DISSERTATION REPORT ON COMPARATIVE STUDY OF DISTRIBUTION CHANNEL OF HUL

A Dissertation submitted in partial fulfillment of the requirements of Post graduate diploma in management

Submitted to: MR. DR. NEERAN GAUTAM DIRECTOR UIMS

Submitted by: Nitin Sharma PGDM (Marketing) UIMS PGDM 2010-2012 UIMS 10-068
UDAI INSTITUTE OF MANEGEMENT STUDIES SITAPURA, JAIPUR DECEMBER, 2011

ACKNOWLEDGEMENT Every endeavor in itself is an impression of the efforts of not only those who pursue it but of those as well who provide guidance and motivation towards its successful completion. Likewise, this project bears an imprint of all those who helped me at various stages and it would be unfair on my part not to thank them. I would like to express my gratitude to PROF. DR. NEERAN GAUTAM, DIRECTOR of UIMS for providing me with an opportunity to undergo this dissertation project. The successful completion of this project could not have been possible without the co-operation and encouragement of MS. RAJESH SHARMA, my project guide, who provided me with his unending support from the very beginning of the project, which helped in timely completion of the project. I would also like to thank the My special friend MR.KARTIK CHELL for enlightening my way whenever any kind of support was required in completion of the project.

THANKS & REGARDS, NITIN SHARMA

PREFACE

As a part of my syllabus of PGDM program in Final year, I was assigned some Practical and theoretical project work. Study of management will be immaterial if it is not coupled with study of financial aspect of the business. It gives the student an opportunity to learn the connection between comparison & execution to test & verify application of theories & help in the comparison of management theories and practice. The study gives a chance to know about the profitability and financial position of the firm.

I have chosen HUL co. which is a US$ 4.46 billion Global company in FMCG product like Home & Personal Care, Food & Beverages. This report contains the analysis of the 8 years data of the company. In the Scenario Analysis of the company we have included the companys industrial GDP, its Market Share, Market Capitalization, Market Growth, HR policy etc.

TABLE OF CONTENTS Industry overview Why to join FMCG industry SWOT analysis of Indian FMCG industry About HUL Current stock performance of HUL Brands Distribution network of HUL SWOT analysis of HUL Procter & gamble review of literature Financial bench marking as well as ratio analysis of the HUL Sales performance of HUL till to the date Work culture Human resources Growth prospect Growth prospectus of HUL BCG matrix of HUL Self competency mapping for compatibility check 44

Page 5 6 8 9 13 15 16 26 27 29 31 36 38 39 40 40 41 42 Conclusion 43 Bibliography

Critical

INDUSTRY OVERVIEW

Fast moving consumer goods (FMCG) or Consumer Packaged Goods (CPG) are products that are sold quickly and at relatively low cost. Examples include non-durable goods such as soft drinks, toiletries, and grocery items .Though the absolute profit made on FMCG products is relatively small, they generally sell in large quantities, so the cumulative profit on such products can be substantial. FMCG products are generally replaced or fully used up over a short period, usually a few days or weeks, or months, but within one year. This contrasts with durable goods or major appliances such as kitchen appliances, which are generally replaced over a period of several years.

The following are the main characteristics of FMCGs:

From the consumers' perspective: o Frequent purchase o Low involvement (little or no effort to choose the item -- products with strong brand loyalty are exceptions to this rule) o Low price From the marketers' angle: o High volumes o Low contribution margins o Extensive distribution networks o High stock turnover

Why to join FMCG industry. 1. Its a stable industry. Theres a saying in the industry that goes everyone has to eat. To this I would add and wash their clothes and brush their teeth. Unlike some industries, such as automobiles, computers, and airlines, FMCG does not suffer from mass layoffs every time the economy starts to dip. You may put off buying a car, but you dont put off dinner. This lends FMCG a level of job security unknown in other industries. 2. Its a high profile industry. Everyone is a consumer. This makes the industry personally relevant as everyone is personally affected. Look at how many of the headlines in the papers over the past six months have been about FMCG related topics: dairy issues, protests against the genetic modification of foods, the growing problem of obesity, the Chinese milk powder recall. People get more excited about and care more deeply about the products they put in their bodies or use everyday. This can be good or bad, but its never boring. 3. You get a depth of experience very quickly. Imagine you and a friend both go to work in sales. They take a job selling cars and make two or three sales a month if theyre lucky. You take a job selling wine and sell to ten or more accounts a day. Who has more experience at the end of two years? No matter what area you want to work in, sales, marketing, operations, accounting, etc., you will get more experience in less time working in FMCG than in any other sector of the economy. Sometimes you may feel like youve been thrown in the deep end, but you will quickly gain a firm grasp of basic business skills. 4. You can get a wide range of experience. You have a wide range of choices when it comes to jobs and career paths in FMCG. You can also work for a large multinational or a small local company and everything in between. In addition, most people who have been in FMCG for any length of time have worked in a wide range of roles. The fast moving part of FMCG requires people who are flexible. Flexibility requires a wide toolkit and a range of experience. Progression from operations to sales to marketing are not uncommon; in smaller companies all three may occur in one role.
6

5. Its an industry that thrives on innovation. FMCG offers you an opportunity to express your creativity through developing new ideas for products, packaging, branding and advertising. There is a constant cycle of regular product improvements and updates as brands compete head to head on the shelf. There are also the new products that come out of nowhere to define a market

6. There are opportunities nationwide, both urban and rural. Unlike some industries that are concentrated in the major cities, FMCG offers opportunities nationwide to those that are interested. FMCG, through its connection to the primary sector, offers opportunities in smaller cities and rural areas. 7. Your job can take you around the World. Baltics people are well educated and are becoming a highly respected training ground for FMCG skills and experience. There is a demand for the skills you learn here either close to home in Europe or further a field in places like the USA, Thailand or Australia. The International offices of most FMCG multinationals regularly recruit staff from all around the World, either for short projects or for longer stints. 8. Lots of choices and opportunities for advancement. Its generally accepted in the industry that people move around. Someone takes a new role to broaden their experience in a new area and someone else takes their job. Opportunities create opportunities. So whether youre a new graduate with no idea what to do next or a experienced hand looking for a change, consider a career in the FMCG sector.

SWOT ANALYSIS OF INDIAN FMCG INDUSTRY Strengths: 1. Low operating costs 2. Established distribution networks in both urban and rural areas 3. Presence of well-known brands in the FMCG sector Weaknesses: 1. Lower scope of investing in technology and achieving economies of scale, especially in small sectors 2. Low exports levels 3. Me-too products, which illegally mimic the labels of the established Brands. These products narrow the scope of FMCG products in rural and semi-urban markets Opportunities: 1. Untapped rural market 2. Rising income levels, i.e., increase in purchasing power of consumers 3. Large domestic marketpopulation of over one billion 4. Export potential 5. High consumer goods spending Threats: 1. Removal of import restrictions resulting in replacing of domestic brands 2. Slowdown in rural demand 3. Tax and regulatory structure

Hindustan Unilever Limited Hindustan Unilever Limited (HUL) is Indias 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. They endow the company with a scale of combined volumes of about 4 million units and sales of Rs.10000 crores. HUL is also one of the countrys largest exporters; it has been recognized as a Golden Super Star Trading House by the Government of India. Hence, research aims is that to study the existing marketing practices, emerging marketing plans and understanding companies business strategy with its profile. The main recommendations have been made on the addressing of the advertising message to the customers. An attempt has been made to formulate the communication in a way to build it on a platform of the basic need for buying HUL products. In another recommendation the suggestions towards better dealer interest in HUL products has been given a chance. Hindustan Unilever: Hindustan Unilever (HUL), Indias largest fast moving consumer goods (FMCG) company. In terms of contribution to HULs overall revenues, its most important segments are soaps & detergents (47%), personal products (28%), beverages (12%), exports (6%) and foods (4%). However, the most important segments of the company in terms of contribution to profits are personal products (46%), soap & detergents (42%), beverages (11%), exports (2%). Thus, personal products are turning out to be far more profitable than the companys traditional mainstay of soaps & detergents.

HULs business segments

HPC: HULs single most important segment HULs single most important business segment is HPC. HPC stands for home & personal care. Growth prospects in all categories in this segment are very bright given the low levels of per capita consumption in India. Ironically, these favorable market conditions have also attracted many international and domestic competitors. We can sense the increasing competition from new product launches as well as the increase in the level of media spends. No surprise then that growth in this segment has of late been driven more by volumes and not as much by value. Soaps & detergents: The old warhorse Soaps & detergents are HULs mainstay. The company has tried hard to defend its leadership position in this space. And it is here that the loss in pricing power is most evident. Prices are now calibrated taking into account commodity prices and competition. In fact, the price table for detergents has moved down across the industry. Although, it must be said that it hurts the small

10

regional players more, who basically compete on price. If anything, large players like HUL have taken share from the smaller players and have grown volumes. The soaps & detergents division can be further divided into the fabric wash, household care and personal wash categories.

HULs soaps & detergents division

Source: Company

Fabric Wash category HULs key brands in the fabric wash category are Wheel, Surf and Rin. The company places a great deal of focus on this category as it constitutes a significant proportion of its business volumes. Its main thrust here is the up gradation from mass markets to more value added detergents. This drive, along with increased competition, has resulted in increased media spend in this category.
11

Personal Wash category HULs key brands in the personal wash category are Dove, Pears, Liril, Lifebuoy, Lux, Hamam and Rexona. The premium soap brands - Dove, Pears and Lux occupy the top three positions in modern trade (as opposed to general trade, i.e. kirana shops). While the company is still by far the market leader in this category, it has lost market share. It continues to win back this lost market share. Towards that, it has re-launched most of these brands in the recent past. It may be noted that a re-launch involves new product features developed after interaction with consumers. Hindustan Unilever: Personal products: Far more profitable As mentioned earlier, HULs personal products are now its single most profitable line of business. They contribute about 46% of the companys profits. The division consists of categories like hair care, skin care, oral care, deodorants, colour cosmetics, infant care and feminine care. HULs personal products division

Hair care category The hair care category continues to be an attractive area of the FMCG industry. The market potential is huge in India given the low levels of per capita consumption. No surprise then that there is a significant amount of competition in this space. And it is constantly increasing. However, HUL has managed to improve its leadership position in the recent past. It is present across price points from premium (Dove) to mid priced (Sunsilk) to mass (Clinic). It may be noted that Clinic Plus is, in fact, the single largest shampoo brand in India. Struggle for consumer acceptance
12

One of the recurring themes in Indias FMCG industry is to get consumers use the product for the first time. Given the price sensitivity, companies often resort to affordable packs. In its oral care category, for example, HUL has up-grader packs which help bring tooth paste within the reach of mass markets. Similarly under the infant care category (under a joint venture with Kimberly Clark), HUL is trying to make nappies affordable and build acceptability. Foods segment: Bearing the brunt of inflation HULs food segment consists of beverages, processed foods, ice creams and bakery. Like the rest of its business, the company faces intense competition in this segment. The only difference is that the competition comes from both national level players as well as smaller local players. One of the biggest worries for all food companies in the recent past has been food inflation. It has led to a slowdown and down-trading in some categories. HUL has tried to respond to the situation through smaller pack sizes, price hikes and cost cutting. HULs foods segment

Beverages category HULs has a tea portfolio across price points. Form loose (Ruby) to mid price (Taaza and Red Label) to premium (Lipton and Taj Mahal). However, it is much stronger in the premium end of the market. Inflation has been a particular worry here. In the recent past tea prices have shot up significantly due strong global demand and local crop shortages. Consumers have resorted to down trading from premium products. As HUL does not have a strong presence at the discount end of the market, its market shares have come under pressure.

13

The company also continues to focus on growing its instant coffee brands. It is trying to shift its coffee portfolio towards the premium end. Consumer acceptance remains vital The theme of creating consumer acceptance plays out in the other categories at HUL too. For example, in its ice cream category, the company is trying to building consumption occasions as a key driver for growth. In its water segment, its offerings range across the price pyramid from about Rs 1,000 to around Rs 6,000.

Current stock performance of HUL 1 Week 4 Weeks -2.3% 15.8% 13 Weeks -2.5% 52 Weeks 30.3%

Current Price (12/9/2011): 385.70 (Figures in Indian Rupees) Hindustan Unilever Limited Key Data: Ticker: Exchanges: HLEV BOM

Country: Major Industry: Sub Industry:

INDIA Drugs, Cosmetics & Health Care Cosmetics & Toiletries 15,000 833,482,162,847

2011 Sales Currency:

199,918,600,000 Employees: (Year Ending Jan 2012). Indian Rupees Market Cap:

Fiscal Yr Ends: March Share Type: Ordinary

Shares Outstanding: 2,160,959,717 Closely Held Shares: 1,134,984,308

14

BRANDS

HUL INDIAS LARGEST FMCG COMPANY

DISTRIBUTION NETWORK OF HUL

15

We have analyzed the distribution network of HUL from the following aspects: 1. Evolution of HULs distribution network 2. Transportation & Logistics 3. Channel Design 4. Initiatives taken for channel member management. 5. Field force management 1. Evolution over Time The HULs 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 Stockiest" (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 stock point to minimize stockouts 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 stockpoints to ensure that stockouts 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.
16

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. 2. Detailed overview: The distribution network of HUL is one of the key strengths that help it to supply most products to almost any place in the country from Srinagar to Kanyakumari. This includes, maintaining favorable trade relations, providing innovative incentives to retailers and organizing demand generation activities among a host of other things. Each business of HUL portfolio has customized the network to meet its objectives. The most obvious function of providing the logistics support is to get the companys product to the end customer. 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 selfservice stores and supermarkets. Around 2,000 suppliers and associates serve HULs 40 manufacturing plants which are decentralized across 2 million square miles of territory.

17

(Schematic of HULs Distribution Network)

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 substockists. HUL approached the rural market with two criteria the accessibility and viability. To service this segment, HUL appointed a Redistribution stockiest 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 stockiest who was responsible to access all the villages at least once in a fortnight and send stocks to those markets. This substockiest distributes the company's products to outlets in adjacent smaller villages using transportation suitable to interconnecting roads, like cycles, scooters or the ageold bullock cart. Thus, Hindustan Unilever is trying to circumvent the barrier of motor able roads.
18

(Rural Distribution Model of HUL)

The company simultaneously uses the wholesale channel, suitably incentivizing 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 Coverage (IDC) method, company vans were replaced by vans belonging to Redistribution Stockists, which serviced a select group of neighboring markets.

Distribution at the urban centers: Distribution of goods from the manufacturing site to C & F agents take place through either the trucks or rail roads depending on the time factor for delivery and cost of transportation. Generally
19

the manufacturing site is located such that it covers a bigger geographical segment of India. From the C & F agents, the goods are transported to RSs by means of trucks and the products finally make the last mile based on the local popular and cheap mode of transport.

New distribution channels 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, Chhattisgarh, 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 directtohome distributors in rural markets. The model consists of groups of (1520) 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 610 villages in the population strata of 1,0002,000. The Shakti entrepreneurs are given HUL products on a `cash and carry basis.

The following two diagrams show the Project Shakti model as initiated by HUL.

20

Project Streamline
21

To cater to the needs of the inaccessible market with high business potential HUL initiated a Streamline initiative in 1997. Project Streamline is an innovative and effective distribution network for rural areas that focuses on extending distribution to villages with less than 2000 people with the help of rural substockists/Star Sellers who are based in these very villages. As a result, the distribution network directly covers as of now about 40 per cent of the rural population. Under Project Streamline, the goods are distributed from C & F Agents to Rural Distributors (RD), who has 1520 rural substockists attached to him. Each of these substockists / star sellers is located in a rural market. The substockists then perform the role of driving distribution in neighboring villages using unconventional means of transport such as tractor and bullock carts. Project Streamline being a cross functional initiative, the Star Seller sells everything from detergents to personal products. Higher quality servicing, in terms of frequency, credit and fullline availability, is to be provided to rural trade as part of the new distribution strategy. The diagram in the next page shows the model of Project Streamline.

Hindustan Lever Network (HLN)

22

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 centers across the country. It presents a range of customized 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

3. 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

23

4. Initiatives taken to improve the Distribution Network HUL has taken the following initiatives to improve its distribution network: Setting up of full scale sales organization comprising key account management and activation to impact, fully engage and service modern retailers as they emerge. Servicing Channel partners and customers with continuous daily replenishment. Leveraging scale and building expertise to service Modern Trade and Rural Markets. Delivering of sales force to improve response times and service levels. Revamping of its sales organization in the rural markets to fully meet the emerging needs and increased purchasing power of the rural population. HULs distribution network in rural India already directly covers about 50,000 villages, reaching about 250 million consumers through about 6,000 sub stockists. Implementation of supply chain system that connects stockists across the country, and also includes a backend 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. Launching of HUL Network to leverage the channel of direct selling by presenting customized 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.

24

 Starting of franchised Lakm Beauty Salons and Ayush Therapy centers to offer standardized services, in line with the strategy to leverage the equity of its brands through relevant services. Finding out Innovative ways to reach out to its consumers, particularly in rural areas by leveraging nonconventional media like wall paintings, cinema vans, weekly markets (haats), fairs and festivals. Initiating the concept of Super Value Stores (SVS) in urban areas to partner traditional stores to provide a range of services ranging from managing their inventory to setting up POS (point of sale) banners. In addition to this, to boost up traditional retail in the face increasing inroads made by large, modern retailing chains like Spencers, Reliance Fresh etc (where HUL is squeezed harder for discounts), HUL started restructuring some of the selected SVSs into the form of selfservice retail shops a la modern retails. This is to protect & maintain the competitive advantage that HUL has over its biggest competitors in the other markets (e.g., P&G), with its very deep distribution reach through traditional retail. Undertaking several initiatives for traditional channels in order to improve its capabilities at the frontend by developing skills for stockists' sales force. Under 'Project Dronacharya', the FMCG major continuously imparted training to over 10,000 stockiest salesmen. 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.

SWOT ANALYSIS OF HUL Strengths:

Distinctly

placed products providing reach to every segment of society. Integrated supply chain and well spread manufacturing units Distribution structure with wide reach, high quality coverage The launch of project Shakti has helped HUL to create brand awareness and extensive reach in rural India. Access to Unilever global technology, capability and sharing of best practices from other Unilever companies.
25

Well

placed to take advantage of growth in rural India and lower strata of the society through Shakti. It can be a leader in exports by positioning itself as a sourcing hub for Unilever companies in various countries. Weaknesses:
Price

positioning in some categories allows for low price competition like Amul captured Kwalitys market. Limited success in changing eating habits of people. Competitors focusing on a particular product and eating up HULs share, like Nirma focusing on soaps and detergents.

Opportunities: Growing consumer base due to increasing income levels and new consumers from lower strata of the society Untapped market in branded Ayurvedic medicines and other such consumer products. Opportunity in Food sector: changing consumer tastes Expansion of horizons towards more and more countries

Threats: Unfavorable raw material prices due to inflation, reducing profitability. Heavy onslaught of competition in the core categories from emerging players like ITC will result in higher advertising expenditure Spurious/counterfeit products in rural areas and small towns.

PROCTER & GAMBLE The Procter & Gamble Company (P&G) boasts boatloads of brands. The world's #1 maker of household products courts market share and billion-dollar names. It's divided into three global units: health and well being, beauty, and household care. The company also makes pet food and water filters and produces soap operas. Some 25 of P&G's brands are billion-dollar sellers,
26

including Fusion, Always/Whisper, Braun, Bounty, Charmin, Crest, Downy/Lenor, Gillette, Iams, Olay, Pampers, Pantene, Pringles, Tide, and Wella, among others. P&G shed its coffee brands in late 2008. Being the acquisitive type, with Clairol and Wella as notable conquests, P&G's biggest buy in company history was Gillette in late 2005.

BRAND

Leadership:

27

We are all leaders in our area of responsibility, with a deep commitment to deliver leadership results. We have a clear vision of where we are going. We focus our resources to achieve leadership objectives and strategies. Ownership: We accept personal accountability to meet our business needs, improve our systems, and help others improve their effectiveness. We all act like owners, treating the Company's assets as our own and behaving with the Company's long-term success in mind.

Integrity:

We always try to do the right thing. We are honest and straightforward with each other. We operate within the letter and spirit of the law. We uphold the values and principles of P&G in every action and decision. We are data-based and intellectually honest in advocating proposals, including recognizing risks.

Passion for winning:

We are determined to be the best at doing what matters most. We have a healthy dissatisfaction with the status quo. We have a compelling desire to improve and to win in the marketplace. Trust: We respect our P&G colleagues, customers, and consumers, and treat them as we want to be treated. We have confidence in each other's capabilities and intentions. CRITICAL REVIEW OF LITERATURE

28

ShareGyan.com News Desk, January 9, 2009 HUL ready to streamline distribution network Hindustan Unilever Ltd (HUL), the countrys largest household and personal care products maker by sales is increasing its so-called go to market (GTM) initiative, introduced in Mumbai last year, in an attempt to refurbish its national distribution network and streamline its supply chain. HULs GTM initiative in Mumbai was aimed at rationalizing its distribution network, make it more proficient, deliver stocks to retailers faster and reduce inventory on their product shelves. It farmed out the task of stock deliveries to logistics provider Mahindra Logistics as part of the Mumbai project. Sai Prasanna Ragu, Muthu Kumar R, IBS Case Development Centre, 2008 P&Gs Logistics Revolution: Co-creating Value Proliferation of products, brands, companies and even distribution channels and media, have necessitated consumer goods industry giants to shift their attention from brand marketing and positioning towards a cross-functional focus. While manufacturers vied for significant shelf space, retailers competed for winning customer attention and loyalty. However, their inability in rightly assessing consumer demand created market imbalance in the form of either excessive stocks or stock outs. The need to produce and deliver goods based on real demand made both manufacturers and retailers rethink/review their business relationships and co-create value for each other. This involved integration of their operations across the supply chain and delivery of the rights goods to the right place at the right time with the right operational cost Prahlad Krishnamurthi, ITC Ltd., October 4, 2007 Supply Chain Management Solution for Hindustan Unilever. The Adexa implementation has improved HLLs proactive planning capability and manufacturing and distribution efficiency, which have helped ensure a more responsive supply chain. The solution has also helped the company gain visibility across its supply chain, reduce distribution lead-time, and minimize the total supply-chain cost. Stock availability, measured in terms of Stock Service Index, has significantly increased, moving from 65% to 90%. The company has also realized a more equitable distribution of stocks with overall mal-distribution reducing from 19% to 6% of total volume transported. Manual intervention has come down from 40% to sub-zero levels. Direct dispatches from the factories to the wholesaler network have increased. Finally, in terms of volume, indirect dispatches from finished goods warehouses have come down from a range between 70-80% to between 30-40%

29

FINANCIAL BENCH MARKING AS WELL AS RATIO ANALYSIS OF THE HUL

As On(Months) Sales of Products/Services Other Income Other Operating Revenue Total Income Total Expenses OPBDIT Interest Depreciation Exceptional & Extraordinary Items Prior Period Adjustments Provision for Tax After Tax Profit Equity Capital Reserves Notes to Accounts

30-Sep-2011(3) 55221.60 776.70 883.20 56881.50 47838.00 8160.30 5.40 571.00 444.20 0.00 2022.10 6889.20 2161.00 0.00

30-Sep-2010(3) 46808.70 768.20 838.00 48414.90 41177.80 -47576.9 0.70 553.70 404.40 0.00 1425.90 5661.20 2182.10 0.00

% Change 17.97 1.11 5.39 17.49 16.17 NM 671.43 3.12 9.84 -41.81 21.69 -0.97 ---

30

Income Statement As On (Months) Profit/Loss Account Net Sales (OI) Material Cost Increase Decrease Inventories Personnel Expenses Manufacturing Expenses Gross Profit Administration Selling and Distribution Expenses EBITDA Depreciation Depletion and Amortization EBIT Interest Expense Other Income Pretax Income Provision for Tax Extra Ordinary and Prior Period Items Net Net Profit Adjusted Net Profit Dividend - Preference Dividend Equity 31-Mar-10(12) Rs. Mn %OI 31-Mar-09(15) Rs. mn %OI 31-Dec-07(12) Rs. mn %OI

175,238.00 100.00 202,393.30 100.00 138,558.91 100.00 67,122.30 38.30 85,071.00 42.03 53,779.02 38.81 22,690.20 12.95 24,235.10 11.97 19,781.56 14.28 9,363.00 5,133.40 5.34 11,521.20 2.93 6,225.70 5.69 3.08 7,678.11 5,920.72 5.54 4.27

70,929.10 40.48 75,340.30 37.22 51,399.49 37.10 45,444.70 25.93 48,780.10 24.10 30,808.33 22.23 25,484.40 14.54 26,560.20 13.12 20,591.16 14.86 1,840.30 1.05 1,953.00 0.96 1,383.59 1.00

23,644.10 13.49 24,607.20 12.16 19,207.57 13.86 69.80 3,496.40 0.04 2.00 253.20 5,897.20 0.13 2.91 254.97 2,510.69 0.18 1.81

27,070.70 15.45 30,251.20 14.95 21,463.29 15.49 6,043.90 993.50 3.45 0.57 5,244.10 2.59 4,032.10 1,823.50 2.91 1.32

-42.60 -0.02

21,467.00 12.25 24,964.50 12.33 19,254.70 13.90 20,473.50 11.68 25,007.10 12.36 17,431.20 12.58 0.00 14,179.40 0.00 0.00 0.00 0.00 0.00

8.09 16,345.10

8.08 19,761.21 14.26

31

Balance Sheet As on 31-Mar-10 Rs. mn Equity Capital Preference Capital Share Capital Reserves and Surplus Loan Funds Current Liabilities Provisions Current Liabilities and Provisions Total Liabilities and Stockholders Equity (BT) Tangible Assets Net Intangible Assets Net Net Block Capital Work In Progress Net Fixed Assets Investments Inventories Accounts Receivable Cash and Cash Equivalents Other Current Assets Current Assets 2,181.70 0.00 2,181.70 %BT 31-Mar-09 Rs. mn %BT 31-Dec-07 Rs. mn %BT 3.28 0.00 3.28

2.34 2,179.90 0.00 0.00

2.64 2,177.46 0.00 0.00

2.34 2,179.90

2.64 2,177.46

23,653.50 25.39 18,435.20 22.30 12,214.88 18.40 0.00 0.00 4,219.40 5.10 885.30 1.33

52,916.60 56.80 42,558.20 51.48 38,370.85 57.80 14,415.50 15.47 15,279.80 18.48 12,738.95 19.19 67,332.10 72.27 57,838.00 69.96 51,109.81 76.99 93,167.30 100.00 82,672.50 100.00 66,387.45 100.00 21,068.90 22.61 15,368.10 18.59 14,808.18 22.31 552.20 0.59 699.70 0.85 416.85 0.63

21,621.10 23.21 16,067.80 19.44 15,225.03 22.93 2,739.60 2.94 4,720.60 5.71 1,856.38 2.80

24,360.70 26.15 20,788.40 25.15 17,081.41 25.73 12,640.80 13.57 3,326.20 4.02 14,408.07 21.70

21,799.30 23.40 25,288.60 30.59 19,535.99 29.43 6,784.40 7.28 5,368.90 6.49 4,433.75 6.68 3.03 0.19

18,922.10 20.31 17,773.50 21.50 2,008.62 166.20 0.18 157.40 0.19 123.92

47,672.00 51.17 48,588.40 58.77 26,102.28 39.32

32

Loans & Advances Miscellaneous Expenditure Other Assets Total Assets (BT) RATIO ANALYSIS As on Return Related Return on Total Assets (%) Return on Net worth (%) Return on Capital Employed (%) Profitability Gross Margin (%) Operating Margin (%) Net Profit Margin (%) Adjusted Net Profit Margin (%) Asset Turnover(x) Leverage Debt/Equity ratio (x) Total Debt/Total Assets (x) Long term Debt/Net worth (x) Interest Coverage (x) Liquidity Current Ratio (x) Quick Ratio (x)

6,005.60 0.00

6.45 7,421.20 0.00 0.00

8.98 6,671.82 10.05 0.00 0.00 0.00

93,167.30 100.00 82,672.50 100.00 66,387.45 100.00

31-Mar-10

31-Mar-09

31-Dec-07

91.50 81.40 111.50

88.96 97.04 122.24

125.70 121.10 166.10

40.50 13.50 12.30 11.70 6.90

29.36 10.80 9.76 9.76 8.16

37.10 13.90 13.90 12.60 6.40

NA NA NA 365.10

0.16 0.16 NA 93.36

0.10 0.10 NA 80.80

0.70 0.50

0.72 0.40

0.50 0.20

33

Cash Ratio (x) Working Capital Working Capital to Sales (x) Working Capital Days (days gross sales) Receivables (days gross sales) Creditors (days cost of sales) FG Inventory (days cost of sales) RM Inventory (days consumption) Cash Flow Indicator Operating Cash Flow/Sales (%) Per Share Book Value Per Share (Rs) Earnings Per Share (Rs) Dividend Per Share (Rs) Growth (%) Total Operating Income EBITDA EBIT Net Profit Total Assets

0.40

0.32

0.10

NA -10.50 13.60 153.00 37.10 51.80

NA 8.00 7.12 74.32 24.80 46.88

-0.10 -30.10 10.90 120.50 34.00 85.40

19.60

7.92

12.10

11.60 10.10 6.50

7.28 9.20 6.00

6.30 8.70 9.00

NA NA NA NA NA

38.46 34.83 34.97 23.72 50.04

14.48 24.94 26.54 3.78

-45.36

Sales performance of HUL till to the date: July 28, 2011:

34

Hindustan Unilever (HUL) managed to improve its sales growth trajectory and keep its profits growing in the latest June quarter, but that wasn't enough to excite the stock market. The sales growth of 15 per cent in its domestic FMCG business was superior to the March quarter (14 per cent) and pretty good in light of what its much smaller rivals delivered. However, market expectations had already budgeted for that. And while almost the whole of HUL's sales expansion in the March quarter came from higher volumes (read higher off take), volume growth moderated to 8.3 per cent in the latest June quarter, with higher selling prices lifting sales. Cutting spends again HUL also managed to expand its profits, both at the operating level and at the net level, by about 11 per cent despite the persisting high input costs. That the recent cooling off in crude oil and palm oil prices are yet to benefit HUL is evident from the continued escalation its raw materials bill. The company's cost of goods sold stood at 55.8 per cent of sales in the latest June quarter, well above last year's 51 per cent as well as the March quarter's 54.3 per cent. In light of rising material costs, the company kept its profit margins from sliding too sharply by the simple ploy of cutting back on its advertising and promotional expenses. Nothing new there, as HUL had begun to economies on its ad spends in deference to rising costs in the previous March quarter itself. Better mix While the above numbers signal business-as-usual for the company, there were a few interesting takeaways from the segment-wise results. One, both soaps and detergents and personal products, HUL's bread-and-butter categories have accelerated their sales growth rates. Soaps and detergent sales grew by 12.8 per cent in the June quarter compared to 11.4 per cent in March and personal products growth surged to 19.4 per cent from 13.6 per cent in the preceding quarter. Given that peers in these categories have not grown as strongly, this could be a sign of market share gains for HUL. Two, the jump in personal product sales had a salutary effect on margins, with this segment now contributing well over half (54 per cent) of HUL's profits before interest and taxes, while soaps and detergents contribute less than a third. If this trend persists, that will be good news for HUL as it will have made a successful shift in its product mix towards higher margin-earning categories that also enjoy better pricing power. Three, profits in the June quarter also got a lift from the big drop in segment losses (Rs.27 crore in June 2010 to Rs.2.5 crore in the latest June quarter) in the water & others' segment. Given that this segment has been in the red for the past four years, any turnaround can make a big difference to HUL's overall profit picture. Technology A carbon reduction supply-chain project has enabled Hindustan Unilever Limited (HUL) to become the first Unilever business worldwide to be awarded carbon credits under the Clean Development Mechanism (CDM) scheme operated by the United Nations Framework Convention on Climate Change (UNFCCC). This is one of a number of schemes that enable companies that invest in technologies to reduce carbon emissions to sell the subsequent carbon savings through carbon trading markets.
35

The project involved the development of a new process for making soap known as Ploughshare Technology, which took four years to develop and is now being across all the eight company factories where soaps are manufactured. By eliminating the need for steam - which is used intensively in the traditional soap-making process - and using 'ploughshare mixers', the new technology (patented by HUL) cuts carbon emissions by 15,000 tons a year. The HUL soap project has been externally verified and registered under the CDM scheme. This success is recognition of sincere, persistent and hard efforts to reduce carbon emissions, and acts as a motivation for exploring new projects which will bring further reductions. Overall, this project represents a big step forward in the fight against climate change. Leveraging Information technology HUL customers are serviced on continuous replenishment. This is possible because of IT connectivity across the extended supply chain of about 2,000 suppliers, 80 factories and 7,000 stockists. This sophisticated network with its voice and data communication facilities has linked more than 200 locations all over the country, including the head office, branch offices, factories, depots and the key redistribution stockists. They have also combined backend processes into a common Shared Service infrastructure, which supports the units across the country. All these initiatives together have enhanced operational efficiencies, improved the service to the customers and have brought us closer to the marketplace.

WORKCULTURE The important things in life It varies around the world because, naturally, people have different points of view depending on where they live. But some things are consistent; important things that determine how we interact with colleagues and partners, customers and consumers. Most important are our high standards of corporate behavior, which are enshrined in our code of business principles. We also have high ethical standards, both in terms of people and the environment.

36

What's more, we are proud of this business and what it does bringing trusted products to millions across the globe. In fact we have a phrase for our philosophy: 'doing well by doing good'. We value colleagues as individuals, we're friendly towards each other and we're informal in terms of corporate behaviour and, to a large extent, dress code. We go out of our way to build personal networks throughout the company, not just in our area of responsibility. Finally, we believe in everyone's ability to develop and grow. Whatever our function, role or level, we all have an equal right to take advantage of learning opportunities and progress how we want to in our chosen careers.

Be yourself Our people have a passion for achievement, strive for outstanding results and are determined to get things done. To make sure that happens each and every day, we have created a working environment in which you can be yourself. After all, as a business we need to be as diverse as our millions of consumers around the world.

HUMAN RESOURCES Your Companys Human Resource agenda for the year focused on strengthening four key areas: building a robust talent pipeline, enhancing individual and organizational capabilities for future readiness, driving greater employee engagement and strengthening employee relations further through progressive people practices at the shop floor. In the first half of 2010, a comprehensive Talent and Organization Assessment was undertaken to understand their readiness to partner the business ambition in the medium term and a holistic people strategy was drawn up, which was the basis of the work done in the key areas mentioned above. This Human Resource agenda not only looks at the current needs of the business, but also enhances the Companys preparedness for the future. Your Company is widely acclaimed for its people development practices and has further reinforced its position in this area in 2010-11. Your Companys ability to attract the best talent gives a competitive edge to the organization.
37

Through 2010, the Companys Employer Brand was further strengthened and it continued to retain the top spot as Dream Employer for the top business schools, for the second successive year. The Company adopted an integrated performance management process that builds greater stretch and alignment in targets across the organization with greater focus on development planning and performance-linked reward for employees. Your Company has identified Beauty, Foods and Modern Trade as key capabilities in order to win in the future and our investment in capability building is focused on these in addition to our core capabilities in Marketing, Sales and Distribution. The Company under took intensive training programmes through a combination of face-to-face and virtual learning approaches and over 35,000 e-learning registrations took place, indicating that the spirit of learn where you are is imbibed in employees of the Company.

GROWTH PROSPECT FMCG major Hindustan Unilever Ltd (HUL) (BOM: 500696), shares hit a lifetime high in trade today with huge volumes. Friday, extending gains for seventh straight session, as good monsoon rains and healthy economic growth prospects are likely to boost demand for fast moving consumer goods. The shares of the company rose to 3.22 per cent from the previous close, on the Bombay Stock Exchange (BSE). The analyst expects the company to report year-on-year growth in Jul-Sep earnings. Although, food inflation continues to remain at double-digit level, policy makers expect it to ease going further following policy actions by Reserve Bank of India to rein in inflation.

38

Last month, the company announced price hike for Lux and Lifebuoy soaps after having reduced the prices in March. However, the stock has performed well thereafter, rising nearly 14% so far this month. The company touched its 52 week high Rs 304.00 and 52 week low Rs 218.00 on 23 Sep, 2010 and 15 Mar, 2010, respectively. Currently, it is trading 3.95% below its 52-week high and 44.95% above its 52-week low. Market capitalization stands at Rs 68,961.31 crore. GROWTH PROSPECTUS OF HUL Competitive Strategy consists of move of companies in order to attract customers. With stand competitive pressures and strengthen an organization's market position. The main objective of Competitive Strategy is to generate a competitive advantage, increase the loyalty of customers and to beat competitors. Five main competitive strategies are: * Overall low cost leadership strategy * Best cost provider's strategy * Broad differentiation strategy * Focused low cost strategy * Focused differentiation strategy

BCG MATRIX OF HUL

39

40

SELF COMPITIENCY MAPING FOR COMPATIBILITY CHECK Basic requirement to hire Management Trainee for HUL (2010 data) Parameter Age: Education: Marks Range: Experience Mobility: Technical Skills: Human Skills Work Environment: Mandatory Skills: Work Shift: Required 21-27 years PGDM/MBA with 60% 50% throughout the Academia 0-2 years in Marketing Field Anywhere in India MS Office & MIS Reporting Excellent Communication/ Interpersonal Skills & Team player Official/Field work Mathematical, Statistical & IT Skills Day Present Fulfilled Fulfilled Partial Fulfilled Partial Fulfilled Fulfilled Partial Fulfilled Partial Fulfilled Fulfilled Fulfilled Fulfilled

41

Scatter diagram shows the compatibility level

Interpretation: It shows the basic requirement to get into the HUL is fulfilled by my profile but in terms of experience & some technical skills, I have some short comings. Those pitfalls can be compensated by the practice over a period of time. CONCLUSION At the end of t project it can be said that there is an ample opportunity for HUL to grow and be the top most company in the world business scenario. If we see the overall performance of HUL it is very much satisfactory in terms of employee engagement & contribution to the Indian GDP. It is also found that HUL is one of the market leaders in Indian FMCG segment by innovation new dimension of product and services. HUL is one of only three in the world to own seven millionaire brands and at least five brands rated by FMCG international, UK to be amongst the ten faster growing brands in the world in their respective categories. The market share of the HUL in India is currently 60% and exports to employees by which they are going to be the pioneer of employee retention and talent management. On the social point of view this company contributes a lot to the socioeconomic sectors. NGO Education, Poverty reduction by its corporate social responsibility. Further more it is my own belief that the company will be able to bring the reformation of Indian Business Sector. .

42

BIBLIOGRAPHY www.google.co.in www.en.wikipedia.org/HUL www.en.wikipedia.org/p&g www.financecontrol.com www.moneycontrol.com/HUL www.scribd.com www.slideshare.net The Times of India The Business Standard Philip Kotler for the developing BCG MATRIX OF HUL

THANK YOU

43