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2„ The economy, markets and competitive environment were changing.

2„ Àeeping ahead required taking account of changes and doing business in different ways.
2„ andia had a major chunk of companies in private sector which were family owned and family
run.
2„ 3ountry lacked basic infrastructure in many areas.
2„ Jrowth opportunities in andia were highest in lower price segments.
2„ igh gap between lower and higher end strata.

x
  

at was a plan to turn the FM3J giant, HLL, into a collection of entrepreneurial ͚virtual companies͛ each
with its own ͚virtual 3
͛.

They wanted to decentralize and break up the company to create small entrepreneurial businesses.

Main issues identified :-

2„ Maintaining aggressiveness and quickness of the company.
2„ xassing on experience without interfering
2„ Gelivering what consumer expects

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2„ at was investor savy as it performed well at stock exchanges.

2„
ne of the best and strongest distribution networks.
2„ ÑÑ of total revenue was from andian rural areas. Thus this was the area with high potential.
2„ antroduced 64 product innovations,
2„ Had one of the best professional management.
2„ They had a structured hierarchy
2„ Their Managers had the ability to continuously outperform themselves
2„ They had detailed systems which helped HLL͛s managers deliver world class results
2„ an over 10 years, revenues and profitability had not dipped even once.



 



2„ HLL had an R
of Ñ0.8 which was almost double the industry average of 28.7 . Thus it was at
a very good position. Nestle, Britannia, 3adbury, x
J had an R
lower than industry average.
2„ x ratio for HLL was 68.7, much higher than industry average of 47.8. This depicts a good
position. Nestle has a slightly higher x ratio of 48.Ñ as compared to industry average.
Britannia, 3adbury, x
J had an x lower than industry average.

Thus looking at the industry, HLL was at a very good position.

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2„ Flexibility to change according to time.

2„ ^bility to rebuild the old
2„ Jood HR practices
2„ åtrong R
G
2„ üse of technology

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xersonal care and processes foods were identified as thrust areas for growth.

They planned a capital expenditure of Rs 2 Bn to develop cold storage chains to improve its ice cream
and atta businesses.

They needed to have products catering bottom end in order to maintain Ñ1 market share.



 

a



HLL acquired 30 ice cream factories, but all were in bad shape and poor hygienic conditions.

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2„ poor product quality

2„ sales split between parlor based products - bricks or cups and ampulse buys ʹ hand held.

x 
 




2„ Higher margins in impulse buying.

2„ xush cart sales



2„ Gistribution channels
2„ High cost of establishing and maintaining a cold chain throughout the country.
2„ How to grow the market
2„ High cost of dry ice used to maintain temperature of -Ñ0o3 in push cart.

å 

2„ stablished Àwality Walls as the new brand and brought all products under this brand name.
2„ They screened the 30 factories and introduced sub brands such as Feast, 3ornetto and ånacks.
 2„ R
G developed liquid pouches which was cheaper than dry ice.
2„ xouches maintained a temperature of -23o3 which was safer for children.
2„ R
G developed a smaller and compact push cart with lower capital cost and carrying capacity.
2„ They wanted to engage push cart concessionaries each responsible for managing 20 push carts
who would retain a 10 margin.

D 

2„ Larger and more rewarding distribution system.

2„ They were prompted to explore possibility of expanding the market by developing a frozen
refreshment product priced at Rs 2-3 as a substitute for bottled beverages.

x x
 

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2„ ^mounted to 3200 bn with single largest segment (40  being staples (wheat, sugar, salt
2„
ther large segments included milk products, meats and edible fats.
2„ HLL participation in food was limited to Galda.

x 
 




2„ åalt and atta market.



2„ 3omplex processing of atta that required R
G strengths.

2„ åhort shelf life of atta.
2„ They conducted market research while developing the atta business to understand consumers.
They concluded soft chapattis and nutrition were the prime requirements. 
2„ 3ompetitive pricing. 

å 

2„ Test marketing for salt and atta.

2„ xopular foods business was parked within the detergent group as the distribution requirement
for both were similar.
2„ They accessed bakery know- how to provide what the customer demanded.
2„ For pricing, they decided to maximize savings in supply chain. They organized wheat
procurement network which allowed it to obtain desirable strains of wheat at a lower cost. 
2„ Farmers were asked to grow harder wheat that would result n softer chappatis.


^
 
 
 !





2„ åtructural advantages
2„ No expensive head offices
2„ Lower geographical costs
2„ Lower transport costs
2„ Gifferent mix of trade margins and lower level of advertising
2„ Lower profit expectations

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x  

HLL saved Rs 7 per ton on polypacks by printing in 3 colors on the front but single color on back.
The R
G team found a new polymer which would make better polypacks at lower cost.



Galda was the original cash cow within HLL which funded the growth of detergent business.

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å

at had been ignored for a long time as its manufacture and sale was heavily regulated, making it
uneconomic

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å

xrice controls were lifted.

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HLL management took a fresh look at Galda and found that it was a powerfull brand as : -
1.„ at was a cheap substitute for pure ghee
But it was low on growth and financial performance.

åD
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They decided to try and rejuvenate Galda. For this
1.„ xroduction and supply chain was re-engineered


3losure of one factory and new agreements with 7 third party manufacturers.
2.„ åupplier finance grew from 4 of sales in 1996 to -3 of sales in 1997


Working 3apital Requirements were reduced.
3.„ ^long with these better packaging and distribution


amproved Return on 3apital mployed from 4 in 1996 to 27 in 1997.
4.„ Galda business unit started working with R
G team to develop modified versions of Galda


 2 new versions of dalda
a„ Light Galda : Yellow fat with higher gross margin than normal dalda
 b„ Healthier ghee : ffort to get closer to pure ghee in taste and texture.

cx
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xc
xc

HLL had a well deserved reputation as an excellent recruiter and developer of people.

a
a



Brooke Bond, xond͛s, lipton and others possessed core ünilever values and culture but had also evolved
their own unique characteristics over a period of time.

c
xc

HLL : Managers described it as a restless company, target driven, with everyone striving to outperform
others. Responsibilities were shared.

Brooke Bond : Had far more command and control than HLL. Managers would not go beyond their own
objectives.

xond͛s : Managers felt they were more entrepreneurial than HLL and they felt they had flexibility to
achieve their targets.


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To create a new HLL culture after mergers .

Dcå 

åeveral jobs overlapped or became redundant once the process of integrating the cultures started.

åtrains were produced in company as there were too many managers at some level and too few at
others.


a 


^ccording to HLL, They offer careers, no jobs.

„  




They were brought in through head-hunters to fill a specific position.
2.„ 


 

 
They were recruited through campus at all major business schools. 3ompany preferred group
discussions to one to one interviews. They had a highly structured training program which
provided them with lot of exposure.
They believed that managers should be very humble and thus they were required to drive a
push cart and sell for a month
 3.„


They were sent to aaM-^hmedabad for a 2 and half week basic business course. Their training
included Rural Gevelopment xrogram where they spent 6 weeks with a village elder and working
on projects like building roads, negotiating with government offices etc. This experience helped
trainees understand realities of life and assisted them in their careers. Besides this was the
strata HLL wanted to cater to.

Thus the company laid high emphasis on training their employees, irrespective of position they joined
at. The company rarely hired externally for senior positions as it had a rich pipeline of candidates and
they preferred people who were used to the training process and company culture.

at was said about HLL that if you understand the system it appears logical and rational , otherwise, it
appears bureaucratic, slow and difficult.

They inculcated the values of integrity and ethics in their managers.

^ppraisal process was open and enabled managers to know exactly where they stood

 x x


Recruitment of some of the best talent in the country combined with a robust training program and
rotation through a range of jobs and product categories made HLL managers highly attractive and this
led to regular departures. They expected only 2Ñ of new trainees to be there after 1Ñ years of joining.

Grawbacks HLL managers faced not allowing them to work as effectively outside the company: -

1.„ HLL way functionalized them

2.„ They were accustomed to lot of support from each other (peer group, functions, senior
manager.

   

HLL had a tradition of putting together teams quickly. The concept there was that when there is a huge
problem and people sit down as a team to address it, they may not reach a solution but solution comes
within sight.

The process of team creation was driven by the concept of unified objectives which were established on
company-wide level every Ñ years through the process of strategic planning.

The best thing is that after the debate once a decision is taken, everyone falls in line and works in
unison to achieve corporate objective.

a

xax


This was a Ñ year plan and responsibility of business head of each business. at reflected the plan for each
brand. at defined a market share and revenue target and this drove the investment required to create
sufficient capacity. The plan translated into a target for each year. The annual target was broken up into
into quarterly and monthly numbers which had to be met. Whenever there was a problem in meeting
target, everyone pulled together as a team to get back on track.