Hindustan Lever's Project:
Case Study in Marketing FMCG to Rural Consumer
With the population of over 1.2 billion and vast territory, India maintains an annual economic growth rate of over 6.5% since 1998. In this fast developing market, India enhances specific characteristics in many aspects: the consumer preference, marketing channel, market liquidity, distributors and manufactories, and so on. Therefore, administrators have to make decisions and strategies corresponding to this circumstance. I. General Background
As the India's largest consumer goods company based in Mumbai, Maharashtra, as well as the branch of world's largest FMCG company, Hindustan Unilever Limited ( HUL) has a remarkable performance through these years. In the financial year 2011-2012, HUL receives the new revenue of 22,115 cores, and the profit of 2,2691 cores. Till now, two out of three Indians use HUL, making the brands a part of everyday life.
Unilever has always held the firm belief that the private sector can contribute to social development by creating win-win solutions to social challenges through innovative strategies that meet both business and social objectives. It was this philosophy that prompted Hindustan Unilever to create Project Shakti, a unique micro-enterprise initiative that is both a catalyst for rural wealth creation and a successful business operation: Hindustan Lever's Project to penetrate the rural market for FMCG goods. About 12,000 women entrepreneurs had been appointed, covering nearly 50,000 villages in partnership with nearly 300 NGO's.
HUL's growth in India was greatly linked to political periods in recent history. From 1947 to late 1980s, due to the restricted political regulation, the India economy was heavily characterized by the "License Raj". Any kind of capital investment had to permit by the government. In that case, it was hard for HUL joined the market.
Beginning at early 1990s, multinational companies were attracted by the economic liberalization and new investment environment in India. Import restrictions were released; trade barriers were shielded, which results in a favorable market for HUL. But competitions are fierce at the same time. Therefore, HUL seek to explore a strategy that aggressively expand its market by broaden the product categories and lower the prices.
For the production section, HUL's FMCG products were generally organized into four sections, including: Detergent, Personal product, Beverage, and Food. For the marketing section, poor connectivity among villages and widely scattered consumers are main problems since over 70% population of India resides in villages. The landscape in India exceeds over 3000 km in north to south and 2900km in east to west and the total coastline length of 6,000 km, especially the main cities are far apart. Large population in the vast territory means a great challenge to HUL.
By conducting the project Shakti, it first reached the rural new markets. Shakti set the distribution system in such a low urbanization country and improved it at the same time, even without the direct retail outlet channel final customer can be reached. It helped to a more personalized services and flexible distribution system. Retailers are given priorities to their target customers in their network, in addition, credits in the regular trading period. In this case, customers are willing to accept this business mode and becoming loyalty to the brand.
The organization Structure in Shakti was distributed by geographic & product categories: Regional manager (RM); General sales manager (GSM); Area sales manager (ASM); Sales officers (SOs); Territory sales in-charge (TSI). Because there are culture and education differences in different regions, it may lead to a great challenge for the administration system. No prior cases may adopt with in this specific project, nevertheless, entrepreneurs are afraid...
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