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Abstract: 70% of the Indian population lives in rural areas.

This segment, commonly referred to as the 'bottom of the pyramid', presents a huge opportunity for companies. Unilever's Indian subsidiary, Hindustan Lever Ltd (HLL), considered one of the best-managed companies in India, understands the importance of rural marketing. The trigger point came when a local firm Nirma, through its new product formulation, pricing and distribution challenged HLL's detergent business. Nirma's attack from below made HLL realise its vulnerability as well as identify a new opportunity. Since then, HLL has launched various initiatives to reach out to the rural consumer. It has changed its product formulations and deliveries. It has begun a number of initiatives in terms of widening distribution reach through traditional as well as unconventional channels. HLL has also empowered rural women by assisting them in obtaining financial assistance through its project shakti. Introduction In the early 2000s, around 700 million people, i.e. 70% of the Indian population lived in 6,27,000 villages, in rural areas. Of this, 90% were concentrated in villages with population less than 2000.3 According to a study conducted in 2001 by the National Council for Applied Economic Research (NCAER), there were as many "middle income and above" households in rural areas as there were in urban areas. There were almost twice as many "lower income households" in rural areas as in urban areas. There were 2.3 million "highest income" households in urban areas as against 1.6 million in rural areas. NCAER projections indicated that the number of "middle income and above" households was expected to grow to 111 million in rural India by 2007, compared to 59 million in urban India.4 Gone were the days when a rural consumer had to go to a nearby town or city to buy a branded product. The growing power of the rural consumer was forcing big companies to flock to rural markets. At the same time, they also threw up major challenges for marketers. Servicing rural markets involved ensuring availability of products through a sound distribution network, overcoming prevalent attitudes and habits of rural customers and creating brand awareness. Price-sensitivity was another key issue. Rural income levels were largely dependent on the vagaries of monsoon, and demand was not easy to predict. Thanks to TV, consumer awareness in rural areas had increased. Rural expenditures on Fast Moving Consumer Goods (FMCG) were growing at an impressive rate of 20 25%.5 Several companies were taking rural marketing seriously, one of them being Hindustan Lever Ltd (HLL), Unilever's Indian subsidiary. In 2004, HLL was India's largest FMCG company, with 30 power brands (Exhibit: I), turnover of over Rs. 10,000 crores and 40,000 employees. HLL derived around 50% of its sales from rural areas. HLL's rural marketing initiatives began way back in 1988, when the company had launched 'Wheel' for the rural and lower income urban consumer. These efforts had intensified since the late 1990s when HLL like many other companies faced flat growth in the urban markets. In early 2004, as it reviewed its past performance, HLL realized that bulk of its future growth was likely to come from rural areas. The challenge for HLL was to exploit this opportunity in a profitable manner.

Background Note HLL's history could be traced back to 1885 when the Lever Brothers set up "William Hesketh Lever", in England. In 1888, the company entered India by exporting 'Sunlight', its laundry soap. In 1895, the Lifebuoy soap was launched in India followed by 'Pears' in 1902, 'Lux' flakes in 1905 and 'Vim' scouring powder in1913. In 1930, the company merged with 'Margarine Unie' (a Netherlands based company which exported vanaspati to India), to form Unilever. In 1931, Unilever set up it first Indian subsidiary, the Hindustan Vanaspati Manufacturing Company for production of vanaspati... Excerpts Reaching out to the rural consumer Prior to the late 1990s, HLL like any other company had used traditional modes of reaching out to the rural consumer - wholesalers and retailers... Product Development HLL's experience with rural consumers dated back to the mid-1980s, when Nirma had been a serious threat to HLL's detergent business. Nirma's success demonstrated that rural India did have the money and willingness to buy packaged goods... Communication Mass media reached only 57% of the rural population. HLL realized that it had to use unconventional media to enhance awareness. In late 1999, HLL engaged Ogilvy Outreach , to take care of its rural communication campaign... Looking Ahead India's rural population comprising 12% of the world's population presented a huge, untapped market. HLL had signaled its commitment to the rural market in various ways. Management trainees had to begin their career with the company by spending a month or two in a rural village. Senior managers continued to emphasize the importance of rural markets. Various innovations in the marketing mix had been introduced, with the requirements of the rural markets in mind...