Professional Documents
Culture Documents
Study of Marketing Strategies of Hindustan Unilever Limited and Proctor & Gamble
Submitted in partial fulfillment of the requirements of the course
Submitted By
Prateek Pranav
EXECUTIVE SUMMARY
The Fast Moving Consumer Goods (FMCG) sector is a corner stone of the Indian economy. This sector
touches every aspect of human life. The FMCG producers now realize that there is a lot of opportunity for
them to enter into the rural market. The sector is excited about the rural population whose incomes are
rising and the lifestyles are changing. There are as many middle income households in the rural areas as
there are in the urban. Thus the rural marketing has been growing steadily over the years and is now bigger
than the urban market for FMCG. Globally, the FMCG sector has been successful in selling products to the
lower and middle income groups and the same is true in India. Over 70% of sales is made to middle class
households today and over 50% of the middle class is in rural India. The sector is excited about a
burgeoning rural population whose incomes are rising and which is willing to spend on goods designed to
improve lifestyle. Also with a near saturation and cut throat competition in urban India, many producers of
FMCG are driven to chalk out bold new strategies for targeting the rural consumers in a big way. But the
rural penetration rates are low. This presents a tremendous opportunity for makers of branded products who
can convert consumers to buy branded products. Many companies including MNCs and regional players
started developing marketing strategies to lure the untapped market. While developing the strategies, the
marketers need to treat the rural consumer differently from their counterparts in urban because they are
economically, socially and psycho-graphically different to each other. This paper covers the attractions for
the FMCG marketers to go to rural, the challenges, the difference between the rural and the urban market
and the suitable marketing strategy with the suitable example of companies and their experience in going
rural.
CONTENTS
Description Page No.
Chapter 1
Rural Market 1
Rural Marketing - Challenges And Opportunity 2
Impulse to go Rural 6
Rural Initiators 11
Rural Vs Urban Consumer 15
Strategies 17
Rural marketing Strategies 19
Chapter 2
About HUL 24
HUL Distribution Model 28
HUL Distribution Effort 30
Partnership Opportunities 38
HUL in foreign Market 38
Chapter 3
Proctor & Gamble 40
P & G Strategies 42
Summary 46
Bibliography 48
CHAPTER 1
RURAL MARKETS
Rural Markets are defined as those segments of overall market of any economy, which are distinct from the
other types of markets like stock market, commodity markets or Labor economics. Rural Markets constitute
an important segment of overall economy, for example, in the USA, out of about 3000 counties, around
2000 counties are rural, that is, non-urbanized, with population of 55 million. Typically, a rural market will
represent a community in a rural area with a population of 2500 to 30000.
Rural products of India are unique, innovative and have good utility and values. Large number of these rural
products (like handicraft items, food products, embroidery, clothes & other products) sustains a significant
segment of the population in the rural areas. Several attributes of rural products can be identified, for
which, it has a demand in the market. Out of the lots, ‘ethnic origin’ and ‘indigenous design & appearance’
are two traits of rural products, attracting a premium in the market. But, contrary to this, the non-
uniformity of rural products (from one another) and lack of its quality control measures has been creating a
negative demand. Besides, the small sized and dispersed production units of these rural products hinder
realization of the economies of scale in marketing and result in high transaction costs per unit of output.
Niche-based products have no local market. Products in local use are also not marketed horizontally; they
often first travel down to market through a long chain of intermediaries and then up to more difficult
locations in the rural areas. In the process, the people in rural areas suffer from both low prices as
producers and high prices as consumers. In this conflict, rural products loss its equilibrium and the supply
side becomes exponentially high. Because of this hazard, rural entrepreneurs face acute economic loss and
rural markets become stagnant. Therefore, there is an emergent need for Building sustainable market
linkages for rural products, so that, it can be connected to larger markets and farmers can get a sustainable
livelihood.
Interestingly, for FMCG and consumer durable companies, any territory that has more than 20,000 and
50,000 population, respectively, is rural market. So, for them, it is not rural India which is rural. According
to them, it is the class-II and III towns that are rural. According to the census of India 2001, there are more
than 4,000 towns in the country. It has classified them into six categories-around 400 class-I towns with
one lakh and above population (these are further classified into 35 metros and rest non-metros), 498 class-
II towns with 50,000-99,999 population, 1,368 class-III towns with 20,000-50,000 population, 1,560 class-
IV towns with 10,000-19,999 population. It is mainly the class-II and III towns that marketer's term as rural
and that partly explains their enthusiasm about the so-called "immense potential" of rural India.
OPPORTUNITIES
The Indian Fast Moving Consumer Goods (FMCG) industry began to shape during the last fifty odd years.
The FMCG sector is a cornerstone of the Indian economy. This sector touches every aspect of human life.
Indian FMCG market has been divided for a long time between the organized sector and the unorganized
sector. Unlike the US market for FMCG which is dominated by a handful of global players, India’s Rs. 460
billion FMCG market remains highly fragmented with roughly half the market going to unbranded ,
unpackaged home made products. This presents a tremendous opportunity for makers of branded products
who can convert consumers to buy branded products. Globally, the FMCG sector has been successful in
selling products to the lower and middle income groups, and the same is true in India. Over 70% of sales is
made to middle class households today and over 50% is in rural India. The sector is excited about a
burgeoning rural population whose incomes are rising and which is willing to spend on goods designed to
improve lifestyle. Also with a near saturation and cut throat competition in urban India , many produces of
FMCGs are driven to chalk out bold new strategies for targeting the rural consumer in a big way. MART, the
specialist rural marketing and rural development consultancy, has found that 53 per cent of FMCG sales and
59 per cent of consumer durable sales lie in the rural areas. Of two million BSNL mobile connections, 50 per
cent went to small towns and villages; of 20 million Rediffmail subscriptions, 60 per cent came from small
towns; so did half the transactions on Rediff's shopping site. According to a study by Chennai-based Francis
Kanoi Marketing Planning Services Pvt Ltd, the rural market for FMCG is worth Rs.65,000 crore, for durables
Rs 5000 crore, for tractors and agri-inputs Rs.45,000 crore and two- and four-wheelers, Rs.8000 crore. In
total, a whopping Rs. 1,23,000 crore. This could be doubled if corporate understood the rural buying
behavior and got their distribution and pricing right.
IMPULSE TO GO RURAL
There are many reasons that have urged the FMCG companies to enter the uncharted territory of rural
India. Some of the attractions are discussed below.
1. LARGE POPULATION
The rural Indian population is large and its growth rate is also high. Over 70% India’s one billion plus
population lives in around 627,000 villages in rural areas. This simply shows the great potentiality rural
India has to bring the much needed volumes and help the FMCG companies to bank upon the volume driven
growth.
2. RISING RURAL PROSPERITY
India is now seeing a dramatic shift towards prosperity in rural households. To drive home the potential of
rural India just consider some of these impressive facts about the rural sector. As per the National Council
for Applied Economic Research (NCAER) study, there are as many ‘middle income and above’ households in
the rural areas as there are in the urban areas. There are almost twice as many ‘lower middle income’
households in rural areas as in the urban areas.
According to NCAER projections, by 2006 – 07, the lowest income class (i.e.Rs.2500 and below) will shrink
by more than 60%. The higher income classes are likely to double by 2006 – 07. This apparently is the
result of development work, which happened under the five years plans and other special programs such as
land reforms, rural electrification rural communication, and rural credit facilities, etc. The absolute size of
the rural market is thus expected to double that of urban India. But despite the high rural share in these
categories, the rural penetration rates are low, thus offering tremendous potential for growth. According to
Mr. D. Shivakumar, Business Head (Hair), Personal Products Division, Hindustan Lever Limited, the money
available to spend on FMCG (Fast Moving Consumer Goods) products by urban India is Rs. 49,500 crore as
against is Rs. 63,500 crore in rural India.
3. GROWTH IN MARKET
The purchasing power in rural India is on steady rise and it has resulted in the growth of the rural market.
The market has been growing at 3-4% per annum adding more than one million new consumers every year
and now accounts for close to 50% of volume consumption of FMCG. The growth rates of lot of FMCG are
higher in rural markets than urban markets. In product categories like toilet soaps, talcum powder, cooking
oil, vanaspati ghee, tea, cigarettes and hair oil, the share of rural market is more than 505. The table below
indicates the market size of FMCG products in 2001 – 02 and 2006 – 07 based on the annual growth rates
compounded for 1994 – 99 period. The estimated annual business from rural markets was Rs 1,23,000
crore, comprising Rs 65,000 crore of FMCG, Rs 5,000 crore of durables, Rs 45,000 crore of agricultural
inputs including tractors and Rs 8,000 crore of two-wheelers and four wheelers. Twenty nine per cent of the
rural people own cars, 27 per cent own colour televisions, 24 per cent own refrigerators and 10 per cent own
washing machines, which points to the untapped potential in the rural areas. "We therefore have to look at
the rural market very seriously for future expansion," said Mr Nandakumar while inaugurating the Business
Line Club and delivering the keynote address on the topic, `Brand Building Beyond the Urban' under the
auspices of the Departments of Business Management and Commerce of the Auxilium College here on
Friday.
Table 4. Rural FMCG market
Category Growth % 2001-2002 2006-2007 Rural Market Share %
4. EFFECTIVENESS OF COMMUNICATION
An important tool to reach out to the rural audience is through effective communication. “A rural consumer
is brand loyal and understands symbols better. This also makes it easy to sell look - alike", says Mr. R.V
Rajan, CMD, Anugrah Madison Advertising. The rural audience has matured enough to understand the
communication developed for the urban markets, especially with reference to FMCG products. Television has
been a major effective communication system for rural mass and, as a result, companies should identify
themselves with their advertisements. Advertisements touching the emotions of the rural folks, it is argued,
could drive a quantum jump in sales.
Rural marketing involves more intensive personal selling efforts compared to urban marketing. Marketers
need to understand the psyche of the rural consumers and then act accordingly. To effectively tap the rural
market a brand must associate it with the same things the rural folks do. This can be done by utilizing the
various rural folk media to reach them in their own language and in large numbers so that the brand can be
associated with the myriad rituals, celebrations, festivals, melas and other activities where they assemble.
One very fine example can be quoted of Escorts where they focused on deeper penetration. In September-
98 they established rural marketing sales. They did not rely on T.V or press advertisements rather
concentrated on focused approach depending on geographical and market parameters like fares, melas etc.
Looking at the 'kuchha' roads of village they positioned their mobike as tough vehicle. Their advertisements
showed Dharmendra riding Escort with the punchline 'Jandar Sawari, Shandar Sawari'. Thus, they achieved
whopping sales of 95000 vehicles annually.
RURAL INITIATORS
"Going rural" the new marketing mantra-all corporate companies agreed that the rural market the key to
survival in India. The real India lives in villages-6, 38,365 villages to be precise. This is where the fortunes
of many of Indian biggest corporations are likely to be shaped. To expand the market by tapping the
countryside, more and more MNC`s are foregoing into rural markets. Among those that have made some
headway are HLL, Coca-cola, LG Electronics, Britannia, Standard life, Philips, Colgate Palmolive, ITC and the
foreign-invested telecom companies. Gone are the days when a rural consumer went to a nearby city to but
branded Products and services`. Time was when only a select household consumed branded goods, be it tea
(or) jeans. There were days when big companies flocked to rural markets to establish their brands. Today,
rural markets are critical for every marketer-be it for a branded shampoo (or) an automobile. Time was
when marketers thought van campaigns, cinema commercials and a few wall paintings would suffice to
entice rural folks under their folds. Thanks to television, today a customer in a rural area is quite literate
about myriad products that are on offer in the market place. An Indian farmer going through his daily chores
wearing jeans may sound idiotic. Not for Arvind Mills, though. When it launched the Ruf & Tuf kits, it had
created quite a sensation among the rural folks as well within few months of their launch.
These products also have sufficient demand to sustain local manufacturer. Reason behind such wide range
of products sold in the rural areas seems to be the heterogeneous nature of the product market. Hence
there is a need of the marketing men to think in term of the products specifically designed or modified for
the rural market. Incidentally this may go on to meet the demand from the poorer section of the urban
population
Price
Pricing is another crucial issue of rural marketing. By and large, it is well known fact that the rural per capita
income is much lower than the urban per capita income. Hence in case of rural customers, there is no need
low priced product or redesigns product, whose unit cost will be low, Mostly this done by reducing the
packaging size. Similarly cheaper blend of tobacco is used to make cheaper cigarettes like Hero, Honey dew
etc. The rural market offer a huge potential, if only product is made available to it in suitable form and price.
The pricing aspect is contingent upon the product, its size of packaging, ingredients used in product,
packaging material used and other factor. Generally speaking there have been only a few attempts in this
direction to redesign and modify product for the rural market.
Distribution
The strategy of distribution should take into account the purchasing habit of the rural people. While
consumables are purchased in the village shop or Shandies or in bigger villages, the consumer durables are
purchased only in Mandi centers, large towns or nearby cities. Hence the distribution centre has to take the
purchasing habit of the rural people into account, so that product may be available at the appropriate
location.
In villages beyond the reach of the distribution system, the shopkeepers make their own arrangement for
the procurement. Most of them commute to the nearby town to get the supply. But the expenses incurred
resulted in the village shopkeepers charging consumers more than the maximum retail price. Generally, the
village shopkeeper invest their funds in purchases and rarely ever get credit facilities, which if available is
made available for very short duration only. Since the quantum of purchase by the village shopkeeper is
very small, the margins are also very meager. The ultimate consumer product reflects the lack of
distribution network.
A very elaborate distribution system is necessary in the case of consumer items through it is not the case
with consumer durable items since the rural consumer purchase those items only from the Mandi towns,
other larger towns and nearby cities. Essentially, a distribution system like appointment of dealers or
stockiest or distributor should penetrate up to that level, where the rural consumer make their purchase
depending upon whether it is consumable or durable items.
Promotion
Among all the element of the marketing mix, promotion should receive adequate attention of manufacturing
and marketing men. Apparently promotional measures adopted by various companies are one of the factors
which have probably resulted in tremendous growth of the rural market.
With the expansion of broadcasting facility, which now cover more than 90% of the population in the
country, the opportunity for promotion of products in the rural areas have opened up. Many companies have
taken advantage of the facility. Accordingly to govt. statistics the telecasting stations cover more of the rural
population than urban areas, given the radius of area on which the program can be seen. While reach of the
program cannot be questioned, the issue is of the number of customer having the access of the television
set for viewing. The access can be limited to higher strata of rural of rural consumers who own television
sets and to those where community television sets are available, this issue merits consideration, if this
medium is to be used. Apart from television, the other rural promotion measure adopted by different
organizations is worth consideration.
Colagate -Palmolive has used Van promotion in rural areas. Their main objective was direct customer
contact, demonstration of the product, sample to consumers and spot sales. This was done sometime during
1987. The campaign was more for selling a concept of “oral hygiene” to the rural consumers than the
product itself. Apart from going to the village they also selected places of mass gathering like shandies. The
younger children were asked to brush/clean their teeth with the paste/powder and tell other about the
feeling of freshness they experienced. In the meantime, the salesmen approached the village shops and
motivated the shopkeepers to stock their products. Either the companies can operate their own vans or
operate vans through their dealers and stockiest. They could even engage professional agencies like video
express or video on wheels for rural promotion activities.
There has been a concerted effort on the part of manufacturers and marketing men to sell products
specifically designed for the rural market. The brand awareness created by these products has given rise to
a number of imitation products sold at cheaper price. In addition, regional branded and local unbranded
product also thrives in rural market. The distribution mechanism takes care of village with at least a
population of 5000 persons and the rest are left to make their own arrangement for procurement and sale.
The policy with regard to distribution varies widely from company to company. Several innovative
promotional measures are adopted by various companies in rural area. Van promotion in rural areas by both
owned and hired vans, is widely adopted by companies to create awareness for the products – consumables
and consumer durables
One more gray area that needs to be probed into is the importance of retailer in rural trade. Rural
consumer’s brand choices are greatly restricted and this is where the retailer comes into the picture. The
rural customer generally goes to the same retailer to buy goods. Naturally there’s a very strong bonding in
terms of trust between the two. Also with the low education levels of rural sector the rural buying behavior
is such that the consumer doesn't ask for the things explicitly by brand but like "laal wala sabun dena" or
"paanch rupey waali chai dena". Now in such a scenario the brand becomes subservient to the retailer and
he pushes whatever brand fetches him the greatest returns. Thus, as there is a need to understand the rural
consumer, similarly need is there to study the retailer as he is a chief influencer in the buying decision.
STRATEGIES
Dynamics of rural markets differ from other market types, and similarly rural marketing strategies are also
significantly different from the marketing strategies aimed at urban or industrial consumers. This, along with
several other related issues, have been subject matter of intense discussions and debate in countries like
India and China and focus of even international symposia organized in these countries.
Rural markets and rural marketing involve a number of strategies, which include:
Client and location specific promotion
Joint or cooperative promotion..
Bundling of inputs
Management of demand
Developmental marketing
Unique selling proposition (USP)
Extension services
Business ethics
Partnership for sustainability
Client and Location specific promotion involves a strategy designed to be suitable to the location and the
client.
Joint or co-operative promotion strategy involves participation between the marketing agencies and the
client.
'Bundling of inputs' denote a marketing strategy, in which several related items are sold to the target client,
including arrangements of credit, after-sale service, and so on.
Management of demand involve continuous market research of buyer’s needs and problems at various levels
so that continuous improvements and innovations can be undertaken for a sustainable market performance.
Developmental marketing refer to taking up marketing programmes keeping the development objective in
mind and using various managerial and other inputs of marketing to achieve these objectives.
Media, both traditional as well as the modern media, is used as a marketing strategy.
Unique Selling Propositions (USP) involve presenting a theme with the product to attract the client to buy
that particular product. For examples, some of famous Indian Farm equipment manufactures have coined
catchy themes, which they display along with the products, to attract the target client, that is the farmers.
English version of some of such themes would read like:
The heartbeats of rural India
With new technique for a life time of company
For the sake of progress and prosperity
Extension Services denote, in short, a system of attending to the missing links and providing the required
know-how.
Ethics in Business. form, as usual, an important plank for rural markets and rural marketing.
Partnership for sustainability involve laying and building a foundation for continuous and long lasting
relationship.
PACKAGING STRATEGY
1. SMALL UNIT PACKAGING
2. LOW PRICED PACKAGING
3. NEW PRODUCT DESIGNS
4. STURDY PRODUCTS
5. UTILITY ORIENTED PRODUCTS
6. BRAND NAME
For evolving the pricing strategies, the manufacturers and marketing men should think in term of low unit
price and low volume packaging with an impression of sturdiness and utilities which should be enhance.
Wherever necessary, redesigning of the product can be thought of depending on the customs and habit of
rural customers. In addition, a brand name or logo or symbol is very essential for the rural consumer to
identify the product with. It can be seen why the imitation product manufacture adopt the same style of
packaging and printing. “Light joy” and “light boy”, the imitation products of lifebuoy toilet soap also carry a
red and white coloured wrapper. This can also be seen in many more products like “friends and lovely” face
cream. A rural consumer identifies the product from the colour of packaging and also low purchase price.
PRICING STRATEGY
1. LOW COST /CHEAP PRODUCTS
2. AVOID SOPHISTICATED PACKAGING
3. REFILL PACKS/ REUSABLE PACKAGING
4. APPLICATION OF VALUE ENGINEERING – This is a technique which can be tried to evolve the cheaper
products, by substituting the costly raw material with the cheaper one. Such application can be seen in the
case of costly metal been replaced by cheaper reinforced plastic. Milk protein is costly but soya protein is
cheaper but the nutrition content is the same. during early 70’s Britannia industries bring a product called “
PROBISK ” with soya protein.
The pricing strategy for the rural market will entirely depend upon the scope for reducing the price of the
product to suit the rural incomes, and at the same time not compromising with the utility and sturdiness of
the product. As seen earlier, nearly two-thirds of rural population belongs to lower income brackets and such
an attempt will expand the market considerably.
PROMOTION STRATEGY
Given the literacy rate of the rural population and distribution of the rural consumers, the promotion
measures or strategies to be chosen should be cost effective. In addition, consumable products may warrant
the use of mass media, since the target market is very large, but the durables products will require personal
selling efforts because of the smaller size of the target consumers.
1. Mass media
Television
Cinema
Radio
Print Media
2. Hoardings/wall painting
3. Shandies / Hats / Jathras / Melas
4. Non price competition
5. Special campaigns
6. Other mass media
i. Hand bills and booklets
ii. Posters
iii. Banners
iv. Gift schemes
v. Agro-techniques for crop cultivation
7. Personal selling and opinion leader
DISTRIBUTION STRATEGIES
1. COVERAGE OF VILLAGES: - with improved communication facilities, it is possible to reach distribution van
to the villages. The frequency of visits may be fixed, depending upon the off- takes or sales realization, so
that the distribution cost can be minimized, but not at the cost of cutting down or rural population. These
distribution cabs can be used for promotion works also. For villages with very less population, the
distribution can be left to the initiative of the shop keepers and dealers in larger villages and to the
shopkeepers of the small villages. The distribution arrangement requires serious consideration by
manufacturing and marketing men, if they have to exploit the potential of the rural market
2. USE OF CORPORATIVE :- Over three lakh corporative society operate in the rural areas for or different
purposes like, marketing co operatives, dairy corporative, farmer service corporative societies, consumer
corporative and other multipurpose corporative. Given the number of such societies, there is at least one
corporative society of one form or another for every two or three villages. These societies are linked to
higher level of society like taluk, district or state level. Thus these corporative have an arrangement for
centralized procurement and distribution through their respective state level federation. Such state level
federation can be motivated to procure and distribute consumables items and low level durables items to the
member societies for selling to the rural consumers
3. UTILIZATION OF PUBLIC DISTRIBUTION SYSTEM: - The Public Distribution System (PDS) in the country is
fairly well organized. The revamped PDS places more emphasis on reaching remote rural areas like hills and
tribal areas. Effective utilization of the PDS system should be explored by the manufacturing and marketing
men, since they already have a distribution set up.
5. DISTRIBUTION TO FEEDER MARKETS/ MANDI TOWNS:- The villagers visit these town at regular intervals
not only for selling the agricultural produce but also for the purchase of cloth, jewellery , hardware, radios,
torch cells and other durables and consumer product. Hence a good distribution network should touch the
identified feeder market and mandi towns. From the feeder market and mandi town, the stockiest or
wholesaler can arrange for distribution to the village shop in the interior places.
SOCIAL MARKETING
Social marketing now hold an important role in the marketing activity and is now viewed as a social
obligation. Social marketing is the design implementation and control of programs, seeking to increase the
acceptability of a social idea or cause in target groups. It utilizes the concept of market segmentation,
consumer research, concept development, communication, facilitation, and incentive and exchange theory
to maximize target group response. This is also known as idea marketing or public issue marketing. the
purpose of social marketing is to bring about a change in behavior and attitude through social advertising
and social communication. The manufacturing men and marketing men can play a vital role in such activity,
since they have the necessary capability to communicate, which can benefit the society and in turn lend a
good image to the company also. The strength of the companies is in their forceful communication abilities
and the far reaching network
CHAPTER 2
Phase I
The first phase of the HUL distribution network had wholesalers placing bulk orders directly with the
company. Large retailers also place direct orders, which comprised almost 30 percent 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.
Phase II
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 would then
distribute stocks from the Registered Wholesaler through distribution units maintained by the company. The
Registered Wholesaler was given a margin of 1 per cent to cover the cost of warehousing and financing the
stocks held by him. The Registered Wholesaler system, therefore, increased the distribution reach of the
company to a larger number of customers.
Phase III
The highlight of the third phase was the concept of “Redistribution Stockiest” (RS) who replaced the
REGISTERED WHOLESALERSs. The REDISTRIBUTION STOCKIST was required to provide the distribution
units to the company salesman. The REDISTRIBUTION STOCKIST financed his stocks and provided
warehousing facilities to store them. The REDISTRIBUTION STOCKIST also undertook demand stimulation
activities on behalf of the company.
The second characteristic of this period was the changes brought in as the company realised that the
REDISTRIBUTION STOCKIST would be able to provide customer service only if he was serviced well. This
knowledge led to the establishment of the “Company Depots” system. This system helped in transshipment,
bulk breaking, and acted as a stock point to minimise stock-outs at the REDISTRIBUTION STOCKIST level.
In the recent past, .significant change has been the replacement of the Company Depot by a system of third
party; the Carrying and Forwarding Agents (C&FAs). The C&FAs act as buffer stock-points to ensure that
stock-outs 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 REDISTRIBUTION STOCKIST.
The most powerful aspect about this model is that it creates a win-win partnership between HUL and the
consumers, some of whom will depend on the organization for their livelihood, and builds a self-sustaining
cycle of growth for all. It has since been extended to in Andhra Pradesh, Bihar, Chattisgarh, Gujarat,
Haryana, Jharkhand, Karnataka, Madhya Pradesh, Maharashtra, Orissa, Punjab, Rajasthan, Tamilnadu, Uttar
Pradesh and West Bengal with the total strength of over 40,000 Shakti Entrepreneurs.
Shakti has three initiatives.
• The Shakti Entrepreneur, a microenterprise initiative
• the Shakti Vani program which translates as ‘the voice of Shakti’, training women to be communicators in
the villages
• IShakti, a group community portal that enables users to access information in a variety of areas. The
software is voice enabled for illiterate users.
HLL starts with the route sales person who identifies the Shakti entrepreneur for village. HLL then provides
the products and helps her understand what to do and how to realize maximum income. Through the Shakti
Vani program women are trained in health and hygiene issues then teach what they have learned to the
village communities. In 2004, Shakti Vani covered 10,000 villages and the vision is to cover 50,000 villages
in 2005.
iShakti, the Internet-based rural information service, has been launched in Andhra Pradesh. It provides
information and services to meet rural needs in medical health and hygiene, agriculture, animal husbandry,
education, vocational training and employment and women's empowerment. The vision is to have 3,500
kiosks across the state by 2005.
SHAKTI ENTREPRENEUR
The Shakti Amma’s are the wealth creators for their villages. They learn about products, prices, returns, and
being and advisor and helper to their customers in the village. Often they have simple goals, by Western
standards, for their earnings wishing to buy a telephone, a scooter for transportation, or education for their
children. Nearly as important as the money they are earning is the improved social standing for the women.
As a Shakti Amma, each woman is looked up to by villagers, approached for advice, and fulfilled by the
knowledge that she is helping other people as well as her own family.
Shakti is HUL's rural initiative, which targets small villages with population of less than 2000 people or less.
It seeks to empower underprivileged rural women by providing income-generating opportunities
In general, rural women in India are underprivileged and need a sustainable source of income. NGOs,
governmental bodies and other institutions have been working to improve the status of rural women. Shakti
is a pioneering effort in creating livelihoods for rural women, organised in Self-Help Groups (SHGs), and
improving living standards in rural India. Shakti provides critically needed additional income to these women
and their families, by equipping and training them to become an extended arm of the company's operation.
A Shakti entrepreneur sets off with 4-5 chief brands from the HUL portfolio - Lifebuoy, Wheel, Pepsodent,
Annapurna salt and Clinic Plus. These are the core brands that they layer it with whatever else is in demand
like talcum powder or Vaseline during winters.
The Shakti model trains women from SHGs to distribute HUL products of daily consumption such as
detergents, toilet soaps and shampoos - the latter's penetration being only 30 per cent in rural areas. The
women avail of micro-credit through banks. The established Shakti dealers are now selling Rs 10,000-
Rs15,000 worth of products a month and making a gross profit of Rs 700-Rs1,000 a month. A typical Shakti
entrepreneur earns a sustainable income of about Rs.700 -Rs.1,000 per month, which is double their
average household income. Shakti is thus creating opportunities for rural women to live in improved
conditions and with dignity, while improving the overall standard of living in their families.
SHAKTI VANI
Fair And Lovely(FAL) Vani operates under the aegis of Hindustan Unilever’s Project Shakti, a network spread
across 18,624 villages in the states of Tamil Nadu, Andhra Pradesh, Maharashtra, Uttar Pradesh, Bihar and
West Bengal. FAL Vani is engineered to empower rural women in earning a livelihood, while improving the
distribution and reach of FAL.
The job of identifying villages for activation programmes rests with the HUL sales team. Once a village has
been selected, HUL team meets key opinion leaders (KOLs) like the sarpanch, the school principal, an
important businessman or anyone who is highly regarded by the villagers. “It is always better to meet and
inform them that we are planning a programme in the village, lest there be trouble in the future,” Punjabi
informs. The KOLs also help the activation team in selecting a local ‘FAL didi’ for that particular kasbah or
mohalla.
The FAL didi is someone of a friendly disposition, is well-known in the village and in the good books of most
villagers. Her role is to help gather the crowd for the presentation.
The baithak is at Baniyapara, where about 30-35 women in the age group of 25 to 30 have assembled. The
crowd also comprises young teenaged girls and children. Here, I’m introduced to FAL Vani, 19-year-old
Rakhiba Khatoon. The FAL Vani is a trained HUL employee who conducts the programme. Khatoon uses a
flip-chart to tell the story of Moon Moon, a village girl who goes to town to study and wants to participate in
a dance competition. But Moon Moon lacks in confidence because of her complexion. On the advice of her
roommate she starts using FAL, and doesn’t just win the competition, but also returns to her village and
starts a dance-school for kids. Khatoon then invites a girl from the crowd and demonstrates the right
method of applying FAL. This is followed by an ‘application challenge’, where a dozen women from the crowd
are given a minute to apply FAL: the one who applies it the fastest and in the right way wins.
I-SHAKTI
I-Shakti kiosks have been set up in 8 villages in Andhra Pradesh, and have been functional since August
2003. The kiosks have received an overwhelming response from the local populace. During the launch of
these kiosks, important village members like the sarpanch, schoolteacher and doctor are invited to help
reinforce relationships with the villagers. The kiosks remain open from 9 a.m. to 7 p.m., six days of the
week. To enable access to the services, users have to register themselves first and obtain the unique
registration number. An id card with the registration number is provided for use every time they visit the
kiosk.
The kiosks offer information chiefly in the form of audio-visuals in the following areas:
• Health & Hygiene
• E-Governance
• Education
• Agriculture
• Employment
• Legal services
• Veterinary services
The information provided in the above areas is called from the best available resources, taking additional
care to ensure that information, especially in areas like agriculture, is locally relevant and includes inputs
from home-grown experts. These experts are also available on request, to help provide solutions to
problems raised by users through a query mailing system. A farmer from the village can obtain a quick
solution to a pest problem with his crops. People can also send queries on health and hygiene to a local
doctor for a speedy response. Villagers can avail of discount coupons from the kiosk for medical treatment
from doctors operating in local areas. 'I-shakti’ has also tied up with Azim Premji Foundation to deliver
innovative educational modules to students of classes VIII-XII through the kiosk. Local school teachers have
also been involved in the process. A similar partnership is in place with Tata Adult Literacy for adult
education.
The effort is expected to help Unilever tap fresh growth avenues in emerging markets in the face of
recessionary trends in the US and Europe. Also, given the saturation of urban markets, companies try to re-
engineer their business models to derive growth from rural consumers.
The project is being customised and adapted in other Unilever markets such as Sri Lanka, Vietnam and
Bangladesh. It is being considered for other Latin American and African markets. In Bangladesh and Sri
Lanka, it is being promoted as Joyeeta and Saubaghya, respectively. There is a similar initiative in Vietnam
as well.
HUL sources said the project currently contributes ‘handsomely’ to the company’s sales. The project was
started in 2001 to empower underprivileged rural women by providing income-generating opportunities,
health and hygiene education. Shakti’s ambit already covers about 15 million rural population. Several rural
pockets are populated by less than 2000 individuals but are seen as unreachable and remain untapped by
consumer goods makers.
Industry officials say the awareness level of rural consumers about products and brands are lesser than the
urban markets. Also, urban business models are not really successful in tapping the full potential of several
small clusters of consumers across remote markets.
CHAPTER 3
P&G
Procter & Gamble Co. is a Fortune 500, American multinational corporation headquartered in Cincinnati,
Ohio, that manufactures a wide range of consumer goods. As of 2008, P&G is the 6th largest corporation in
the world by market capitalization and 14th largest US Company by profit. It is 10th in Fortune's Most
Admired Companies list (as of 2007). P&G is credited with many business Innovations including brand
management, the soap opera, and the Connect + Develop initiative.
In the 1880s, Procter & Gamble began to market a product, an inexpensive soap that floats in water. The
company called the soap Ivory. William Arnett Procter, William Procter's grandson, began a profit-sharing
program for the company's workforce in 1887. The company's leaders began to diversify its products as well
and, in 1911, began producing Crisco, a shortening made of vegetable oils rather than animal fats. As radio
became more popular in the 1920s and 1930s, the company sponsored a number of radio programs. As a
result, these shows often became commonly known as "soap operas".
In January 2005 P&G announced an acquisition of Gillette, forming the largest consumer goods company
and placing Unilever into second place. This added brands such as Gillette razors, Duracell, Braun, and Oral-
B to their stable. The acquisition was approved by the European Union and the Federal Trade Commission,
with conditions to a spinoff of certain overlapping brands. P&G has agreed to sell its SpinBrush battery-
operated electric toothbrush business to Church & Dwight. It also divested Gillette's oral-care toothpaste
line, Rembrandt. The deodorant brands Right Guard, Soft & Dri, and Dry Idea were sold to Dial Corporation.
The companies officially merged October 1, 2005.
In July 2007 the company's operations are categorized into 3 "Global Business Units" with each Global
Business Unit divided into "Business Segments," according to the company's June 2007 earnings release.
Beauty Care
Beauty segment
Grooming segment
Household Care
Baby Care and Family Care segment
Fabric Care and Home Care segment
Health & Well-Being
Health Care
Snacks, Coffee and Pet Care
P&G has been operating in India for the last 10-12 years, and has been able to build stable equity in brands
like Vicks, Ariel, Head & Shoulders, among others. The Cincinnati-based parent operates through two
subsidiaries — Procter & Gamble Home Products, which is wholly-owned, and Procter & Gamble Hygiene and
Health Care, in which it holds 65 per cent. The latter reported a net profit of Rs 77 crore on gross sales of Rs
449.8 crore in the year ended June 2002.
After the successful implementation of the Golden Eye distribution model, which was put in place by the
company’s former managing director Gary Cofer, the next move is to invest in distribution and penetration.
According to Mr Khosla P & G managing director (India) “Golden Eye is the most efficient distribution system
in the country. The challenge is to win the hearts and minds of the consumer by being cost efficient. We are
putting this in place and hope to accomplish the task in the next 2-3 years.” P&G had earlier pronounced
that its strategy would largely revolve around the urban consumer, given the huge growth potential therein.
In India P &G found itself headlock with HLL on most of the front and losses ground in almost all of them.
HLL has better Local market understanding and a robust distribution channel. Some examples are
1991: Breaking new ground to create a premium segment in the Hindustan Lever Ltd (HLL)-ruled detergents
market, Procter & Gamble India (P&G) launched Ariel. Costing thrice as much as the most expensive product
till then-Surf with Wash Boosters-the compact detergent powder dominated the slot for 7 years. Then, in
1998, HLL's Surf Excel with Active Oxygen became the segment-leader. 1992: Capitalising on the high-
quality, high-performance image built by the brand, P&G's Ariel bar quickly grabbed 7 per cent of the
detergent bars segment, a remarkable achievement against well-entrenched competitors like HLL's Wheel
and Rin. By 1998, however, its marketshare had dropped to less than 1 per cent. 1993: P&G unveiled Ariel
Super Soaker, a mid-segment detergent powder still riding on the equity of the mother brand, gaining a 5
per cent share of the competitive market in the very first year. But, as HLL quickly hit back with Rin Power
White, the brand started losing share, and commands just 1 per cent of the segment five years later.1994:
Slotting the global soap brand, Camay, which already had the image of a premium product, into the popular
price-segment, P&G took its competitors by surprise. In just 2 years, Camay built a marketshare of 6 per
cent-only to lose a quarter of it by 1999 because of a renewed assault on the segment by HLL's Lux
International and Dove. 1995: P&G launched Pantene, its global shampoo brand, in a virtually stagnant
market. Within 12 months, it soaked up a marketshare of 11 per cent. But, with HLL fighting back with Clinic
and Sunsilk, Pantene's share had come down to 6 per cent 36 months later.
The Impact
From 1990 -1996, the net price paid by consumers of P&G products increased 20.4% (due to the
decrease of coupons use by 54.3%, and reduction in price cuts). Meanwhile P&G increased advertising
by 20.7%, and decreased channel deals by 15.7%.
During the same time period, the overall competition's (including companies such as Colgate, Unilever, and
Gillette) net price paid increased 10%, advertising increased 6.3percent;, deals increased 13.1
percent;, and coupons decreased 17.1 percent;. Of the three competitors, only Gillette lowered prices and it
increased coupons use by 127.6 percent; -- far more than Colgate. Overall, the competition did not
completely cooperate with P&G, but neither did it take full advantage in a mad grab for market share. P&G's
Value Pricing Strategy showed no change in share of requirements or category usage, but it did end up with
a reduced penetration rate, which declined 16 percent. This was because the cut in promotions resulted in
fewer consumers buying P&G brands, and neither the cut in promotions nor the increase in advertising had
any appreciable effect on SOR. Overall, P&G's market share decreased 16percent. It lost 16% of
share, but made up for this through increased prices 20%, a lower cost of good sold, and efficiencies
in production
According to a study by the National Council for Applied Economic Research (NCAER), there are as many
'middle income and above' households in the rural areas as there are in the urban areas. Moreover, there
are almost twice as many 'lower middle income' households in rural areas as in the urban areas. At the
highest income level there are 2.3 million urban households as against 1.6 million households in rural areas.
As per the NCAER projections, the number of middle and high-income households in rural India is expected
to grow from 80 million to 111 million by 2007. In urban India, the middle and high-income market is
expected to grow from 46 million to 59 million. Thus, the absolute size of rural India is expected to be
double that of urban India. But despite the high rural share in these categories, the rural penetration levels
are low, thus offering tremendous potential for growth. But rural India isn’t just being developed as a
consumer market. It is also being developed as a cost effective supply chain. With a judicious blend of click
& mortar capabilities, agricultural communities in villages use internet kiosks - known as i-shakti - to access
ready information in their local language on the weather & market prices.
It becomes amply clear that rural India has to be the hot target in future for FMCG companies as it presents
a plethora of opportunities, all waiting to be harnessed. Many of the FMCG companies are already busy
formulating their rural marketing strategy to tap the potential before competition catches up. With extensive
competition not only from MNCs but also from the numerous regional players and the lure of an untapped
market has driven the marketers to chalk out bold new strategies for targeting the rural consumer in a big
way. All biggies in the industry be it HLL, Marico, Colgate-Palmolive or Britannia, P&G are showing deep
interest in rural India. However not everything is all rosy and there exist some gray areas in the rural
strategies also. To increase sales, growing the consumer pie rather than sharing it, has emerged as one of
the key strategies being used by FMCG majors. Offering more product variants, categories, price points,
sizes and different marketing and distribution channels, all form part of a FMCG corporate’s strategy. It is
clear that rural markets have caught the eyes of FMCG marketers and it is being targeted through
experiments in a big way. But is it a right marketing strategy? Or will it prove to be an expensive mistake?
Well that’s the issue most FMCG companies face today and the one we discuss here. They are also able to
disseminate knowledge on scientific farm practices & risk management. Whether the objective is to increase
market share or to lower transaction costs, the end objective is to improve the robustness of the rural
supply chain. Moreover, there are scalable and robust models, and, given the right policy environment, it
should be possible to seamlessly integrate them in the months and years to come.
In the end it is certain that FMCG companies will have to really gain inroads in the rural markets in order to
achieve double digit growth targets in future. There is huge potential and definitely there is lot of money in
rural India but the smart thing would be to weigh in the roadblocks as carefully as possible. The companies
entering rural market must do so for strategic reasons and not for tactical gains as rural consumer is still a
closed book and it is only through unwavering commitment that the companies can make a dent in the
market. Ultimately the winner would be the one with the required resources like time and money and also
with the much needed innovative ideas to tap the rural markets.