Distribution Model of HUL

Ankit Chhabra (104)

Sankalp Kohli (110)
Abhijit Arora (303)
Arpan Mehra (309)
Anshum Kawatra (308)
Anshul Jindal (306)
 Introduction to Company

• India’s largest FMCG company

• Renamed as HUL in June 2007

• 20 distinct categories in Home & Personal Care Products and Foods & Beverages

• Volumes of around 4 million tonnes and sales worth ` 13718 cr

• HUL’s mission driving its 15,000 employees – “add vitality to life”

• HUL has over 40 factories in India

• Operations involve over 2,000 suppliers and associates

HUL’s Product Portfolio
 Distribution Network of HUL
• 35 C&FAs, 4,000 redistribution stockists, covering 6.3 million retail outlets

• Reaches the entire urban population, and about 250 million rural consumers

• Its evolution over time - 1 st Phase

• Initially, wholesalers and retailers used to place direct orders

• Company salesman used to take these orders and later distribute the goods

• Cash payment was then remitted to the company

• 2nd Phase

• Registered wholesalers were appointed

• Sales man then took products from RW and distributed further

 Distribution Network of HUL

3rd Phase
• RW were replaced by RS (Redistribution Stockist)

• Company Depot system was also established

• CD helped in transhipment, bulk breaking, and acted as a stock point to minimise stock‐outs at the
RS level

• In recent past, Company Depot has been replaced by a system of third party Carrying and
Forwarding Agents (C&FAs)

• C&FAs act as buffer stock‐points to ensure minimum stock‐outs

• The C&FA system resulted in cost savings in terms of direct transportation and reduced time lag in
delivery

• C&FA has improved customer service to the RS

 Role performed by Redistribution Stockists

• Providing warehousing facilities

• Providing manpower

• Providing service to retailers

• Implementing promotional activities

• Extending indirect coverage

• Reporting sales and stock data

• Demand simulation and screening for transit damages

 Distribution at rural centres
• Areas with populations below 50,000

• Network covers about 50,000 villages, reaching 250 million consumers, through 6000
sub‐stockists

• HUL approached rural market with two criterias ‐ the accessibility and viability

• HUL launched Indirect Coverage (IDC) in 1960s.

• Indirect Coverage (IDC) method replaced company vans by vans belonging to

Redistribution Stockists, which serviced a select group of neighbouring markets
 Distribution Network of HUL

New Distribution Channel

•Project Shakti
• 80000 villages

•Project Streamline
• 40% rural population

•Hindustan Lever Network

• 80% urban population

•Mother Depot and Just In Time

Major Stakeholders
1. HUL
Retail network of 4 million outlets.
Implementing an IT system to connect 3,500 stockists in 1200 towns who account
for 80 per cent of company sales.
Sourcing: HUL promotes sustainable agricultural practices by working with external
agencies, farmers/small growers. They contribute towards
• Adoption of technology
• Harnessing the land
• Achieving quality: Gathering certifications.

Manufacturing: Apart from employing world class facilities they look into broader
issues such as reducing carbon footprint in their production activities.
• Developing energy efficient production technologies like Ploughshare Mixer Technology
• Increasing the use of carbon neutral fuels
• Implementing a strategy for water is based on the 4-R principle: Reduce, Reuse, Recycle and
Renew
Major Stakeholders
2. Carrying and Forwarding Agents (CNFs )
• In the recent past Company Depots have been replaced by a
system of third party Carrying and Forwarding Agents (C&FAs).
• The C&FAs act as buffer stock‐points to ensure that stock‐outs did not take
place.
• C&FAs also act as gatekeepers between the manufacturers and
end-users.
• Can serve as a key differentiator as channel experience strongly
affects end-user's overall perception of the brand's image.
• Main functions are:
• ACCUMULATION – Bringing similar stocks from different suppliers,
• ALLOCATION- breaking down a homogeneous supply into smaller slots &
• ASSORTING-Building assortments that are readily consumable.
Major Stakeholders
3. Transport and Logistics
• Critical part of the distribution as they are responsible for the
timely delivery of the stocks along the chain and finally to
the customer.
• Manufacturing site is usually located close to the suppliers,
thus major transportation takes place in the delivery to the
market.
• Trucks: Used to transport stocks from manufacturer to
C&FAs and then to the RSs (Redistribution Stockists)
• Local/Cheap Transport: To deliver the products to the end
consumers or retailers.
Major Stakeholders
4. Redistribution Stockists
HUL's products, are distributed through a network of about 7,000 redistribution
stockists

The major functions of RSs consist of:

•Financing stocks
•providing warehousing facilities
•providing manpower
•providing service to retailers
•implementing promotional activities
•reporting sales and stock data
•demand simulation and;
•screening for transit damages
Major Stakeholders
5. Wholesaler
• Wholesaler is an intermediary who buys goods for resale usually from
company distributors or stockists.

• He has the ownership of the goods he sells and the operations are run
like a typical store where the resellers (could be retailer's themselves or
bulk buying individual customers) who come to him with an elaborate
list and buy.

• HUL considers it a necessary evil, in an ideal situation they would like to

avoid them totally , but the fact is that in spite of the negatives like loss
of control, and lack of transparency, they have an important role to play
in Indian distribution channels.
Major Stakeholders
6. Retailer

They cater to the end customers.

While a traditional distribution chain is followed in

the urban markets, the rural areas have a new
strategy implemented for catering to the rural
customers.
Major Stakeholders
Distribution at the Villages – Shakti
• The company has brought all markets with
populations of below 50,000 under one rural sales
organisation.
• Started in the late2000, 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.
 The respective stategovernments and several NGOs are
actively involved in the initiative. 
SHAKTI PROFILE

CONSUMERS
Monitoring the Stakeholders
Monitoring Methods

Quantitative
Qualitative Measures
Measures

LEVERAGING
LEVERAGING ADEXA
ADEXA
COST
COST BENEFIT
BENEFIT NEED
NEED BASED
BASED INFORMATION
INFORMATION RS
RS NET
NET INITIATIVE:
INITIATIVE: ICOLLABORATION
ICOLLABORATION
ANALYSIS
ANALYSIS PRODUCTION
PRODUCTION TECHNOLOGY
TECHNOLOGY SUITE
SUITE

Field Sales Force

• Target chasing
• Reporting on a daily basis.
• Technology Usage : Palmtops for effective
reporting
Incentives to Channel Partners
 Redistribution Stockists:
 Sales Margin: 4.76% which includes cash discount, unloading expenses from depot,
distribution expenses to retailers, incentive schemes & other incidental expenses.
 Incentive schemes: Before 2000 holiday packages and tours but after 2000 no non‐monetary
incentive for RS.

Wholesaler:
 1.5 % max. discount from RS
 cash discounts and other schemes promoted by HUL (gets points under Vijeta Scheme).
 bulk discounts

Retailers
 1.0% max. discount from RS
 Sales Margin: Depends on the product
Soap, detergents ‐ 8% on MRP
Cosmetics ‐ 10% on MRP
Food items ‐ 8% on MRP
  Incentive schemes: Company programs (Scheme Discounts + Cash Discounts) TPR schemes
based on Sales (1 % to 4 %). Vijeta scheme is not for retailers.
Key Challenges and Initiatives
Three Way Strategy of HUL

er
High of
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Leve d
Bran nc
rie
Expe
e

Brand
Communicatio
Communicatio
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n

Product
Availability
Organizational Structure (Delhi Branch)
Regional Manager North

Regional Sales Manager

Area Sales Manager

Sales Officer

Territory Sales In charge

Salesman
Key Challenges Faced
HUL

C&F

Stockist

CSD Canteen Retail Outlets Wholesaler

Consumers
Distribution at Villages
PHASE 1: PHASE 3:
VAN BASED SHAKTI
Fixed Route Coverage ENTREPRENUER
Town
25 % Rural Population 50 % Rural Population
Based
Distributor

PHASE 2:
SS (Star Seller)
Large Villages: Accessible by Motor
Distributor Based in
able Roads
the Village
Villages accessible from nearer Follows Hub & Spoke
villages Model
25 % Rural Population
Small Villages
Key Initiatives of HUL
• Servicing Channel partners and customers with continuous
daily replenishment

• Delayering of sales force to improve response times and

service levels

• Revamping of its sales organization in the rural markets

• Implementation of supply chain system

• Launching of various projects

Recommendations

HUL, Absolute FMCG leader

How many of them do you use???
 What we plan???

Middle Class
Value Pack
 Benefits

Kill competition Faster

Leveraging the
in Non Leading inventory
categories Top position
turnover
Other Recommendations
Pure It
• Low cost water purifier

•Co-Creation
• Involve customers in
Value Creation
Thank You