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What are Fast Moving Consumer Goods (FMCG)? Products which have a quick turnover, and relatively low cost are known as Fast Moving Consumer Goods (FMCG). FMCG products are those that get replaced within a year. Examples of FMCG generally include a wide range of frequently purchased consumer products such as toiletries, soap, cosmetics, tooth cleaning products, shaving products and detergents, as well as other non-durables such as glassware, bulbs, batteries, paper products, and plastic goods. FMCG may also include pharmaceuticals, consumer electronics, packaged food products, soft drinks, tissue paper, and chocolate bars. A subset of FMCGs are Fast Moving Consumer Electronics which include innovative electronic products such as mobile phones, MP3 players, digital cameras, GPS Systems and Laptops. These are replaced more frequently than other electronic products. White goods in FMCG refer to household electronic items such as Refrigerators, T.Vs, Music Systems, etc. In 2005, the Rs. 48,000-crore FMCG segment was one of the fast growing industries in India. According to the AC Nielsen India study, the industry grew 5.3% in value between 2004 and 2005. Indian FMCG Sector The Indian FMCG sector is the fourth largest in the economy and has a market size of US$13.1 billion. Well-established distribution networks, as well as intense competition between the organised and unorganised segments are the characteristics of this sector. FMCG in India has a strong and competitive MNC presence across the entire value chain. It has been predicted that the FMCG market will reach to US$ 33.4 billion in 2015 from US $ billion 11.6 in 2003. The middle class and the rural segments of the Indian population are the most promising market for FMCG, and give brand makers the opportunity to convert them to branded products. Most of the product categories like jams, toothpaste, skin care, shampoos, etc, in India, have low per capita consumption as well as low penetration level, but the potential for growth is huge. The Indian Economy is surging ahead by leaps and bounds, keeping pace with rapid urbanization, increased literacy levels, and rising per capita income. The big firms are growing bigger and small-time companies are catching up as well. According to the study conducted by AC Nielsen, 62 of the top 100 brands are owned

by MNCs, and the balance by Indian companies. Fifteen companies own these 62 brands, and 27 of these are owned by Hindustan Lever. Pepsi is at number three followed by Thums Up. Britannia takes the fifth place, followed by Colgate (6), Nirma (7), Coca-Cola (8) and Parle (9). These are figures the soft drink and cigarette companies have always shied away from revealing. Personal care, cigarettes, and soft drinks are the three biggest categories in FMCG. Between them, they account for 35 of the top 100 brands. Exhibit I THE TOP 10 COMPANIES IN FMCG SECTOR S. NO. Companies 1. Hindustan Unilever Ltd. 2. ITC (Indian Tobacco Company) 3. Nestlé India 4. GCMMF (AMUL) 5. Dabur India 6. Asian Paints (India) 7. Cadbury India 8. Britannia Industries 9. Procter & Gamble Hygiene and Health Care 10. Marico Industries Source: The companies mentioned in Exhibit I, are the leaders in their respective sectors. The personal care category has the largest number of brands, i.e., 21, inclusive of Lux, Lifebuoy, Fair and Lovely, Vicks, and Ponds. There are 11 HLL brands in the 21, aggregating Rs. 3,799 crore or 54% of the personal care category. Cigarettes account for 17% of the top 100 FMCG sales, and just below the personal care category. ITC alone accounts for 60% volume market share and 70% by value of all filter cigarettes in India. The foods category in FMCG is gaining popularity with a swing of launches by HLL, ITC, Godrej, and others. This category has 18 major brands, aggregating Rs. 4,637 crore. Nestle and Amul slug it out in the powders segment. The food category has also seen innovations like softies in ice creams, chapattis by HLL, ready to eat rice by HLL and pizzas by both GCMMF and Godrej Pillsbury. This category seems to have faster development than the stagnating personal care category. Amul, India's largest foods company, has a good presence in the food category with its ice-creams, curd, milk, butter, cheese, and so on. Britannia also ranks in the top 100 FMCG brands, dominates the biscuits category and has launched a series of products at various prices. In the household care category (like mosquito repellents), Godrej and Reckitt are two players. Goodknight from Godrej, is worth above Rs 217 crore, followed by Reckitt's

Mortein at Rs 149 crore. In the shampoo category, HLL's Clinic and Sunsilk make it to the top 100, although P&G's Head and Shoulders and Pantene are also trying hard to be positioned on top. Clinic is nearly double the size of Sunsilk. Dabur is among the top five FMCG companies in India and is a herbal specialist. With a turnover of Rs. 19 billion (approx. US$ 420 million) in 2005-2006, Dabur has brands like Dabur Amla, Dabur Chyawanprash, Vatika, Hajmola and Real. Asian Paints is enjoying a formidable presence in the Indian sub-continent, Southeast Asia, Far East, Middle East, South Pacific, Caribbean, Africa and Europe. Asian Paints is India's largest paint company, with a turnover of Rs.22.6 billion (around USD 513 million). Forbes Global magazine, USA, ranked Asian Paints among the 200 Best Small Companies in the World Cadbury India is the market leader in the chocolate confectionery market with a 70% market share and is ranked number two in the total food drinks market. Its popular brands include Cadbury's Dairy Milk, 5 Star, Eclairs, and Gems. The Rs.15.6 billion (USD 380 Million) Marico is a leading Indian group in consumer products and services in the Global Beauty and Wellness space. Outlook There is a huge growth potential for all the FMCG companies as the per capita consumption of almost all products in the country is amongst the lowest in the world. Again the demand or prospect could be increased further if these companies can change the consumer's mindset and offer new generation products. Earlier, Indian consumers were using non-branded apparel, but today, clothes of different brands are available and the same consumers are willing to pay more for branded quality clothes. It's the quality, promotion and innovation of products, which can drive many sectors. FMCG Sector IBEF: February 21, 2006 The Indian FMCG sector is the fourth largest sector in the economy with a total market size in excess of US$ 13.1 billion.It has a strong MNC presence and is characterised by a wellestablished distribution network, intense competition between the organised and unorganised segments and low operational cost. Availability of key raw materials, cheaper labour costs and presence across the entire value chain gives India a competitive advantage. The FMCG market is set to treble from US$ 11.6 billion in 2003 to US$ 33.4 billion in 2015. Penetration level as well as per capita consumption in most product categories like jams, toothpaste, skin care, hair wash etc in India is low indicating the untapped market potential. Burgeoning Indian population, particularly the middle class and the rural segments, presents an opportunity to makers of branded products to convert consumers to branded products. Growth is also likely to come from consumer 'upgrading' in the matured product categories. With 200 million people expected to shift to processed and packaged food by 2010, India needs around US$ 28 billion of investment in the food-processing

industry. Automatic investment approval (including foreign technology agreements within specified norms), up to 100 per cent foreign equity or 100 per cent for NRI and Overseas Corporate Bodies (OCBs) investment, is allowed for most of the food processing sector.

Include About Companies

Annapurna brand, first introduced in 1997, has been the provider of wholesome nutrition to millions of Indians. The brand currently operates in two of the largest, almost universally consumed, foods categories of the country – Salt & Atta (wheat flour). Iodine deficiency is a serious health issue in India. Annapurna salt has played a big role towards reduction of iodine deficiency by providing its consumers with the Right Level of Iodine as prescribed by the Indian government and international standards. Annapurna salt was the first in the world to be endorsed by The International Council for Control of Iodine Deficiency Disorders (ICCIDD). Annapurna has also taken initiatives to educate consumers about the benefits of iodine and its effect on the mental development of growing children. Annapurna Atta was launched nationally in 1998, to help the Indian homemaker provide wholesome tasty nutrition to her family. It is made with modern technology that helps Annapurna atta absorb more water than ordinary atta when kneaded, resulting in softer chapatis.

ITC entered the branded Atta market with the launch of Aashirvaad Atta in Jaipur and Chandigarh on 26th May 2002. The product is now available all over India. ‘Aashirvaad’ promises the Indian housewife the joy of providing her family with the most delightful home-made rotis, made from the finest quality atta. ITC uses the sourcing strength of its e-Choupals to buy wheat directly from the farmers to deliver happiness to the Indian consumer – Khushiyaan Chun Chun ke (Happiness handpicked). ‘Aashirvaad’ is made from finest quality wheat that ITC has the unique capability to source through its e-Choupal network. Premium quality atta, made from the best wheat in India, is also available as Aashirvaad Select Atta. ITC Foods also aims to delight the consumer through superior and innovative packaging. The Aashirvaad package is PET Poly, with the design showcasing the farming process undertaken in the rural heartland of India in the form of a Madhubani painting. ‘Aashirvaad Select’ Atta (5

kg pack) was awarded the World Star Award for Excellence in Packaging in the Consumer Pack Category. This is one of the most prestigious awards in the world for Packaging.

At ITC Aashirvaad, extra care is taken to keep things as natural as possible. The way Mother Nature intended for them to be. That’s why you’ll see that a lot of traditional, sometimes even cumbersome methods that the world has long left behind are adopted, so that you can have a taste of the authentic. In our quest to provide you wholesome goodness, the finest of ingredients are sourced, directly from the farmers through our e-choupals. ITC’s e-choupal initiative, aims to confer the power of expert knowledge on even the smallest individual farmer. Thus enhancing his competitiveness in the global market. A walk through our range our products might well seem like a journey through the good old world. A world that found happiness in harmonising with nature. Aashirvaad Atta was launched on 27th May 2002 and within a short span of 5 years has become the number one in branded packaged atta across the country. Aashirvaad Atta is made from the choicest grains - heavy on the palm, golden amber in colour and hard in bite. It is carefully ground using modern 'chakki - grinding' process for the perfect balance of colour, taste and nutrition which also ensures that Aashirvaad atta contains 0% Maida and is 100% Sampoorna Atta. The dough made from Aashirvaad Atta absorbs more water, hence rotis remain soft longer. The wheat for Aashirvaad Atta is sourced directly from farmers through ITC's e-choupals. Select - 100% MP Sharbati atta Aashirvaad Select 100% MP Sharbati atta comes from the plush, fertile soil of Madhya Pradesh, tended by the right amounts of sunshine and rainfall. The land here truly sprouts gold. The gold that we call ‘sharbati’. The ‘sharbati’ wheat is sourced directly from farmers through ITC’s e-choupals and then blended using the traditional ‘chakki-grinding’ method to give you that superior, discerning taste that you well deserve. MP Chakki Atta: Aashirvaad MP Chakki Blend is made only from the finest MP wheat. This wheat is again sourced through ITC’s e-choupals from the golden fields of the most carefully cultivated wheat. Whole Wheat Atta - 0% maida and 100% Atta: Aashirvaa

FMCG major Hindustan Unilever Limited (HUL), formerly known as Hindustan Lever Limited, employs 36,000 people, including over 1,350 managers. It is one of the earliest MNCs to have entered India. It was in the summer of 1888 that Unilever of England first marketed Sunlight soap in India. This was followed by brands like Pears and Vim. Vanaspati was launched in 1918 and Dalda came to the market in 1937. In 1931, Unilever set up its first Indian subsidiary, Hindustan Vanaspati Manufacturing Company, followed by Lever Brothers India Limited (1933) and United Traders Limited (1935). These three companies merged to form HUL in November 1956. A number of prominent companies came into the HUL fold as result of Unilever’s international acquisitions. These included Brooke Bond (1984), Lipton (1972) and Pond’s (1986). In 1993, Tata Oil Mills Company (TOMCO) merged with HUL. Two

years later, HUL and yet another Tata company, Lakme Limited, formed a 50:50 joint venture, Lakme Lever Limited. Subsequently in 1998, Lakme Limited sold its brands to HUL and divested its 50 per cent stake in the joint venture to the FMCG giant. HUL formed a 50:50 joint venture with the US-based Kimberly Clark Corporation in 1994, Kimberly-Clark Lever Ltd, which markets Huggies diapers and Kotex sanitary pads. HUL has also set up a subsidiary in Nepal, Nepal Lever Limited (NLL), and its factory represents the largest manufacturing investment in the Himalayan kingdom. In a historic step, HUL picked up 74 per cent of the equity of Modern Foods from the Indian government. In 2002, HUL acquired the government s remaining stake in Modern Foods.

HUL’s business activities are divided into four broad areas: Home and personal care (personal wash, fabric wash, home care, oral care, skin care, hair care, deodorants and talcs, colour cosmetics) Foods (tea, coffee, branded staples, culinary products, ice creams, Modern Foods ranges) New Ventures (Hindustan Lever Network, Ayush ayurvedic products and services, Sangam, Pureit water purifiers) Exports (HPC, beverages, marine products, rice)


HUL s brands are household names across the country. They include Lifebuoy, Lux, Surf Excel, Rin, Wheel, Fair & Lovely, Pond s, Sunsilk, Clinic, Pepsodent, Close-up, Lakme, Brooke Bond, Kissan, Knorr-Annapurna and Kwality Wall s.

HUL products are manufactured in 80 factories. The operations involve over 2,000 suppliers and associates. HUL s distribution network, comprising about 7,000 redistribution stockists, directly covers the entire urban population, and about 250 million rural consumers.

ntroduction Unilever has earned a reputation for conducting its business with integrity and with respect for the interests of those our activities can affect. This reputation is an asset, just as real as our people and brands. Our first priority is to be a successful business and that means investing for growth and balancing short-term and long-term interests. It also means caring about our

consumers, employees and shareholders, our business partners and the world in which we live. To succeed requires the highest standards of behaviour from all of us. The general principles contained in this Code set out those standards. More detailed guidance tailored to the needs of different countries and companies will build on these principles as appropriate, but will not include any standards less rigorous than those contained in this Code. We want this Code to be more than a collection of high-sounding statements. It must have practical value in our day-to-day business and each one of us must follow these principles in the spirit as well as the letter. Code of Business Principles Standard of Conduct We conduct our operations with honesty, integrity and openness, and with respect for the human rights and interests of our employees. We shall similarly respect the legitimate interests of those with whom we have relationships. Obeying the Law Unilever companies and employees are required to comply with the laws and regulations of the countries in which we operate. Employees Unilever is committed to diversity in a working environment where there is mutual trust and respect and where everyone feels responsible for the performance and reputation of our company. We will recruit, employ and promote employees on the sole basis of the qualifications and abilities needed for the work to be performed. We are committed to safe and healthy working conditions for all employees. We will not use any form of forced, compulsory or child labour. We are committed to working with employees to develop and enhance each individual's skills and capabilities. We respect the dignity of the individual and the right of employees to freedom of association. We will maintain good communications with employees through company based information and consultation procedures. Consumers Unilever is committed to providing branded products and services which consistently offer value in terms of price and quality, and which are safe for their intended use. Products and services will be accurately and properly labelled, advertised and

communicated. Shareholders Unilever will conduct its operations in accordance with internationally accepted principles of good corporate governance. We will provide timely, regular and reliable information on our activities, structure, financial situation and performance to all shareholders. Business Partners Unilever is committed to establishing mutually beneficial relations with our suppliers, customers and business partners. In our business dealings we expect our partners to adhere to business principles consistent with our own. Community Involvement Unilever strives to be a trusted corporate citizen and, as an integral part of society, to fulfill our responsibilities to the societies and communities in which we operate. Public Activities Unilever companies are encouraged to promote and defend their legitimate business interests. Unilever will co-operate with governments and other organisations, both directly and through bodies such as trade associations, in the development of proposed legislation and other regulations which may affect legitimate business interests. Unilever neither supports political parties nor contributes to the funds of groups whose activities are calculated to promote party interests. The Environment Unilever is committed to making continuous improvements in the management of our environmental impact and to the longer-term goal of developing a sustainable business. Unilever will work in partnership with others to promote environmental care, increase understanding of environmental issues and disseminate good practice. Innovation In our scientific innovation to meet consumer needs we will respect the concerns of our consumers and of society. We will work on the basis of sound science, applying rigorous standards of product safety. Competition Unilever believes in vigorous yet fair competition and supports the development of appropriate competition laws. Unilever companies and employees will conduct their operations in accordance with the principles of fair competition and all applicable regulations. Business Integrity

Unilever does not give or receive, whether directly or indirectly, bribes or other improper advantages for business or financial gain. No employee may offer, give or receive any gift or payment which is, or may be construed as being, a bribe. Any demand for, or offer of, a bribe must be rejected immediately and reported to management. Unilever accounting records and supporting documents must accurately describe and reflect the nature of the underlying transactions. No undisclosed or unrecorded account, fund or asset will be established or maintained. Conflicts of Interests All Unilever employees are expected to avoid personal activities and financial interests which could conflict with their responsibilities to the company. Unilever employees must not seek gain for themselves or others through misuse of their positions. Compliance – Monitoring – Reporting Compliance with these principles is an essential element in our business success. The Unilever Board is responsible for ensuring these principles are communicated to, and understood and observed by, all employees. Day-to-day responsibility is delegated to the senior management of the regions and operating companies. They are responsible for implementing these principles, if necessary through more detailed guidance tailored to local needs. Assurance of compliance is given and monitored each year. Compliance with the Code is subject to review by the Board supported by the Audit Committee of the Board and the Corporate Risk Committee. Any breaches of the Code must be reported in accordance with the procedures specified by the Joint Secretaries. The Board of Unilever will not criticise management for any loss of business resulting from adherence to these principles and other mandatory policies and instructions. The Board of Unilever expects employees to bring to their attention, or to that of senior management, any breach or suspected breach of these principles. Provision has been made for employees to be able to report in confidence and no employee will suffer as a consequence of doing so. In this Code the expressions 'Unilever' and 'Unilever companies' are used for convenience and mean the Unilever Group of companies comprising Unilever N.V., Unilever PLC and their respective subsidiary companies. The Board of Unilever means the Directors of Unilever N.V. and Unilever PLC.

Hindustan Unilever is the top defensive bet 17 Mar, 2008, 0540 hrs IST,Kiran Kabtta, TNN




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During turbulent times, defensive stocks act as bulwark in a falling stock market. As the financial fortunes of these companies are not much dependent on business cycles, they offer growth, as well as dividend income, even in an economic recession. Hindustan Unilever (HUL), India’s largest FMCG company, is the top defensive bet right now. Its defensive nature was evident in the recent fall in the market. Over the past two months, while the Sensex has fallen by nearly 25% to 15923.7, HUL’s stock has traded in a tight range of Rs 228.8 to Rs 223.5. The implication of this is clear: the scrip may not have gained from the bull run, but it surely provides a much-needed cushion to investors when the market turns hostile. Business: HUL, 51% owned by Unilever Worldwide, has a diversified product portfolio spanning fabric care, personal care, processed foods and beverages, and is a market leader in most product categories that it operates in. Historically, the company was a darling blue-chip stock of most investors. However, it went through a lean patch in the early part of this decade, as consumers switched their spending to emerging categories like mobile telephony, personal transport, consumer durables and housing. However, now the economy is once again showing signs of a revival in consumption demand. The rejig in its product mix and organisational structure has also helped. Growth strategy:

After witness ing stagnant growth between ’02 and ’04, HUL has been steadily growing since ’05, which also coincides with the boom in the economy and consequent increase in consumer spending. HUL is exploiting the opportunity by launching branded products to attract consumers with different income levels. Its key growth drivers are home and personal care (HPC) and the food segment. HPC accounted for over 93% of HUL’s pretax profits and 72% of its revenues during CY07 and grew 12%. Similar buoyancy is visible in other segments. For the financial year ended December ’07, revenues from soaps and detergent segment grew 14%, personal products by 9.3%, beverages by 15.2%, processed foods by 40% and exports by 5%. Financials: Over the past three years, HUL’s revenues recorded a CAGR of 11.3% to Rs 13,683.2 crore, while profit grew by 17.2%. This compares favourably with the ’00-03 period, when its net sales declined, while net profit posted a CAGR of 10.6%. However, even during its worst year of performance, HUL has neither posted a loss nor failed to declare a dividend. While escalating raw material prices are putting margins under pressure, price hikes have helped protect its margins. HUL is a high dividend-paying company, with an average dividend yield of 4% over the past four years. The rate of growth in dividend

paid during the period stands at 18.8%, which is higher than the rate of growth in profit at 10.2%. On an estimated net profit of Rs 2,224.5 crore and a payout ratio of 100%, the dividend yield has been estimated at 4.5% for CY08 at the current stock price. Valuations: The company is currently trading at 22 times its CY08 earnings. The earnings have been estimated assuming HUL’s revenues will continue to grow at 14% with no adverse changes in its operating margin. In comparison, it is currently trading at 25 times its trailing fourquarters earnings per share. However, the stock looks fairly valued compared to the average P/E of 21.5 for the industry (ET FMCG index). Taking into account the growth potential in the FMCG sector in India, the stock is a good defensive bet for investors looking for modest capital appreciation and steady dividends. s_the_top_defensive_bet/rssarticleshow/2872679.cms Mumbai: After having fought a bitter price battle for market share with its rivals, Hindustan Unilever Ltd (HUL), Indian subsidiary of the Anglo-Dutch consumer goods company Unilever Plc, is now working on a new growth strategy for its laundry business. “Price cut or hike is not a long-term growth strategy. Pricing, in fact, is now passe,” insists Sudhanshu Vats, category head, home care. “Our strategy for growth, now is focused on product innovation, new consumer and retail trends and aggressive marketing and promotions,” he said. This comes even as Unilever is scouting for a potential buyer for its laundry business in the US. A worker stacks Hindustan Unilever products in a store in Mumbai HUL says it is quite upbeat about the segment and says the laundry segment is one of its “key growth areas.” “We have done key innovations across the product portfolio and it is working for us,” says Vats. “We successfully migrated from Rin Supreme to Surf Excel and Wheel Smart Srimati—which was rolled out in 2006—is also on the right track.” HUL’s market share in the laundry segment grew to around 37.8% in the quarter ended June from 35.5% in the same period last year, according the market research firm ACNielsen. However, this time, the increase was not at the expense of price war with its multinational rival Procter & Gamble Co. P&G also gained 0.5 percentage points, up to a 7.6% share. Nirma Ltd, the Ahmedabad-based manufacturer, however, saw its market share dip by 1.7% percentage points to 13.5%. Wheel, a value brand that, according to Vats contributes around 50% of HUL’s laundry segment revenues, increased its market share by 2 percentage points in the same period, with a total share of about 18%. According to ACNielsen, the laundry industry in India was worth Rs7,908 crore in 2006 and rose 8.4% over 2005. HUL doesn’t report its laundry revenues separately but puts them under the soaps and detergent category.

In 2006, HUL’s soaps and detergents segment contributed around Rs5,596 crore to the company’s total sales of Rs12,103 crore. “Laundry has been an attractive segment in the past and is likely to keep growing in the near future. The recent price war between companies led to erosion in their profitability but now, the industry is stabilizing,” says Unmesh Sharma, an analyst at Macquarie Securities here. According to Vats, the laundry business is witnessing a surge in demand from cities and HUL is focusing on Tier I and II cities to tap that demand. “Consumers today are buying more clothes,” says Vats. “Trends suggest that the usage of detergents has gone up as a result. Also, with premium quality of clothes, people want to use better and branded products.” Still, analysts remain cautious. “Some of HUL’s recent moves, such as promotional campaigns and advertising, seem right,” says Macquarie’s Sharma. “Still, it is too early to say what result their new strategies will yield.” Delighting consumers everywhere Indira is 20 years old, a tribal woman at Kondegaon village in Bastar district. She is just back from the nearby jungles, collecting firewood. After attending to her baby son, she will go to the village well to take a quick wash. Yesterday her husband brought her a white soap, with pink petals in it. Indira had requested him to buy one, for the festival later this evening. Indira is among millions of consumers in rural India who use Hindustan Unilever's products. She came to know about Lux through the TV set at the community centre. It is not very costly, and also available nearby. Home to over 700 million people, rural India comprises not only over 70% of India's billion-strong population, but also over 12% of the world's population. The rural population already accounts for substantial consumption of Fast Moving Consumer Goods and also consumer durables. About 50% of the sales of soaps & detergents are generated in rural India. Similarly, almost half the demand for black & white television sets, pressure cookers, table fans, sewing machines also comes from there. A pack for every budget But the potential is even larger, both in terms of consumption and penetration. The fact that 70% of the population accounts for only 50% of even relatively wellpenetrated categories, like soaps & detergents, indicates the enormous scope of consumption-led growth in these categories. Therefore such categories will derive growth out of increased usage. In categories, which are relatively less penetrated, like personal products, rural India offers an even bigger growth opportunity through greater penetration and then consumption. For example only three out of 10 consumers in rural markets use shampoo or skin care products. Therefore growth in such categories will emerge, as more consumers purchase these products, and then continue to use them regularly. Hindustan Unilever has taken many initiatives over the decades to create markets in

the rural hinterlands. By marketing relevant products, at affordable prices. A unique example is Hindustan Unilever's Lifebuoy soap. In rural India, health is of paramount importance, because indisposition is very directly related to loss of income. Lifebuoy, whose core equity is health and hygiene , has for decades now been synonymous with soap in rural India. At the same time, if products have to come up the order in the rural purchase hierarchy, they have to be affordable. If rural India today accounts for about half of detergents sales, it is because HUL has developed low-cost value-for-money branded products, like Wheel. The company has also taken initiatives to create markets even for apparently premium products, by offering them in pack sizes, like sachets, whose unit prices are within the reach of rural consumers. For example, initiated in the 1980s, sachets (Rs.2, Re.1, or 50 paise) today constitute about 55% of Hindustan Unilever's shampoo sales. With media reach gradually increasing, rural consumers today, where the media has its footprints, share the same aspirations with their urban counterparts. HUL has responded to the trend with low unit price packs of even other products - Lux at Rs.5, Lifebuoy at Rs.2, Surf Excel sachet at Rs.1.50, Pond's Talc at Rs.5, Pepsodent toothpaste at Rs. 5, Fair & Lovely Skin Cream at Rs.5, Pond's Cold Cream at Rs.5, Brooke Bond Taaza tea at Rs.5. Changing habits For decades now, Hindustan Unilever has also taken initiatives to circumvent the limitation in communication channels, by innovatively leveraging non-conventional media. Among them are wall paintings, cinema vans, weekly markets (haat), fairs and festivals. Given the rural consumer's fascination for cinema, the cinema vans show popular movies, interspersed with products advertisements. Weekly markets, fairs and festivals are parts and parcel of rural life. They give an opportunity to address consumers, spread over many tiny hamlets, at one location. The occasions are used to demonstrate product benefits and also sell such products. Such demonstrations have played a significant role in creating, for example, the detergents market in rural India. In recent times, such demonstrations are being deployed to illustrate how visible clean is not hygienic clean, and how using soap is essential to prevent easily avoidable infections. Communication through fairs and festivals are backed by direct consumer contact. For example, in 1998-99, Hindustan Unilever implemented a major direct consumer contact, called Project Bharat, which covered 2.2 crore homes. Each home was given a box, at a special price of Rs.15, comprising a low unit price pack of shampoo, talcum powder, toothpaste and skin cream, along with educational leaflets and audiovisual demonstrations. The project has helped eliminate barriers to trial, and has strengthened salience of both particular categories and brands. Similarly in 2002, Hindustan Unilever has launched a similar large-scale direct contact, called Lifebuoy Swasthya Chetana, which already covers 70 million people in 18,000 villages of 8 states. The project is intended at generating awareness about good health and hygiene practices, and specifically how a simple habit of washing hands is essential to maintaining good health. The initiative will involve interaction with students and senior citizens, who act as change agents.

At every nook and corner Generating awareness pays dividends only when steps are taken to ensure constant availability of products. In rural India particularly, availability determines volumes and market share, because the consumer usually purchases what is available at the outlet, influenced very largely by the retailer. Therefore, over the decades, Hindustan Unilever has progressively strengthened its distribution reach in rural India, which today has about 33 lakh outlets. Direct rural distribution in Hindustan Unilever began with the coverage of villages adjacent to small towns. The company's stockists in these towns were made to use their infrastructure to distribute products to outlets in these villages. But this distribution mode could only be extended to villages connected with motorable roads, and it could cover about 25% of the rural population by 1995. Therefore in 1998, Hindustan Unilever launched Project Streamline to further extend its distribution reach. Under this initiative, the company identifies sub-stockists in a large village, connected by motorable road to a small town. This sub-stockist in turn distributes the company's products to outlets in adjacent smaller villages using transportation suitable to interconnecting roads, like cycles, scooters or the age-old bullock cart. Hindustan Unilever is thus trying to circumvent the barrier of motorable roads. As a result, the distribution network, as of now, directly covers about 50,000 villages, reaching about 250 million consumers. The company simultaneously uses the wholesale channel, suitably incentivising them to distribute company products. HUL has in the recent past established a common distribution system in rural areas for all its products. Given the number of brands and their packs the rural retailer usually requires, one HUL representative can take all the products from the company portfolio that he needs. This common distribution system is now fully operational, under one Regional Sales Manager exclusively dedicated to rural markets of each region of the country. Over time, Hindustan Unilever will further strengthen its rural distribution through mutually beneficial alliances with rural Self Help Groups (SHGs). Over the last five years, financial institutions, NGOs and government organisations are working closely to establish SHGs, whose objective is to alleviate poverty through sustainable incomegenerating activities. Since 2001, Hindustan Unilever is implementing Project Shakti, whereby SHGs are being offered the option of distributing relevant products of the company as a sustainable income-generating activity. The model hinges on a powerful win-win relationship; the SHG engages in an activity which brings sustainable income, while Hindustan Unilever gets an interface to interact and transact with the rural consumer. HUL's vision for Project Shakti is to scale it up across the country by 2005, creating about 25000 Shakti entrepreneurs, covering 100,000 villages, and touching the lives of 100 million rural consumers. Begun with 50 groups in Nalgonda district of Andhra Pradesh, with the support of local authorities, the project has been extended, as of now, to about 50,000 villages in 12 states. A typical Shakti entrepreneur conducts business of around Rs.10,000 - Rs 15,000 per month, which gives her an income of about Rs 700 - Rs.1000 per month on a sustainable basis. As most of these women are from below the poverty line, and live in extremely small villages (less than 2000 population), this earning is very significant, and is almost

double of their past household income. The full benefit of Project Shakti will be realised after some years.

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Hindustan Unilever Limited
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Contact Information Hindustan Unilever Limited Hindustan Lever House, 165/166 Backbay Reclamation Mumbai 400 020, India Tel. +91-22-3983-0000 Fax +91-22-2287-1970

Hindustan Unilever Limited (HLL), a 51%-owned subsidiary of Anglo-Dutch giant Unilever, has been working its way into India since 1888. India's largest consumer goods company, HLL markets products such as beverages, food, and home and personal care goods. Its brands include Kwality Wall's ice cream, Lifebuoy soap, Lipton tea, Pepsodent toothpaste, and Surf laundry detergent. HLL markets atta (a type of meal), maize, rice, and salt, and its export division ships castor oil and fish. The company also sells bottled water and over-the-counter healthcare products. Douglas Baillie, former president of Unilever's Africa Business Group, became the firm's first expatriate leader in March 2006. Key numbers for fiscal year ending December, 2006: Sales: $2,902.6M One year growth: 9.5% Net income: $4,285.8M Income growth: 1329.8% Officers: Chairman: Harish Manwani CEO and Managing Director: Douglas (Doug) Baillie Director, Finance and IT: D. Sundaram

Competitors: Kraft Foods Nestlé Procter & Gamble

Company History: Hindustan Lever Limited MUMBAI Hindustan Unilever, India’s largest maker of home products, reported 23% growth in earnings for the fourth quarter, compared with the year-ago quarter, as consumers bought more of its skin lotion and hair care offerings. Net income stood at $159 million, the Mumbai-based company said in a release Wednesday. In a year featuring a stronger winter and more dry skin, Hindustan Unilever's Pond's range of creams did extremely well, as did its Dove line of shampoos and conditioners. The home and personal care business grew by 18%. Personal care products from the maker of the popular skin-lightening cream Fair and Lovely grew at the fastest rate in five quarters. The foods business expanded by 16.6%. Hindustan Unilever is also rolling out its water purifier, Pure-it, which now retails in 10 states across the country. "Our business has witnessed the third consecutive year of accelerated double digit growth for our FMCG [fast-moving consumer goods] portfolio. Personal Products business registered robust growth in the December quarter," said Chairman Harish Manwani. But he pointed out that one of the challenges to growth is inflation. As costs of raw materials rose last year, Hindustan Unilever had to increase prices for some products. For the full year 2007, net sales were 13.3% higher than in the previous year, with the home and personal care segment and the food business growing by 12.3% and 20.2%, respectively. The consumer goods manufacturer is facing increasing competition from domestic rival ITC, formerly the Imperial Tobacco Company of India, and the Indian arm of Procter and Gamble (nyse: PG - news - people ). It increased advertising spending by 32% this quarter to combat the threat. "We reiterate our underweight call on Hindustan Unilever," Morgan Stanley analysts including Hozefa Topiwalla said in a note to clients. They observed that the company had strong numbers including a 270-basis-point improvement in gross profit margins, despite an intensification of cost pressures.

Hindustan Unilever’s earnings will be driven by "strong high-teens growth in the personal products business; recovery in laundry margins as the price war with P&G comes to an end; and successful foray into the nascent foods business. With 19.1% revenue growth in personal products and 70 bps EBIT margin growth in the soaps and detergents business, two of three triggers are in play," read the note from the Morgan Stanley analysts. Hindustan Unilever closed down 0.3%, at 193.05 rupees ($4.85), on the Bombay Stock Exchange.

Incorporated on 24 August 1910 as the Imperial Tobacco Company of India Limited, the company's name was changed to ITC Limited in 1974. Rated among the 'World's Best Big Companies' by Forbes magazine, ITC ranks third on all major profit parameters among India's private sector corporations. ITC employs over 20,000 people at more than 60 locations across India. It has a turnover of $3 billion. ITC's unique e-Choupal initiative began in 2000. ITC e-Choupal, the largest Internetbased intervention in rural India, empowers over 3.5 million farmers in 35,000 villages. It enables them to readily access crop-specific, customised information through vernacular websites. The service also creates a two-way direct marketing channel for rural India, eliminating wasteful intermediation and multiple handling.

ITC has a diversified presence in cigarettes, hotels, paperboards and specialty papers, packaging, agri-business, packaged foods and confectionery, branded apparel and greeting cards. ITC's agri-business is one of India's largest exporters of agricultural products. A wholly-owned subsidiary, ITC Infotech India Limited, provides end-toend IT solutions, including e-enabled services and business process outsourcing. top

India Kings, Gold Flake, Scissors, Bristol (cigarettes), ITC-Welcomgroup (hotels), Wills Sport (range of casual wear for men and women), John Players (men's wear), Essenza Di Wills (fragrances), Kitchens of India (Confectionery, staples and snack foods), Aashirvaad (flour), Sunfeast (biscuits), Mangaldeep, VaxLit and Delite (safety matches), Expressions (greeting cards) and Classmates (school note books).


Company Perspectives Mission: Unilever's mission is to add Vitality to life. We meet everyday needs for nutrition, hygiene, and personal care with brands that help people feel good, look good and get more out of life. Key Dates
• • • • • • • • • • • • • • • • • •

1888: Lever Brothers soaps are sold for the first time in India. 1931: Lever Brothers launches its first manufacturing subsidiary in India, Hindustan Vanaspati Manufacturing Company. 1933: A second Indian subsidiary, Lever Brothers India Limited, is established. 1935: A third subsidiary, United Traders Limited, is established. 1944: The three Unilever companies in India are placed under common management. 1956: A merger of the three companies forms Hindustan Lever Limited (HLL). 1962: Export operations are launched. 1969: HLL diversifies into fine chemicals production. 1971: Industrial chemicals production is added. 1980: Unilever reduces its shareholding in HLL to less than 52 percent. 1986: HLL launches an agri-foods unit. 1993: HLL merges with chief rival Tata Oil Mills Company. 1994: The company establishes Nepal Lever Limited in Nepal. 1995: HLL forms joint venture Lakme Lever Limited with Lakme, part of Tata, to produce cosmetics. 1998: HLL acquires full control of Lakme Lever. 2000: HLL acquires 74 percent of Modern Food Industries from the Indian government. 2002: Full control of Modern Food is acquired.

2006: The company undergoes a complete restructuring as part of the "power brand" strategy, selling Tea Estates India to a subsidiary of the Woodbriar Group. In 1985, ITC set up Surya Tobacco Co. in Nepal as an Indo-Nepal-British joint venture. In August 2002, Surya Tobacco became a subsidiary of ITC Limited and its name was changed to Surya Nepal Private Limited. In a short span of five years, ITC Infotech has already crossed over US$ 60 million in revenues.

Incorporated: 1956 NAIC: 325611 Soap and Other Detergent Manufacturing; 311119 Other Animal Food

Manufacturing; 311225 Fats and Oils Refining and Blending; 325620 Toilet Preparation Manufacturing SIC: 2841 Soap & Other Detergents; 2048 Prepared Feeds Nec; 2074 Cottonseed Oil Mills; 2075 Soybean Oil Mills; 2076 Vegetable Oil Mills Nec; 2077 Animal & Marine Fats & Oils; 2079 Edible Fats & Oils Nec; 2844 Toilet Preparations Hindustan Lever Limited (HLL) is India's leading consumer goods supplier, with a focus on the Fast-Moving Consumer Goods (FMCG) category that includes detergents, soap, shampoo, deodorant, toothpaste, and other personal care items, and

cosmetics. HLL's personal care brands include soap brands such as Lux, Lifebuoy, Liril, Breeze, Dove, Pear's, and Rexona; shampoos and hair coloring brands including Sunsilk Naturals and Clinic; skin care brands Fair & Lovely and Pond's; and oral care brands Pepsodent and Close-Up. The company's cosmetic line is led by the Lakme brand; HLL also produces a line of Ayurvedic personal and healthcare items under the Ayush brand. In addition to the FMCG segment, HLL has developed a line of food items, primarily under the Kissan and Knorr Annapurna brands, as well as the ice cream brand Kwality Wall's. In the early 2000s, HLL also acquired baked goods producer Modern Food Industries. In addition to its domestic brand family, HLL sells bulk foods, including maize, rice, salt, and atta. HLL is also an active exporter, shipping its FMCG and food brands, as well as rice; marine products including surimi, shrimp, crabsticks, and others; and castor oil. HLL has completed a restructuring of its business in the first half of the 2000s, streamlining its brand portfolio, from 110 brands to 35 "power" brands, while exiting a number of businesses, such as teas (sold to the Woodbriar Group in 2006) and specialty chemicals. HLL maintains a strong manufacturing presence in India, with some 80 factories located throughout the country; the company also subcontracts to more than 150 third-party producers. HLL is itself a subsidiary of Unilever, which controls 51.55 percent of the group. HLL is listed on the Mumbai Stock Exchange. Indian Manufacturing Base Starting in 1931 England's Lever Brothers began importing their Sunlight brand soap into India in the late 1880s. By 1895, Lever had introduced another of its brands, Lifebuoy, which became the company's longest-running successful brand in India. Other Lever brands followed into the beginning of the next century, including the Lux soap flake brand in 1905; and scouring powder Vim as well as soap brand Vinolia in 1913. Lever Brothers, by then well into an international expansion that would see the company become one of the world's top multinationals, also acquired and introduced a number of other brands into the Indian market, including Pear's soap, in 1917. By 1930, Lever Brothers, which also had entered areas such as food production, including edible oils and margarine, had merged with The Netherlands' Margarine Unie, forming Unilever. Unilever's Indian sales were based on imports into the early 1930s. The company had begun planning, however, to establish a manufacturing presence in the Indian subcontinent as early as 1923. The company began talks with the British and Indian authorities, and finally received permission to build its first factory in 1931. In that year, the company incorporated a new subsidiary, Hindustan Vanaspati Manufacturing Company, to produce edible oils. That company opened a production facility in Sewri in 1932. Two years later, the company added another subsidiary, Lever Brothers India Limited, for the production of soap, and began construction of a factory next to its Vanaspati facility. That company launched production of Sunlight-branded soap at a factory in Bombay in 1934. In that year, as well, the company took over production at the Calcutta factory of another company, Northwest Soap, where it began producing the Lever brand family. That factory, known as the Garden Reach factory, added production of a line of personal care products in 1943.

In 1935, Unilever added a third subsidiary in India, United Traders Limited. This unit was created to provide marketing support for the company's other operations, tailoring the group's sales to the specifics of the Indian population. Through the 1940s, Unilever's Indian unit began extending its sales network throughout India, building up its own sales team, and adding sales offices in Mumbai, Chennai, Calcutta, Karachi, and elsewhere. The transition of Unilever's multiple businesses to the single Hindustan Lever Limited began in the 1940s. In 1944, the three Indian companies were reorganized under a unified management. Nonetheless, the companies retained separate sales and marketing businesses. In the meantime, the company had launched an effort to transition the company from one led almost entirely by foreign and, in large part, European management, to one staffed primarily by Indians. This effort began in 1942, when the company began training Indians for its junior and then senior management positions. By 1951, the company appointed an Indian, Prakash Tandon, to the managing director's position. Tandon led the merger of the three Indian subsidiaries into a single entity, Hindustan Lever Limited (HLL), in 1956. By the end of the decade, Tandon had taken over the chairman's position as well. By then, nearly all of the group's management positions were filled by Indians. HLL was then taken public, as Unilever reduced its stake in the company in favor of domestic shareholders. By 1980, Unilever's stake in HLL had dropped to less than 52 percent. National Consumer Goods Giant in the Second Half of the 20th Century HLL already produced a wide range of consumer goods for the Indian market by the early 1960s. In 1962, the company launched its own export operations as well, in a move made in part to bring foreign exchange capital into the struggling Indian economy. HLL's exports reflected the company's own multifaceted operations. In addition to producing and supplying raw materials and finished products, including a number of specialty chemicals and tea, in the support of the international Unilever brand family, HLL also developed a bulk goods export business. For this the company focused on Indian-specific goods, such as castor oil, Basmati rice, and a variety of marine products, including shrimp and surimi. HLL set up a new headquarters in Mumbai in 1963. The following year, the company entered the dairy industry, establishing its Etah dairy and launching the Anik brand of ghee (a prepared butter product used in Indian cooking). The company also began producing animal feed that year. Meanwhile, HLL launched a new shampoo, Sunsilk, for the Indian market. By the end of the decade, HLL had launched a number of other successful brands, including Signal toothpaste, Taj Mahal tea, Bru coffee, and Clinic shampoo, launched in 1971. By then, the company had firmly established itself as the leading producer of so-called "fast-moving consumer goods." Part of the company's success came from its highly active sales network. A significant proportion of India's population, which would top one billion before the dawn of the 21st century, still lived in rural regions and in extreme poverty. For much of this population, personal care products remained luxury items. Yet the company recognized the importance of building its brands in this region as well, and as such the company developed a vast sales network. Much of this network was based on an army

of independent, direct sales agents, who hawked the company's products in the country's more than 150,000 villages. Into the 1970s, HLL also began diversifying beyond its consumer goods operations. The company opened the Hindustan Lever Research Center, in Mumbai, in 1967. This led the group to begin producing fine chemicals in 1969. By 1971, the company had received permission from Unilever to enter the production of industrial chemicals. The company began construction of a pilot plant for this operation in Taloja in 1974. This unit was completed in 1976. In that year, HLL launched the construction of a larger chemicals complex, at Haldia. That facility began producing sodium tripolyphosphate in 1979. The production of these chemicals enabled HLL to begin producing synthetic detergents at Jammu in 1977. Through the 1980s, HLL continued to develop its businesses. In 1986, the company set up an agri-products business, based in Hyderabad, which began producing hybrid seeds that year. HLL also added a new soap production facility in Khamgaon, and a personal products factory in Yavatmal that year. HLL's growth had nonetheless been limited by restrictions put into place by the Indian government's quasi-socialist economic policies. In 1991, however, in the face of a major economic crisis, the government was forced to liberalize the country's economy. This opened up a new era of opportunity for HLL. Power Brand Focus into the 21st Century A major step forward for the group came in 1993, when the company acquired its leading rival, Tata Oil Mills. By then, HLL also had met with success in the detergents category, with the launch of its Surf Ultra brand. This brand targeted the country's middle class, which, with the liberalization of the country's economy, was also becoming one of the fastest growing segments of India's population. In a further move to target this population, the company launched a new, high-end detergent brand, Surf Excel, in 1996. By the mid-1990s, HLL's revenues had topped $540 million. The company also had launched its first foreign subsidiary, establishing Nepal Lever Limited. That unit began producing soaps and detergents and other products within the HLL brand family, both for the Indian and Nepal market, as well as for the larger export market. HLL also began developing a series of joint venture partnerships in the 1990s. In 1995, the company teamed up with Tata, this time forming a 50-50 joint venture with Tata's Lakme cosmetics group. HLL bought the Lakme brand family just three years later, taking full control of Lakme Lever. By then, the company also had formed a joint venture with Kimberly-Clark, which began marketing the Huggies diaper and Kotex sanitary pad brands in India. HLL also deepened its food brands during the 1990s and into the 2000s. The company acquired Kwality and Milkfood, which included the Kwality Wall's ice cream brand. In 2000, HLL marked the beginning of a new era in India's economy, when it acquired 74 percent of Modern Food Industries Limited. A major baked goods business in India, Modern Food had previously been owned by the Indian government, and

marked HLL's extension into an entirely new product category. HLL subsequently acquired full control of Modern Food in 2002. The first half of the 2000s nonetheless represented a difficult period for the company, which was faced with an economic slowdown in its core Indian markets. At the same time, HLL underwent a dramatic restructuring as part of the parent company's global "power brand" strategy. The company began streamlining its brand portfolio, which had grown to some 110 brands by the beginning of the decade, cutting that number back to just 35 brands by mid-decade. As part of this refocus, HLL also began selling off its noncore operations, including its chemicals businesses. That process was completed in large part with the sell-off of the last of HLL's tea plantation and production units, Tea Estates India, which was sold to a subsidiary of the Woodbriar Group in 2006. By then, HLL appeared to have once again moved into a growth phase, posting revenue gains of 9 percent, and net profit growth of some 23 percent, over the previous year. HLL also prepared to enter a new management era; in 2006, the company appointed Douglas Baillie, who previously headed Unilever's operations in Africa, as the company's CEO. That appointment placed a non-Indian at the head of the company for the first time in more than 40 years. HLL appeared certain to clean up in India's consumer goods market for decades to come. Principal Subsidiaries Bon Limited; Daverashola Tea Company Limited; Hindlever Trust Limited; Indexport Limited; Indigo Lever Shared Services Limited; International Fisheries Limited; KICM (Madras) Limited; Kimberly-Clark Lever Private Limited (50%); Lever India Exports Limited; Levers Associated Trust Limited; Levindra Trust Limited; Lipton India Exports Limited; Merryweather Food Products Limited; Modern Food and Nutrition Industries Limited; Modern Food Industries (India) Limited; Nepal Lever Limited (Nepal) (80%); Ponds Exports Limited; Quest International India Limited (49%); Thiashola Tea Company Limited; TOC Disinfectants Limited. Principal Competitors Nirma Ltd.; Jocil Ltd.; Nahar Industrial Enterprises Ltd.; Shrihari Laboratories P Ltd.; Ruchi Infrastructure Ltd.; Procter & Gamble Hygiene and Healthcare Ltd.; Amrit Banaspati Company Ltd.; Henkel SPIC India Ltd.; K S Oils Ltd.; Ultramarine and Pigments Ltd.; Vashisti Detergents Ltd. Further Reading Ananthanarayanan, Ravi, "New Improved HLL Rides the Bandwagon," Economic Times, February 18, 2006. "Can Lever Get the Lather Back?," Business Week, December 4, 2000, p. 29. Dadiseth, Keki, "Poor People," Fast Company, June 2001, p. 120. Dinakar, S., "Choice and No Choice," Forbes Global, November 14, 2005, p. 40.

------, "A Penny a Packet," Forbes, November 28, 2005, p. 186. "Future Perfect," India Business Insight, February 27, 2006. "HLL Sells TEIL to Woodbriar Group," Business Line, March 3, 2006. Lakshman, Nandini, "The New Broom at Hindustan Lever," Business Week Online, December 29, 2005. Tanzer, Andrew, and Ghosh Chandrani, "Soap Opera in Bombay," Forbes, June 11, 2001, p. 129. "Unilever Jewel," Business Week, April 26, 1999, p. 114. — M. L. Cohen

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