Group 3: Himanshu Kamat (22) Hitesh Mahansaria (24) Sahil Gupta (88) Prachi Bansal (84) Kuntal Panja (106

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Overview of HUL
Distribution Network Sales Force Management Incentives Financial Analysis

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    Maintaining Favorable trade relations Providing innovative incentives to retailers Organizing demand generation activities Logistic Support Evolution of Sales Force Salesman  Registered Wholesaler  A stock point for company’s products in that market   .

 Products manufactured over 40 factories decentralized across 2 million square mile of territory. Distribution network consist of     4000 redistribution stockists 6.3 million retail outlets  Reaching entire urban population and about 250 million rural consumers . The operation involves 2000 suppliers and associates.

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Factory Carrying and Forwarding Agent Distributor Urban Area Redistributi on Stockists Star Seller Rural Area Redistribut or .

Redistribution Stockists Whole seller Family Groceries Retailers .

 Carry and Forward Agents    Buffer stock points Resulted in cost saving in terms of direct transportation and reduced time lag delivery Improved customer service to RS  Redistribution Stockists    Provide distribution units to the company salesman Company Depot Helped in transshipment. stock point to minimize stock out at the RS level . bulk breaking.

 Demand simulation and screening for transit damages  . reporting sales and stock data. service to retailers. Role by redistribution stockists Financing stock. manpower. extending indirect coverage. warehousing facilities. implementing promotional activities.

   Markets with population below 50.000 villages. through 6000 sub stockists  Criteria is accessibility and viability . reaching 250 million consumers. Exclusive sales force and exclusive redistribution stockists Covers around 50.000 under rural sales organization.

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 Indirect coverage (IDC) launched in 1960s RS responsible for   All outlets and all business within his particular town  Sub stockists responsible for  Assigned for 25 % of the accessible market with low business potential  Access all the villages at least once in a fortnight and send stocks to those markets. scooters or the age old bullock cart.  Incentivizing channel through credit extension and trade discounts to influence retailer stocks and quantities .  Transportation through interconnecting roads. like cycle.

Project Shakti Project streamline RS Net Initiativ e .

    Symbiotic partnership between HUL and its consumers started in late 2000 Access 80.000 villages HUL’s partnership with Self Help Groups (SHGs) of rural women Extended to 12 states .000 of India’s 638.

   Shakti Entreprenuer Sells goods directly to consumers and retailers Caters to 6-10 villages in the population strata of 1000-2000 .

Sub stockists – drives distribution in neighboring villages using unconventional means of transport such as tractors and bullockcarts Higher quality servicing. Initiated in 1997. is an innovative and effective distribution network for rural accessible market with high business potential. credit and full line availability is provided as part of new distribution strategy . in terms of frequency.

Leveraging scale and building expertise to service Modern Trade and Rural Markets. Delayering of sales force to improve response time and service levels. fairs and festivals. Servicing channel partners and customers with continuous daily replenishment. weekly markets (haats). Innovative ways of reaching customers in rural areas by leveraging non conventional media like cinema vans.    .

Direct Selling Model .   Mother Depot and Just in Time System – JITs draw their requirement from MD on a weekly or bi weekly basis. . consist of independent entrepreneurs trained by HLN managers spread over 1500 towns and cities.Provides customized offering in 11 home and personal care and food categories. covering 80% of the urban population backed by 42 offices and 240 service centres across the country. Hindustan Lever Network – Direct selling Channel.

Accounts for about 80% of the company’s turnover.  RS Net – launched in 2001    Connecting Redistribution Stockists through internet based system. . and 7000 stockists. RS Net is one of the largest B2B e –commerce initiative aimed at continuous replenishment basis. Leveraging Information Technology – extended supply chain across 2000 suppliers. reducing inventory buffers. and optimizing planning and scheduling. Live customer/supplier collaboration and integrating demand and distribution planning with production scheduling.  Adexa iCollaboration Suite – Project Leap increasing supplier/distributor responsiveness. 80 factories.  Facilitates centralized monitoring of SCM.

 Super Value store – restructuring of traditional retail to self service modern retails.000 stockist salesmen    . to maintain HUL’s competitive advantage. Franchising of Lakme Beauty Salons and Ayush Therapy centres to leverage the equity of its brand though relevant services. Launching of Unicare scheme with upmarket pharmacies and retailers to sale its premium brands Project Dronacharya – aimed at continuously imparting training to over 10.

 Major Tasks    Maintain favorable trade relations Provide innovative incentives to retailers Organize demand generation among . Challenged by ever changing needs of consumers and to ensure availability of their products.

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•The working cycle of a typical HUL sales force member is from 21st of every month to the 20th of the next month. . •Particular area is assigned to the member who has to cater to all the retailers in that area. •Incentivizing sales force at HUL can be Monetary and Non Monetary.

It consists of 4 components ‐ 1.The sales force is evaluated using QOC model (Quality of Contribution). 2.5) Eco (Max points = 0.5) FCS (Max Points = 0. Secondary Sale (Max points = 2.5) Focus (Max points = 0.5) . 4. 3.

. if he achieves 95% target he gets 1. . Rs.  Based on the operating area. 15 lacs) for the operating month (21st – 20th of next month). If the member achieves 100% of the target he gets 2.5 points. each member is given a specific target in terms of value (e.g.5 points. These points are used to add to the total QOC score as well as linked to monetary incentive.

The following is a typical ECO target assigned to a field force agent: Lux International – 105 outlets x 1 SKU Pears Soap ‐ 135 outlets x 1 SKU .   This is used for the penetration/reach of certain products in the existing market.

5 points added to his QOC score along with monetary incentive associated with it. he looses the opportunity.     The outlets mentioned are within the operating area of the person and 1 SKU = Rs. However if this is not met within 5th. Based on this the Field person calculates number of packs he should sell to the retailers. . Upon completion he gets additional 0. 27/‐. The concerned agent receives this target around 25th of each month and has to complete this target within the 5th day of next month.

220 /‐ @ Rs 10/‐ per unit Wheel ‐ Rs 99.      This is mainly used to increase the sales volume of certain products.640 /‐ @ Rs 6/‐ per unit Life Buoy ‐ Rs 70.000 /‐ @ Rs 10 /‐ per unit This target needs to be achieved within 20th of next month.000 /‐ @ Rs 10/‐ per unit Breeze Soap ‐ Rs 27. .5 points which is then added to his overall QOC score. Upon achieving the target the field person is awarded 0. A typical „Focus‟ target is given below: Lux International – Rs 20.

Each scheduled visit per outlet is one per week. If this is achieved the retailer gets a discount of 1% on the billed amount and on the other hand the field person gets an additional score of 0. The sales person is required to achieve 90% success rate to get 0.5 points for his QOC score and at least 65% for a satisfactory performance.    In this component. .5 which is added to his QOC score. the field force persons are required to ensure that the scheduled visit/outlet billing is such that at least 15 items are demanded per order. For example if there are 100 outlets within the operating area of a field person then the number of visit per week is 100 and total number of visit per month = 100x4 = 400.

If QOC score > 4.5 – The person is eligible for 7 star award If QOC score > 4 – The person is eligible for 5 star award If QOC score > 3. These awards are also known as „MOC Star‟ awards.5 – The person is eligible for 3 star award In the event of exceptional performance. The photograph of the award winners is displayed in the office as a source of inspiration for other sales person. . Based on the QOC various awards are distributed to the field persons at the end of every month. MOC stands for Monthly operating Cycle. management representatives from the regional office come to the zonal office to distribute the awards.     The other purpose of the QOC scores is to highlight the performance of the field person among his peers.

5 % max.76% which includes cash discount. incentive schemes & other incidental expenses.Redistribution Stockists:  Sales Margin: 4.0% max. distribution expenses to retailers.   Modes of transport used: tempo. Selling Operations: RSs sells the goods to ‐ Wholesaler (gets 1. unloading expenses from depot. discount from RS) Retailers (gets 1.    Incentive schemes: Before 2000 holiday packages and tours but after 2000 no non‐monetary incentive for RS. discount from RS) .

Wholesaler:  Gets cash discounts and other schemes promoted by HUL (gets points under Vijeta Scheme).  The wholesaler gets bulk discounts when he orders in bulk. Most of the bigger wholesalers get these discounts since their orders are huge and they in-turn supply to major retailers of a particular region.  .

. detergents ‐ 8% on MRP  Cosmetics ‐ 10% on MRP  Food items ‐ 8% on MRP  Incentive schemes: Company programs (Scheme Discounts + Cash Discounts) TPR schemes based on Sales (1 % to 4 %).Retailers:  Sales Margin: Depends on the product  Soap. Vijeta scheme is not for retailers.

A thorough analysis is done at the end of each month and based on that the weak products are identified or those for which the demand has weakened. b) The sold item is immediately updated in the company information system.  .  This is the basis of setting ECO and FOCUS targets for the field persons. Each field person is given a palmtop wherein he can feed the entries on the spot where the transaction is done. This solves basically the two purposes ‐ a) The field person is freed from the tedious task of maintaining cumbersome records and can then concentrate on the job (thus IT is replacing some of the field force or other channel members).

1 /‐ shampoo sachets being a very good example). as a thumb rule we can take that the mean time between two purchases is ~ 90 days. With the introduction of smaller form factor packaging for FMCG goods (Re. then transport intensity in “the last mile” (i.If the frequency of purchase is high..e. the transport intensity increased further. . For FMCG products. from distributor to retailers) increases manifold.

. who supply to approx.3 million outlets across India. Certain C&FAs were selected across the country to act as mother depots.   HUL has about 4000 redistribution stockists. An innovative step in that regard has been the formation of the Mother Depot and Just in Time System (MD‐JIT). 6. rationalizing the logistics and planning is a huge task. Since manufacturing is done at 40 plants around the country.

efforts from the channel members can be much lesser for final off‐take to happen which in turn leads to lesser margins to the channel members for those products.   If the consumers are more brand loyal. . This implies that for products with loyal customer base. then less “push” will be required from the channel members to sell the products as there will be sufficient “pull” or demand from the consumers. For faster moving products (mostly due to brand pull). retailers may not be averse to slightly lesser margins as rotation of the products is high and thus his/her ROI is protected.

Marketing & Distribution functions in FY ‘08 .Annual Spend in Advertising.

Britannia & Tata Tea. which are mostly into the Food & Beverages 27 segment where HUL has relatively lesser presence   . Amul. ITC. nearly as high as Nirma.. But for the sake of comparison. does not come under this purview as its major economic activity is Tobacco business which is nearly 85% of its total revenue. 2511 Cr. the second largest player after HUL in HUL‟s chosen category. Other major FMCG players not included in the analysis are Nestle. we have included ITC also as its non‐ tobacco FMCG business revenue in FY „08 was Rs.

.Marketing expenses here include the following –       commissions rebates discounts sales promotional expenses on direct selling agents entertainment expenses etc.

Advertising Expenses as percentage of Sales .

. Godrej & Henkel (ITC also) have less advertising expenses (as % to sales) than HUL. Henkel has zero advertising expenses in 2008. which may explain the fact that awareness level in consumers for Henkel brands is low. laundry detergents (“Surf Excel”. done mainly to reaffirm that it‟s not a soap!). HUL advertising is done mainly in case of soaps (for example – “Dove”. “Rin”) etc. shampoos. Importantly. With the introduction of home water purifier (“Pure It”). deodorants (“Axe”). considerable advertising & promotional expenses have gone into it.    Nirma.

Coke and others. Moving faster into non‐tobacco FMCG business riding high on its strength of distribution network matching or surpassing in some cases that of HUL. . ITC has started aggressive advertising campaigns increasing the heat on Britannia for biscuits & other snacks and chips from Pepsi.

Marketing Expenses as percentage of Sales .

ITC mostly deals with small retailers and distributors who have marginal bargaining power.This proves that HUL is able to maintain considerable brand pull through advertising. Also. ITC again comes among the lowest its tobacco products require very little „push‟ and have very high rotations.  The marketing expenses of HUL are among the lowest in the market . .

Distribution Expenses as percentage of Sales .

Henkel (largely B2B) are mostly protected from this implication of the variable. on the increased transport intensity for HUL in the last mile for some of the products like household personal care. HUL is lower in this respect than Nirma & P&G. but higher than Henkel. . laundry detergent. ITC (tobacco). Time Band of purchase. This can be explained somewhat from the impact of the variable. branded atta etc in the first & last week of the moth.

transportation cost of Nirma. So. has 6 manufacturing plants. Nirma. . if it tries to cater to pan‐Indian market will be higher. the 2nd largest FMCG major in soaps and detergents category. Compared to HUL‟s 40 manufacturing plants across India. all located in and around Gujarat. This is supported by the fact that Nirma‟s higher distribution cost percentage than HUL.

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