HINDUSTAN LEVER LIMITED:

RESTRUCTURING MARKETING STRATEGY*

GROWTH IS IMPERATIVE FOR Hll

Hindustan Lever Limited (HLL) is India's largest fast moving consumer goods company. with
leadership in home and personal care products. foods and beverages and specialiry chemicals.
The vision that inspires HLL's 36.000 employees. including near!}' 1,300 managers. is "to meet
everyday needs of people everywhere. to anticipate the aspirations of our consumers and
customers and to respond creative!}' and competitive!}' with branded products and services
which raise the Qualiry of life." This objective is achieved through the 110brands that the
company markets. Its deep roots in local cultures and markets around the world are HLL's
unparalleled inheritance and the foundation for its future growth. With this wealth of knowledge
and international expertise in the services of local consumers it is truly a multi-local
multinational.

HlllN 1999-2000
In 1888. less than four years after William Hesketh Lever's company Lever Brothers launched
Sunlight Soap in England. William Hesketh's company also started exporting the revolutionary
laundry soap to India and carved a niche for itself in the Indian market. The company merged
with the Netherlands-based Margarine Unie in 1930 to form Unilever. A year later. Unilever set
up the Hindustan Vanaspati Manufacturing Company. its first subsidiary in India and further
strengthened its position by establishing two more subsidiaries. Lever Brothers India Limited
and United Traders Limited. soon thereafter. The three companies. which marketed soaps.
vanaspati and personal products. merged in 1956 to form Hindustan Lever. in which Unilever
has a 51%stake.
Since then. HLL has entered virtual!}' every arena in the fast moving consumer goods market
through organic growth. diversiflcation. mergers and aCQ!.lisitions.Today. the company markets
more than 110brands. in 950 packs. The products are sold in one million retail ot:tlets. almost
reaching out to the entire urban population and about 50.000 villages in India. HLL has market
leadership in virtual!}' every area of presence. It is the market leader of soaps and detergents as
well as skin and hair care products. It is also the market leader in tea. processed coffee. icecream and frozen desserts. tomato-based products. jams and SQuashes.HLL's gross turnover
in 1997 was Rs. 83.4 billion and profit after tax was 5.8 billion. Also. HLL has emerged as a
* Deepankar Mukherjee

100 1:1 THEORY AND PRACTICE OF CASE METHOD OF INSTRUCTION

major exporter. It is a super star trading house. an honour that on!>' seven Indian companies
enjoy. Hll's exports turnover in the year 1999 was Rs. 1.803 crore. Hll' s introduction of a
variery of products from the time of its conception till date is shawn in Exhibit I. Hll' s brand
portfolio in various categories like home and personal care products food and beverages etc.,
are listed in Exhibit 2.
Exhibit I: HLL from Conception Till Date
How We Got There
1888:

LeverSoap. 'Sunlight', introduced in India through imports.

1918:

Vanaspati(hydrogenatededible oil) launched through imports.

1930:

Unilever created through the merger of LeverBrothers. UK and

Margarine Unie. Netherlands.

1931:

Unilever registers compa'"!}'in India

HindustanVanaspatiManufacturing Company
(HVM) - for local manufactureof vanaspati.

1933:

LeverBrother's India Limited (LBIL) incorporated in India to market personal soaps.

1935:

United Traders Limited (Un) incorporated in India to market personal products.

1956:

The three subsidiaries. HVM. LBIL and UTL merge to form Hindustan LeverLimited (HLL) .

1958:

Hindustan LeverResearchCentre starts functioning.

1979:

Chemicals complex commissioned at Haldia. West Bengal.

1993:

HLL's largestcompetitor, TataOil Mills Company (TOMCO). mergeswith the company.

Erstwhile Brooke Bond India accwiresKissan,Businessfrom the UB Group and Dollops icecreamfrom Cadbul)'. Doom Dooma and TeaEstatesPlantation divisions mergedwith Brooke
Bond, Brooke Bond and erstwhile Lipton India merge to form Brooke Bond Lipton India
Limited.

1994:

HLL and US-basedKimberlty-Clark Corporation form 50:50 joint venture, Kimberlty-Clark

Lever Limited

1995:

HLL and Indian cosmetics major, Lakme limited form 50:50 joint venture. Lakme Lever
Limited
HLL accwiresKwalio/and Milkfood with 100%brand namesand distribution assets.
HLL and US-basedSC Johnson and Son incorporated to form 50:50 joint venture, Lever
Johnson(Consumer Products) Private limited.
HLL soaps and detergent salescross one million tonnes.

1996:

HLL and associatecompany. Brooke Bond Lipton India Limited, India's biggest firm in food
and beverages.merge.

Contd...

HINDUSTAN LEVER LIMITED: RESTRUCTURING MARKETING STRATEGY

1997:

HLL and Gist Broacades BV form 50:50 jointventure. Lever Gist Brocades, to market 'Gold
Seal Fermipan Instant Yeast' for baking industl)'.

1998:

Group Company Pond's India Limited merges with HLL. HLL aCQuiresLakmebrand, factories
and Lakme Ltd'sSO% eQui~ in Lakme Lever Limited, HLL aCQuiring manufacturing rights of
Kwali~ ice-cream.
Appellate Authori~ of Government of India absolves HLL of insider trading charges. made by
SEBI in 1997. in the BBLIL merger.

2000:

Source:

HLl aCQuiresModern Foods. theJirst public sector company to be divested by the Government
or India.

www.hll.com

Exhibit 2: HLL's Brand Portfolio

Home & Personal Care

Personal Products

Soaps & detergents

Skin care

Fabric wash

Fair & love!y

Surf

Pond's

Rin

Oral care

Wheel

Pepsodent

Personal

Close-up

Lifebuoy

Hair care

lux

Sunsilk

Breeze
Household care
Vim
Foods & Beverages
Beverages
Brooke Bond 3 Roses
Brooke Bond Red Label
Brooke Bond AI
Brooke Bond Taj Mahal
Upton Taaza
Lipton Yellow Label
Brooke Bond Bru
Lipton Green label

Clinic
Deodorants
Axe
Colour cosmetics
Lakme
Ice creams
Kwali~ Wall's Cornetto
Kwalio/Wall's Feast
Kwali~ Wall's Max
Kwali~ Wall's Sof~
Popular Foods
Annapurna
CullnalJ
Kissan
Source:

www.hll.com

wash

011 & Fats

Dalda

101

102 [] THEORY AND PRACTICE OF CASE METHOD OF INSTRUCTION

CORE COMPETENCIES
HLL is the market leader in soaps and detergents as well as hair and skin care products and is
the second largest manufacturer of dental care products. One of the HLL' s strengths that has
great!>, contributed to this success are the breakthroughs at the Hindustan Lever Research
Centre. Their research center is India's largest in the private sector. The focus on reseaf(,:h
gives HLL an edge over competitors by coming up with innovative products and processes.
ma~ of which have been patented. Some of the researcheshave been in household cleaning in
soaps and improving performance related to tough soil removal and dingy clothes. Studies
related to improving Qualiry in tea and enhancing characteristics like colour. aroma and taste
have enabled HLL to make better blends of tea. The company achieved remarkable success in
ice-creams when HLRC developed a 'eutectic mixture' which acts as a refrigeration 'battery' and'
thus enables the sub-ambient temperature distribution/vending of ice-creams.. In the personal
products segment. an important research based product is Fair & Love!>'. .
HLL has always stressed on constant technology upgradation. In 1999. there was a change in
the entire instrumentation setup of HLL Research to bring it on par with the latest research
facilities in the world. The compa~ has alw'!}'s focused on aCQuiringknowledge-based software
with a view to creating knowledge-based communities in HLL Research. HLL has tied up with
organizations like the Indian Institute of Science (Bangalore). All India Institute of Medical
Sciences (Delhi). National Chemical Laboratory (pune) and Department of Physics. Universiry
of Pune in different areas of research. Besides. HLL has also funded research projects at the
lawahar Lal Nehru Universiry. New Delhi and the MS Swaminathan Research Foundation at
Chennai.
Another factor that contributes to the success of HLL is its massive and eFficient distribution
system. The operation involves 2.000 suppliers and associates and 7.000 stockists and agents.
Its operations are spread across 70 locations in India. There are around 100 factories. of which
28 are in backward areas. In the recent years most of HLL's major investments have been in A
category backward areas or no-industrial districts. A few such areas where investments have
been made are Khamgaon and Yavatmal in Maharashtra. Chhindwara in Madhya Pradesh. Orai
and Sumerpur in Uttar Pradesh. Dabgram in West Bengal. Silvassa in Dadra and Nagar Haveli
and Pondicherry. Many of HLL's factories including export oriented units are ISO 9002 certified.
Some of these. like the Khamgaon soap plant and the Sumerpur detergent bar unit. have been
recognized as the best in the Unilever Group. To add to its distribution system. HLL has even
aCQuiredsick enterprises in Mangalore. Rajpura and Gajraula and converted them into viable
operations. HLL has over 36.000 employees. and has created 2 lakh indirect jobs.
HLL has an export portfolio of soaps. detergents. tea. tomato-based products. cosmetics. agroproducts. leather products and marine products. carpets. chemicals and fatry acids and castor
oil. Castor oil is one of the biggest export products and the company supplies 30% of the world
demand. It is also the largest exporter of tea and branded fast moving consumer goods. HLL' s
export turnover in the year 1999was Rs. 1.803 crores. HLL is one of the country's five biggest
exporters and has been recognized as a star trading house by the Government of India. It is a
net foreign exchange earner. Due to its outstanding performance in exports of castor seeds.

HINDUSTAN LEVER LIMITED: RESTRUCTURING MARKETING STRATEGY

103

castor oil and its derivatives. HLL received the Globeoil Gold Award. The company also received
the Silver Shield from Federation of Indian Export Organization (FIEO) for "Outstanding Export
Performance in Superstar Trading Housing Category" for the year 1996-97.
Financial Performance: Hindustan Lever Limited has recorded a tax deducted profit of
Rs. 316.94crore in the Quarterended 31stMarch 2001, an increaseof 20.7% over the corresponding
period of 2000. After including a one time exception income of Rs. 22.59 crore on account of
profit arising from the transfer of interest in the animal feeds business to the Godrej group. the
net profit went up to Rs. 33~.53 crore. which was an effective increase of 29.3%.
HLL's turnover (net of excise) at Rs. 2642.51 crore grew by 1.1%.Sales of domestic FMCG
products grew by 2.6%. Profit before tax at Rso406.33crore grew by 1804%.Annualized earnings.
per share of Re I each. is Rs. 6.17 compared to Rs. 4.77 in MQ2000. Other income grew from
Rs. 90.01 crore to Rs. 102.20 crore. reflecting efficient treasury management of surplus funds.
The results include an estimated business restructuring cost of Rs. 6.25 crore charged in the
Quarter. compared to Rs. 30 crore in the same Quarter last year. The company reviews such
costs each Quarter. on the basis of estimated annual spends. and necessary adjustments are
suitab~ made and disclosed. The sales performance of the company under various product
categories has been shown in Table I:
Table I: HLL - Sales Performance

Soaps, detergents. scourers

42140

40

41010

40

Personal products

18330

17

17650

17

Beverages

19870

19

15750

16

26

Oils and Fat (incl. Vanaspati)

6070
1640

6130

1710

-4

Ice-creams and frozen desserts

Canned and Processed Fruits &
Ve etables

1360

Branded staple foods

2690

2180

Speciali~chemicals

2170

2330

710

3320

11060

10

10110

10

100

101420

100

Animal Feed
Others
, Total Net Sales
Source:

106040

II

1230

23

-79

www.moneypore.com

HUMAN RESOURCE MANAGEMENT

HLL has one of the best HR management practices in the world. One of the key focus areas has
been its stress on 'team building'. A constant interaction between employees. customers and
competitors encourages a unified corporate focus. The idea is to keep the employees (including
senior executives) in touch with external realities that confront the company. This facilitates

104 THEORY AND PRACTICE OF CASE METHOD OF INSTRUCTION

the understanding of value creation on behalf of the employees and this in turn facilitates a
better response from them. Every management trainee of HLL is sent to the field and spends
time with customers. This helps them to keep in touch with the marketplace and inculcates a
sense of not onlY business obligation but also a moral obligation to work harder. This also
motivates the individual to understand the purpose of the company and what it stands for.

MARKETING
The company has a strong brand eQuio/ which gives it credibilio/ and respect among its peers
in the market. It has even created a positive motivational climate in the organization as employees
take pride in remaining associated with it. It attracts the best talent and inspires respect among
industry professionals. Pursuing aggressive marketing strategies, HLL continues to be India's
most admired marketing company in the FMCG sector. HLL has in fact emerged as one of Asia's
most admired companies. The table below gives the relative positions of marketing companies
in India and Asia.
Table 2: India's Top 10 Most Admired Marketing Companies

......,

++ii:in:::v!1:illl1i,;;:;:iili

:HH.
H;;;iH H.!.

M".y!'.

;::+1 +,HE

.,I'ill11Iil:

HLL

Coca-Cola

Cadbul)'

Pepsi Foods

Colgate-Palmolive

Nestle

Britannia

ITC

Amul

10

Lakme Lever

10

11

Source: A & M November 3D, 1999

Table 3: Asia's Most Admired Companies

Max Score 7

6.52

Hindustan Lever

6.46

Singapore Airlines

6.46

Sony

6.41

Reliance Industries

6.37

Microsoft

6.30

/ollibee Foods

6.16

Pohand Iron and Steel Company

6.16

T oyoto Motor

6.10

(ontd ...

HINDUSTAN LEVER LIMITED: RESTRUCTURING MARKETING STRATEGY

Ayala Corporation

6.09

Larsen and Touhro

6.06

Honda Motor

6.06

Coca-Cola

6.06

Taiwan Semiconductor Mfg. Company

6.05

Acer

6.03

105

Last Year. the club had 21 members. or 33% more

Source: Far Eastern Review. December 1999-lanuary 2000)

Hindustan Lever continues to be among the top 200 marketing spenders. In the diversified
industries category according to the A&M Survey Report in October 1999 it ranks on!>' next to
Reliance. Its sales in December 1999 were Rs. 10.978.31 crore and its marketing spend was
Rs. 8.64 crore. Hindustan Lever continued to be the top advertising spender. having spent
about Rs. 71Scrore for this purpose in 1999 and Rs. 669 crore in 1998-99.
Table 4: Advertising Budget
(Crare)

108.94

22.89

46.81
85.15
58.68
34.92
77.01
40.93
Source: Abstracted from A&M October 31. 1999

CHANGING PROFILEOF INDIAN CONSUMERS

The urban Indian consumer has undergone radical changes over the years. This has large!>,
been shaped by the media and technology developments in the Indian markets. Due to the
convergence of technologies like electronics. computers. telecom and broadcasting. newer
media have developed and have brought about Qualitative changes in conventional mass media
like press. radio. television. cinema and so on. Television is now one of the cheapest sources
of entertainment. Cable TV as a mass medium has already become very popular but in future.
there is scope for more 'personalized' and interactive services like Direct Broadcast Satellites
(DBS) and Direct To Home services is gaining ground.

106

II

THEORY AND PRACTICE OF CASE METHOD OF INSTRUCTION

The print media is witnessing a change due to availabiliry of the Internet. The Indian consumer
has become more Internet-sa\'\)'. The Internet grew at vel)' fast pace and took just 4 years to
achieve a user/subscriber base of I million. This can be credited in great measure to the
emergence of cyber cafes in semi-urban areas. Therefore. companies are now taking e-initiatives
to target these consumers.
Companies are now tapping rural markets to widen their consumer base and gain volumes.

.. tailoring brands specificallY for these markets. There are approximatelY 700 million people in
rural areas and more than one-third of the population is exposed to television in one form or
another. Big players like Hll lay thrust on building brands in these markets as more and more
rural consumers are beginning to insist on buying brands rather than products.
Changing patterns in rural consumption can be gauged from the fact that rural spending on
consumer goods has increased over a period of time. The latest figures from the NCAER
demographics survey shows the following consumption patterns:
Table5: Rural Consumption
Consumer expendables

Rural share (%)

Tooth powder

78.85

Cooking medium (oil)

65.78

Tea

S8.Q2

Toilet soaps

57.25

Washing powder

54.81

Hair Oil

47.24

Talcum powder

43.12

Tooth paste

38.94

Packaged biscuits

38.24

Shampoos

25.37

Table6: Rural Consumption

Consumer durables

Rural share (%)

RadiolT ransistor

79.20

Bicycle

78.08

Wrist watch (mechanical)

75.59

Fan (table)

65.89

Sewing machine

64.34

TV (Band W)

62.65

Cassette recorder

S5.Q3

Wrist Watch (Q!Jartz)

54.00

Pressure cooker

51.51

Fan (ceiling)

50.36

Thus. today companies are formulating different strategies to capture both urban and rural
markets.

HINDUSTAN LEVER LIMITED: RESTRUCTURING MARKETING STRATEGY

107

AMBITIOUS STRATEGIES OF SOME OF THE MAJOR COMPETITORS

CavinKare Limited
Chennai-based CavinKare Limited has launched the Fairever skincare cream. taking the dominant
HLL's Fair & Love!)' by surprise. Fair & Love!)' had a 97% market share but Fairever has already
garnered a good 14% share of the rough!)' Rs. 650 crore fairness cream market.
The company has also entered the toilet soap market with the launch of Meera herbal soap. It
is planning to introduce a range of other soap brands as well as detergents. thus direct!)'
competing with Nirma. Procter and Gamble (P&G) and HLL.
In the hair care segment too. it launched its Chik brand through the small packaging sachet
route. and has picked up a sizeable marketshare-rough!)' 15%of the RS.840 crore shampoo
market - in just two years. This has clear!)' rumed the feathers of both HLL and P&G. CavinKare
has. as a part of its marketing strategy. sought to be different. It has decided that apart from an
organic growth. it would even take to the brand aCQuisition route. It plans to introduce a
number of new products in existing categories like skin. hair and personal care. CavinKare is
also trying innovations in pricing and packaging areas. For example. in May 2001 it launched
a single-use perfume Spinz Singlez priced at Rs. 1.50 per sachet. This is expected to drive
usage and volumes by expanding the Rs. 66 crore category. Current!)'. it is estimated that on!)'
one percent of the population use perfumes. Chik's shampoo sachets priced at 50 paise have
already created waves in the market. Within ayear of its launch. the shampoo penetration in the
country grew from 17.90% to 19.4%.

Today. the company spends around 4% of its turnover on R&D and close to 25% on advertising
and marketing. while constant!)' upgrading its offerings. based on consumer feedback. It has
employee forums like 'cross functional teams' which discuss and plan new product developments
while sharing learning and insights from its successes and failures. The company also records
its brand histories on compact disks for the benefit of new employees. Thus. at the pace at
which the company is moving. it is poised to offer competition to HLL.

Procter & Gamble

P&G has recent!)' announced price cuts in two of its premium brands. Earlier P&G cut the
price of its most popular and premium brand Whisper Ultra by 19%.Whisper Ultra sales are
estimated to have doubled post price cut in February 2001. With the price cuts P&G's core
business of healthcare (Vicks) and hygiene (Whisper). have registered an 8.3% growth during
the year. from Rs. 2.6 bn to Rs. 2.8 bn. This growth is primari!)' attributed to the success of
Whisper Ultra and strong growth in Vicks cough drops.
Last week it announced price cuts in Tide - its largest selling global detergent brand-launched
in India last year. Its price has been slashed by a massive29% from Rs. 120 per kg to Rs. 85 per
kg. Tide was initial!)' positioned midway between concentrates like Ariel and Surf Excel
(Rs. 160 per kg) and the premium segment occupied by Surf (Rs. 85 per kg). Now the company
has lowered prices. after creating a premium image. Ana!)'sts see this price cut on Tide as a
threat to HLL's Surf.

,.

108 1:1 THEORY AND PRACTICE OF CASE METHOD OF INSTRUCTION

The technology-focused P&G is now concentrating on the value-for-money consumer. and this
is perhaps the company's most successful strategy and strongest effort to capture
the market.

volumes :n

Marico Group
The group is following the strategy of being proactive in a:1 areas of marketing. supported by
new product development and segmentation. Various initiatives are being undertaken for new
product development and the group is also looking at building an aggressive cost structure.
which will help in improving margins. It has hired Anderson Consulting in an advisory capaci~.
Marico has adopted TCM (Total Cost Management) practices in all its operations. It will be a
4-5 month project and will concentrate on the entire chain including manufacturing. marketing.
distribution. and so on. Cost targets have been set and if these are achieved. the payback will
come within a month. It plans on tapping a larger number of consumers and expanding its
distribution reach. special!>,in rural markets. Marico has made significant progress in enhancing
sales capaci~. Quali~ of its distributors. and the size of the distributors' field force. The
company has also taken several initiatives to improve penetration in rural areas. Marico's
parallel rural sales and distribution network ranks among the top three in the industry tod'!}'.
Marico has leadership in the coconut oil category and in fact, Parachute has gained market
share in the last one year and current!>,has a market share of about 53%. It has expanded range
in the value-added segment by recent!>, launching the Parachute Dandruff Solution Hair Oil
and has positioned it on a herbal platform. Marico's Saffola is positioned in the premium
category and has a well-entertained brand eQui~. It is also test marketing Saffola Kardi-Corn
blend in Bangalore. which is receiving a good response. Besides this. Saffola Salt which is
positioned in the premium category. has also been doing well.

Godrej Consumer Products Ltd.

Godrej's Ezee. common!>'recognized as a detergent for woolen and delicate clothes. has been
launched in a range of variants including an expensive T-shirts wash and a fabric softener for
cottons. The company intends to invent a niche segment and make it grow through this umbrella
brand. It plans on aCQuiringa household category brand. especial!>,in the floor cleaner segment.
This category is growing at over 20% annuallY and Godrej so far had been !>,ing low in the
household segment with just the Godrej liQuid Cleaner.
Godrej is well entrenched in the fairness cream category. It launched Fairglow last year which
has picked up 2.1% share of the market. The market share in the hair care category has also
improved from 39.4% to 41.7%. The company however. does not intend to get into shampoos
and detergent bars as it does not

have the reQuired technology to manufacture such products.

Dabur
Strong brand eQui~ in the ~urvedic

segment has helped Dabur sustain growth despite a

sluggish demand situation. Apart from its large range of ~urvedic products like Chyawanprash.

over a period of time. the company has forayed into personal products like Dabur Amla Hair

HINDUSTAN LEVER LIMITED: RESTRUCTURING MARKETING STRATEGY 1:1 109

Oil and Lal Dant Manjan by capitalizing on its distribution

strengths. Dabur has a strong

transnational distribution network of more than 5.500 distributors servicing 1.300.000 retail
outlets. through 21 sales offices. The successful repositioning of Chyawanprash. Pudin Hara
and Dabur Honey has led Dabur to modernize its portfolio of traditional products. Honey.
which was always advertised as a therapeutic product. changed track in 1993, and positioned
itself as a food item. Honey sales rose from Rs. 5 crore (Rs. SO million) to Rs. 12 crore in a
year. Dabur now has an unparalleled dominance in various niche categories. Brands such as
Dabur Amla. Dabur Chyawanprash. Lal Dant Manjan (LDM), Hajmola. Pudin Hara and Hingoli
are undisputed leaders in their respective categories. Dabur has built a loyal user base that has
expanded with an increase in the popularity of 'nature-based' products. particular\)' in the
urban market. It is this loyal and expanding user base in its niche categories which has helped
the company to tide over the FMCG's slowdown.
The company has shown healthy double-digit growth rates during this period of FMCG
slowdown. Its hair care segment. which contributes 61% to its fami\)' products division. grew
9% during the financial year 2001. This was main\)' fueled by a 15%growth in Dabur Amla.
which constitutes over 54% of revenues from the hair care business. Also. with the Vatika
brand of anti-dandruff and plain herbal product. Dabur has created a niche in the shampoo
market. Vatika shampoo has grown 78% in 2001. Dabur dominates the red tooth powder category
with about 67% market share. Despite a shift towards white tooth powder. Dabur Lal Dant
Manjan has achieved a growth rate of 12%during 2001. Dabur has also launched Binaca white
toothpowder as a reaction to the shift in preference towards white tooth powders. It has also
launched Binaca toothbrushes and has garnered a 2% share of the estimated Rs 300 crore
market.
Ana\)'sts expect that the company will continue to grow. main\)' driven by growth in the Vatika
brand of hair oil and shampoo. Dabur Amla. LDM. and Binaca brand products. Moreover. the
ayurvedic specialities business grew

by 19%to cross the Rs 100 crore mark for 2001 (Rs 105

crore).
Now the company's energies are focused on Real and Hommade pastes. It is looking at the
possibility of launching tomato pastes and at the same time. is doing research in chutneys and
pickles. Dabur is also working furious\)' on tetrapacks to take on the competition in fruit drinks
and nectars.

lTC's initiative
lTC's e-choupal has redefined the way the supp\)' chains can be integrated and distribution

system streamlined for the cutting edge competitive advantage.

How to face competition
In the midst of such tight competition. HLL is coping in numerous ways.
New Business Opportunities:

HLL is exploring new growth areas. It has evaluated 9 feasible

areas where it can venture and is current\)' experimenting

in five such areas. These are

confectionery. consumer healthcare. water. direct consumer distribution and rural marketing.

110 EI THEORY AND PRACTICE OF CASE METHOD OF INSTRUCTION

HLL plans an organic entry in the water business and further strengthen it through brand
aCQuisitions.Consumer healthcare will be an extension of its current personal products business.
It will sell non-prescription products over the counter.
HLL is also considering entry into food retailing by piggybacking on its ice-cream business. It
plans to expand the product mix at its exclusive Kwaliry Walls ice cream parlours by including
confectionery and other offerings. HLL is opting for the franchisee route to open these parlours
and hopes to take this concept to all cities of India.

Brand Portfolio Restructuring HLL, like its parent brand Unilever. plans to prune its brands
and focus on the top 30 out of a total 110brands. These top 30 brands contribute more than
75% of the turnover. The rest will either be dropped sold, migrated or continued as regional
brands. HLL is not planning to vacate any category it is present in. and is only eliminating
brands. With the rational ising of these brands an enormous simplification is expected to take
place. According to Chairman, Banga "Because you cut down on the number of SKU's, the
supply chain gets simplified and that saves costs". The company plans to support the power
brands with strong advertising.
Brands which contribute to about 25% of HLL's turnover, have been classified into three groups.
First, they are the 'regional jewels', that is, brands which are exceptional~' strong in certain
geographic areas. Hamam, for instance, gets about 60% of its volumes from Tamil Nadu. where
it has more than 30% market share. HLL will keep such brands as purely regional brands. and
support them heavily in these limited geographies. HLL, though tightlipped about its power
brands gameplan, has started to announce its list of casualties. or brands which are both small
and unprofitable, and are to be discontinued or sold off. HLL has delisted two toothpaste
variants. Close-Up Renew and Close-Up Oxyfresh, which are off the shelves. the washing
powder Revel and the rural toothpaste Aim which will also go off the shelves soon. Breeze, a
mass market brand in the toiletries market is growing at 50% plus per annum. Hence, the
company plans to phase out the other mass market brand /ai soap. which is now being supported
lesser and lesser. Another brand that might be phased out is Moti soap which sells

only in one

or two states and just about 5,000 tonnes ayear, mostly during the Diwali season. Among the
emerging categories Rexona and Axe deodorants are the power brands. Rexona has been used
to build the deodorant market by HLL. Axe. though launched

only last year. has been doing

well. However Denim and Impulse are likely to go since they have not fared well in the market.
Banga explains, "Wheneveryou have the same benefit and same price point there"s no advantage
to me to carry two brands. So what we would do is to merge those brands with some of the 30".
The company through intelligent communication and use of pack graphics intends to migrate
the consumers of the phased out brands to existing brands.
After almost a month of research, The Economic Times shortlisted what it considered the
probable power brands of HLL. The criteria for selecting the 30 brands was brand's current
sale, its differentiation vis-a-vis the rest of the market and its future growth potential. The 30
power brands as listed by The Economic Times are shown in Exhibit 3.

HINDUSTAN LEVER LIMITED: RESTRUCTURING MARKETING STRATEGY

III

Exhibit 3: The HLL Sensex

Brands

30 Power Brands
Lifebuoy: Lifebuoy. Lifebuoy Active soaps
lux: soap. shampoo
Uri!: soap
Dove
Breeze
Pears: soap, face wash
Fair & love!y: cream. soap, lotion
Close-Up: toothpaste

Lifebuoy: Lifebuoy liQuid. Lifebuoy Plus/Gold

Jai:soap
Liril: Tale. LiQ!Jid
Moti: soap
Denim
Pears: Naturals
Super SO I
Close Up: 0lo/-Fresh, Renew, toothbrushes

Pepsodent : toothpaste. tooth powder

Pepsodent: toothbrush

Surf: Surf Excel. Surf Excelmatic

Surf: Surf Easywash

Wheel

OK

Comfort

501 Half Bar

Vim

Sunlight

Rin

Aim

Sunsilk

Sunsilk: Ceramides

Clinic: Clinic Plus. Clinic All clear. Clinic Hair Oil

Fruitamins

Axe
Rexona: deodorant

Organics

Red Label

Rexona: soap

Brooke Bond A I

Impulse

Lipton Taaza

Domex

Three Roses

Savlon

Taj Mahal

Revel

Bru
Kissan
Kissan Annapurna
Kwali~Walls
Ponds
Lakme
Elle 18

Some mega brands like Surf and Lifebuoy are likelY to undergo pruning. In the fabric wash
market there are likelY to be three distinct brands: Wheel catering to the mass market, Rin and
Surf operating from the middle upwards. However, Rin talks about whiteness while Surf occupies
the stain removal platform. Surf has Surf Excel and Surf Excelmatic. both of which hold great
potential for growth and positioning of technology leadership, though at present in volume
terms they are less than 5%. However, other variants like Surf EasyWash may be pulled off the
shelves as they have not been doing well. Lux is a power brand, which started out in the
personal wash market initiallY and is now a brand that talks all about beauty care. Lux enjoys a
wide appeal amongst consumers as a beauty brand and has a lot of authority since it has been
endorsed by film stars. Banking on the eQuity of Lux, HLL is pushing Lux shampoo sachets in
rural markets. According to analYsts brands like Pears. which are small in terms of turnover

112 D THEORY AND PRACTICE OF CASE METHOD OF INSTRUCTION

and profitability. but have the potential to be the products of the future. are like!}' to be
concentrated upon. Though the Pears brand has less than 5% market share in the toilet soaps
market. it has a uniQue position that has been extended into face wash ana off late into an oil
free. green variant.
Hll has designed the power brand portfolio in such a way that the Company has a presence in
all categories and key consumer segments.
New Product Introductions: At the top end (premium soaps) segment of the personal wash
category. Hll launched Savlon and Liril Rainfresh. In the fabric wash category. Surf Excel was
relaunched with a new and improved formulation. thus enabling Hll to further consolidate its
numero-uno position in the concentrates segment. Hll launched "Operation Streamline" to
enhance the rural coverage of its detergents. which led to an increased contribution from rural
markets.
In the culinary products category Hll introduced Tom Pudina in the Ketchup category. In the
Tomato Puree. a single use pack was introduced to give consumers convenience and lower the
money outlay. Hll has recent!}' introduced popular foods like wheat flour and edible salt under
the KissanAnnapurna brand name. These products are changing consumer habits in a remarkable
manner by the consumer giving more preference to processed. hygenic. healthy and convenient
products.
Hll is also concentrating on improvement in the manufacturing sector by laying stress on
areas like productivity. Quality, energy conservation. safety and environmental protection. It
has been able to improve operational performance through significant improvement in its Total
Productive Maintenance (TPM) at six manufacturing sites.
Mergers: The personal care segment of the FMCG market provides both high volumes and
high margins. The merger of Hll and Pond's (India) will result in increased revenues for HlL
As compared to Hll's margins of 11.6%in 1997, Pond's achieved 18%margin while Lakme had
45% margins in March 1997. Hll has also aCQuireda 50% stake in lakme lever Limited gaining
total control of the company. This led to the restructuring of the manufacturing and distribution
systems of lakme with HlL It also fuelled the growth of Lakme's business through a focused
portfolio approach and increased the reach of lakme through more outlets as compared to
before.
Hll also intends to aCQuireLakme's cosmetics brands. With this, it will own the largest colour
cosmetic franchise in the country. once again making it the market leader.
e-commerce Initiatives: Keeping pace with times and the changing market scenario. Hll is
now taking to e-commerce in a big way. HLL is considering three opportunity segments-business
connectivity. consumer connectivity and consumer commerce. Hll's vision is "connect. attract
and fulfil" on a large scale.
In the area of business connectivity, HlL plans to create an extranet linking in phase I with
about 5.000 stockists. 30.000 retailers and 100 suppliers spread over 1,000 locations. A
similar plan also aims to link suppliers. factories and the purchasers through an extranet to
achieve real-time. vendor-managed inventory. The company is planning e-banking initiatives to

HINDUSTAN LEVER LIMITED: RESTRUCTURING MARKETING STRATEGY

1:1

113

enable paperless financial settlements. The company's Aviance business. which has a new
international and customized skin care and beau~ cosmetics portfolio of 70 products. is being
configured to run on the Net. The Aviance range of products consists of the best Unilever
formulations. selected from across the world and promises technology that works with the
skin's natural processes to provide high perform;mce beau~ solutions. HLL is already working
in the area of consumer connectivi~. through the Pond's website. Hello Hindustan and Mera
Hindustan initiatives in the detergents business and events like Clos~. Up Antakshari on the
Net. The company is also testing interactive kiosks for the Lakme and Pond's ranges, in a few
cities. These will enable the consumer to try out, various beau~ products on screen. before
buying. It is also considering the possibili~ of joint ventures with woman's portals.
HLL is poised to gain from e-retailing as it will have the widest distribution capabili~ with
about I million outlets across urban areas, over 100.000 in villages and a privileged relationship
with around 7,000 stockists.
Working for a Social Cause: HLL is a social!)' responsive organization. HLL believes that "an
organization's worth is eQual!)' reflected by the service it renders to the communi~". HLL has
contributed to the socie~ in many ways. Through different projects, it provides care for HIVpositive patients. education and support for children with challenges. a hospice for dying
destitutes. basic education for children in rural areas, and support to government relief measures
in natural calamities.
The largest FMCG company of India provides employment to around 36.000 people in the
country. It has worked f~om time to time to spread awareness regarding various issues. For
instance. 6 out of 10 children in India and a large percentage of women are deficient in iodine.
HLL carried out "Project Iodine". a school contact programme to spread awareness on iodine
and sampling of iodised salt. The company's plantation division has a large workforce of about
19,000 people. It started "Project Dialogue" in 1999 where more than 3,500 workers were
exposed to basic level awareness. This was one of its major initiatives in carrying out a nonmanagement level training programme. It also started special education centres for handicapped
children in Ankur in Assam and Kappagam in Tamil Nadu. Ankur has been vested with the
prestigious World Awareness Business Award for Social Progress by HRH the Princess Royal
in lanuary 1999. HLL has saved precious jobs and developed local economies by taking over
sick enterprises and converting them to viable profit making units.

Business Concerns
HLL has been going through a rough phase. The FMCG industry witnessed an almost flat
growth in the April-lune Quarter of the fiscal year 2001-2002. According to ORO data in April
2001, the industry grew at 0.6% which marginal!)' improved to 0.7% in May 2001. HLL' s woes
are two fold - distribution and product portfolio.
With a well-entrenched network of a million retail outlets, HLL has already attained optimal
distribution levels. Therefore. potential to achieve meaningful volumes in growth. by expanding
distribution, is limited. On the other hand. many of its competitors still have a long way to go
in terms of distribution and reach, thereby making it easier for them to achieve growth in
volumes by snatching

away marketshare from HLL.

114 THEORY AND PRACTICE OF CASE METHOD OF INSTRUCTION

Its portfolio seems to be going through a structural shift with high growth products moving to
the mature category. Therefore. further penetration is unlike\>'. accounting for 72% of Hll's
revenue. This means that margins will be under pressure in the coming years. Although Hll
has been making investments. there will be a time lag before new products to move into the star
category. Categories like ice cream. culinary products and coffee constitute on\>' 5% and are
stagnating despite the company's efforts to make them grow. Hence no spectacular growth is
expected in these procijJct categories. Also. with increasing competition. the company will
have to increase its ad spend. which will affect its margins. even though on~' marginal\>'.
Table 7:
Rs.lakh

1991

[993

1992

HLL

Profit & Loss Account

1994

1995

1996 t[997

1998

1999

2000

Profit and Loss Account

Sales

150761 175703 206317

Other
Income

616

1200

28248

336695

66001

781971

948185

10142 10603

2976

5621

6670

11808

18387

24474

31898 34507

2928

2239

Interest

2063

3219

2723

2954

2015

5700

3389

Profit before
taxation (a)

13770

16598

22277
,

30271

37222

60525

85025

113044 13879 16650

Profit after
taxation (a)

8020

9848

12727

18996

23922

41270

58025

83744

EPS of Re I
(adjusted for
bonus)

0.57

0.70

0.91

1.30

1.64

2.08

2.81

3.67

4.86

5.95

DPS ofRe 1
(adjusted for
bonus)

0.39

0.42

0.56

0.80

1.00

1.25

1.70

2.20

2.90

3.50

19353
760

22275
1224

25434
5095

32890
19145

39556
12283

72171
32877

79409
53157

105377 10871 12034

69751 10061 17697

25408

29858

19560

34202

45767

37867

12242

22606

45521
Share capital 13999

53357
13999

50089
13999

82637
14699

97606
14584

142915
19917

144808
19917

197734 228053 259983

21957 22006 22006

Reserves
and Surplus

15047

19331

24569

39127

49244

79236

106233

149346 188320 226816

17757

17757

17757

16475
45521

20027
53357

11521
50089

14654
82637

16021
97606

26005
142915

18658
144808

1315

10699 13 100

Balance Sheet
Fixed assets
Investments
Net current
assets

Share
premium
suspense
account
Loan Funds
Source:

HLL Report and Accounts

18725 37338

26431 17727 11161

197734 228053 259983

2000

As mentioned earlier. due to intense competition and slowdown in the demand for FMCGs.
HlL's margins could come under ~train. The parent company's decision to charge a royalo/ of
1%on a part of the turnover will also affect the bottom line of the company. Some of the sunrise
categories that the company has been banking on have failed to take off. Although there have

HINDUSTAN LEVER LIMITED: RESTRUCTURING MARKETING STRATEGY

liS

been no indications so far, other than a couple of separate joint ventures, there is an apprehension
that the parent company may set up a 100% subsidiary in India to pursue future business
opportunities.

~
I
,

The chairman of HLL, M.S. Banga, however is optimistic, "Our objective is to improve the
underlYing Quali~ of our business and achieve sustainable and profitable growth. According[y,
we have embarked upon a three-pronged strategy of leading growth through focusing on 30
power brands, improving the profitabili~ of our foods business and taking steps to secure the
future of the non-FMCG businesses. Significant investments have been made in improving
product Quali~ and brand support stepped up by 15%for our power brands. Actions initiated
for improving foods prontabili~ through rationalization of the portfolio and supply chain
initiatives have also started yielding results. loint Ventures are being formed for two of our
non-FMCG businesses to protect their value-one with Godrej Agrovet for our AFS business
and another with the ICI group for our fragrance/flavours division".
The chairman also stated that the company intends to reinvest a portion of the exceptional
income from these divestments to fortify its competitive position in the FMCG sector, especial[y
in personal care and fabric wash and oral care. Strategic initiatives to improve the portfolio
mix, overall cost management measures and benefits of previous restructuring led to an
improvement of about a 1%point in operating margins.
In the past five years, HLL has seen its profitabili~ margins expand continuouslY due to
improvement in operational efficiencies and working capital management. Operating 'profit
increased from 10.81%in December 1995to 14.11%in December 1999. Net working capital <ycle
reduced from 27 days in 1995to 4 days in 1999. However, analYstsare Quick to point out that
further improvement in productivi~ is ruled out. Ana[ysts estimate that sales for HLL will fall
by around 3-4% on account of the higher revenue base and lower rural consumption of the
previous year. The company's decision to focus on 30 power brands is ~xpected to result in
revenue pressure in the short term. There is however, a likelihood of the margins for increasing
onlY slight[y, given the lower restructuring costs, rise in product prices and lower input costs.

Issue
Given the nature of problems HLL is facing today, it will take Quite a while for the company to
reconstruct its product portfolio to counter the impending slowdown. The managementwonders
what strategies HLL should use to increase both volumes and margins and fight off the stiff
competition.

References
I.

Brockbank, Wayne, "This will be the decade of the human side of business', Business
Line, May 2001.

2.

Mahalakshmi, N, "HLL: Diminishing

marginal returns, the smart investor", Business

Standard, October 2001.

3.

Brand EQui~, May 23, The Economic Times, May 22, 2001.

-r'- __

,..

.,,,,_m.~'"",,,,""",,,,"~""",""","~'"""'"

~~~

116 C THEORY AND PRACTICE OF CASE METHOD OF INSTRUCTION

4.

www.hll.com

5.

The Financ:al Express, Ju!>,16, 2001.

6.

www.lndiainfoline.com

7.

www.bs~trategist.com

8.

"The smart investor". The Business Standard, www.business-standard.com

9.

NCAER Consumer Demographics Survey. 1998.

10.

A&M October 31,1999.

II.

Far Eastern Economic Review, December 1999-Ianuary 2000.

12.

HLL Reports and Accounts. 2000.

PART II
HLL Network is going to be a powerful source of growth. Our objective is to build
steadi!y so that we have more than one million entrepreneurs.
M. S. Banga*

HLL'AND DIRECT MARKETING

HLL made its foray into direct marketing in 1999 with the launch of a range of personal care
products under the brand name Aviance. Though Aviance was not a roaring success in absolute
sales numbers. it laid the foundation for HLN, which was launched on January27, 2003.
In terms of market share, HLL is India's largest consumer goods company and the leader in
beaury, personal hygiene and home care products in the country. The innovative distribution
channels created by HLL to access the Indian market have spelled success for the company for
over five decades. HLL's formula has been successful!>,replicated by many competing brands
and small players in the FMCG segment. The wide range of products offered by HLL to tap
every conceivable price point. tapped the unexplored Indian market optimal!>,.and HLL became
the jewel in Unilever's crown, contributing to revenue growth even when the parent company
was struggling. But in the late 1990s and ear!>'2000s, an influx of foreign players and n~riad
low-price local rivals started eroding HLL's dominant position.
The compa!'!)' zeroed in on the idea of meeting the growing needs of the time-starved Indian
middle class population through direct marketing via HLN. The direct marketing industry was
estimated to be worth more than Rs. 15bn as of ear!>'2003. and was growing at the rate of
approXimate!>' 25% year-on-year. Through value-added services like expert advice and home
delivery, and a range of world-class products which mirrored the aspirations of its target
consumer, HLN aimed to be the most preferred network marketing company in the country. It
*Chairman.

Hindustan Lever in 2003.

--_--

--_--~_..."...".,"'"

,._.

HINDUSTAN LEVER LIMITED: RESTRUCTURING MARKETING STRATEGY

1:1

117

envisioned partnering with its consultants (salespersons) and providing them with a business
and self-development opportuni~ that was tru!)' rewarding. In the words of Dalip Sehgal.
Executive Director - New Ventures and Marketing Services. HLL, "We need to be present in all
channels. And we see network marketing as a bigger opportuniry than a threat."

Network Marketing Indlistl)' in India

Indian Direct Selling Association (IDSA) defined direct selling as the act of marketing of
consumer goods and services through personal contact. away from a fixed location or a shop.
In the words of Ka!)'an Ranjan. Manager. Corporate Communications. Amway India Ltd.. "The
direct selling system adopts methods of door-to-door selling. group meetings. and networking
marketing." By selling direct!)' to the consumers and avoiding lengthy intermediaries in the
distribution network. companies save on time. transaction and retailing costs. and reap
substantial benefits in the process. It is estimated that with the success of Amway. Oriflame
and other direct marketing brands. direct selling constituted around 1.5%approximate!)' Rs. 20
bn of the total annual retail market in India in the ear!)' 2000s. Initial!)'. restricted to limited
product offerings like home care. personal care. education and kitchenware. this innovative
distribution system has expanded over the years to include sophisticated categories like software
products. banking and other services as of 2004. Companies such as Eureka Forbes pioneered
the direct selling system in the country with a sales force that was trained to make direct
house-to-house sales.
In its nascent phase. the direct selling industry had to confront the negative attitude of the
Indian populace who rypical!y viewed direct selling as an intrusion into their priva0'. Untrained
sales personnel. de-motivated distributors. poor Quali~ of the products and the 'hardsell'
tactics adopted by salespeople left consumers wary of the credibili~ of this distribution system.
But with the advent and success of global players like Amway and Oriflame in the Indian
market in the 1990s. growth in the direct sales market aCQuireda new momentum.
MLM or Multi-Level Marketing is the fastest growing sector of the direct selling industry
worldwide. In multi-level marketing. also known as network marketing. salespeople not on!)'
sell products but also recruit other sales personnel who become a leveraged sales-force and
contribute to the commission earned by the initiating salesperson. In the pre-liberalization
era. network marketing in India usual!)' took the form of various chit fund companies which
operated a system of agents. who simultaneous!)' mobilized deposits and appointed sub-agents
for further deposit mobilization.
Oriflame International was the first international major to begin network marketing operations
in India in 1996. This was followed by the entl)' of Avon in late 1996. Tupperware. with a
product portfolio comprising plastic food storage and serving containers. also entered India in
the sameyear. The biggest success story in this field. Amway India Ltd.. started commercial
operations in the country in May 1998. The first homegrown MLM major was Modicare. started
by the Modi Group in 1996. Modicare's network covered northern and western India. Like other
direct selling companies. network marketing companies are affiliated to the Indian Direct Sellers'
Association and are bound by its code of conduct. (Refer Exhibit 5 for a list of direct selling
companies in India).

118 THEORY AND PRACTICE OF CASE METHOD OF INSTRUCTION

Exhibit I: Direct Selling Companies in India

..
;:;;;""1. ...... n. "I t:jjJ;;.l]'lO"UY,.

iii;:!!;:;

nn

;:\!I:';\\,;;;;> .~",,~~.;..~~.~;:;i.

1981

Eureka Forbes ltd.

1992

Time Life Asia

1992

lotus learning (P) ltd.

1995
1995

Avon Beauo/ Products India Pvt. ltd.

Personal Care and Cosmetics

Oriflame India Pvt. ltd.

Skin Care and Cosmetics

1995

Amway India Enterprises

J996

Quantum International (P) ltd.

1996

Tupperware

India Pvt. ltd.

,ii

Home Care
Educational Products and
Multimedia
Educational Products and
Multimedia

Home Care, Personal Care,

Cosmetics, Nutrition
Ayurvedic Health Care, Personal and
Home Care, Food and Beverages
Plastic Moulded Kitchen Containers

1996

Modicare ltd. (Home grown)

Home and Personal Care. Everydayuse Products

10

AMC Cookware India (P) ltd.

Stainless Steel Cookware

Herbal life International

Weight Management

12

1997
1998
1999

Aviance Hindustan lever

Cosmetics and Skin Care

13

1999

Sunrider India

Home and Personal Care, Everydayuse Products

/I

Source: www.indiandsa.com

Exhibit 2: Tupperware's 'Food Preparation and Storage' Product Range

2.

3.

Clear Plastic Storage Containers

and Canisters

a) One touch reminder Kitchen

Canister Set
b) Classic Sheer I Gallon Pitcher

EQuipped with a see

through window to see
contents. Easy pouring.
prevents dripping

Food Preparation Serving

Containers and Sets

a) Egg-ceptional Server Set

b) Impressionall Gallon Pitcher
c) large Pick-A-Deli Containers

24 half egg holder

To store and serve
beverages
For handling pickles with
care

Food storage and preparation

methods and suppliers

a) Silicon Wonder Mat

b) Butter Huggers Set
c) Chef Series Knife Sets

Baking mat:
Two containers to hug
com and dispense butter.
For cutting. slicing and
peeling.

4.

Handy Households

5.

Insulated Freezer Containers and

Cold Food Storage

a) Tupperware Mealmaker Set

b) Crystal Wave Small Set Bowls

a) Freeze Smart Products

b) Chillin'out Sets

To steam vegetables and

brown ground beef
To store food in
refrigerators. Also usable
in microwaves.
For frozen food storage
Higher capacio/ storage
Contd ...

HINDUSTAN LEVER LIMITED: RESTRUCTURING MARKETING STRATEGY

6.
7.

8.

119

Long-Term Food Storage and

Home Food Preservations
Lunch Box and Portable
Storaj?,eContainer Ideas

a) Pasta Mates

For storing Pasta

a) Lunch'N Things Con~ainer

b) Sandwich Keeper Sets

Microwave Cooking Safe

Plastics and Dishes

a) Oval Microwave Cooker

b) Crystal Wave Divided Dish

Lunch box with four compartments.

For sub-style sandwiches
To steam. brown and bake
Dinner plate sized container for
reheating and serving
Srylish carrier for organizing beaury
accessories.
Mini beverage set including mini
pitcher. plates and tumblers.
Slim sandwich keeper and a tumble

plastic Barbie Doll Products:

Lunch and Toy Boxes

a) Barbie Beaury Carry All

b) Barbie Mini Beverage Set
c) Barbie Lunch Set

10.

Plastic Food Storage

Containers and Canisters

a) Modular Mates
b) Serving Center Set

II.

Plastic Home Storage

Solutions and Ideas for
Pantries

a) Fridge Smart
b) Spaghetti Dispenser

12.

Plastic Storage Pitchers and

Bowls Sets

a) Open House Tumbler

b) Refrigerator Pitchers

13.

Portable Plastic Storage

Containers and Bins

a) Insulated Commuter Mug

14.

Spice and Seasoning Storage a) Spice Shaker Set

Containers in Modern Designs b) Classic Sheer Midget Set

To keep spices fresh for Pouring.

measuring or shaking

15.

Stackable Small Plastic

Container and storage
solutions

To store. reheat and serve

individual portions.

9.

a) Rock'N Serve

Store food. fit in narrow placed.

Six components tray for TV snacks
For storing vegetables
For easy spaghetti measuring and
pouring
Four unbreakable tumblers set.
Sleek pitchers to save space
To reheat contents

Source: www.tupperware.com

HINDUSTAN LEVERNETWORK (HLN)

A dominant player and market leader in the fast moving consumer goods segment HLL forayed
into direct marketing in 1999with a premium brand of personal care products for women, with
women acting as consultants. Aviance. the brand name under which the products were sold.
was limited in its domain and scope of operation. It offered customized beauty solution and a
range of cosmetic and skin care products to its consumers. The Aviance range of products
catered to the premium section of the Indian population. However. the consultants selling the
products belonged to the SEC B&C strata and this led to visible mismatch between the brand
positioning and the consultant profile. The brand Aviance. therefore. never reallY managed to
attract and retain its target consumer segment.
At the same time. aithough Aviance had failed to attain its desired level of success. the direct
selling industry in India was undergoing great change with the emergence of a number of new
product categories. Network marketing expanded. engulfing a wide spectrum of products from
kitchenware and home care to food and jewellery. In such a scenario. HLL stood conspicuouSlY
limited in its positioning as a premium women's brand with women-oriented beauty products.
By the end of 2002. the company therefore decided to rethink its strategy and not onlY broadbase
its products but also open the distribution network to men. who wanted to act as consultants.

-----w---',_,

-~~-I

120 a THEORY AND PRACTICE OF CASE METHOD OF INSTRUCTION

I
Past experiences with Aviance (the brand name failed to communicate the origin of the product
from the House of Levers and therefore failed to instill trust and confidence in its target segment)
made HLL skeptical about using a neutral, new or foreign name for its revamped efforts in the
direct marketing segment. The company wanted to leverage its goodwill and brand eQuiry that
it had built over a period of 100years in the Indian market, and decided to stamp its own name
on the rejuvenated venture. HLN was formal!>,launched on January27, 2003. Speaking of the
importance of leveraging the corporate name, Dalip Sehgal, Executive Director, New Ventures
and Marketing Services. HLL commented. "HLL has built a reputation built on trust and Qualiry
over the last 100years. With its existing position of strength as the leading consumer goods
company in India, HLL will leverage its capabilities across manufacturing. supp!>,chain, R&D
and consumer understanding to provide a strong!>' differentiated proposition in Hindustan
Lever Network that redefines the business of network marketing."
A comprehensive range of more than 175to 200 products was sold under the umbrella brand
HLN. Aviance was incorporated as a sub-brand within HLN. Several other products that were
added onto the expanding portfolio included Lever home-range of kitchen care. home care and
laundry care products. HLL also launched a food supplement Nutrium Plus, exotic tea, special
coffee and value-added foods such as sauces in its direct marketing network. Consumer offerings
were expanded to oral care (Mento dent). confectionary gifting items and the 'Denim' brand of
men's grooming and personal care products. The company aimed to expand its reach over time,
by adding a new product every alternate month to cover all product categories. Internal sources
stated HLN's intentions to introduce a complete range of products similar to its existing retail
range in the future. Apart from this. the company also decided to increase the product line of
its existing retail brands, Denim and Ayush. Denim Xclusive and HLL Ayush Spa were the two
new brands that were in the offing. Most of the HLN products were manufactured in-house in
the world class centre set up by HLL at Mumbai.

PART III
MANAGING WORKING CAPITAL
Unilever's Indian subsidiary. Hindustan Lever limited (HLL) is the country's largest Fast Moving
Consumer Goods (FMCG) compa'"!}'.It has brands spread across 20 distinct consumer categories.
HLL holds a place of pride in the Unilever global system. In India, HLL is known for its tight
management of working capital and the company has been operating with a negative working
capital since 2000. But the management realizes that as competition intensifies, there is still
scope for improving operational efficien<}' and cutting working capital needs.
"Our capital to

turnover ratio is 1:4 and last year we used zero working capitaL"
-M. S. Banga. Chairman. HLl

,~-------------------

,,

HINDUSTAN

LEVER LIMITED: RESTRUCTURING MARKETING STRATEGY

Exhibit I: HLL - Key Financials

Rs. Lakhs

Gross turnover

2002

2001

1095161

1178130

995485

1066756

Turnover. net of excise

Profit before tax
Tax on profits

219712

194337

(47985)

(40242)

3842

10036

175569

164131

Exceptional income
Net profit

(\21068)

Dividend (inc I . tax on distributed profits)

Transfer to general reserve

(\1583

I )

(17700)

(16500)

119816

75998

Profit & Loss Account balance carried forward

Source:

(\01 )

1435

Taxation adjustments of previous years

HLL Annual Report 2002

Exhibit 2: HLL - 10 Year Performance

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

By Segment % of 2436

3240

3775

7120

8343

10215

10918

11392

11781

10952

68

65

61

45

45

39

41

40

. 40

45

12

10

II

16

17

17

21

22

34

34

35

34

37

33

30

14

12

13

9.9

9.2

9.4

8.0

8.8

9.5

10.7

12.3

14.0

17.6

9.6

9.9

9.5

9.9

1035

9.7

10.0

9.5

8.9

8.3

12.5

9.5

8.3

18.8

68.2

45.2

58.3

-*

60

107

126

272

3.65

548

694

858

1080

1236

0.91

1.30

1.64

2.08

2.81

3.67

4.86

5.95

7.46

7.98

1.00

1.;25

1.70

2.20

2.90

3.50

5.00

5.50

7.0

8.2'

9.8

I 1.5

13.\

15.7

# Sales (Rs. Cr)

Sales
Soaps.
Detergents
& Household
Care
Personal
Products
Foods
Chemicals. Agri
Fertilizers &
Animal Feeds
Others
EBIT as % of
Sales
Fixed Assets
Turnover (times)
Working Capital
Turnover (times)
Economic ValueAdded (EVA)
(Rs.Cr)
EPS ofRe. 1 @
DPSofRe.

I @

0.56

0.80

5.2

5.9

6.3

5.8

RaCE (%)

49.9

48.5

49:1

52.9

61.1

58.7

61.8

64.6

62.4

59.4

RONW(%)

33.0

35.3

37.5

41.6

46.0

48.9

50.9

52.7

53.9

48.0

PAT/Sales (%)

Sales before excise duty.

Source:

HLL Annual Report 2002

Adjusted for bonus issue.

*Denotes working capital is negative

121

122 THEORYAND PRACTICEOF CASE METHOD OF INSTRUCTION

Exhibit 3: HLL Balance Sheet (December 31. 2002)

1"1l1li11 I~J.lr
.,

......

RS);;lakh~

Sources of Funds

Shareholders funds
Capital

22012.44

Reserves & Surplus

343875.14

Secured loans

1961.50

Unsecured loans

3868.26

22012.44
365887.58

282356.74

304369.18

loan Funds
4304.39
5829.76

4069.4 7

3717/7.34

8373.86
312743.04

Application of Funds
FixedAssets
Gross block
Depreciation

199436.41

193587.62

(77889.64)

(72634.20)

121546.77

120953.42

Net block
Capital work-in'progress
Investments
Current assets,
loans and advances
Inventories

127873.62

124003.62

Sundry debtors

36785.04

42478.4 7

Cash and Bank balances

94262.60

91315.69

Other current assets

10

4630.22

5061.56

loans and advances

II

/0686.88
6

132233.65

1105.60

236474.10

132006.02
163593.12

79555.40

79818.70

343106.88

342678.04

(241041.86)

Current liabilities and

provisions
liabilities

/2

(246534.09)

Provisions

13

(120555.34)

(109140.42)

(367089.43)

(350182.28)

Net current assets

23982.55

7504.24

Deferred Tax
Deferred Tax assets

14

38730.63

Deferred tax liabilities

15

(11738.49)

34961.26
26992.14
371717.34

Source: Hll Annual Report 2002

(10313.12)

24648.14
312743.04

HINDUSTAN

LEVER LIMITED: RESTRUCTURING MARKETING STRATEGY

123

India's economic liberalization. which started an 199. marked an inflexion point in HLL's growth
curve and allowed the company to explore new business opportunities. Deregulation permitted
alliances. aCQuisitions and mergers. In one of the most celebrated events in Indian corporate
history. the erstwhile Tata Oil Mills Company (TOMCO) merged with HLL, effective from April
I. 1993. In 1995.HLL andyet another Tata Group company. Lakme Limited. formed a 50:50 joint
venture. Lakme Lever Limited. to market Lakme's cosmetics and other products of both the
companies. In 1998. Lakme Limited sold its brands to HLL and divested its 50% stake in the
joint venture to the company. HLL formed a 50:50 joint venture with the US-based Kimber\)'Clark Corporation called Kimber\)'-C1ark Lever Ltd.. which marketed Huggies Diapers and
Kotex Sanitary Pads.
Exhibit 4: Hll P&l Account (December 31, 2002)

Income
995485.30

1066755.69

38454.22

38179.05

1033939.52

1104934.74

(799899.50)

(895357.13)

(13410.06)

(14465.97)

(918.40)

(774.42)

(814227.96)

(910597.52)

219711.56

194337.22

(45894.00)

(39769.00)

Deferred Tax

(2091.00)

(473.00)

Profit after Taxation and before Exceptional Items

171726.56

154095.22

3841.90

10036.13

175568.46

164131.35

1405.17

(101.36)

75997.56

44298.62

252971.19

208328.61

(55031.09)

(55014.88)

Sales
2

Other Income
Total
Expenditure

3-5

Operating expenses
Depreciation

Interest
Total
ProfJt before Taxation and Exception Items

10

Taxation for the year - Current Tax

14

Exceptional Items (net of tax)

Net Profit
Taxation adjustments of previous years (net)
Balance brought forward
Available for distribution
Dividends (2002-subject

to deduction of income-tax)

on eQuit shares:
Interim - Rs. 2.50 per share--declared

on Ju!y 22.

2002
Interim dividend payable to the

(16.22)

shareholders of the erstwhile

Contd ...

1
124

THEORY AND PRACTICE OF CASE METHOD OF INSTRUCTION

!
International Best Foods limited
Pursuant to the Scheme of Amalgamation
Final- Rs. 3.00 per share- proposed

(66037.31)

(55031.09)

5913.17

(5768.86)

Transfer to General Reserve

(17700.00)

(16500.00)

Balance carried forward

119815.96

75997.56

7.98

7.46

Tax. on distributed profits [2002-Credit (200l-afte

considering Credit of Rs. 5457.48 lakhs) pertaining t
the previous year]

Earnings per share (Rs.) - Basic

& Diluted (Face value of Re. I each)

17

Source: HLL Annual Report 2002.

In 1992. Brooke Bond India aCQuiredKothari General Foods. with significant interests in Instant
Coffee. In 1993, it aCQuiredthe Kissan business from the UB Group and the Dollops ice cream
business from Cadbury India. Also. Tea Estates and Doom Dooma. two plantation companies
of Unilever. were merged with Brooke Bond.
In ju!>' 1993. Brooke Bond India merged with Lipton India. to form Brooke Bond Lipton India
Limited (BBLlL). In 1994. BBLIL launched the Wall's range of Frozen Desserts. By the end of the
year. the company entered into a strategic alliance with the promoters of Kwaliry Ice Cream. In
1995. the Milkfood 100% ice cream marketing and distribution rights too were aCQuired.Final!>,
BBLIL merged with HLL, with effect from january I. 1996. In 1998. Pond's India was merged with
HLL. With this merger. HLL got the high!>' popular Pond's Dreamflower Talc. which had a 53%
share of the RS.250 cr talcum powder market. I,part from Pond's Dreamtlower. the company
also had Pond's Dreamflower Magic. and Pond's Sandal Talc.
In lanuary 2000. the government of India decided to award a 74% eQuiry stake in Modern
Foods to HLL. In 2002. HLL aCQuiredthe government's remaining stake in Modern Foods. In
2003. HLL aCQuiredthe cooked shrimp and pasteurized Crabmeat business of the Amalgam
Group of Companies. a leader in value-added marine products exports.

Working Capital
Unilever companies in India integrated all aspects of finance. accounting and logistics into
one all-embracing commercial function. 'Commercial' focused on cutting working capital
reQuirements through innovative supp!>,chain management and use of Information Technology
to improve the efficiency of transactions. With sales plateauing in the last few years. working
capital efficiency had become one of the prime drivers of operating margins for HLL.
In 2002. HLL' s net current assets (current assets-current liabilities) as a percentage of sales
were on!>' 2% compared to near!>'20% for competitors like Godrej Soaps. This meant that if
this shortfall were to be funded through borrowings. Godrej Soaps would need a much larger
amount than HLL. Due to better working capital management. HLL' s liQuidiry was higher when
compared to Godrej Soaps.

,
HINDUSTAN LEVER LIMITED: RESTRUCTURING MARKETING STRATEGY

1:1

125

QlJestion
Shiva Shankar, a young MBA graduate, had joined HLL in its Corporate Finance Department.
His supervisors asked him to understand and analYze the financials of the company and make
suggestions on further improving HLL's working capital management. They wanted him to
compare the inventory managementof HLL with that of Dell, one of the most efficient companies
in the world in working capital management. Shiva Shankar also had to suggest what best
practices of Dell could be replicated.

PART IV
RURAL DISTRIBUTION IN HLL
This case describes an innovative 'win-win' partnership between Hindustan Lever Limited (HLL)
and rural self-help groups. By assisting rural women to access micro-credit. buy HLL products
and sell them in their villages, HLL was creating new markets while creating a stronger economic
base within the rural communities. The case focuses on the challenges of scaling up this model
in a difficult socio-economic environment.
Mumbai, India - lulY 2000: Dalip Sehgal, Director of the New Ventures Unit at Hindustan
Lever ltd. (HLL), came out of a long team meeting with many Questions on his mind. As a
seQ1JeIto Project Millennium, he had brought together a new team to help implement a daring
new growth blueprint for HLL. The blueprint consisted of seven new business initiatives that
would drive the company's ambition of continuing to double its turnover every four years.
Manvinder Singh 'Vindi' Banga, who just two months earlier had been appointed Chairman and
Managing Director-at
a time when the company appeared to be losing market share-was
convinced that Dalip had the necessary enthusiasm and vision to help achieve this goal.
Rural Venture, one of the seven new initiatives, led by KT Halli Srinivas with assistance from
Pratik Pota, charted out an ambitious plan-to stimulate new demand at the lower end of the
market by creating a self-sustaining cycle of 'business growth through people growth.' The
team planned to develop a win-win partnership with rural Self-Help Groups (SHGs) by assisting
them to access micro-credit. buy HLL products and sell them in their villages. If successful, the
initiative would create hundreds of jobs, train new entrepreneurs and extend HLL's distribution
reach into the most inaccessible rural villages of India.
Penetrating the informal sector in this way was a potentiallY risky endeavour; furthermore, was
it reallY the company's role to develop rural areas in this way? Dalip was concerned about
potential channel confiicts with the existing, successful distribution network. Coordinating
with governmental and NGO partners would be a key success factor, but this also brought its
own complexities. Training mostlY illiterate women in sales and promotion techniQues was a
major challenge. The payback in terms of new markets and wealth creation was potentiallY
enormous, but what would a successful rollout reQuire to enable the SHGs to achieve economies
of scale?

126

I:l

THEORY AND PRACTICE OF CASE METHOD OF INSTRUCTION

Exhibit 5: Unilever's Corporate Purpose Statement

At the hea,t of the Corporate purpose. which guides us in our approach to doing business, is the drive to serve
consumers in a uniQ!Jeand effective w~. This purpose has been communicated to all employees worldwide.
Our purpose in Unilever is to meet the everyday needs of people everywhere - to anticipate the aspirations of
our consumers and customers and to respond creative!y and competitive!y with branded products and services
which raise the Qualiry of life.
Our deep roots in local cultures and markets around the world are our unparalleled inheritance and the
foundation for our future growth. We will bring our wealth of knowledge and international expertise to the
service of local consumers-a tru!y multi-local. multinational.
Our long-term success reQuiresa total commitment to exceptional standards of performance and pmductiviry.
to working together effective!y and to a willingness to embrace new ideas and learn continuous!y.
We believe that to succeed reQuires the highest standards of corporate behaviour towards our employees,
consumers and the societies and the world in which we live. This is Unilever's road to sustainable. profitable
growth for our business and long-term value creation for our shareholders and employees.

When Unilever first becameengaged in India in the 1930s,the opportuniry to conctuer unexplored
markets was enormous. The company broke ground by establishing the first edible oil. soap
and personal product companies in India: Hindustan Vanaspati Manufacturing Company (edible
oil), Lever Brothers India Limited (soaps) and United Traders (personal products), all created
between 1931and 1935.The three Unilever companies merged in 1956to form Hindustan Lever
Limited (HLL).

By the 1990s,Unilever's business in India was entirelY represented by HLL. Given its longstanding
presence in India, it had become a uniQuelYIndian company and was perceived by the Indian
people as a local company and not a multinational. The company made painstaking efforts to
become implanted in the hearts and minds of people by showing that it cared about local
communities. Its corporate purpose statement noted "to succeed reQuires the highest standards
of corporate behaviour towards our employees. consumers and the societies in which we live."
HLL had several ongoing projects that focused on rural development. education. health,
communiry welfare, resource conservation, sustainable development and national heritage in
art and culture.
By 2000, HLL was India's largest fast-moving consumer goods company-with

market leadership
in home and personal care products and one of India's seven biggest exporters. HLL operated
over 100 manufacturing facilities across the country, with several third-parry manufacturing
arrangements.

THE HLL DISTRIBUTION

NETWORK

HLL already had one of the widest and most efficient distribution networks for consumer products
in India; in fact, this was recognized as one of its key strengths. HLL' s products were distributed
through a network of about 7,500 Redistribution Stockists (RS) who sold to shops in urban
areas and villages with over 2,000 people that could be reached by vehicle (refer to Exhibit 2
for an illustration of HLL's rural distribution model). Its supplY chain was supported by a
satellite-based communication system, the first of its kind in the fast-moving consumer goods

HINDUSTAN LEVER LIMITED: RESTRUCTURING MARKETING STRATEGY

127

industry_ This sophisticated network with voice and data communication facilities linked over
200 locations all over the country. including head office. branch offices. factories. depots and
key redistribution stockists. This was a tried and tested model. The various Levels of HLL
distribution channels is shown in Exhibit 6.
Exhibit 6: Rural Distribution Model-Indirect

'only~tornble
25"

Coverage

villages covere<E

of ruml population

Soorte:Company

serviced

i'!.formation

".::::::::r

Exhibit 7
Piace/

./

::

Level

Channel Measure

Level A

Company depot

National/State

Level B

Redistribution stockist. C&F agents. semiwholesalers and retailers

District
HeadQ!larters

Level C

Semi-wholesalers and retailers

Tehsil HeadQuarters. Mofussil towns.

Industrial townships

Level D

Itinerant traders. vans. petro bunks semiwholesalers. retailers. Cooperative societies

Haats
Large villages

Level E

Retailers. vans. sales people. NGOs. Government

agencies

Villages

:/

Central to the success of rural marketing strategy is distribution. Product distribution and
retailing has developed into a highly specialized activiry in urban markets. However. the
distribution channel. a much-publicized means of merchandising in urban markets has remained
in the background in the rural areas. Now. distribution has to be virtually reworked from
scratch with full rural orientation and awareness of existing rural channels of distribution.
Many companies view the burgeoning rural markets as a great opportuniry for expanding their
sales but find distribution as a major problem. Unfortunately. it is almost impossible to transplant
strategies which work successfully in urban markets onto rural markets. namely. extensive
retailing and sustained pull generation through mass media advertising. The impediments for
them to reach the rural customers are:

Lack of adeQuate transport facilities.

1_'. -----'"-.-.--.--~-

~-~l

128 EI THEORY AND PRACTICE OF CASE METHOD OF INSTRUCTION

Large distances between villages.

Lack of pucca roads connecting villages to the nearest townships. Lack of proper retail
outlets. and

Lack of mass media infrastructure.

Issue
What distribution strategy will be appropriate for HLL to optimal!>, exploit the rural demand
potential?