers of FMCGs are driven to chalk out bold new
strategies for targeting the rural consumer in a big way. MART, the specialist rural
marketing and rural development consultancy, has found that 53 per cent of FMCG sales
and 59 per cent of consumer durable sales lie in the rural areas. Of two million BSNL
mobile connections, 50 per cent went to small towns and villages; of 20 million
Rediffmail subscriptions, 60 per cent came from small towns; so did half the transactions
on Rediff's shopping site. According to a study by Chennai-based Francis Kanoi
Marketing Planning Services Pvt Ltd, the rural market for FMCG is worth Rs.65,000
crore, for durables Rs 5000 crore, for tractors and agri-inputs Rs.45,000 crore and two-
and four-wheelers, Rs.8000 crore There are many reasons that has urged the FMCG
companies to enter the uncharted territory of rural India. Some of the attractions are
discussed below:

2.1 Large Population

The rural Indian population is large and its growth rate is also high. Over 70% India’s
one billion plus population lives in around 627,000 villages in rural areas. This simply
shows the great potentiality rural India has to bring the much needed volumes and help
the FMCG companies to bank upon the volume driven growth.

2.2 Rising Rural Prosperity

India is now seeing a dramatic shift towards prosperity in rural households. To drive
home the potential of rural India just consider some of these impressive facts about the
rural sector. As per the National Council for Applied Economic Research (NCAER)
study, there are as many ‘middle income and above’ households in the rural areas as there
are in the urban areas. There are almost twice as many ‘lower middle income’ households
in rural areas as in the urban areas. The purchasing power in rural India is on steady rise
and it has resulted in the growth of the rural market. The market has been growing at 3-
4% per annum adding more than one million new consumers every year and now
accounts for close to 50% of volume consumption of FMCG. The growth rates of lot of
FMCG are higher in rural markets than urban markets.

An important tool to reach out to the rural audience is through effective communication.
``A rural consumer is brand loyal and understands symbols better. This also makes it easy
to sell look - alike", says Mr. R.V Rajan, CMD, Anugrah Madison Advertising. The rural
audience has matured enough to understand the communication developed for the urban
markets, especially with reference to FMCG products. Television has been a major
effective communication system for rural mass and, as a result, companies should
identify themselves with their advertisements. Advertisements touching the emotions of
the rural folks, it is argued, could drive a quantum jump in sales.

2.3 IT Penetration in Rural India

Today there are over 15 million villagers in India who are aware of the Internet and over
300,000 villagers have used it! Ten years back, history was created with Public Call
Office phone booths (essentially manually operated payphone facilities), opening in
every corner of the country. This experiment was an instant success and contributed to
hundreds of thousands of jobs. Over the next two years, WorldTel is expected to provide
1000 centres in Tamil Nadu with 2 to 20 terminals in each centre. If successful, this
experiment can be replicated easily to all 27 states leading to over half a million Internet
users through this experiment alone! The existing 600,000 public call offices in India will
soon be transformed into public 'tele-info-centres' offering a variety of multimedia
information services. The rural consumers spend time and money to access higher level
information. Studies have indicated that if the content has direct relevance and will result
in commercial gains, people in rural areas are willing to pay for information services.
Consumerism has altered rural buying behavior in recent years. Spending patterns of
those who spend are now adapting to face the technology bug. Today's rural children and
youth will grow up in an environment where they have 'information access' to education
opportunities, exam results, career counseling, job opportunities, government schemes
and services, health and legal advice and services, worldwide news and information, land
records, mandi prices, weather forecasts, bank loans, livelihood options. If television
could change the language of brand communication in rural India, affordable Web
connectivity through various types of communication hubs will surely impact the
currency of information exchange. As the electronic ethos and IT culture moves into rural
India, the possibilities of change are becoming visible.

2.4 Impact of Globalization

The impact of globalization will be felt in rural India as much as in urban. But it will be
slow. It will have its impact on target groups like farmers, youth and women. Farmers,
today 'keep in touch' with the latest information and maximize both ends. Animal feed
producers no longer look at Andhra Pradesh or Karnataka. They keep their cell phones
constantly connected to global markets. Surely, price movements and products'
availability in the international market place seem to drive their local business strategies.
On youth its impact is on knowledge and information and while on women it still
depends on the socio-economic aspect. The marketers who understand the rural consumer
and fine tune their strategy are sure to reap benefits in the coming years. In fact, the
leadership in any product or service is linked to leadership in the rural India except for
few lifestyle-based products, which depend on urban India mainly.

3. The mode of reaching the market: Distribution Channels

Marketing channel is ‘an organized network of agencies and institutions which, in

combination, perform all the activities required to link producers with users to
accomplish the marketing task’ (Bennett 1988). This channel must be designed such that
it delivers a level of value to the customer that creates a sustainable competitive
advantage for the supply chain. This ‘value’ can take many forms depending upon the
requirements of the customer. The relationship between the value of the product and the
shopping experience is particularly important and the skill of the value chain is in the
positioning of the total offer.

Distribution is all about getting your product/service to the right people at the right time
with special consideration for profit and effectiveness. Successful marketing does not end
when a business has developed a product/service and has found its appropriate target
audience with a view to selling it at the 'right price'.

Known as intermediaries or Chain of intermediaries, each passing the product down the
chain to the next organization, before it finally reaches the consumer or end-user. This
process is known as the 'distribution chain' or the 'channel.' Each of the elements in these
chains will have their own specific needs, which the producer must take into account,
along with those of the all-important end-user.

The following explains the different types of intermediaries that are used in the
distribution channels.

- Direct (on-site) - Agents

- Direct Mail - Wholesalers

- Telemarketing - Retailers

- Internet (e-commerce)

3.1 Direct (on-site)

Very common for small businesses, products/services can be sold directly to the
consumer on-site i.e. directly from your shop, office or home by consumers physically
coming into the premises to make a purchase. This can be related with, for example, a
village baker or a hand made furniture business where the products are made and sold at
the same place. This type of distribution works only when your target consumers are
within the local region and are not based on a wide geographical area.

3.2 Direct Mail

Also known as a mail shot, this type of marketing can produce sales on a local, national,
or even global, scale. Your business would send out, say, flyers, leaflets, brochures or
catalogues (often targeted to particular consumers) selling your product/service. Any
interested receivers of the mail would make an order through the contact details/order
form that would be included.

Although very effective, there is some cost involved but is considerably cheaper
compared to other sources of marketing such as advertising. Poorly targeted mail shots
can also damage the image of your business, so be sure that you obtain/build appropriate
mailing lists before you adopt the idea. Direct mail can be complied and sent directly
from your business, or you can use a professional service to distribute your information:
at a much higher expense.

3.3 Rural Marketing Channels

The Indian rural market with its vast size and demand base offers great opportunities to
marketers. Two-thirds of countries consumers live in rural areas and almost half of the
national income is generated here. It is only natural that rural markets form an important
part of the total market of India. Our nation is classified in around 450 districts, and
approximately 630000 villages which can be sorted in different parameters such as
literacy levels, accessibility, income levels, penetration, distances from nearest towns,
etc.

The success of a brand in the Indian rural market is as unpredictable as rain. It has always
been difficult to gauge the rural market. Many brands, which should have been
successful, have failed miserably. More often than not, people attribute rural market
success to luck. Therefore, marketers need to understand the social dynamics and attitude
variations within each village though nationally it follows a consistent pattern.While the
rural market certainly offers a big attraction to marketers, it would be naive to think that
any company can easily enter the market and walk away with sizable share. Actually the
market bristles with variety of problems. The main problems in rural marketing are:

• Physical Distribution
• Channel Management
• Promotion and Marketing Communication

The problems of physical distribution and channel management adversely affect the
service as well as the cost aspect. The existent market structure consists of primary rural
market and retail sales outlet. The structure involves stock points in feeder towns to
service these retail outlets at the village levels. But it becomes difficult maintaining the
required service level in the delivery of the product at retail level.
One of the ways could be using company delivery vans which can serve two purposes- it
can take the products to the customers in every nook and corner of the market and it also
enables the firm to establish direct contact with them and thereby facilitate sales
promotion. However, only the bigwigs can adopt this channel. The companies with
relatively fewer resources can go in for syndicated distribution where a tie-up between
non-competitive marketers can be established to facilitate distribution.

As a general rule, rural marketing involves more intensive personal selling efforts
compared to urban marketing. Marketers need to understand the psyche of the rural
consumers and then act accordingly. To effectively tap the rural market a brand must
associate it with the same things the rural folks do. This can be done by utilizing the
various rural folk media to reach them in their own language and in large numbers so that
the brand can be associated with the myriad rituals, celebrations, festivals, melas and
other activities where they assemble.

One very fine example can be quoted of Escorts where they focused on deeper
penetration .In September-98 they established rural marketing sales. They did not rely on
T.V or press advertisements rather concentrated on focused approach depending on
geographical and market parameters like fares, melas etc. Looking at the 'kuchha' roads
of village they positioned their mobike as tough vehicle. Their advertisements showed
Dharmendra riding Escort with the punchline 'Jandar Sawari, Shandar Sawari'. Thus, they
achieved whopping sales of 95000 vehicles annually.. A year back HLL started
'Operation Bharat' to tap the rural markets. Under this operation it passed out low–priced
sample packets of its toothpaste, fairness cream, Clinic plus shampoo, and Ponds cream
to twenty million households. Thus looking at the challenges and the opportunities which
rural markets offer to the marketers it can be said that the future is very promising for
those who can understand the dynamics of rural markets and exploit them to their best
advantage.
4. Insight in to the giant’s wardrobe: Products under HUL

Hindustan Unilever, formerly Hindustan Lever Limited is the biggest FMCG player in
India. It has almost 130 brands encompassing various product lines and product mixes.
This organization has reach into the lives of a huge chunk of Indian population. Out of
the total brands, only about 30 of the brands are profitable and these are the brands on
which the company focuses its marketing efforts. These brands are as follows:

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

Almost all the marketing money that is spent by HUL is spent on these products. These
are the performers of this organization and hence are nurtured by the same. However we
know that a supplier has to have price differentiation if he wants to extract the consumer
surplus from the consumers. So, HUL has many products which are priced differently
and positioned differently in order to cater to different sections of the market so that all
sections use one or the other of its products. Thus it reaches out to everyone to embrace
its product offerings, from the low income groups to high income people seeking beauty
and value additions like glycerine soaps and moisturises enriched soaps. So even though
most of its products are not profitable it continues to produce and sell them in the market.
Another reason is that it does not want its distributers to keep and sell products of its
competitors which are in the same category but in different segment. When asked for a
product which is not profitable for the company to produce but in demand in that part of
the market, the company does not want to tell its distributers to take products of some
other company. It wants that its distributers to sell only their product offering and hence
they also put in the contract that those distributers will not sell the products of any other
brand in the same segment as the one in which they are selling the products of HUL.
Also, the organisation knows that even if the people move into a higher income group,
they generally keep to the same organisation but try to move to a higher value added
product from the same stable. So, they don’t want the situation to occur whereby a
consumer wanting to move to a different product offering of the company finds that there
is no product in the value or price category that he is seeking to move into. Additionally it
wants to impression its brand loyalty in the minds of everyone so even if due to their
changing economic or behavioural status they don’t jump to products of any other
organisation but rather stay in only their own stable if on a different offering.

So considering these factors the company does not shelve their loss making brands and
continues to produce and sell them.

5. The Distribution Network of Hindustan Unilever Limited

HUL is one of the few companies that have penetrated the Indian rural market to a much
greater extent than any competitor. This has happened purely because it has focused on
improving its distribution network over the years further and further. Today it is one of
the few companies in India which actually generates more than 50% of its revenues from
the rural market in India.
However the penetration of the rural market has been slow to say the least. The success
of HUL is a result of painstakingly hard work done by the company over a period of
decades after conducting market research and understanding the psyche of rural
customers. Very early on the company realized that it needed to focus on the rural market
in order to grow at a fast pace. Even while rejigging the distribution channel several
unique initiatives were launched like Project Shakti and Lifebuoy Swasthya Chetana
which will be elaborated in greater detail in the following pages. All these measures have
combined to give HUL the enviable market-share it commands in rural India today. The
distribution network of HUL today already covers about 50000 villages, reaching about
250 million rural customers through about 6000 sub-stockists.

In the following pages the evolution of the company’s rural distribution network is
examined following which there is a description of the unique and successful schemes
that the company has launched from time-to-time to specifically target the rural market
and how all these factors have combined to make HUL a household name in rural India.

6. Evolution of HULs distribution model

To meet the ever-changing needs of the customers HUL has tried to set up an efficient
distribution network that caters to all customers’ needs by providing the entire basket of
products of the company at all times under a single roof. It has followed a strategy of
building its distribution network in a transitional phase wise manner with evolution of the
model in each phase. This strategy together with providing the right incentives to
retailers, organizing demand-generating activities and maintenance of favorable trade
relation among other factors have enabled it to penetrate deep into the rural market.

6.1 Phase-1

In the first phase (from the time of the company’s inception) there were only 2 types of
distributors-wholesalers and large retailers. Wholesalers placing bulk orders directly with
the company. Large retailers also placed direct orders, which comprised almost 30
percent of the total orders collected.

After grouping all the orders the company salesmen placed an indent with the Head
Office. Goods were then sent to these markets, with the company salesmen as the
consignee. The salesman then collected and distributed the products to the respective
wholesalers, collected payment in cash, and the remitted the money back to the company.

6.2 Phase-2

Phase 2 spanned the decade of the 40s where the focus was to provide desired products
and quality services to the company’s customers. To achieve this, there was one
wholesaler in each market who was appointed as a “Registered Wholesaler,” a stock
point for the company’s products in that market. The company salesman however still
covered the market, and canvassed for orders from the rest of the trade. Then he would
distribute stocks from the Registered Wholesaler through distribution units which were
maintained by the company. A margin of 1 per cent was given to the Registered
Wholesaler to cover the cost of warehousing and financing the stocks held by him. The
Registered Wholesaler system, therefore, increased the distribution reach of the company
to a larger number of customers.

6.3 Phase-3

Here came the concept of “REDISTRIBUTION STOCKIST” (RS) who replaced the
Registered Wholesalers. The RS was now required to provide the distribution units to the
company salesman. He financed his own stocks and also provided warehousing facilities
to store them. Also he undertook demand stimulation activities on behalf of the company.

Another characteristic of this period was the changes brought in as the company realized
that only if the Redistribution Stockist himself was serviced well would he be able to and
willingly provide customer service. Thus the “Company Depots” system was introduced.
This system helped in transshipment, bulk breaking, and acted as a stock point to
minimize stock-outs at the RS level.
The model has continued to evolve so as to foster greater efficiency as the company
keeps on fine-tuning its distribution model. Recently the “Company Depot” system has
been replaced by a third-party system popularly known as the Carrying and Forwarding
Agents (C&FAs). These agents act as buffer stock-points to ensure that stock-outs at the
Redistribution Stockist level did not take place. The system has also resulted in savings in
cost because of direct transportation and reduced time lag in delivery. Customer service
to the RS has also vastly improved which is the most important benefit.

Over the years the Redistribution Stockist’s responsiblites have increased with more
functions being included. Providing service to retailers, screening for transit damages,
undertaking and implementing promotional activities, reporting sales and stock data are
some of the additional functions performed by the Redistribution Stockist today.

As the company has grown in size sot has been the number of factories and
manufacturing units. Hence in order to rationalize the logistics an planning tasks there
has been introduction of a Mother Depot (MD) and Just-In-Time (JIT) Depots system.
Under this certain C&FAs have been selected across the county to act as mother depots
with each Mother Depot having a certain minimum number of JIT depots attached to it
for stock requirements. First the Mother Depots receive the brands and packs required for
the type of markets the MD services from the manufacturing units. The JIT Depots then
draw their requirements from the MDs on a weekly or bi-weekly basis.

7. Focus on the rural markets

While rural markets presented a great potential to the company, reaching the rural
customers also entailed undertaking many challenges and overcoming obstacles. The
company has been at the forefront of experimenting with innovative methods to reach the
rural consumer and undertaking several ambitious projects which are given below.

7.1 Operation Bharat

The pioneering effort of HUL to reach rural homes and increase awareness among rural
customers was Operation Bharat launched by its personal products division in 1998-a 13
crore direct-consumer reach program which reached an estimated 2.2 crore homes. Under
this project each home was given a box of products, at a special price of Rs.15,
comprising low unit-price pack of different categories of products-dental-care (Pepsodent
toothpaste), skin-care (Fair & Lovely cream) ,hair-care (Clinic shampoo) and body-care
(Pond’s Dream flower talc) products along with educational leaflets , audio-visual
demonstrations, film songs and mythological serials interspersed with ads of Uni-Lever
products. Almost 160 vans ,each equipped with a TV and VCR, were used in this
operation with over a thousand promoters (which included distributors and other private
operators). The project strengthened the visibility of both the particular brands and
categories and helped eliminate barriers to trial by increasing awareness among potential
rural customers.

7.2 Operation Streamline

In 1998, the company launched Project Streamline to extend their distribution network in
the rural markets. Here, the goods are distributed from the C&F Agents to the Re-
distributors, who in turn pass it on to the Star Sellers who sells everything from
detergents to personal products. The project opened up a new distribution channel beyond
the territories that were covered by HUL’s 7,500 odd distributors. In less than two years,
it doubled’ the company’s reach in rural India. The company’s distribution network now
covered 60 per cent of the villages with population greater than 2,000, and having motor
able roads. To service the additional villages the company created a super-stockist, sub-
stockist hierarchy with the sub-stockist essentially being the stock-point for servicing
retailers in his area. The ultimate aim of this program is to have a Single Distribution
Channel for rural markets by consolidating across categories.
7.3 Indirect Coverage

Under the Indirect Coverage (IDC) method, company vans were replaced by vans
belonging to Redistribution Stockist, which serviced a select group of neighboring
markets.

7.4 Operation Harvest

Since the reach of conventional media in rural markets is low, awareness of different
products was weak. Although it was not feasible for the Redistribution Stockist to cover
all these markets due to the high costs involved these markets were heavily important due
to their untapped potential. Therefore this operation was launched to supplement the role
of conventional media in rural markets and in the process increase awareness and forge
loyalty with rural customers. To do so the company initiated mobile van operations in a
focused manner to create awareness and point-of-purchase access. As the company
demonstrated with Operation Harvest, such an exercise whose primary aim was to
increase brand awareness, is best done through van operations. During this exercise, vans
from HUL and its distributors did the rounds of 30,000 villages giving promotional
packs, showing products ads and identifying key retail and distribution points

7.4 Cinema-Van Operations

Cinema Van Operations are typically funded by the Redistribution Stockist and have
films and audio cassettes with song and dance sequences from popular films, also
comprising advertisements of HUL products. They have however been used for dual
purposes-to regularly service retailers in deeper and less accessible markets in addition to
making contact with the end customers. The company recognized early in its rural
distribution initiative that market share would be created only when demand is built up
through awareness, trial and consistent availability. The company literally had to build
up’ the market village by village in its rural initiative. But in the end-result it managed to
do achieve its objectives-achieve penetration in the rural market-far greater in fact that
any other company. Cost-effective distribution solutions were first attempted by HUL,
and many other companies are learning from its model today.
7.5 Project Shakti

An unique initiative launched by the company- Project Shakti is a low-cost distribution

network HUL launched in 2001 in tie-up with rural women’s self-help groups. In 15
states, it has worked with self-help groups and non-governmental organizations to
identify underprivileged women and train them to be saleswomen. These women
entrepreneurs, or Shakti Ammas, as they are called act as the end-point in HUL’s rural
distribution chain. A woman from a SHG selected as a Shakti entrepreneur receives
stocks at her doorstep from the HUL rural distributor and sells direct to consumers as
well as to retailers in the village. Each Shakti entrepreneur services 6-10 villages which
have a population of less than 2000.

The Shakti model trains women from SHGs to distribute HUL products of daily
consumption such as detergents, toilet soaps and shampoos - the latter’s penetration being
only 30 per cent in rural areas. The women avail of micro-credit through banks. On
average, a Shakti amma records monthly sales of Rs10,000, on which she earns Rs600-
800; those earnings come out of a 3% discount that HUL gives her on its products, as
well as a trade margin of approximately 10%. A really outstanding Shakti amma—a
Diamond Shakti amma—can even book Rs30,000-40,000 of sales every month, often
turning her house into an HUL store.

There are now 45000 Shakti entrepreneurs serving over 1,35,000 villages in India across
15 states. So resoundingly successful has been this program in increasing rural
penetration that the parent company of HUL-Unilever is now thinking of replicating
Project Shakti globally.

7.6 Lifebuoy Swasthya Chetana

This rural awareness program launched by HUL in 2002 endeavors to induce adoption of
hygienic practices among rural Indians and aims to bring down the incidence of
diarrhoea. Launched with the objective of spreading awareness about the importance of
washing hands with soap the company simultaneously introduced a smaller bar (18 gram)
of Lifebuoy soap priced at two rupees, to encourage people with low incomes to use
soap. In a single stroke the company identified itself with the needs of the rural customer
where health and hygiene is the primary concern and managed to establish its Lifebuoy
soap as the most popular soap in rural India.

7.8 Recent Developments

In an attempt to further increase efficiency and cut costs HUL has further fine-tuned its
distribution model with the elimination of one layer-that of the Star Sellers. Previously
the Rural Distributors serviced these Star Sellers which in turn serviced the rural outlets
in every village. Now with the elimination of Star Sellers the distributors service the rural
outlets directly leading to increased efficiency and better quality of service.

HUL has successfully penetrated the rural market using its many flagship initiatives and
constantly fine-tuning its distribution model. The company continues to grow with its
mission of identifying itself with the needs of the Indian customer. Today it has
successfully tapped into 250 million households in rural India. But considering that rural
India comprises nearly 72% of the total population in India with 720 million people
(according to the 2001 Census), a lot more needs to be done to increase the penetration of
HUL in the rural market.

8. Rural Marketing: The Road Ahead

To succeed in the rural markets companies will need to adapt the 4 Ps of the marketing to
the 4 As in the strategy – Awareness, Acceptability, Availability and Affordability. Due
to limited reach of the mass media (television, radio and the press), marketers have to
come up with creative and effective ways of marketing with traditional media – melas,
haats, jatras, puppetery – to create in the media dark markets.
The rural consumers are getting better day by day and they have more money to spend
these days, thanks to government programs like NREGS and Pradhan Mantri Gram
Sadak yojana, the villages have better accessibility these days and the villagers
consuming power is also improving. And when we see into FMCG goods, the urban
market is more or less saturated. So the companies would grow if they have good
distribution channels in place and come up with innovative marketing strategies for the
rural masses. Another important aspect of many rural families these days is that they have
one or more member working in a town or city and sends the bulk of his savings to his
family thereby improving their spending power. Microfinance also helps in laying money
in the hands of the poorest of the poors.

8.1 Rural Psyche:

There’s a gamut of things that differentiate the rural masses from their urban
counterparts. So in order to have better impact on rural India, the companies need to
understand the rural consumers mind. The same thing might arouse different feelings in
the minds of the rural consumers because of their upbringing. The rural consumer, unlike
his urban counterpart, is quite content to satisfy his basic needs, relevant to his
environment. He is less adventurous, averse to taking risk and prefers to stay with the
tried and tested. A lot of persuasion by an influence, whose achievements he respects, is
required to convince him to try new products. For products which are higher on the
involvement scale (not necessarily more expensive), opinion leaders too play a significant
role.
Unlike the urban consumer, peer group pressure is not very significant in initiating
product trial. He is not driven by ‘status symbols’ acquired by his neighbors in order to
upgrade to a better lifestyle.
Though high in self-esteem, he is quite content with his everyday life, resigned to adverse
circumstances and less ambitious about comfort and material possessions, except those
those seem to provide security.

Fig 2: A case in example is cited below:

Rural Taste Subject Urban Taste
Bold and Primary Colours Colours Liked Shades of colours, Light Hues
Cinema, ‘Nautanki’, Entertainment Theme Parks, Internet, Travel
‘Dangals’, ‘Melas’
Synthetics, colourful Clothes Denim, Cottons, Designer
Red – Happiness, Auspicious, Colour Relevance Red – Danger, Green – Safety
Green – Prosperity
Source: (4)

8.2 Word-of- Mouth

Revital, a pill positioned as an energy booster and health supplement for all-round well-
being, is now being consumed by farmers in rural Punjab and even by the labour working
in the fields in Bihar(perhaps by word of mouth from Bihari labours returning from
Punjab) because it is said to improve the productivity. Each pill costs Rs. 6, which is 10
percent or more of their average daily wages.
On the other hand, consumers in urban India consume this pill believing that it increases
their sexual performance because it contains ginseng.
We wonder if Ranbaxy would have thought it would sell quite a sizeable proportion of
these tablets to people whose daily income is not even 10 times of the cost of the tablet.

9.0 Conclusion

HUL over the years has been pursuing the ‘Power Brands’ strategy. This means that
some brands which show potential growth are developed and promoted more than other
brands which have low potential attractiveness in future. The power brands are invested
in and promoted such that they can skim large revenues and generate cash flows that can
compensate for weaker brands as well.
The first half of the 2000s represented a difficult period for the company, which was
faced with an economic slowdown in its core Indian markets. At the same time, HLL
underwent a dramatic restructuring as part of the parent company's global "power brand"
strategy. The company began streamlining its brand portfolio, which had grown to some
110 brands by the beginning of the decade, cutting that number back to just 35 brands by
mid-decade. As part of this refocus, HLL also began selling off its noncore operations,
including its chemicals businesses. That process was completed in large part with the
sell-off of the last of HLL's tea plantation and production units, Tea Estates India, which
was sold to a subsidiary of the Woodbriar Group in 2006.

In 2001, Hindustan Lever Limited (HLL), the Indian arm of the Unilever group,
restructured its strategy to concentrate on its core brands – brands that add to the bottom
line of the company. This was because the FMCG segment, which accounts for most of
HLL's business, witnessed lower growth rates in comparison to the double digit growth
rates in the nineties.

Besides, the company's core competence was in these consumer brands where the top 30
of its brands contributed to 75% of its sales. Based on these factors, HLL identified 30
national power brands and 10 regional brands from its portfolio of around 110 brands and
directed its entire marketing efforts at developing and building them. Focus on select
brands helped HLL to increase the scale of resources and spend more per brand.
According to Mr. M. S. Banga, Chairman, HLL, "Our objective is to deliver directionally
with the focus on certain key products.

By undertaking a power brand strategy, HLL exited from certain segments. This enabled
regional players to operate and develop their brands. Besides, some of the sub-brands
were repositioned under mother brands in different segments

Some problems of power branding strategy-

1. Execution is difficult as a lot of brands need to be phased out gradually.

2. Regional players come in to fill up the void left by withdrawl of brands which
increase competition.
3. Penetration is difficult to achieve with a power brand strategy. Segmentation is a
problem.For exmple,people in rural India have a completely different set of
 preferences, so a company like HUL which is trying to improve its reach in rural
India can face a problem due to this strategy.
4. Power branding adds to the bottomline of the company but less to the topline.

References

1. S John Mano Raj and K Govindaswamy International Marketing Conference on

Marketing & Society, 8-10 April, 2007, IIMK
2. Editorial, The Times of India, 30th May 2005.
3. Editorial column, The Economic Times, 9 February 2005.
4. The Rural Marketing Book by Pradeep Kashyap & Siddhartha Raut, 2007 edition
5.