HINDUSTAN LEVER LIMITED

A Project Report On SURF EXCEL

TABLE OF CONTENTS
ACKNOWLEDGEMENTS INTRODUCTION EXECUTIVE SUMMARY INDUSTRY ANALYSIS COMPANY OVERVIEW FINANCIAL STATEMENT ANALYSIS MARKETING MIX OF ORISSA COMPETITORS ANALYSIS PROJECT1: o OBJECTIVES o SCOPE AND LIMITATIONS OF THE STUDY o RESEARCH METHODOLOGY o DATA ANALYSIS CONSUMER ANALYSIS

o CONCLUSIONS APPENDIX o CONSUMERS QUESTIONNAIRE o DETAILED FSA

EXECUTIVE SUMMARY
The project assigned to us was to study the business and marketing practice, competitors in business and customers of Surf Excel, for Orissa market. For this a questionnaire was prepared for the consumers. A sample of 53 consumers was surveyed. The respondents were interviewed in market places across Bhubaneswar. After the analysis we came to the conclusion that the Surf Excel enjoys a space in the top 2 positions in brand recall of the consumer. This is a positive sign for HLL. The research also shows that the market share of Surf Excel in Orissas detergent market is approximately 66%. Also, from the survey it is evident that brand name, price and cleansing action are three of the most important attributes a consumer looks for in any detergent brand. Surf Excel enjoys a good reputation with the consumers with respect to all these attributes. Another thing that we noted in this survey was that Television is the most used information source for the consumer. The exact communication recall however, is very poor among the consumer. This could be attributed to the ever increasing advertisement clutter, across all media. Thus, HLL should consider looking for other media like outdoors. It was also noted that over 50% of the consumers who used Surf Excel, would purchase packs whose size was 1/2 1 kg and did not prefer purchasing the 200gm pack. We tried to find out the reason as to why this practice occurred, but to no avail. HLL should consider promoting this pack size in some way, or phase it out totally. Thus, we can conclude that Surf Excel enjoys excellent customer reviews. It gets special recognition for its superior cleansing action, the convenient packs it comes in, the ease it

is available with, and the fact that its price is at par with similar products available in the market today.

OBJECTIVES OF THE STUDY

1. The primary objective of the study was to understand the customers of Surf Excel ( type/ quality/ their decision making style/ source of information that they use for collecting information regarding Surf Excel) 2. The study was also aimed to understand the business and marketing practice of Surf Excel and the marketing mix used by HLL for Surf Excel. 3. Another important objective of the study was to understand the competitors of Surf Excel. 4. Efforts were also made to evaluate the financial strength and market capabilities of the parent firm, Hindustan Lever Limited.

INDIAN FMCG INDUSTRY

Background The FMCG sector has been the cornerstone of the Indian economy. Though, the sector has been in existence for quite a long time, it began to take shape only during the last fifty-odd years. The sector touches every aspect of human life, from looks to hygiene to palate. Perhaps, defining an industry whose scope is so vast is not easy. Generally, FMCG refers to consumer non-durable goods required for daily or frequent use. The sector touches every aspect of human life, from looks to hygiene to palate. Perhaps, defining an industry whose scope is so vast is not easy. The FMCG sector consists mainly of sub segments viz. personal care, oral care and household products. This can be further sub-divided into oral care, soaps and detergents, Health and Hygiene products, beauty cosmetics, hair care products, food and dairy-based products, cigarettes, and tea and beverages. Major Indian consumer product companies (like Britannia, P&G, HLL, etc.) have a very strong presence through their strong brands. Diversified portfolios, wide distribution networks and scale economies of these companies deter new players from entering. Brand equity, therefore, is an extremely important factor in FMCG industry. One of the other most critical factors is the ability to build, develop, and maintain a robust distribution network

Post-reforms, the industry's growth has been hinging around a burgeoning rural population which has witnessed significant rise in disposable incomes. Consequently, the rural markets have been witnessing intense competition in almost all the consumer product classes. Another reason which has led to rise in this trend is the saturation in urban markets in most of the consumer non-durable goods categories. This has led to the industry players scrambling for greater rural penetration as a future growth vehicle, the area which accounts for 70% of the total Indian households So far, it has been a chequered graph for the MNCs operating in the Indian FMCG industry. Domestic companies are only beginning to make their presence felt in the industry. It has taken tremendous consumer insight and market savviness for the FMCG players to reach where they are today. But, the journey seems to have just now begun for the players as the majority of the rural populace are yet to get access to the items of daily usage like toothpastes, soaps and shampoos.

Value for money Ever since the global recession of 1991-94, which hit consumer spending hard, value-formoney has become the buzzword for FMCG companies globally. These FMCG companies embarked upon major restructuring and cost rationalization exercises as business continued to become fiercely competitive. Several packaging innovations were also resorted to. India was no different. There was a paradigm shift towards value-formoney products and, to some extent, towards the rural market. What Nirma did all these years suddenly became the buzzword for many FMCG players. Price cuts became inevitable to keep the market share from shrinking. Sometimes, the cuts touched ridiculous levels. Economic recession hit the urban pockets badly and forced companies to train their guns on rural India, which was witnessing a major change in its aspiration and lifestyles and even had an income that translated into increasing volumes. Indias agrarian economy is fundamentally strong. Rural India accounts for as much as 70 per cent of the nations population. That means rural India can bring in the much needed volumes and help FMCG companies to log in volume-driven growth. Companies such as HLL, Colgate and Britannia who already had a strong rural focus, stepped up the gas further. HLL unleashed its "Operation Bharat". Britannia pushed its Tiger biscuits to every nook and corner of the country, while Colgate went about wooing the rural masses by offering low-priced products in convenient packaging. Those who could not do it on their own went piggyback on somebody else. P&G, whose distribution is largely urban, chose to leverage Marico's retail reach. P&G and Smith Kline Beecham, nonetheless, are interesting cases. With small product portfolios like theirs, they have been able to achieve what others could not and proved that what you need is a good product, marketed effectively and sold at the right price Of late, an interesting trend in the Indian FMCG sector has been brand acquisitions. This represents a growing awareness among the FMCG players are talking today more and more of product "fits" while discussing brand acquisitions. It is not just acquiring anything and everything as it was in the past

Rural marketing has become the latest marketing mantra of most FMCG majors. True, rural India is vast with unlimited opportunities. All waiting to be tapped by FMCGs. Not surprising that the Indian FMCG sector is busy putting in place a parallel rural marketing strategy. Among the FMCG majors, Hindustan Lever, Marico Industries, ColgatePalmolive and Britannia Industries are only a few of the FMCG majors who have been gung-ho about rural marketing. With reason. Certainly, rural marketing holds the key to success of FMCG companies, which are desperate to find ways out to gain deeper penetration. Not just the rural population is numerically large, it is growing richer by the day. Of late, there has been a phenomenal improvement in rural incomes and rural spending power.

FMCG sector performance in last decade The fmcg sector in India showed a constant decline in the last decade. What started as 2025% growth rate in year 1994-96, had reached a negative growth rate of -2.8% in Q104. The FMCG sector is now mockingly called SMCG or slow moving consumer goods.

Source India Today - R K Swamy BBDO Guide to Urban Markets *Soap, Shampoo, Nail Polish, Washing Powder, Footwear, Tea, Coffee, Cigarettes, Electric Bulbs.

Rank 1 2 3 4 5 6 7 8 9 10

Towns Chandigarh Greater Mumbai Chennai Ahmedabad Vadodara Pune Coimbatore Ludhiana Faridabad Hyderabad

States Chandigarh Maharashtra Tamil Nadu Gujarat Gujarat Maharashtra Tamil Nadu Punjab Haryana Andhra Pradesh

Average Monthly Spending on FMCG Products* in Rs. 3,418 2,955 2,886 2,869 2,816 2,804 2,684 2,674 2,596 2,533

The Fabric Care Market In India

Detergents The Indian fabric wash market consists of synthetic detergents (comprising bars, powder and liquids) and oil-based laundry soaps. The detergent powder market is further segmented based on price and form. It is characterised by brands from a plethora of regional and local players competing with the national marketers primarily in the lowpriced and mid-priced segments The synthetic detergent market can be classified into premium (Surf, Ariel), mid-price (Rin, Wheel) and popular segments (Nirma), which account for 15%, 40% and 45% of the total market, respectively. The product category is fairly mature and is dominated by two players, HLL and Nirma. Nirma created a revolution in the market by pioneering the concept of low-cost detergents. Currently, the market is highly segmented with the differential between the premium and popular segments at almost 7X. Growth Although the per capita consumption of detergents in India (2.7 kg pa) is comparable to some countries like Indonesia, China and Thailand (around 2 kg pa), it is lower than in others such as Malaysia, Philippines (3.7 kg) and the USA (10 kg). High consumer awareness and penetration levels will enable the market to grow at an average 8-10% per annum with slightly higher growth in the rural areas. Higher penetration stems from popularity of low-cost detergents. Hence, besides increase in per capita consumption, there is tremendous scope for movement up the value chain. Leading Fabricare Brands Available In India

Surf Excel Surf comes from the stables of Hindustan Lever, the largest player in this market with an offering at each price point. Surf was the first detergent powder brand to be launched in the country. It created the detergent powder category and introduced the concept of bucket wash to housewives hitherto used to washing clothes with laundry soap bars. Surf has, since, become generic to detergent market. Consumers refer to all their powders as Surf, even competitive powders are called Surf e.g. Nirma Surf

Selling over 60,000 tonnes per year, Surf is the market leader in the concentrate and premium powder price segments Surf has always been the first to recognize and respond to trends. Whether it was through 'Surf with Easy Wash'- a low lather variant, in 1994 or 'Surf with Wash Boosters' (1995) that provided 'best clean' even in hard water. The brand Surf Excel now has three variants Surf Excel Quickwash, Surf Excel Blue and Surf Excel Automatic which address different laundry needs but each offers stain removal as the key benefit. In 2003, recognising changing consumer purchase patterns, it once again redefined value for the consumers by introducing the concept of monthly packs. Sensitive to the increasing concerns on environmental pollution and water scarcity problems across the country, it brought to the consumer Surf Excel Quickwash. This low lather variant is the first eco-friendly detergent in the country, as it uses almost half the water other detergents require. Surf has innovated beyond the basic product into other aspects of laundry. Understanding the need for easy-to-store packaging, tubs and jars were introduced. In order to help consumers dose correctly for the best possible clean, measuring scoops were built into the packs. For convenience seekers, washing has been simplified with the ready to dose packs of Surf Excel Automatic. Consistent innovation addressing ever-evolving consumer needs has earned the brand a place in the hearts of consumers. Surf was rated in the top Ten Most Trusted brands in The Economic Times survey in 2003

Wheel Wheel is India's number one detergent brand. Launched in 1987, it cleans effectively with lesser effort, making a laborious chore like washing light and easy. Moreover, Wheel does not burn hands or harm clothes like some other detergents, which contain a high percentage of soda.

Ever since its relaunch in 2001, with the new positioning of 'best clean with less effort', Wheel has been growing strongly. Research showed that consumers seek a solution to heavy duty laundry, like bed sheets and curtains. Developing on this insight, wheel sought to

eliminate the trouble of tough dirt or heavy-duty laundry. Mass market consumers have welcomed the solution, making it the number one.

Nirma - a home-grown product that revolutionized the detergent market in India, and successfully challenged large multinational leaders in the process.The Nirma success story is a result of its founder, Dr. Karsanbhai Patel's relentless focus on quality, cost and value. The distribution model, sustained line extensions and umbrella branding strategies have enhanced the brand's cost leadership. Today, the company's two brands, Nirma and Nima, are distributed through more thantwo million retail outlets across the country, generating gross sales in excess of Rs. 26,000 million. In the fabric care category, Nirma has three products for the lower-end market. The Nirma Yellow Washing Powder is available in pack sizes of 30 gms, 200 gms, 500 gms and 1 kg, and is ranked as the largest selling single detergent brand in the world. Nirma is one of the large st selling single detergent brands in the world. Nirma products are sold through two million retailers and reach 400 million. This brand had been ranked as the Most widely distributed detergent powder brand in India as per All India Census of Retail Outlets carried out in 435 urban towns by the AIMS (Asian Information Marketing & Social) Research agency [Brand Equity - The Economic Times, March 11, 1997]. As per the ORG-MARG Rural Consumer Panel [December 1998] survey, Nirma brand has been ranked as highest in terms of penetration in washing powder category [BT Rural Market Watch, Business Today, June 22, 1999].

World-over Ariel epitomizes stain removal and removes even the toughest stains in the first wash. Introduced in India in 1991, Ariel has continuously led other detergents in product innovation. For example, it pioneered the use of enzyme technology for superior and safe stain-removing power, longer-lasting perfume, and the P&G proprietary cleaning technology, which cleans everyday soil and dirt from garments. Over the years, the brand has enjoyed endorsement from celebrities such as the former actress and now MP Shabana Azmi and lakhs of other homemakers in India. Tide is the Worlds Oldest and Most Trusted Billion Dollar Detergent and is the market leader in 23 Countries around the world. Tide provides outstanding whiteness on white clothes and provides excellent everyday cleaning for colored clothes too. Launched in India in mid-2000, the brand has gained popularity among Indian housewives, thanks to its superior whitening, creative advertising starring Shekhar Suman, and its Value-for-Money proposition. Both Tide and Ariel are billion dollar brands in sales for P&G globally.

Now Large Packs of Tide and Ariel Worlds Best Detergents at Rs. 23/and Rs. 50/- only

Mumbai, India -- March 02, 2004 -- Procter & Gamble today announced that it has reduced the prices of Ariel and Tide bags (large packs) by 20-50%, while maintaining the superior quality. The superior quality kg pack of Tide now cleans a familys one-month laundry in just Rs. 23/-, while a kg pack of Ariel cleans a familys one-month laundry in just Rs. 50/-. This significant price reduction will now allow many more Indian consumers to experience the world-class experience of outstanding whiteness from Tide and superior stain-removal from Ariel in every wash. The new prices of Ariel and Tide are as follows:

Pack Size 200gm 500gm 1kg 1.5kg 2kg

Old Price Ariel Rs. 30 Rs. 70 Rs. 135 Rs. 180 N.A

New Price Ariel Rs. 22 Rs. 50 Rs. 99 Rs. 145

Old Price Tide Rs. 20 Rs. 43 Rs. 85 N.A*

New Price Tide Rs. 10 Rs. 23 Rs. 46 N.A

Rs. 160 N.A Rs. 88 The prices of sachets (20gm) of Ariel and Tide remain unchanged. * N.A = Not Available in that size.

P&G's move to slash detergent prices is ostensibly to get more consumers to experience its brands but the industry sees it primarily as a move to wrest the advantage from HLL in a sluggish market.

Six months ago, P&G reduced the prices of Ariel and Tide sachets by 50% in order to encourage a larger number of consumers to experience their superior quality. The better value offer on sachets received such an overwhelming, positive response from consumers across India that P&G was encouraged to offer the irresistible value to Ariel and Tide bag users as well, thereby make the worlds best detergents accessible to a larger number of Indian consumers. P&G talked to over 3,000 consumers across the length and breadth of India and observed over 25,000 washing sessions in consumers homes. Consumers believed in the superior quality of Ariel and Tide but indicated pricing as a constraint in using Ariel and Tide on a regular basis. The drop in prices by the P&G has forced HLL to also react in a similar way thus shrinking the overall profit margins for the group. While the immediate impact of any price slash is bound to result in more volumes and thereby shares for the companies concerned, improving margins in the business remains doubtful.

Company Overview
Hindustan Lever Limited (HLL) is India's largest fast moving consumer goods company, with leadership in Home & Personal Care Products and Foods & Beverages. HLL's brands, spread across 20 distinct consumer categories, touch the lives of two out of three Indians. They endow the company with a scale of combined volumes of about 4 million tonnes and sales of Rs.10,000 crores. The leading business magazine, Forbes Global, has rated Hindustan Lever as the best consumer household products company. Far Eastern Economic Review has rated HLL as Indias most respected company. Asiamoney has rated HLL as one of Indias best managed companies. Leading national publications, like The Economic Times, Business World, and Business Today have also rated HLL as one of Indias most respected companies and the number one in Market Value Added and EVA. HLL is India's largest marketer of Soaps, Detergents and Home Care products. It has the countrys largest Personal Products business, leading in Shampoos, Skin Care Products, Colour Cosmetics and Deodorants. HLL is also the market leader in Tea, Processed Coffee, branded Wheat Flour, Tomato Products, and Ice cream, Soups, Jams and Squashes. HLL is also one of the country's biggest exporters and has been recognized as a Golden Super Star Trading House by the Government of India; it is a net foreign exchange earner. HLL is India's largest exporter of branded fast moving consumer goods. The company's Exports portfolio includes HLL's brands of Soaps and Detergents, Personal Products, Home Care Products, Tea and Coffee. HLL is also driving exports in chosen areas where India has a competitive advantage Marine Products, Basmati Rice, Castor Oil and its Derivatives. It is India's largest exporter of Marine products, and one of the largest global players in castor.
Market leading brands

1888
Sunlight soap introduced in India.

1895
Lifebuoy soap launched

1902 Pears soap introduced in India

1903 Brooke Bond Red Label tea launched.

HLLs brands have become household names. The companys strategy is to concentrate its resources on 35 national power brands, and 10 other brands which are strong in certain regions. The top five brands together account for sales of over Rs.3000 crores. Each of these mega brands has a potential scale of Rs.1000 crores in the foreseeable future. Some of the big brands in Soaps and Detergents are Lifebuoy, Lux, Liril, Hamam, ,Pears,Rexona & Dove, (all soaps), Surf Excel, Surf, Rin, & Wheel (all detergents). HLL also markets the Vim and Domex range of Home Care Products. In the Personal Products business, HLL's Hair Care franchises are Clinic, Sunsilk and Lux shampoos.In Oral Care, the portfolio comprises Close-up and Pepsodent toothpastes and toothbrushes. In Skin Care, HLL markets Fair & Lovely Skin Cream and Lotion, the largest selling Skin Care Product in India; a brand developed in India, it is now exported to over 30 countries. It has been extended as an Ayurvedic cream, an under-eye cream, soap

1905 Lux flakes introduced

1913 Vim scouring powder introduced.

and talc, in line with the strategy to take brands across relevant categories. The other major Skin Carefranchises are Ponds, Vaseline, Lakme and Pears. In Colour Cosmetics, HLL markets the Lakme and Elle-18 ranges. In Deodorants, the key brands are Rexona, Axe, Denim and Pond's, while the Talc brands are Pond's, Liril, Fair & Lovely, Vaseline and Lifebuoy. Axe and Denim are HLLs franchises for Mens toiletries. HLL has recently launched Lever Ayush Ayurvedic Health & Personal Care Products. Health Care is among the new businesses HLL has chosen to enter. The product range comprises Cough Naashak Syrup, Headache Naashak Roll-on, Dandruff Naashak Shampoo, Hair Rakshak Oil and Body Rakshak Soap. The purity of the Ayurvedic ingredients in Lever Ayush is endorsed by the renowned Arya Vaidya Pharmacy (AVP) of Coimbatore. It is for the first time that rigorous testing procedures of the pharmaceutical industry have been applied to Ayurvedic products. That is why the brand seal is Truth of Ayurveda; Proof of Science. HLL has started franchised Lakme Beauty Salons, offering standardised services, in line with the strategy to add a service dimension to relevant brands. The company has set up the Hindustan Lever Network, a direct selling channel, offering the Lever Home range of Laundry and Home Care products and the Aviance Personal Care range. The company has also begun an e-tailing service, called Sangam, which can home-deliver on order by phone or through the Net, a diverse range of about 5000 branded and unbranded products. The service is now available in select areas of Mumbai and Navi Mumbai, besides Thane. HLL is one of the worlds largest packet Tea marketers. Its Tea brands Taj Mahal, Red Label, Taaza, - are among the top brands in the country; it also markets Lipton Ice Tea. HLL and Pepsi have formed an alliance to distribute a full range of tea and coffee and soft beverages through vending machines; HLL already has a base of around 15000 such machines. The coffee business comprises Bru Instant Coffee and Deluxe Green Label Roast & Ground Coffee. The Kissan and Knorr Foods range comprises Spreads & Jams, Biscuit Sticks, Soups, Squashes, Tomato Ketchup, Sauces, Puree, and Cooking Aids. Popular Foods, like Wheat Flour and Iodized Edible Salt, under the Knorr Annapurna brand name, have met with remarkable success. The range has been expanded with ready-to-eat 10-second chapatis. The innovative offerings are changing consumer habits into using processed, hygienic, healthy and convenient products. The Kwality-Wall's Ice Cream range comprises exotic Sundaes, Viennetta Desserts, popular Impulse segment products like Max, Cornetto and Feast, and Cornetto Ripple Softies. Max was extended in 2001 as sugar confectioneries, because children are a key consumer segment in confectioneries too. This is among the new businesses HLL has chosen to enter.

1930 Unilever is formed on January 1

1931 Hindustan Vanaspati Manufacturing Company registered on November 27

1932 Vanaspati manufacture starts at Sewri

1939 Garden Reach Factory purchased outright

1943 Personal Products manufacture begins in India at Garden Reach Factory

1947 Pond's Cold Cream launched.

HLL has acquired Modern Food Industries (India) Limited, entering the bread market. Modern Foods was the first Public Sector Undertaking to be disinvested. Besides upgrading the existing Modern products, HLL has launched new products, among them biscuits. HLL is liberating its brands from their existing category mindset. Historically, brands originated and stayed within a category format. HLL sees its Power Brands as being able to occupy a unique position in the consumer's mind and therefore being able to stretch into other product formats and categories. All such initiatives have had a promising start, and there are more to come.

1959 Surf launched.

The Distribution network

HLLs distribution network is recognised as one of its key strengths -- that which helps reach out its products across the length and breadth of this vast country. The need for a strong distribution network is imperative, since HLLs corporate purpose is to meet the everyday needs of people everywhere. HLL's products, manufactured across the country, the operations involve over 2,000 suppliers and associates. HLL's distribution network, comprising about 7,000 redistribution stockiest about one million retail outlets, directly covers the entire urban population, and about 250 million rural consumers. In addition to the ongoing commitment to the traditional grocery trade, HLL is building a special relationship with the small but fast emerging modern trade. HLL's scale enables it to provide superior customer service including daily servicing, improving their range availability whilst reducing inventories. HLL is using the opportunity of interfacing more directly with consumers in this retail environment through specially designed communication and promotions. This is building traffic into the stores while yielding high growth for the business. An IT-powered system has been implemented to supply stocks to redistribution stockists on a continuous replenishment basis. The objective is to catalyse HLLs growth by ensuring that the right product is available at the right place in right quantities, in the most cost-effective manner. For this, stockists have been connected with the company through an Internet-based network, called RSNet, for online interaction on orders, dispatches, information sharing and monitoring. RS Net covers about 80% of the company's turnover.

1964 Etah dairy set up, Anik ghee launched; Animal feeds plant at Ghaziabad; Sunsilk shampoo launched.

1969 Rin bar launched

1975 Close-up toothpaste launched..

1978 Fair & Lovely skin cream launched..

HLL's foray into Network Marketing As per the market surveys conducted it is expected that the consumer market in India is worth 13000 crores per year and in few years the network market will capture 500 crores as per market surveys, considering the potential Hindustan Lever has launched Hindustan Lever Network (HLN), a unique Network Marketing opportunity .

1930 Unilever is formed on January 1 1988 Launch of Lipton Taaza tea.

The Network marketing concept In the normal marketing system, the manufacturer supplies the products through the middle men such as brokers, wholesalers and retailers. These middle-men add their establishment costs and their own margin of profit or commission on the price. This increases the price by approximately 45 per cent. The consumer therefore gets the product at atleast a 45 per cent markup from the manufacturer's price. In network marketing, these middle men are eliminated. A person is invited to join and become a member (also called Consultant) of the network marketing company. This person in turn invites many more people to join under him to form a group. These group members, in turn invite their acquaintance to join under them. This group is made to steadily grow and it can grow into thousands or tens of thousands, in the course of time, depending upon the enthusiasm with which the Consultant pursue the sponsorship of new Consultants. These Consultants make purchases of the products of the marketing company for self use and also for sale to other consumers. For their loyalty in regularly purchasing the products, the marketing co. gives discounts, handsome bonuses, rewards and special incentives. Each consultant in the group gets his shares of benefits depending upon the purchases made by him and also by the number of the consultant under him (called downlines). This is called network marketing. The growth in the beginning will be slow, from 1 to 2 to 4.......but later on it will be rapid, 1000 to 2000 to 4000.....and so on. Given below are the approx. benefits received, depending upon your group strength and on the assumption that each consultant has purchased goods worth Rs 1,000/- in the month. The benefits will be more for higher purchases and bigger groups.
Group Strength Benefits: 253Nos(1+12+60+180) 1531Nos(1+18+216+1296) 3061Nos(1+36+432+2592) Rs17,938/Rs64,558/Rs 1,28,818/-

1991 Surf Ultra detergent launched.

1993 Tata Oil Mills Company (TOMCO), merges with the company

1994 HLL introduces Wall's.

1995 HLL enters branded staples business with salt

1996 HLL introduces branded atta; Surf Excel launched

2002 HLL enters Ayurvedic health & beauty centre.

Shakti-Hll Rural Project

Shakti is HLL'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, health and hygiene education through the Shakti Vani programme, and creating access to relevant information through the iShakti community portal. Started in 2001, Shakti has already been extended to about 50,000 villages in 12 states - Andhra Pradesh, Karnataka, Gujarat, Madhya Pradesh, Tamil Nadu, Chattisgarh, Uttar Pradesh, Orissa, Punjab, Rajasthan, Maharashtra and West Bengal. The respective state governments and several NGOs are actively involved in the initiative. Shakti already has about 13,000 women entrepreneurs in its fold. A typical Shakti entrepreneur earns a sustainable income of about Rs.700 -Rs.1,000 per month, which is double their average household income.

Project Shakti - By using self-help groups, HLL has pushed its products down into the country. Into villages where people cannot spend more than Rs 20-25 on FMCGs in a month

Project Shakti will expand the distribution cover bottom-up, the rural project will be top-down. This will be a huge competitive advantage for Lever. The costs of expanding into these villages will be too high for most companies, which do not have a portfolio spanning teas to detergents, In recent past Hindustan lever took some major decisions to remodel its business. These decisions had major impact on the how distribution of lever products is managed in the market. Hindustan lever took the decision to simplify the company it merged all the different business units into two large divisions: home and personal care (HPC) and foods and beverages (F&B). This gave each division "The advantage is that these divisions get us enormous scale," The company decided to whittle its brands down from 110 to 35, over the next three years. This is known as HLLs Power Brand strategy. To identify these power brands, managers were asked to consider their growth potential, profit delivery and the size of the opportunity. And to ensure that Lever would not lose sales, it was decided to migrate these brand users to the designated power brands. For one, the drastic slimming down of the brand portfolio which threw up huge problems in execution is now over. HLL is already combining its scale advantage to offer retailers a bigger basket of products and better service. Instead of different sales teams servicing the same retailer, the company has integrated both HPC and Foods portfolios for modern trade chains like Margin Free. Once again, its large portfolio

range helps Lever to use the power of customer relationships to corner greater shelf space and a disproportionately higher share of the branded segment. Modern trade, it reckons, is already growing at 15-20 per cent and will continue that way for a long time. By bulking up the businesses, it is possible for Lever to service these modern trade outlets on a daily business. As a result, these retailers do not have to maintain high inventory levels.

HINDUSTAN LEVER LIMITED --- BOARD OF DIRECTORS

Mr. Harish Manwani Mr. M. K. Sharma Mr. Arun Adhikari

Non Executive chairman Vice Chairman Managing Director (Home & Personal Care) Managing Director (Foods) Finance & IT Director Director Director Director Director

Mr. S. Ravindranathan Mr. D. Sundaram Mr. A. Narayan Mr. V. Narayan Mr. D. S. Parekh Mr. C. K. Prahlad

The Competitors
The Indian FMCG markets have witnessed some of the classic struggles involving HLL. So far Levers have been able to stand their ground but times are changing. HLLs response to the latest challenges is being eagerly studied by the corporate India. In order to gain a foothold in Indian FMCG sector various domestic and MNC companies are using all kind of schemes to woo customer from HLL. The major competitors of HLL are: Detergents: Toothpaste: Beverages: Tea: Coffee: Ice-creams: Shampoo: P&G, Nirma, Henkel Spic Colgate-Palmolive Rasna, Coca-Cola (Sun fill) Tata tea Nestle Amul P&G, Garnier

Procter & Gamble

P&G Home Products Limited is a 100% subsidiary of The Procter & Gamble Company, USA. P&G Home Products Limited is one of India's fastest growing Fast Moving Consumer Goods Companies that has in its portfolio P&G's global brands such as Ariel and Tide in the Fabric Care segment, and in the Hair Care segment: Head & Shoulders - world's largest selling anti-dandruff shampoo; Pantene - world's No. 1 beauty shampoo; and Rejoice - Asia's No. 1 shampoo. Fabric Care Procter & Gamble has two of its world-leading detergents Tide and Ariel, in India to cater to the main concerns of the Indian households. In India P&G has launched following brands:

Ariel Front-O-Mat Ariel 2 Fragrances Tide Detergent Tide Bar

Hair Care In India, P&Gs beauty care business comprises of Pantene, the worlds largest selling shampoo, Head & Shoulders, the worlds No. 1 Anti-dandruff shampoo and Rejoice Asias No. 1 Shampoo.

Pantene Pro V Head & Shoulders Rejoice

Baby Care

Pampers

In India, P&G will continue to be a midget, in turnover terms, when compared to Hindustan Lever. The two P&G subsidiaries in India (P&G Hygiene and P&G Home Products) today generate a combined turnover of about Rs 1,100 crore, just a tenth of Hindustan Lever's sales. P&G's distribution network is largely urban and has a reach of 0.4 m outlets. In 1994, Godrej entered into a strategic alliance with P&G for inter alia toilet soap business, under which Godrej used to manufacture soaps, which were marketed by a joint venture company. However post marketing alliance with P&G, the company lost significant part of its market share and subsequently the arrangement was discontinued. Godrejs entire distribution network was then taken over by P&G. THE Procter & Gamble -Gillette deal could result in the former getting a significant boost both to its scale of operations and range of products in the Indian market. That Gillette's portfolio of shaving razors, gels, grooming products and toothbrushes has no overlap with that of P&G in India (shampoos, detergents, feminine hygiene, cold medication) is a positive. The addition of Gillette's businesses could help P&G expand its portfolio and acquire a more extensive distribution network; This may strengthen P&G's hand in the ongoing war for market share with Unilever arms in the Asian markets, particularly with Hindustan Lever in India.

Nirma
Nirma is one of the few names - which is instantly recognized as a true Indian brand, which took on mighty multinationals and rewrote the marketing rules to win the heart of princess, i.e. the consumer. It was way back in 60s and 70s, where the domestic detergent market had only premium segment, with very few players and was dominated by MNCs. It was 1969, when Karsanbhai Patel started door-to-door selling of his detergent powder, priced at an astonishing Rs. 3 per kg, when the available cheapest brand in the market was Rs. 13 per kg. In a short span, Nirma created an entirely new market segment in domestic marketplace, which is, eventually the largest consumer pocket and quickly emerged as dominating market player. Now, the year 2004 sees Nirmas annual sales touch 800,000 tones, making it one of the largest volume sales with a single brand name in the world. Looking at the FMCG synergies, Nirma stepped into toilet soaps relatively late in 1990 but this did not deter it to achieve a volume of 100,000 per annum. This makes Nirma the largest detergent and the second largest toilet soap brand in India with market share of 38% and 20% respectively. Soaps In 1992, sensing a strong need to expand the market through Penetrative Pricing, Nirma entered this market with the launch of Nirma Bath Soap& Nirma Beauty Soap .In 1998 Nirma expanded its product line in the soap

category by introducing Nirma Lime Fresh & Nirma Rose. This brand had carved a niche in its segment by achieving leadership position just within two months of its launch. It is available in 100g and 150g pack sizes. Nirma entered the premium soap segment when it launched Nirma Sandal Detergents Nirma launched Nirma Washing Powder in Indian market in year 1969, This product was priced at almost one third to that of the competitor brands, resulting into instant trial by the consumers. Presently Nirma has different variants in Indian market. Nirma washing powder Nirma super Nirma popular Edible Salt Nirma has also entered the Food market in the recent past with launch of Nirma Shudh.

FINANCIAL ANALYSIS Ratio Analysis

Particulars
Sales Total assets Net worth Borrowings Capital Employed Debtors PAT PBDIT Depreciation PBIT Current liabilities & Provisions Current assets Current assets -Inventories Long term Debt Interest Total Purchases

All figures in Rs cr Dec 2001 12420.71 7089.06 3170.86 102.55 3273.41 1254.38 1576.47 2211.63 202.63 2009 3709.17 3505 2201 102.55 12.31 6077.97 16.17 12.68 28.33 61.37 49.71 0.944 0.59 0.25 .032 163.2 38.85 135.31 1.75

Dec 2002 10641.15 7761.01 3713.91 86.23 3800 1169.49 1757.59 2461.31 192.65 2269 3841.92 3510 2146 86.23 12.86 5389.04 21.30 16.51 29.23 59.72 47.3 0.91 0.55 0.254 0.023 176 40.11 149.2 1.37

Dec 2003 11919.04 8104.68 2189.22 1715.18 3904 1228.55 1687.33 2462.92 199.99 2262.9 4084.71 3610 2120 1715.18 69.12 5438 19 14.15 27.92 58 77 0.88 0.52 0.218 0.78 32.74 37.62 131.62 1.47

Dec 2004 11594.65 7820.34 2148.67 1604.25 3752 793.56 1208.4 1875.63 195.68 1680 3919.71 3132 1574 1604.25 136.25 5413.77 14.5 10.42 21.5 44.77 56.23 0.79 0.40 0.20 0.75 12.33 25 145.23 1.48

Profitability Ratios
Operating Profit Margin (%) Net Profit Margin Ratio (%) ROTA (%) ROCE Return on Equity (%)

Liquidity Ratios
Current ratio Quick Ratio Absolute Cash Ratio

Solvency Ratios
Debt Equity Ratio Interest Coverage Ratio

Efficiency Ratios
Debtor Days Creditor days Total assets turnover ratio

Interpretation: Profitability Ratios:

HLL earns 14.5 paisa on every Re. 1 of Sale before Interest and Taxes It ultimately makes 10.42 paisa on every Re. 1 of Sale after Interest and Taxes. It is visible that Hindustan Lever Ltd. has not been able to increase its Operating Profit margin constantly over the years. We can see that the operating margin has decreased considerable in the last year. This is mainly due to the fact that the interest cost of HLL has almost doubled from 69.12 crores to 136.25 crores. Moreover the companys operating expenses have increased by almost 75 % in the year 2004.The efficiency has certainly decreased over the last few years mainly owing to high operating expenses , increased interest burden and high indirect taxes. The Net Profit Margin has also decreased by 17.8 % in 2004 as compared to 2001. This is mainly due to the decrease in sales by Rs.826 cr. HLL generates 21.5% Return on Total Assets (ROTA) that it employs in its operations in the year ended 2004. ROTA has decreased in the last year mainly due to the fact that its profit margin has decreased. It could be because of high competition as a result of which profits have decreased and the total assets of the company have increased. As we can see that the Return on Capital Employed (ROCE) for Hindustan lever Limited has decreased considerably during the last year mainly due to lower profit margins. The company is earning a return of 44.77% on the funds employed by it. Though the ROCE has seen a considerable change, even now the company is getting good enough returns and can pay good enough dividends to the shareholders as we saw the case in the year 2004 where the rate of dividend was 250%.

The Return on Equity Ratio (ROE) states how much profit a company earned in comparison
to total amount of shareholders equity on the balance sheet of the company. Here, we see that the ROE of HLL has increased in comparison to the year 2001 but this cant be concluded as a favourable situation for the company as looking at the figures in detail we can notice that there has been a near to 30% decrease in ROE in comparison to the year 2003 , also we do see that the PAT of the company has fallen by about 23% and the shareholders equity has also decreased by 32% in comparison to the year 2004. But Even now an ROE of about 56.23% is considered to be very good.

Liquidity Ratios:

It can be seen from the above table that the Current Ratio for all the years is less than 1. This signifies that HLL has short term liabilities greater than the short term assets. It implies that the company would have problems in managing its short term liabilities and liquidity requirements. The company might have to resort to financing its short term liquidity requirements by long term sources of finance. We can observe that the current assets have decreased by 13 % and at the same time the current liabilities have decreased by just 4 % in the last year. The reason is that since the company is

using long term sources of finance to fund its short term obligations therefore the interest burden has increased and as a result the cash balance has decreased .Other receivables have also decreased by more than 66% leading to a fall in current assets.

Solvency Ratios:
The company was highly unleveraged in the years 2001 and 2002. It was risky as the company had invested a huge amount of its own funds as compared to debt. However in the last 2 years the company has changed its policy and is leveraging the advantage of debt along with equity. Though the debt equity ratio of 0.75 is not good enough as compared to industry norms of 2:1 but the company is moving towards a favourable debt equity mix. It has realized the importance of trading on equity .The Company has increased its debt burden by 1470% in the last 4 years Interest Coverage Ratio(ICR) basically signifies the ability of a firm to service its interest burden through the profits generated .In the initial years when the firm had not employed debt its interest burden was very low. As a result the Interest Coverage ratio is very high, gradually the company has employed more debt and as a result of which the interest burden has increased significantly. Moreover, due to high competition and operating inefficiency the earnings of the company have declined. As a result the ICR has reduced from 163.2 to 12.33 in the last 4 years. However an ICR of 12.33 is still very impressive which reflects the companys ability to pay interests on loans easily. This is a good indicator to the various financial institutions providing long term sources of finance to HLL.

Efficiency Ratios:

Here, we see that the Debtors Days for the company is less than the Creditor Days of the company. From this we can interpret that the company has a favorable cash position as it is making its payments long after receiving the dues from the debtors. Here, from the Asset Turnover Ratio we can know how efficiently the firm is using its assets, the ratio for which is pretty low for the company. The Creditor Days as well as Debtor Days both show negative growth which reflects negatively on the companys financials. The Asset Turnover Ratio also shows negative growth which is also not a good sign for the company. Thus, looking into these figures we can analyze that the efficiency level of the company has gone down vis--vis the previous years and hence the company needs to look urgently into these matters so as to improve the efficiency of the company.

DU-PONT RATIO ANALYSIS:

The Du Pont ratio analysis is a combination of financial ratios in a series in order to assess the investment returns of the company. It combines the financial ratios of both the Income Statement as well as the Balance Sheet in order to assess either the Return on Equity or the Return on Investment. One of the Plus points of this method is that it provides a clear understanding of how the company generates its return. This analysis provides an insight into the importance of asset turnover as well as sales to overall return. This formula shows the relationship of profit margin and turnover how these two complement each other.

The Du Pont ratio divides the Return on equity into three parts: Net Profit Margin, total asset turnover, and the companys use of leverage referred to as Equity Multiplier also.

DU-PONT CHART FOR HLL FOR THE YEAR 2004

RETURN ON EQUITY
=PAT/NETWORTH 56.23%

Equity Multiplier =TA/NW =3.64%

NET PROFIT MARGIN

=PAT/NETSALES =10.42%

TOTAL ASSET TURNOVER =SALES/TA =1.48

RETURN ON ASSETS
ROA=PAT/TA =15.44%

Growth Trends Over The Years

Particulars

Dec-01

Dec-02

Dec-03

Dec-04

Sales Expenditure Change In Sales (%) Change In Expenditure (%) Change in PBIT (%) Change in PAT (%) Change in Borrowings (%) Change In Interest (%)

12420.71 10627 ---

10641.15 8690 -14.33

11919.04 9941 12

11594.65 10076 -2.7

-------

-18.22 12.94 11.48

14.39 -0.26 -3.99

1.35 -25.75 -28.38

-----

-15.91 4.46

1889 437.48

6.46 97.12

COMMON MARKETING MIX FOR ALL MARKETS

consists of brand, 1. Product quality, appearance, 2. Price Structure consists of prices, dealers and consumers discounts. 3. Promotional activities consist of advertising, media. 4. Placement (distribution) system consists of dealers, distributors, retailers and overall logistics.

MARKETING MIX FOR RURAL MARKET

1. 2. 3. 4. 5. Product Price Promotion Placement system Packaging-Reason for putting it separately is because symbols and packaging becomes very important when literacy levels are very low. 6. Retailer is the one who gives all information about brand choice and consumer feedback. 7. Education is very important for rural sector-eg. Project Shakti 8. Empowerment Example-Project Shakti and Self Help Groups.

PRODUCT
Surf derives its name from Surfactant the basic ingredient of a detergent. After 44 years, Surf brand has been upgraded and made more modern and contemporary. Surf has changed the entire brand is now called Surf Excel. Continuous improvements in the formulation of the product and introduction of new ingredients e.g. enzymes, along with new perfumes have ensured that the product meets the evolving consumer needs. The brand Surf Excel now has three variants Surf Excel Quickwash,

Surf Excel Blue and Surf Excel Automatic which address different laundry needs but each offers stain removal as the key benefit. Surf Excel Blue Target segment: Economic segment. Attributes:-Removes stains without fading colours. Sizes avalaible: 25gm, 200gm, 500gm, 750gm, 1.5kg, 3kg Surf Excel Quickwash (also called as Surf Excel Easy wash) (Hitherto known as just Surf Excel)

Target segment: Superior quality for washing machine users. Sizes available:- 20gm, 20gm, 500gm, 1kg, 1.5kg Attributes:-Stain removal

Surf Excel Automatic Target segment:-Washing machine owners Top and front loading machines . Sizes available:- 600gm, 1kg Attributes: Low lather detergent, anti corrosive, stain removal, ensures longer life of fabric.

PRICE
Latest price war between detergent majors, Hindustan Lever (HLL), Proctor and Gamble India (P&G), Nirma and Henkel-Spic India (HSIL) has proved that price in the marketing mix is very critical for growth of HLL products. If Surf excel prices were reduced to match the price cuts of their competitor (P&G), simultaneously they had to ramp up spending on advertising and promotions to increase consumption and penetration in the market and retain values of premium brand

PROMOTIONS Surf communication has been pleasant, soothing and gentle, Surf Excel has had a distinctively bold tongue in cheek style of communication. Promotions for Surf Excel are more often than not tactical weapons. Gift is offered to the consumer to gain shortterm patronage or to engineer enhanced consumption. Choice of various promotional gifts is usually governed by what can be bought cheap rather than any brand-related factors. Surf Excel has always been sensitive enough to recognise the change in the consumer choice dynamics. In some of their promotions, they have pampered influencers considering that brand choice in family products is a collective exercise. Various promotions being used for Surf are: Scholarship offer Rs five lakh scholarship. Extremely rare and intelligent use of the marketing budget. Beauty of this promotion is in its design. An innovative and clever way of underscoring the core promise of Surf Excel stain removal!! Visual depiction in the ad is studentfocussed there are no mothers or daughters to be seen in the ad. Most of the people in the ad are in their teens. The protagonist himself is barely in his teens. This can be an indication towards changing consumer algorithm. This was backed by Win with Stains campaign one of the largest campaigns taken up by Surf excel. This promotion is happening in Orissa markets which is aimed at offering consumers a chance to win prizes as well as give students an opportunity to pursue further studies. The aim of the whole campaign is to drive home the point that stains are good in life and one is not to be scared to get themselves dirty. They are not only doing road shows, advertisements but branded horoscope columns in keeping with the theme of luck and fortune. They have roped in former South African cricketer Jonty Rhodes to participate in the 'Win with stains' washathon to wash the largest stain in town with kids of the NGO Magic Bus 1 bucket free with 3kg of Surf Excel has really managed to increase sales revenue of Surf excel. This is the most successful consumer promotion till date in Orissa market. Surf KidStains - a roadshow that invites consumers to get first-hand experience of using Surf.

Surf has taken communication beyond mass media advertising and involved consumers in the brands promise in the real world. It has touched consumers life through school contact and in-store programmes. Road shows have helped to go to the consumers and demonstrate superior performance vis--vis competition.

PLACEMENT SYSTEM
In Orissa, HLL has around 100 dealers and distributors. But HLL is into the exercise of reducing number of channels in Orissa by increasing territory size of each dealer.

HLL Distribution in Rural Markets HLL has come up with new distribution channels to cater to rural markets. For long-term benefits, HLL has mounted an initiative, Project Streamline, to further increase its rural reach with the help of rural sub-stockists. It has already appointed 6000 such sub-stockists. As a result, the distribution network directly covers about 50,000 villages, reaching about 250 million consumers. The pivot of Streamline is the Rural Distributor (RD), who has 15-20 rural sub-stockists attached to him. Each of these substockists is located in a rural market. The sub-stockists then performs the role of driving distribution in neighboring villages using unconventional means of transport such as tractor, bullock cart,etc. The Streamline system has extended direct HLL reach in these markets to about 37% of India's rural population from 25% in 1995 and the number of HLL brands and SKUs stocked by village retailers has gone up significantly.

PACKAGING
Packaging plays a key role in rural markets. Since customers are daily wage earners and they dont have monthly incomes like the urban consumers have, so Surf excel is packaged in smaller sizes of 20gm so that they can afford given their kind of income streams.

EDUCATION
Since vast majority of rural India lacks even basic education levels and modern outlook, HLL is training their new sellers to basic education levels. This is example of Project Shakti which is explained in detail later.

EMPOWERMENT
HLL runs the program of Self-Help Groups (SHG), which operate like direct-to-home distributors. The model consists of groups of (15-20) villagers below the poverty line (Rs.750 per month) taking micro-credit from banks, and using that to buy HLL products, which they will then directly sell to consumers

Prices of products
Surf Quickwash Surf Automatic Surf Blue 20gm 2 NA NA 25gm NA NA 2 200gm 23 NA 16 500gm 53 NA 40 600gm NA 90 NA 750gm NA NA 53 1kg 103 145 NA 1.5kg 153 NA 103 3 kg NA NA 220

Range of products
If we divide detergent industry into three tiers Premium Mid-price Popular at Rs.80-140 per kg at Rs.30-50 per kg at Rs.15-25 per kg

Popular segment accounts for 80% of the detergent industry. HLL leads in detergent powders with Premium Surf Excel Mid price Sunlight Popular Rin, Wheel

Dealers and distributors

Retail Distributor Margins Example of various distributor discounts on sale of these variants. Sale of 200gm Surf Excel Sale of 20 gm Surf Excel Dealer Discount of 8% Dealer Discount of 12%

Wholesale Distributor Margins They get a standard discount of 1.5% on sale of any variant

Strategies in Orissa market

1. Shakti Program With a twin objective of creating "income-generating capabilities" for underprivileged rural women and "improving their rural living standard" through health and hygiene awareness, the Project Shakti is implemented in Orissa. Housewives and old ladies are targeted for this project. They are trained and given basic education to sell products. All products which are priced below Rs 5 are sold through this project. The sellers which are all ladies are paid margins of 3% on their sale of products. Now out of a total of 15,454 Shakti Entrepreneurs across India, Orissa has over 928 (6%)Shakti Entrepreneurs spread across 22 districts. They are operating through Self Help Groups (SHG's) which is makes women direct-tohome distributors of HLL. Partnerships with several NCOs and support from state governments have been key enablers for the programme. Currently women entrepenuers are earning an average income of Rs. 7007- per month, doubling their household income. For the SHG women, it provides a stable, sustainable source of income. For villagers, this channel has become a source of genuine and correctly priced products.

SALES TREND IN BHUBANESHWAR

Big Bazaar ,Bhubaneshwar Sales figures of Surf excel and is competitors Surf 1,21,000 1787 pieces Ariel 26,246 341 pieces Tide 71,672 1996 pieces

July sales July sold quantity

MARKET SHARE OF SURF

Bhubaneswar, 20% Orissa, 35% Surf Excel Surf Blue Orissa, 65% Bhubaneswar, 80%

SALE OF SURF EXCEL ON BASIS OF DIFERENT SIZES

10% 25%
20gm 200gm 500gm

50%

15%

others(1kg,1.5kg)

SALE OF SURF BLUE ON BASIS OF DIFERENT SIZES

7% 5%

13%

20%

500gm 750gm 1kg 3kg

55%

others(25gm,200gm)

PERCENTAGE SHARE OF SURF IN PREMIUM DETERGENTS MARKET

25% Surf Excel Ariel 75%

SALE OF SURF EXCEL ON BASIS OF SEASONS

Customers reduce their washing frequency in rains, so the sales are drastically affected. Sale of detergents is strongly affected by seasonal changes as shown in the chart below.

12%

18%

Summers Winters Rains 70%

COMPETITOR ANALYSIS.
In this section we compare HLL with its competitors, viz. Proctor and Gamble (Ariel, Tide) and Nirma Ltd (Nirma washing powder).We now compare these products and the companies on the various counts.
Market Share:

The per capita consumption of detergents in India is 2.7 kg per annum. The synthetic detergent market can be classified into three main categories Premium (Surf and Ariel) 15% of total market Mid price (Rin and Wheel) 40% of total market Popular (Nirma) 45% of total market.
Product Comparison:

HLL (market share 40%, including all 3 segments) manufactures Surf Excel in three avatars, Surf Excel Blue, Surf Excel Automatic and Surf Excel Quick wash. The USP of Surf Excel is that it reduces soaking time and water usage by 50%. It also contains a lesser amount of bleach than Ariel or Tide. P&G (market share 12%, including all 3 segments) produces both Ariel and Tide. Ariel is produced in three types, Ariel Front-o-mat, Ariel Spring Clean and Ariel Fresh Clean. The USP here would be removal of tough stains while taking care of cloth quality and imparting a fresh fragrance to it. Tide detergent improves washing experience while imparting a lingering lemon fragrance to clothes. Nirma (market share 30% of popular segment) comes in three variants, Nirma washing powder, Super Nirma washing powder and Nirma popular washing powder. Its USP would be low prices and the value for money it gives to the customer.

Pricing Comparison:

We now compare the prices for these brands. The price of each product and its variant is shown in the table b 20gm 200gm 500gm 600gm (30sachets) 2 23 53 NA NA NA NA 90 NA 16 40 NA 2 22 50 NA 1 10 23 NA 750gm 1kg 1.5kg 2kg NA NA 53 NA NA 103 145 NA 99 46 153 NA 102 145 NA NA NA NA NA 88 3 kg NA NA 220 NA NA 4kg NA NA NA NA 186

Surf Quick wash Surf Automatic Surf Blue Ariel Tide

Place comparison: HLLs distribution system is one of its key strengths. The delivers its finished products to various Carrying and Forwarding Agents, via whom the goods reach different wholesalers. From here the goods are delivered to either rural or urban retailers, via whom they reach the consumers. HLL's scale enables it to provide superior customer service including daily servicing, improving their range availability whilst reducing inventories. An IT-powered system has been implemented to supply stocks to redistribution stockists on a continuous replenishment basis. The objective is to catalyze HLLs growth by ensuring that the right product is available at the right place in right quantities, in the most cost-effective manner. For this, stockists have been connected with the company through an Internetbased network, called RSNet, for online interaction. As far as distribution to rural areas is concerned, they use a process called Project Streamline, wherein there exist networks of rural sub-stockists, who operate in the rural areas itself.20-30 sub-stockists come under a rural distributor (RD). The sub-stockists are then responsible for distributing the products in rural areas.

Nirma Limited markets its products through its fully owned subsidiary Nirma Consumer Care Limited (NCCL), which was incepted in 1985.NCCL then resells the products through Nirma and Nima. Nirma pioneered the concept of flat distribution network. Nirma Consumer Care Limited operates with two parallel distribution networks. The NIRMA brand is marketed through the first network, which consists of about 450 exclusive distributors. It is one of the lowest cost FMCG distribution channels of the country. The principle channel for Nirmas Products is the lowest cost system in India with in built flexibility and speedy distribution. All NIRMA and NIMA range of products have a retail reach of over two million retail outlets and more than 40 million loyal consumers spread all over the country. The Company has been successful in establishing an extremely good urban as well as rural presence through the two distribution channels. The distribution channels have played a significant role in making Nirma a household name. The efficient network has made Nirma Washing Powder the brand with highest penetration in its product category. The network is well equipped to meet the demands of the loyal consumers of the Company across the country.

Promotion comparison: HLL. Advertising. Surf excel, synonymous with the catch line, Surf Excel hai naa! was the first national detergent brand on television. It has indulged in numerous advertisement campaigns which have gained a lot of popularity. Surf Excel and Lalitaji ad also was in news for a long time. Slice of life situations have generated high levels of interest in the communication. Using consumer speak in the form of testimonials has helped in building credibility in the brand.

She was a hard-headed bargain-hunting housewife who demanded value for money and not just cheap price. Consumers' faith in Surf was restored, and not just because she offered a rational argument. The real reason Lalitaji was believed was because she was trusted by the Indian housewife to get her a good bargain. We showed her bargaining with the vegetable vendor about good tomatoes and bad tomatoes ... `Sasti cheez or achchi cheez me farak hota hai, bhai saab.' " This advertisement reversed a declining brand share trend. The currents advertisement on television shows noted actor and human rights activist Shabana Azmi (who did promote Ariel once upon a time), walking with two buckets of water and encouraging a crowd of people to do the same. It basically plays on Surf Excels strength to perform with lesser amounts of water. It thus underlines the fact that by buying Surf Excel, even the most common of people can make a difference to our environment.

Sales Promotions. HLL has indulged in numerous promotional activities like the win with stains campaign. 'Win with stains' is a promotion aimed at offering consumers a chance to win prizes as well as give students an opportunity to pursue further studies. Under the "Win With Stains" consumer promotion every consumer who purchases a large pack of Surf Excel Quickwash (500gm and 1kg) or Surf Excel Blue (500gm, 700gm and 1kg) will get a stained cloth. On washing the cloth the consumer will get a chance to win a grand prize of Rs. 5 lakh scholarship or a Zenith Personal Computer or runs of 1, 2, 3, 4, 5 and 6.On collecting 12 runs the consumer would be entitled to receive an Oxford Dictionary worth Rs. 325. In Orissa distributors of HLL indulge in activities like washing clothes in public places, in order to acquaint people with the effectiveness of Surf Excel.

P&G. Advertisements. Ariel has a very vigourous advertisement campaign in its kitty. It boasts of enjoying endorsements from celebrities like Sharmila Tagore (actor and wife of Nawab of Pataudi), Smriti Irani (television actor and BJP member) An advertisement that had gained a lot of popularity was the one where the daughter-in-law had stained her mother-in-laws saree, after she had worn in to a party. She then used Ariel to remove the stain just as her mother-in-law came home.

The tide advertisements generally show people going about their daily activities, when suddenly the screen has something orange rushing through, leaving a sparkling white garment. This tries to show that nothing is as white/clean as something washed with Tide. Sales promotions. Like HLL, P&G also indulges in numerous promotional offers from time to time. Tide and Ariel have recently slashed their prices in order to penetrate into deeper markets. P&G in association with Sony Entertainment Television, launched the shiksha-secure your childs future as a promotional campaign. By purchasing packs of Vicks, Whisper, Ariel, Tide, Head & Shoulders and Pantene between 21st April - 12th June 2003, a

mother can win either Rs. 2 lakhs towards Graduate Education Fee of one child (24 such Prizes), or Rs. 5,000 towards Next Year's Tuition Fee for one child (96 such Prizes), and a number of Consolation Prizes, all courtesy P&G.

NIRMA. Advertisements. Nirma began its advertisement by playing its ever popular jingle on the radio, as early as 1975. Nirmas telelvision advertisement history is synonymous with the dancing girl. This advertisement, which was broadcast on telelvision in 1982 for the First time, reached out to lakhs of people. The brand gained enormous popularity because of this particular advertisement and soon grew to be the most used detergent in India. In the 1980sit overtook its biggest competitor Surf, and this was dubbed the marketing miracle of the decade.

A current advertisement features a small child using Super Nirma to wash his soiled clothes before his mother can catch him doing so. These advertisements generally appeal to the masses and are based on common problems and day to day incidents. Another current Nirma Ad features the ever popular family feud wherein four daughters-in-law of a family have a tiff which ends up in a colourful food fight. And then Nirma comes to the rescue. Sab ki pasand Nirma.

RESEARCH METHODOLOGY
For the purpose of the project, information was collected from both primary and secondary sources.

The primary sources of information were consumers, retailers, wholesalers and territory Sales incharge of HLL. For collecting primary information one questionnaire were developed for the consumers.

The questionnaire contained a total of 14 questions. Most of the questions were close ended questions so that the respondent does not have any problem in answering them. The objective of the first question was to determine the TOMA or the Top of Mind Awareness of the consumers. The following questions aimed at knowing the decision making criteria of the customers of detergent powder using various attributes like brand name, cleansing action, chemical content, price, packaging, availability, advertisements, sales promotion, amount of water required for cleaning etc. This was followed by few questions for the users of Surf Excel pertaining to their consumption pattern, sources of information and their association with the parent company. Consumer perception of Surf Excel was also tested on the attributes like Cleansing action, Packaging, Availability, Price and Advertisements effectiveness. There was also a question to determine the preferred pack size of the customers. The last question was targeted at the non-surf users to determine the reasons of not trying Surf Excel.

For carrying out the survey a sample 53 consumers were interviewed. During consumer interview, each one was administered the questionnaire. The areas where the consumer survey was done were: Markets of Bhubaneswar : Indradhanush Market, Shaheed Nagar Market, Unit 1 Market, Unit 4 Market, Bapuji Nagar Market, Janpath, Kalpana Square. Big Bazaar.

Unstructured interviews were undertaken to get information from Distributors, Territory Sales Incharge, and manager of big Bazaar.

The secondary information pertained to company details and it was collected from the company brochures, Annual Reports, and various web sites on internet. The secondary information contains information relating to the company, its products in the market, its ambitions etc.

SURVEY ANALYSIS
Question : Which brand of detergent do you use to wash your cloths?

Brand Used

6% 19%

9% 66%

Surf excel

Ariel

Tide

others

Question : What is your average (per month) consumption of Surf excel?

Consumption per month

12

10

No. of respondents

0 >1Kg 1/2 - 1 Kg 250 - 500 gm <250 gm

Consumption per month

Question : Rank the following attributes in terms of importance while purchasing a detergent(Washing powder).(Rank in scale of 10)

Attribute Ranking Chart

Company Name Fragnanace Amt Of Water Reqd Sales Promotions Advertisment

Availabilty Packaging Price Chemical Content Cleansing action Brand Name 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

1st Prefrence 2nd Prefrence 3rd prefrence 4th prefrence 5th prefrence

Question : Which pack of Surf excel do you generally buy?

Attributes

Pack Purchase

0%

10%

10%

24%

1.5 Kg 1 Kg 1/2 Kg 200 gm 20 gm

56%

Question: Details of respondents on basis of gender.

Respondants

19%

Males Females

81%

Question: Details of respondents on basis of their annual income level.

Annual Income Level of Sample

13%

34% 16% <50k 50K-1lk 1 lk- 2 lk > 2 lk

37%

SCOPE AND LIMITATIONS OF THE STUDY

1. The sample was restricted to the geographical limits of Bhubaneswar only. As a consequence, the results of the study pertain to Bhubaneswar market only and might not be a true representative of Orissa market. 2. A sample of 53 customers was taken to carry out the study. The sample is very small to draw important conclusions and is not a true representation of the 36 mn plus population of the state of Orissa.

3.

The demographic profile of the respondents is not the same as that of the target

market. This might result in discrepancies.

4.

There was a general tendency in respondents to give incorrect personal or

demographic information. This might have an effect on the profile of the respondents.

CONCLUSION

CONSUMERS SURVEY

1. 100% of the respondents had Surf in their TOMA of 3 brands. But another interesting thing that came to light was that only a few respondents said Surf Excel.

2. 66% of the respondents surveyed were Surf users. Remaining was divided amongst tide (19%), Ariel (9%) and others (6%). This is a sufficient indication of Surf Excel being market leader in Orissa market.

3. The decision making criteria of the consumers were also studied. The results of the same were as follows. a. 60% of the respondents find Brand Name to be very important buying criteria. b. 87% of the respondents rated Cleansing action to be very important buying criteria. c. 22% of the respondents rated Chemical content to be very important buying criteria. d. As per the survey, price is perceived to be an important criterion by only 41% of the respondents. e. The research also establishes that consumer perceive the timely sales promotions offered by the company as an important buying criterion with over 47% respondents considering this as an important factor. 4. Over 50% of the Surf Excel using respondents consume, on an average, -1 Kg Surf Excel. 5. Another important point that came to light in our research was that the respondents using Surf Excel dont prefer buying 200gm pack of surf excel. This observation was verified by the actual market data, collected from the Territory Sales Incharge.

6. Another finding from the research was that a majority of the Surf Excel users were unaware of the fact Surf is a HLL product. 7. The research showed that over 86% of the respondents find TV as the major source of information about Surf Excel. Despite of this only 26 respondents were able to correctly recall any surf excel advertisement seen on TV. This finding points towards the reduced recall of communication by the brands due to excessive cluttering on mediums like TV. 8. The research showed that the consumer perception about Surf Excel is by-large very good. Consumers perceive Surf Excel to be very good in cleansing action. They find Surf Excel to be conveniently packed, very easily available and competitively priced.

Questionnaire
Dear respondent, We are students of XIM (Xavier Institute of Management) and as part of our curriculum we are conducting a market research. We would like your cooperation for the same, with an assurance that all the information, which youll give, will remain confidential. Q 1. Name any three detergent brands. ____________________________________________________________________

Q 2. Which brand of detergent do you use to wash your cloths? i) Ariel iii)Surf Excel v) Any Other (Plz sepecify)________ Q 3. Rank the following attributes in terms of importance while purchasing a detergent (Washing Powder). (Rank the scale of 10):
Most Important Least Important

ii) Tide iv) LG Super Enz

(5)

(1)

Brand Name:

Cleansing Action:

Chemical Content:

Price: Packaging (incl. Size options available): Availability: Advertisements:

Most Important (5)

Least Important (1)

Sales Promotions: Amt.of water required for cleaning: After wash fragrance:

Name of Company:
(Following set of questions are only for those respondents who use Surf Excel)

Q 4. Whats your average (per month) consumption of Surf Excel? i) >1kg ii) iv) 500gm-1Kg <250gm

iii) 250gm-500gm

Q 5. For how long are you using Surf Excel? i) <6 Months iii) 1-2 year(s) ii) iv) 6 12 Months > 2years

Q 6. With which company do you associate the Surf Excel? i)P&G iii)J&J ii)HLL iv) Any Other (Plz sepecify)________

Q 7. How did you come to know about Surf Excel? i) Retailer v) T.V. ix) Hoardings ii) Friends vi) Radio x) Promotional stalls iii) Relatives vii) Cinema iv) Press Ad viii)Displays

xi) Any Other source _________

Q 8. Can you recall any one of the advt. of Surf Excel that you saw in past one month? If yes please narrate. ________________________________________________________________________ ________________________________________________________________________ Q 9. Rate your perception about Surf Excel on the given attribute.
Cleansing Action

Excellent

Pathetic

Packaging (convenience) Convenient

Availability

Inconvenient

Easy
Price

Difficult

Low
Advertisement

High

Effective

Ineffective

Q 11. In what pack sizes is Surf Excel available? (Write down all the pack sizes stated by the respondent)

Q 12. Which pack size of Surf Excel do you generally buy? i) 1.5 Kg Pack iii) Kg Pack v) 20 gm satches ii) iv) 1 Kg Pack 200 gm Pack

(Following question is only for those respondents who dont use Surf Excel) Q 13. Any specific reason for not trying Surf-Excel. i) Lack of awareness ii) Highly priced

iii) Non availability v) Others (specify)______________

iv)

Negative feedback

Personal Details
Name Gender Age Group Profession _________________________________ Male up to 18 Student Female 18-25 Service 25-35 Self-employed above 35 Business

Others (specify)______________ Annual Income level Up to 50,000 1 lk 2 lk 50,000-1 lk above 2 lk

Thanks for your cooperation

BIBLIOGRAPHY

1. Market Research for Small Business. 2. Marketing Management 3. www.google.com 4. www.magindia.com 5. www.blonnet.com

by: Edmunds by: Philip Kotler

Ratio Analysis of HLL Profitability Ratios:

Profitability Ratios show how successful a company is in terms of generating returns or profits on the Investment that it has made in the business i.e. the Profitability ratios speak about the profitability of the company. The various profitability ratios used in the analysis are: operating profit margin (operating profit divided by net sales), net profit margin (net profit divided by net sales), return on investment (operating profit divided by total assets), return on capital employed (operating profit divided by capital employed) and return on equity (net profit divided by net worth of the company). As obvious from the name, the higher these ratios the better it is for the company. There are two types of profitability ratios:

Profit Margin ratios

o Operating Profit Margin ratio o Net Profit Margin ratio

Rate of Return ratios

o Return on Total Assets (ROTA) o Return on Capital Employed (ROCE) o Return on Net Worth (RONW) A) Profit Margin ratios measure how much a company earns relative to its sales. A company with a higher profit margin than its competitor is more efficient. The Profit Margin of a company determines its ability to withstand competition and adverse conditions like rising costs, falling prices or declining sales in the future. The ratio measures the percentage of profits earned per rupee of sales and is thus a measure of efficiency of the company. i) Operating Profit Margin ratio measures the earnings before Interest and Tax, and is calculated as Profit before Interest and Tax (PBIT) / Net Sales x 100 %

Particulars Operating Profit Margin

Dec 2001 16.17

Dec 2002 21.30

Dec 2003 19

Dec 2004 14.5

ii) Net Profit Margin ratio measures the earnings after Interest and Tax, and is calculated as

Profit after Tax (PAT) / Net Sales x 100 %

Particulars (Rs. Crores) Sales PAT Net Profit Margin Ratio(%)

Dec 2001 12420.71 1576.47 12.68

Dec 2002 10641.15 1757.59 16.51

Dec 2003 11919.04 1687.33 14.15

Dec 2004 11594.65 1208.4 10.42

Interpretation: For the year ended 2004 HLL earns 14.5 paisa on every Re. 1 of Sale before Interest and Taxes It ultimately makes 10.42 paisa on every Re. 1 of Sale after Interest and Taxes. It is visible that Hindustan Lever Ltd has not been able to increase its Operating Profit margin constantly over the years. We can see that the operating margin has decreased considerable in the last year. This is mainly due to the fact that the interest cost of HLL has almost doubled from 69.12 cr to 136.25 cr. Moreover the companys operating expenses have increased by almost 75 % in the year 2004.The efficiency has certainly decreased over the last few years mainly owing to high operating expenses , increased interest burden and high indirect taxes. The Net Profit Margin has also decreased by 17.8 % in 2004 as compared to 2001. This is mainly due to the decrease in sales by approximately Rs.826 cr.
25

20

21.3 19 16.17 12.68 16.51 14.15 14.5 10.42

15

Operating profit

Net profit margi

10

0 2001 2002 2003 2004

Rate of Return ratios

i) Return on Total Assets (ROTA) ratio tells us how well management is performing on all the firm's resources. However, it does not tell how well they are performing for the stockholders. The ROTA of a company determines its ability to utilize the Assets employed in the company efficiently and effectively to earn a good return. The ratio measures the percentage of profits earned per Rupee of Asset and thus is a measure of efficiency of the company in generating profits on its Assets. It is calculated as -Profit before Interest and Tax (PBIT) / Total Assets x 100 %

Particulars. PBDIT Depreciation PBIT Total assets ROTA(%) Interpretation:

Dec 2001 2211.63 202.63 2009 7089.06 28.33

Dec 2002 2461.31 192.65 2269 7761.01 29.23

Dec 2003 2462.92 199.99 2262.9 8104.68 27.92

Dec 2004 1875.63 195.68 1680 7820.34 21.5

HLL generates 21.5% return on the Total Assets (ROTA) that it employs in its operations in the year ended 2004. ROTA has decreased in the last year mainly due to the fact that its profit margin has decreased. It could be because of high competition as a result of which profit have decreased and the total assets of the company have increased. Looking at ROTA from another angle in order to do, Dupont Analysis, we have, ROTA = PBIT / Sales (Profit Margin) x Sales / Total Assets (Asset Turnover)

For HLL, Profit Margin ratio is 14.5 % & Asset Turnover ratio is 148.3 % Interpretation: Clearly, HLL is a company which survives more on volume of sales than the profit margins on its products. ii) Return on Capital Employed (ROCE) ratio explains the overall utilization of funds by a business enterprise. It says how much profits we earn from the amount invested by the Shareholders. Capital Employed means the long-term funds employed in the business and includes the shareholders fund, debentures and long-term loans.Profit before Interest

and Tax is considered for computation of this ratio to make numerator and denominator consistent. It is calculated as -Profit before Interest and Tax (PBIT) / Capital Employed x 100 %

Where, Capital Employed = Owners Fund (Share Capital plus Reserves & Surplus) + Long-term Debt Particulars PBIT Net worth Borrowings Capital Employed ROCE Dec 2001 2009 3170.86 102.55 3273.41 61.37 Dec 2002 2269 3713.91 86.23 3800 59.72 Dec 2003 2262.9 2189.22 1715.18 3904 58 Dec 2004 1680 2148.67 1604.25 3752 44.77

As we can see that the ROCE for HLL has decreased considerably in the last year mainly due to lower profit margins. The company is earning a return of 44.77% on the funds employed by it. Though the ROCE has seen a considerable change even now the company is getting good enough returns and can pay good enough dividends to the shareholders as we saw the case in the year 2004 where the rate of dividend was 250%.

Return on Equity =

Net income________ Shareholders Equity Dec 2001 1576.47 3170.86 49.71 Dec 2002 1757.59 3713.91 47.3 Dec 2003 1687.33 2189.22 77 Dec 2004 1208.4 2148.67 56.23

Particulars. PAT Shareholders Equity Return on Equity (%)

The Return on Equity Ratio states how much profit a company earned in comparison
to total amount of shareholders equity on the balance sheet of the company. Here, we see that the ROE of HLL has increased in comparison to the year 2001 but this cant be concluded as a favourable situation for the company as looking at the figures in detail we can notice that there has been a near to 30% decrease in ROE in comparison to the year 2003 , also we do see that the PAT of the company has fallen by about 23% and the shareholders equity has also decreased by 32% in comparison to the year 2001.Even now an ROE of about 56.23% is considered to be very good.

100 80 61.37 49.71 28.33

Rate of return ratios

77 59.72 47.3 29.23 58 27.92 56.23 44.77 21.5

%age

60 40 20 0

2001

2002 years

2003

2004

Return On Total Assets

Return on Capital Employed

Return on Equity

Liquidity Ratios
Ability of the firm to meet short term obligation comes from holding of liquid assets which are readily convertible into cash. Its the responsibility of the treasury manager to maintain the right balance between investments and liabilities to get the maximum liquidity. It involves constant monitoring of cash flow position. We will analyze the two popular measures of the liquidity of the company.

Current Ratio:
Current Ratio = Current Assets / Current Liabilities

Quick ratio:
Quick ratio = (Current assets Inventories) / Current Liabilities Also known as the acid test ratio, it is a stringent test that indicates if a firm has enough short-term assets (without selling inventory) to cover its immediate liabilities. It is similar but a more strenuous version of the "working capital" ratio, indicating whether liabilities could be paid without selling inventory. Its more reliable then current ratio because it considers only the most liquid assets and does not include the hidden factors like window dressing that may skew the actual scenario.

Particulars Current liabilities provisions Current assets Current assets -Inventories

Dec 2001 & 3709.17 3505 2201

Dec 2002 3841.92 3510 2146

Dec 2003 4084.71 3610 2120

Dec 2004 3919.71 3132 1574

Current Ratio Quick Ratio Cash and near cash items Absolute Cash Ratio

0.944 0.59
943.25 0.25

0.91 0.55
977.28 0.254

0.88 0.52
892.4 0.218

0.79 0.40
781.53 0.20

It can be seen from the above table that the current ratio for all the years is less than 1 . This signifies that HLL has short term liabilities greater than the short term assets. It implies that the company would have problems in managing its short term liabilities and liquidity requirements. The company might resort to financing its short term liquidity requirements by long term sources of finance. We can observe that the current assets have decreased by 13 % and at the same time the current liabilities have decreased by just 4 % in the last year. The reason is that since the company is using long term sources of finance to fund its short term obligations therefore the interest burden has increased and as a result the cash balance has decreased .Other receivables have also decreased by more than 66% leading to a fall in current assets.
1 0.8 0.6 0.4 0.2 0 2001 2002 years Current Ratio Quick Ratio 2003 2004 0.59 0.55 0.52 0.4 0.944 0.91 0.88 0.79

Solvency Ratios
Its the companys ability to meet long term liability. Also called the capital structure it is one of the major financing decisions for the company. A proper mix of equity and debt is said to be always beneficial for the company rather than pure equity. Existence of debts disciplines management to some extent. We will have a look at few of the solvency ratios for HLL.

DER: Debt to Equity Ratio

DER = Long-term debt / Shareholders Equity Particulars. Shareholders Equity Long term Debt Debt Equity Ratio Dec 2001 3170.86 102.55 .032 Dec 2002 3713.91 86.23 0.023 Dec 2003 2189.22 1715.18 0.78 Dec 2004 2148.67 1604.25 0.75

The company was highly unleveraged in the years 2001 and 2002. It was risky as the company had invested a huge amount of its own funds as compared to debt. However in the last 2 years the company has changed its policy and is leveraging the advantage of debt along with equity. Though the debt equity ratio of 0.75 is not good enough as compared to industry norms of 2:1 but the company is moving towards a favourable debt equity mix. It has realized the importance of trading on equity .The Company has increased its debt burden by 1470% in the last 4 years which is mainly on account of issuing Debentures of the amount of 1320 cr in 2003.
0.78

0.8 0.7 0.6 0.5 ratio 0.4 0.3 0.2 0.1 0

0.75

Debt 0.032 2001 0.023 2002 years Debt Equity Ratio 2003 2004

Interest Coverage Ratio:

ICR = (PBIT) / Interest Particulars PBIT Interest Interest Coverage Ratio Dec 2001 2009 12.31 163.2 Dec 2002 2269 12.86 176 Dec 2003 2262.9 69.12 32.74 Dec 2004 1680 136.25 12.33

Interest Coverage ratio basically signifies the ability of a firm to service its interest burden through the profits generated .In the initial years when the firm had not employed debt its interest burden was very low. As a result the Interest Coverage ratio is very high gradually the company has employed more debt and as a result of which the interests burden has increased significantly. Moreover due to high competition and operating inefficiency the earnings of the company have declined. As a result the ICR has reduced from 163.2 to 12.33 in the last 4 years. However an ICR of 12.33 is still very impressive which reflects the companys ability to pay interests on loans easily. This is a good indicator to the various financial institutions providing long term sources of finance to HLL.

Efficiency ratios:

It measures the quality of a business' receivables and how efficiently it uses and controls its assets, how effectively the firm is paying suppliers, and whether the business is overtrading or under trading on its equity (using borrowed funds).

Debtor Days: (Total No. of Debtors/Total Sales)* 365

This ratio actually indicates the no. of days of sales that are on the balance sheet of the company as debtors. This ratio is expressed in no. of days. A higher debtor days ratio signifies general problems in the collection of funds faced by the company or the financial position of the debtors.

Particulars Debtors Sales Debtor days

Dec 2001 1254.38 12420.71 38.85

Dec 2002 1169.49 10641.15 40.11

Dec 2003 1228.55 11919.04 37.62

Dec 2004 793.56 11594.65 25

The Debtor days for the company have seen a decline from 37.62 days in the year 2003 to 25 days in the year 2004. This is mainly due to the fact that there was a significant improvement in the companies receivables management. The Debtors have decreased by about 35% where as the sales have seen a decline of just 2.72%.

Creditor Days:
(Total No. of Creditors/Total Purchases)*365 This ratio indicates the no. of days of purchases that are on the balance sheet of the company as creditors. Expressed as no. of days, a lower creditor days ratio signifies that

the company is liberal in paying its creditors and follows a policy of paying them at a faster rate.

Particulars. Creditors Total Purchases Creditor days

Dec 2001 2253.23 6077.97 135.31

Dec 2002 2202.91 5389.04 149.2

Dec 2003 1961.06 5438 131.62

Dec 2004 2154.11 5413.77 145.23

Here, we see that the credit days which the company enjoys from its suppliers are pretty high throughout the time period under consideration. The Creditor Days for the company have seen a rise from 131.62 days in the year 2003 to 145.23 days in the year 2004. Hence, we can say that the payment policy followed by the company is not very liberal and the payment made by the company to its creditors is pretty late.

Total Assets Turnover Ratio =

Net sales___ Total Assets Particulars Sales Total assets Total assets turnover ratio Dec 2001 12420.71 7089.06 1.75 Dec 2002 10641.15 7761.01 1.37 Dec 2003 11919.04 8104.68 1.47 Dec 2004 11594.65 7820.34 1.48

Total Assets turnover ratio signifies how efficiently the company is utilizing its assets to generate returns. We see a drop in the turnover ratio in the year 2002 because of a combined effect of a decrease in sales and increase in total assets simultaneously. The company has maintained a constant turnover ratio in the years 2003 and 2004. It indicates efficient usage of assets by the company to generate constant sales .

DU PONT RATIO ANALYSIS:

The Du-Pont ratio analysis is a combination of financial ratios in a series in order to assess the investment returns of the company. It combines the financial ratios of both the Income Statement as well as the Balance Sheet in order to assess either the Return on Equity or the Return on Investment. One of the Plus points of this method is that it provides a clear understanding of how the company generates its return. This analysis provides an insight into the importance of asset turnover as well as sales to overall return.

This formula shows the relationship of profit margin and turnover how these two complement each other. The Du-Pont ratio divides the Return on equity into three parts: Net Profit Margin, total asset turnover, and the companys use of leverage referred to as Equity Multiplier also.

DU-PONT CHART FOR HLL FOR THE YEAR 2004

RETURN ON EQUITY
=PAT/NETWORTH 56.23%

Equity Multiplier =TA/NW =3.64%

NET PROFIT MARGIN

=PAT/NETSALES =10.42%

TOTAL ASSET TURNOVER =SALES/TA =1.48

RETURN ON ASSETS
ROA=PAT/TA =15.44%

Filename: Marketing Management Project ( Surf Excel) Directory: C:\Documents and Settings\tapan\Desktop Template: C:\Documents and Settings\tapan\Application Data\Microsoft\Templates\Normal.dot Title: TABLE OF CONTENTS Subject: Author: ximb Keywords: Comments: Creation Date: 12/13/2007 3:06 PM Change Number: 3 Last Saved On: 12/13/2007 3:06 PM Last Saved By: tapan Total Editing Time: 2 Minutes Last Printed On: 12/13/2007 3:07 PM As of Last Complete Printing Number of Pages: 66 Number of Words: 13,028 (approx.) Number of Characters: 74,265 (approx.)