SALES & DISTRIBUTION

MANAGEMENT
Group Assignment –PART B
FMCG Non-Eatables
SOAP INDUSTRY (INDIA)

Group 3FH
Chandran M 2016PGP099
Garima Sharma 2016PGP126
Harshwardhan Singh 2016PGP140
K N Nagadarshini 2016PGP158
Mehta Chirag 2016PGP211
Rishab Khaitan 2016PGP313
Saumya Garg 2016PGP343
Vandan Vamsi 2016PGP417
HINDUSTAN UNILEVER LIMITED
Introduction

Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer

Goods Company with a heritage of over 80 years in India. With over 35 brands
spanning 20 distinct categories such as soaps, detergents, shampoos, skin care,
toothpastes, deodorants, cosmetics, tea, coffee, packaged foods, ice cream, and
water purifiers, the Company is a part of the everyday life of millions of
consumers across India.

HUL - Market share, brand share and sales

Hindustan Unilever continued to lead bath and shower in India in 2015,

recording a value share of almost 46%. The company has a large number of
brands and product offerings at various price points to tap into the market, with
its leading brands including Lifebuoy and Lux, which both accounted for 12%
of retail value sales in 2015. In addition, the company also recorded the highest
absolute sales growth during 2015 (INR320.8 billion) due to its larger consumer
base.
Other soaps brands of HUL include Dove, Pears, Breeze, Hamam.

Market Share in Bath & Shower category (2015)

HUL 45.7%
Reckitt Benckiser 8.9%
Godrej 8.1%
Wipro 7.5%
ITC 5.9%
Others 23.90%
Company share in bath & shower category

23.90% HUL
45.70% RB
5.90%
GODREJ
7.50%
WIPRO
8.10%
8.90% ITC
OTHERS

*Source: Euromonitor International

PRODUCT PORTFOLIO OF HUL
Brand Share of Bath & Shower (2015)
Lifebuoy 12.4%
Lux 11.6%
Dettol 8.9%
Santoor 7.2%
Dove 5.5%
Godrej No.1 4.6%
Hamam 3.6%
Cinthol 3.2%
Pears 2.5%

Sales by Value (2015):

Category INR Millions
Bath & Shower 201,155.4
Bar Soap 178,863.2

Bar soaps is the largest bath and shower area, accounting for 89% of retail value
sales in 2015.

Lifebuoy
Lifebuoy has journeyed from humble beginnings of being a chunky red bar of
soap to an evolved range of general and specialized products across formats,
offering solutions in the health and hygiene space. Lifebuoy is World’s No. 1
Selling Germ Protection Soap.
Lifebuoy is available in bar soaps, liquid hand wash, hand sanitizer and talc.

Recent campaigns by Lifebuoy:

Lifebouy has a strong social mission, promoted through its rural hygiene
programme, Khushiyon Ki Doli, (which propagates the practice of hand
washing with soap to reduce diarrheal deaths.), Help Reach a Child 5 campaign
and World Handwashing Day.There was also a huge ad campaign by Lifebuoy
undertaken at the Kumbh Mela to spread the message of cleanliness and
handwash.
INNOVATIVE SALES AND DISTRIBUTION
INITIATIVES BY HUL:
PROJECT SHAKTI:

Starting 2001, HUL began expanding its reach through Project Shakti to reach
consumers in villages. HUL has recruited local female entrepreneurs— Shakti
Ammas (“Shakti” – power and “Amma” – mother)—across 15 states to act as
salespeople and brand-builders. HUL’s products are delivered to central
locations where Shakti Ammas purchase the goods and from there to thousands
of villages.
Project Shakti has expanded its operations to include men (Shaktimaan) as part
of its distribution network.
With 45,000 Shakti Ammas and 26,000 Shaktimaans, HUL today reaches an
estimated 3 million rural households a month through this initiative.

GEOTAGGING

The Company makes use of 'geo-tagging' to understand how far villages are
from the nearest highway and how long it would take the nearest distributor to
reach them. Plans can now be made in a more methodical manner.
In addition to improved maps, HUL is also making use of wireless technology
to get real time information on demand patterns and trends.

KHUSHIYON KI DOLI—a new campaign strategy

The latest brand building initiative by the HUL in the rural India is “Khushiyon
Ki Doli”. The main motto behind the campaign is to create awareness with the
use of technology and engaging the common mass. Four set of dolis or
palkis are moved all around the village. Equipment like LCD TV, a DVD Player
and a small generator is there in each of these dolis or palkis.
Khushiyon Ki Doli, which was launched in 2010 was a huge success thereby
covering around 70K villages, 25 million consumers and 4 lakh retailers.
SALES AND DISTRIBUTION SYSTEM

Distribution Channel:

Manufacturing Unit

Supermarkets Carrying and

e
Forwarding Agents

Redistribution
Stockists

Wholesalers

Rural Retailers Urban Retailers

Customers
DISTRIBUTORS

On the basis of our interaction with an erstwhile distributor of HUL, who

currently operates HUL Adda in campus, we got some insights about the how
the distributor network works. HUL has 4 distributors in Indore territory who
procure their materials mostly from carry forward agents or special
stockists. These agents generally stock in large quantities and push these
products by giving bulk deals on their discretion to the distributors. The
distributors are spread across the territory to capture maximum wholesalers and
other downstream buyers. Their margins are low, 5%-6% because they buy and
sell in bulk. Because of high market capture of Unilever, it does not give credit
period relaxation as most of the proceeds are done on cash payments. Buyers of
distributers are majorly wholesalers who also get quantity discounts on the
discretion of distributor. The quantity discounts are mostly availed by those
wholesalers who have a high market reach and are confident about selling the
stock in time.

WHOLESALES
We received a few contacts and referrals of wholesalers from our retailers. Approximately
there are more than 100 wholesalers in and around Indore.

1) Best Price (Walmart) (Indore)

Manufacturing Customers/Big
Wholesaler Customers
Unit Bazaar/More

Name of Manager: Mr. Pradeep Singh

Position: Assistant Stores Manager
 Visits by distributor: 2-3 times a month
 Inventory replenished by store owner: 21 days
 Trade Promotion Seasonal (festive season)- The discounts are nationwide
and not store specific. Both price and quantity discounts are availed but
are not quite frequent.
 Margins: 10% for other retailers
 Most selling: Depends on seasonality as well as location, Lux is the most
popular brand here but if differs on a zonal level
  It is on the discretion of Best price store managers to decide the
positioning of the product on the shelfs. No additional incentives given
for positioning SKUs
 Margins remain constant. National HQs take a call if there are any
changes required.
 Salesforce: Same person comes every time
 Distributors are company specific (E.g. ITC, HUL, Godrej, etc.)

2) SRI GANESH TRADERS

 He has a daily customer base of 200 retailers, mostly khirana shop

owners, visit the area on a bi-weekly basis to purchase their stock
 These wholesalers can get their product either directly from distributor or
from wholesale supermarkets like Best Price, Metro Cash & Carry, and
Reliance mart
 No targets are provided to the wholesaler
 The wholesaler gets relatively less/no trade promotions as opposed to a
mall
 The wholesaler gets a margin of 1.5% on soaps
 The wholesaler is eligible for credit period of 7 days
 Salesman visits the area twice a week to take order of stock to be
replenished. Stock outs do not usually happen
 Typical customers for Wholesalers are local khirana stores, medical
stores and retail customers
 According to the wholesaler fast moving products of HUL are Lifebuoy
and Lux
 Fast moving competitor product Godrej No. 1
 The distributor doesn’t have price discrimination for volume slabs
 He gets cash discount

RETAILERS
Our team undertook 6 visits to different marketplaces to as to get an
understanding of the sales and distribution management system followed for
soaps (with a focus on HUL Lifebuoy soap) e.g. company practices, channel
practices, norms, margins etc.
An important information that we gathered regarding HUL products was the
fact that retailers do not rely on credit very much for its products. This is
 because HUL product has high turnover, so the company leverages on its vast
brand portfolio by not providing credit.
Generally the retailers get good deals from distributors by buying in bulk from
them. Their margins vary from 8-10%. These margins vary from product to
product on the basis of their sales in those territories. They also sell SKUs in
loose quantities where there are quantity discounts prescribed by companies.

Following are the chronicles of our visits:

1) MOM and POP Stores (Rau):

Carrying and Redistribution

Manufacturing MOM and POP
Forwarding Stockists- Customers
Unit stores
Agents Wholesalers

Shop 1: G.K. Stores (mid-sized)

 Distributor visits the store 4 times a month for checking the inventory
levels.
 The stock is replenished 3 times a month.
 Promotional offers are only provided during festive season.
 Owner captures consumer promotions (E.g. Buy 4 lifebuoy and get 1 free,
owner sells all the 5 lifebuoy at MRP loosely. Thus shopkeeper usually
pushes the product which has such an offer to get maximum profits for
himself. Rural consumers are not aware of such offers.)
 Cash discount (Upfront Payment): 2%. No credit is taken by this store
 Margins: 10%
 Most selling: ITC Superia
 HUL also pays extra (Rs200) for displaying stock on special rack.
 Margins is increased every 4-5 months
 Salesforce: Same salesperson comes every time
Shop 2: Shringaar (mid-sized)

Most of the features are similar to GK stores except a few of the following:

 Profit earned on Lifebuoy is Rs 2 and that on Cinthol is Rs 1.3

 Cash discount received is 1.5-2%, while credit period given is 15 days.
 Supervisors from company come periodically to check inventory in store.
 Complaints regarding distributors can be easily made with the help of
internet.
 Festive gifts and Quantity discounts given by companies.

Shop 3: Kotwal (large size)

 Credit period- 7 Days

 Margins- 8% on an average
 Patanjali is a very important product for this store as per customer
demand. If the product is not available customers can be lost.
Shop 4: Chittoda General Store (mini-wholesaler)

 Distributor visits: 4times/month

 Additional 2% margins compared to retailers for bulk purchases.
 Distributor warehouse of soaps in DEVAS NAKA (covers entire
Indore)
 Retailers and wholesalers prefer to sell the product which have high
volume demand and low margins over low volume demand and higher
margins
 Credit period by HUL: (4-5 Days) ( But not preferred by the owner as
cash discount is preferable)
 Best-selling Soap: Godrej No. 1
 HUL Distributor gives company Targets to wholesaler
 Unilever Targets: Monthly
 Godrej Targets: Quarterly
 No incentives if targets are not met.
2) MODERN RETAIL - Big Bazar and MORE (Indore City)

Manufacturing
Retailers Customers
Unit

Big Bazaar:

Interviewees: Bilal Ahmad Qureshi (Store Manager) and Anand Solanki

(Employee)
 A visit by the zonal officers was being done when we visited the shop and
the entire stock, layout, offers etc. was being audited. This is done 2-3
times a year.
 Every company refill stock on different days of the week. For example,
HUL refills stock every Monday, while P&G refills stock every Tuesday.
 The soaps are stacked on different levels with the most popular ones kept
at “eye-level”, to ensure visibility.
 The layout for the different brands is derived from sales and is
determined by the Head-Office.
 Dove is the best-selling soap, followed by Lifebuoy and pears.
 Godrej No1, Dettol and Fiama Di Wills give good competition to the
market leader HUL.
 The combo packs and offer soaps are generally kept on higher levels of
the shelf while loose soaps are kept on lower levels.
 Brands from HUL, ITC, Dettol, Godrej are always on higher levels of
shelf while Patanjali and Neem are on the lower levels.
 Branding and sales are pushed through various techniques like “Hand-
Caps”, “Front –Layout”, “Floor stacks”, “Dump bins” , FSUs, Free
combo offers.
MORE:
Interviewees – Pramod Mahesh Wari (Store business manager), Amit (Store
employee) and Pankaj Jain (HR manager)
 Here also there is no intermediary and the products are bought directly
from company and the stock refilling is the same like Big Bazar.
 Branding, advertisement and discounts are paid for by the company.
 Most sales are done from Lifebuoy in the mid-range soaps and Dove in
the premium range soaps.
 There is a MORE specific PLANO sent by the head-office. This is the
design of how the displays are to be made. MORE employees are very
strict about adhering to the PLANO and during our visit there were
continuous rounds by admin department personnel just to check the
PLANO was adhered to. It contains all the information of product display
including the number of lines of the product to be displayed in the
allotted space at each part of the shelf.
 No sign of Patajali in MORE store.
 Store employees say that the customer behavior is such in case of soaps
that they can’t induce buy, customers themselves select the product, the
only thing that they enquire about is the combo or discount offers.
Points of Differentiation between the 2 stores

 Big Bazaar is flexible about following the design of Layout while More is
very strict about following the PLANO.
 MORE has much more variety of products compared to Big Bazar in case
of soaps.
 Big Bazaar has more lucrative offers compared to MORE. For example,
at Big Bazaar for Pears soap – Buy 4 get 2 free. At More, Buy 4 get 1
free.
 At Big Bazaar, there were 4 promotor employees for HUL and at MORE
there were 8 promotor employees for HUL. Other brands have less than
half of the employees for HUL. But none of these were allotted for
dedicatedly soaps section as soaps are considered to be self-selling
products.
 3) Pi Shop (IIM Indore)

Carrying and Redistribution

Manufacturing
Forwarding Stockists- Retailers Customers
Unit
Agents Wholesalers

 Visits by distributor: 2 times a month

 Inventory replenished by store owner: 3 times a month
 Credit Period: 15 days
 No Cash discounts
 Margins: HUL: 9%, Godrej 10%
 Most selling: Dove. Seasonal: Liril in Summer, Pears in Winter,
Lifebuoy. Hamam and Rexona is the least selling
 No incentives and targets
 No racks and display units
 As the area falls under rural area the wholesale supplier runs out of stock
very fast. HUL is the fastest moving brand but stock outs with
distributors. P&G is very good with supply and credit. But customer
prefers HUL.

4) D-Mart
Unfortunately, our visit to D-Mart yielded no result, as the store manager
regrettably informed us that according to their company policy they can’t
divulge any information and can’t entertain such requests.
 SALES MANAGEMENT STRUCTURE
Sales Structure of HUL:

NATIONAL ZONAL REGIONAL AREA TERRITO

RY

ZONAL
SALES
MANAGER
(NORTH)
SALES
ADMINIS
ZONAL TRATIVE
SALES EXECUTI
MANAGER VE
(WEST)
AREA
SALES
MANAG
ER
ZONAL
NATION SALES
REGION
AL MANAGER AL
SALES (CENTRAL SALES
MANAG ) MANAG
DISTRIBU
TOR
ZONAL
SALESMA
SALES
MANAGER N
(EAST)

ZONAL
SALES
MANAGER
(SOUTH)
Salesforce Roles And Responsibilities:
National Sales Manager:
 Mediator between the company and the other sales mangers
 Monitoring the activities of Zonal Sales Managers
 Estimating the Sales Quantities
 Setting targets for managing the distribution reach

Zonal Sales Manager:


 Providing information for planning targets for distributors
 Hiring of Regional and Area Sales Manager
 Planning the trade schemes provided to the distributors

Regional Sales Manager:

 Overall P&L of assigned territory
 Ensuring maintenance of Company policies
 Managing the cohesiveness of the sales team
 Training and Development of ASMs

Area Sales Manager:

 Primary target achievement (Company to distributor)
 Ensuring company best practices at distributor operations
 Managing relationship with government officials and legal entities
 Training and Development of sales officers

Territory Sales Incharge (or Sales Officer):

 Secondary target achievement (Distributors to market)
 Ensuring execution of all strategies-selling/promotions etc.
 Managing relations with the top retailers and wholesalers
 Training and development of Distributor salesmen

Distributors:
 Buy and hoard stocks for selling at market
 Provide infrastructure for retailing services
 Managing relationships with local administration
 Managing business and goodwill for self and company
Distributor Salesmen:
 Achieve daily targets by travelling and selling in retail and wholesale
markets.
 Bring orders for inventory replenishment.
 Provide information of top selling brands and products
 Provide other services to shops-eg. merchandising
 Collect information on competition and market
 Increase and enrol more shops under company coverage.

Retailers:
 Selling Company products to end consumers
 Maintain freshness of products by selling First Expiry First Out process
(FEFO)
 Proper execution of in shop marketing activities
 Introduce new products to small outlets by communicating benefits.

SELLLING PRICE AND MARGIN

Lifebuoy SKUs
SELLING PRICE
120g 90g
Retail selling Price 15 12
Modern Retail Price* 14.13 11.31
Wholesale selling Price 13.95 11.16
Distributor Selling Price 13.392 10.71
Manufacturer Selling
12.7224 10.18
Price

Not Product
MARGINS
Specific
Retailers (Khirana) 7%
Modern Retail* 10%
Wholesalers 4%
Distributors 5%

*Procured directly from Manufactures. Includes Big Bazaar, Best Price etc.
COMPETITORS SALES AND DISTRIBUTION NETWORK
HUL’s main competitor is Reckitt Benckiser’s Dettol.
RB’s Sales Distribution Structure is as follows:

COMPETITORS VS HUL
RECKIT BENKISER:
The national sales department of RB has divided India into four zones
consisting of four zonal managers reporting to a National Sales Director. Area
sales managers report to Zonal Sales Managers. Each Area Sales Manager
(ASM) has 8 Territory Sales In charge (TSI) reporting to him. Each TSI has
about 7-8 Distributor Sales Representative reporting to him. Each of the Area
Sales Executive supervises about 9 Pilot Sales Representative. On the other
hand, for the channel involving modern trade, the sales force is a centralized
one. The ASMs for modern trade are separate from those for the normal
channel. The TSIs are also different for modern trade.
Dettol also occupies the same shelf position as Lifebuoy/Dove in all retail
outlets. However the promotions, SKUs and inventory of Dettol soaps are
far less in comparison as was observed during our field visits.
The margins for Dettol are similar to HUL products as told by the different
players in the distribution channel, the difference lies in the branding,
promotional offers and Inventory. Also Dettol sells more as a liquid hand-
wash rather than a bathing soap unlike Lifebuoy. Dettol was not seen as a
bathing soap among retailers and it was present only in the super market.

HUL: HUL has a robust distribution model which comprises of C&FAs.

Redistribution Stockists, wholesalers and retailers (as shown earlier). One of the
biggest strengths of HUL is its distribution strength. The goods produced in
each of the HUL's 45 (approx.) factories are sent to a depot with the help of a
carrying and forwarding agent (C&FA). The company has its depot in almost
every state of the country. The C&FA is a third party and gets servicing fee for
stock and delivery of the products. In each town, there redistribution stockist
(RS) who takes the goods from the C&FA and sells them to retail outlets.
However gradually HUL realized that this model of sales channel was not a
viable one for smaller towns and villages and it is also expensive to appoint one
stockist exclusively for each town.

CHALLENGES FACED IN CHANNEL MANAGEMENT BY HUL

 Integrating operations with distributors and channel partners
 The retailers could buy from dealers in metros/adjacent states providing
discounts. This will say that company is growing but this will not be
reflected in numbers
 Wholesaler stocks in bulk during discount period only to sell later
 Company representatives undercut to meet targets
 Cross- geography undercutting due to difference in VAT
 Dealers complain to the company that certain stock perished during
transportation and ask the company to write-off these stocks, but in
reality they sell these products in places where the bar code tracking is
absent.
 Absence of communication and reporting between channel partners
 Employee retention
Recommendations:
 More visits by HUL can be done during discount time to ensure that
retailers are not stocking it in bulk during that period. Inventory
management can be done during that period weekly and salesperson can
be constant touch to monitor the movement of goods.

 Establishment of ERP software at retailer level to ensure proper

communication between different channels to improve communication
among them. Integration of information between such levels will also
give a better picture of performance of products.

 Employee retention can be controlled by altering compensation plan

according to industry standards. Fixed pay and variable pay can be
adjusted to increase commission as it will motivate them to increase sales.
Targets can be set in comparison with competitors and achievable. This
may also result in less undercutting.

 Cross geography undercutting can be reduced by recording information

of the customers of distributors/wholesalers and including tracking of
transportation systems to a certain extent.