HUL Final Project

Project Report On HINDUSTAN UNILIVER LIMITED

Submitted by Neha Malik BBA-3rd Year

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INTRODUCTION TO HUL HUL was formed in 1933 as Lever Brothers India Limited and came into being in 1956 as Hindustan Lever Limited through a merger of Lever Brothers, Hindustan Vanaspati Mfg. Co. Ltd. and United Traders Ltd. It is headquartered in Mumbai, India and has employee strength of over 15,000 employees and contributes to indirect employment of over 52,000 people. The company was renamed in June 2007 as “Hindustan Unilever Limited”. The Anglo-Dutch company Unilever owns a 52% majority stake in Hindustan uniliver Limited. Hindustan Unilever's distribution covers over 1 million retail outlets across India directly and its products are available in over 6.3 million outlets in the country, nearly 80% of all retail outlets in India. It estimates that two out of three Indians use its many home and personal care products, food and beverages. Hindustan Unilever was recently rated among the top four companies globally in the list of “Global Top Companies for Leaders” by a study sponsored by Hewitt Associates, in partnership with Fortune magazine and the RBL Group. The company was ranked number one in the Asia-Pacific region and in India. ("Present stature", official website) The Brand Equity rankings in 2010 are ruled by FMCG products with Hindustan Lever accounting for as many as 6 out of Top 10 most trusted Indian Brands. (Brand Equity Survey, 2010)

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HISTORY - CHRONOLOGY 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; HUL offered 10% of its equity to the Indian public, being the first among the foreign subsidiaries to do so. Unilever now holds 52.10% equity in the company. The rest of the shareholding is distributed among about 360,675 individual shareholders and financial institutions. The erstwhile Brooke Bond's presence in India dates back to 1900. By 1903, the company had launched Red Label tea in the country. In 1912, Brooke Bond & Co. India Limited was formed. Brooke Bond joined the Unilever fold in 1984 through an international acquisition. The erstwhile Lipton's links with India were forged in 1898. Unilever acquired Lipton in 1972 and in 1977 Lipton Tea (India) Limited was incorporated. Pond's (India) Limited had been present in India since 1947. It joined the Unilever fold through an international acquisition of Chesebrough Pond's USA in 1986. Since the very early years, HUL has vigorously responded to the stimulus of economic growth. The growth process has been accompanied by judicious diversification, always in line with Indian opinions and aspirations. The liberalization of the Indian economy, started in 1991, clearly marked an inflexion in HUL's and the Group's growth curve. Removal of the regulatory framework allowed the company to explore every single product and opportunity segment, without any constraints on production capacity. Simultaneously, deregulation permitted alliances, acquisitions and mergers. In one of the most visible and talked about events of India's corporate history, the erstwhile Tata Oil Mills Company (TOMCO) merged with HUL, effective from April 1, 1993. In 1996, HUL and yet another Tata company, 3|Page Unilever Limited

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Lakme Limited, formed a 50:50 joint venture, Lakme Unilever Limited, to market Lakme's market-leading cosmetics and other appropriate products of both the companies. Subsequently in 1998, Lakme Limited sold its brands to HUL and divested its 50% stake in the joint venture to the company. 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, Unilever Nepal Limited (UNL), and its factory represents the largest manufacturing investment in the Himalayan kingdom. The UNL factory manufactures HUL's products like Soaps, Detergents and Personal Products both for the domestic market and exports to India. The 1990s also witnessed a string of crucial mergers, acquisitions and alliances on the Foods and Beverages front. In 1992, the erstwhile Brooke Bond acquired Kothari General Foods, with significant interests in Instant Coffee. In 1993, it acquired the Kissan business from the UB Group and the Dollops Ice-cream business from Cadbury India. As a measure of backward integration, Tea Estates and Doom Dooma, two plantation companies of Unilever, were merged with Brooke Bond. Then in 1994, Brooke Bond India and Lipton India merged to form Brooke Bond Lipton India Limited (BBLIL), enabling greater focus and ensuring synergy in the traditional Beverages business. 1994 witnessed BBLIL launching the Wall's range of Frozen Desserts. By the end of the year, the company entered into a strategic alliance with the Kwality Ice-cream Group families and in 1995 the Milk food 100% Ice-cream marketing and distribution rights too were acquired. Finally, BBLIL merged with HUL, with effect from January 1, 1996. The internal restructuring culminated in the merger of Pond's (India) Limited (PIL) with HUL in 1998. The two companies had significant overlaps in Personal Products, Specialty Chemicals and Exports businesses, besides a common distribution system since 1993 for Personal Products. The two also had a common management pool and a technology base. The amalgamation was done to ensure for the Group, benefits from scale economies both in domestic and export markets and enable it to fund investments required for aggressively building new categories.

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In January 2000, in a historic step, the government decided to award 74 per cent equity in Modern Foods to HUL, thereby beginning the divestment of government equity in public sector undertakings (PSU) to private sector partners. HUL's entry into Bread is a strategic extension of the company's wheat business. In 2002, HUL acquired the government's remaining stake in Modern Foods. In 2003, HUL acquired the Cooked Shrimp and Pasteurized Crabmeat business of the Amalgam Group of Companies, a leader in value added Marine Products exports. HUL launched a slew of new business initiatives in the early part of 2000’s. Project Shakti was started in 2001. It is a rural initiative that targets small villages populated by less than 5000 individuals. It is a unique win-win initiative that catalyses rural affluence even as it benefits business. Currently, there are over 45,000 Shakti entrepreneurs covering over 100,000 villages across 15 states and reaching to over 3 million homes. In 2002, HUL made its foray into Ayurvedic health & beauty centre category with the Ayush product range and Ayush Therapy Centers. Hindustan Unilever Network, Direct to home business was launched in 2003 and this was followed by the launch of ‘Pureit’ water purifier in 2004. In 2007, the Company name was formally changed to Hindustan Unilever Limited after receiving the approval of share holders during the 74th AGM on 18 May 2007. Brooke Bond and Surf Excel breached the Rs 1,000 crore sales mark the same year followed by Wheel which crossed the Rs.2, 000 crores sales milestone in 2008. On 17th October 2008, HUL completed 75 years of corporate existence in India. (Official website of Hindustan Unilever Limited)

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Mission 1. 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.

2. To help people feel good, look good and get more out of life (Scribd 2010)

Vision Unilever products touch the lives of over 2 billion people every day – whether that's through feeling great because they've got shiny hair and a brilliant smile, keeping their homes fresh and clean, or by enjoying a great cup of tea, satisfying meal or healthy snack.

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A clear direction The four pillars of our vision set out the long term direction for the company – where we want to go and how we are going to get there: •

We work to create a better future every day

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We help people feel good, look good and get more out of life with brands and services that are good for them and good for others.

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We will inspire people to take small everyday actions that can add up to a big difference for the world.

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We will develop new ways of doing business with the aim of doubling the size of our company while reducing our environmental impact.

The company has always believed in the power of their brands to improve the quality of people’s lives and in doing the right thing. As the business grows, so do companies responsibilities. HUL recognize that global challenges such as climate change concern us all. Considering the wider impact of company’s actions is embedded in its values and is a fundamental part of who they are. (Companies official website)

Instilling values Our corporate purpose states that to succeed requires "the highest standards of corporate behavior towards everyone we work with, the communities we touch, and the environment on which we have an impact." •

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 our employees are required to comply with the laws and regulations of the countries in which we operate.

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• Employees Unilever is committed to diversity in a working environment where there is mutual trust and respect and where everyone feels responsible. 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 labor. • 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 labeled, 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 business partners to adhere to business principles consistent with our own. (Scribd 2010)

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MANAGEMENT

Organization structure Hindustan Unilever Limited is India's largest Fast Moving Consumer Goods (FMCG) Company. It is present in Home & Personal Care and Foods & Beverages categories. The fundamental principle determining the organization structure is to infuse speed and flexibility in decision-making and implementation, with empowered managers across the company’s nationwide operations. Board of Directors The Board of Directors as repositories of the corporate powers act as a guardian to the Company 9 | P a gas e also the protectors of shareholder’s interest Unilever Limited

Management Committee The day-to-day management of affairs of the Company is vested with the Management Committee which is subjected to the overall superintendence Hindustan and control of the Board.

Unilever Limited

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2009

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HUL won Customer and Brand Loyalty Award in the consumer non durables sector. • HUL ranked fourth in the ‘Top Companies for Leaders, 2009’ for the Asia Pacific region and bagged the 10th place in the global rankings. HUL was awarded the CNBC AWAAZ Consumer Awards 2009 in

2010 • Year

Achievement HUL won two prestigious awards at the World HRD Congress 2010: 'The Most Admired & Best HR Team Award' and our Executive Director-HR, Leena Nair was awarded the 'HR Super Achiever of the Year' award

Awards & Recognisitions (Companies official website)

Mr. Nitin Paranjpe - CEO and Managing Director Mr. R. Sridhar - Chief Financial Officer Mr. Harish Manwani - Chairman Mr. Shreejit Mishra - Executive Director, Foods Nitin Paranjpe Mr. Care - CEO and Managing Director Personal Mr. Gopal Vittal - Executive Director, Home & Mr. R. Sridhar - Chief Financial Officer Mr. Hemant Bakshi - Executive Director Vittal - Executive Director, Home & Perso Mr. Gopal Chain Mr. Pradeep Banerjee - Executive Director, Supply Mr. Pradeep Banerjee - Executive Director, Supply Ms. Leena Nair - Executive Director, HR Mr. D. S. Parekh - Independent Director Mr. Dev Bajpai – Executive Director, CS Mr. A. Narayan - Independent Director Mr. S. Ramadorai - Independent Director Dr. R. A. Mashelkar - Independent Director

three categories: Most Preferred Personal Care Company, Most Preferred Home Care Company and Value for Money Brand of the Year. HUL’s Project Shakti won the Silver Trophy of the EMPI-Indian Express Indian Innovation Awards.

2008

2007

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Ad club Emvies: Hindustan Unilever has bagged 7 Awards (2 Gold, 2 Silver and 3 Bronze) across categories, the only company with maximum wins. • HUL won the Bombay Chamber Civic Award 2007 in the category of Sustainable Environmental Initiatives, for its water conservation and harvesting project at Karchond village, Silvassa, Dadra and Nagar Haveli. HUL won the UK Trade & Investment India Business Award in the Innovation category for Pureit. • In 2007, Hindustan Unilever was rated as the most respected company in India for the past 25 years by Business world, one of India’s leading business magazines. • Mr.D.S.Parekh –HUL in depend director received for services to financial services and banking industry in India and ‘Best Non-Executive Director 2006’ by the Asian Centre for Corporate Governance. (Companies official website)

Corporate Social Responsibility •

The water usage per tonne has been reduced by more than 32% in its own manufacturing operations against a baseline of 2004.

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More than 50% of our own manufacturing units have a rain water harvesting facility. As on date, five Company units return more water to ground than being consumed by them.

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The energy consumption and CO per unit of production since 2004 has also come down by 38% and 28% respectively. 11 | P a g e

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Company has initiated works in the area of sustainable agriculture sourcing for Tea, Fruits & Vegetables and Palm oil.

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The Company has started developing Indian producers for Tomato paste. We are working closely with key producers and the initiatives include water conservation, use of authorized pesticides, land conservation and improvement of farmer income.

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The Brand partnered with the Government of Tamil Nadu and organized a massive event on Global Hand Washing Day (15th October, 2009) wherein out of 47,000 children that washed their hands on that day, 15,000 washed their hands in perfect harmony to stake claim to the Guinness record for the most people washing their hands simultaneously.

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In the area of Health and Hygiene, during the Swine Flu epidemic, 'Lifebuoy' undertook rallies in key effected cities, where the message of the importance of hand washing was emphasized, in preventing Swine Flu.

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The vast majority of HUL’s products reach the consumers without being tested on animals. Your Company started the Sankalp initiative of employee volunteering in the 75th year of its existence in India. In 2008 our employees undertook volunteering and community service totaling more than 48,000 hours against a target of 27,375 hours. In 2009 we have achieved more than 1, 15,000 hours of volunteering.

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(Annual Report 2010, p.38 & Sustainability Report 2010, p.10)

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PRODUCTS PROFILE

Product Categories/Segments

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Two out of three Indians use Hindustan Unilever products. From feeding your family to keeping your home clean and fresh, our brands are part of everyday life.

Health, hygiene & beauty

Nutrition

Food

Beverages

Water

Personal care Home care

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HUL is the proud owner of around 35 major Indian brands. HUL has divided its products into following categories: 1.

Food brands:

HUL is one of India’s leading food companies. Companies passion for understanding what people want and need from their food - and what they love about it-makes their food brands a popular choice.

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3 Roses is a 30 year old regional brand and is the market leader in Tamil Nadu. It is one of the largest FMCG brands in Tamil Nadu across categories. It has a strong presence in both in home and out of home segments. It has two functionally differentiated variants - 3 Roses Natural Care and 3 Roses Mind Sharp. Red Label is a 105 year old brand and has tremendous equity and heritage in the Indian market. It is the second largest tea brand in the country. It has both leaf and dust variants, as well as a health and immunity variant Red Label Natural Care. It is now proven that regular consumption of 3 cups of Red Label Natural Care every day can enhance one's immunity and help one fall ill less often. Red Label holds the Guinness Record for the world’s largest tea party. Taaza is a 20 year old brand with strong presence in North & West India. It is the 3rd largest tea brand in the country with a portfolio spanning in both leaf and dust segments. It has a strong presence in the out of home segment in South India. Taj Mahal was launched in 1966 by Brooke Bond. Taj Mahal since 2007 has Saif Ali Khan as its ambassador, a relevant choice for today’s Indian. Taj Mahal is the most premium brand of tea in the Indian market. It was the first brand to launch tea bags and is the only tea brand in India to be sold in vacuum sealed packs. Hindustan

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Unilever’s only coffee brand Enjoys a rich heritage, came into existence in 1962 under the brand name Deluxe green

(Companies official website)

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Home care brands: HUL has a diverse portfolio of brands offering home care

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Solutions for millions of consumers across India.

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Key Facts Wheel, biggest laundry brand in India, dominates a complex mass market laundry business in India. Sales Turnover of about 1500 crs in 2007 as per AC Nielson Data. Wheel powder commands the market with 20 shares as per AC Nielson data. Its contribution to HPC business in Value and Volume terms is 17% and 47% respectively. Cif is the number 1 cream cleaner in the World. It is the number one cleaner in various countries including France, Germany, and Russia. It’s a 500 million Euro Brand. Cif is sold in 51 countries around the globe. The world’s largest fabric conditioner brand. Worldwide sales of over Euro 750 million. (approx. 4,500 crore) Comfort is the number 1 in 14 of the 23 countries in which it is sold!

Domex is the number 1 or 2 bleach in 9 countries (Croatia, Greece, Hungary, India, Ireland, Netherlands, Philippines, Poland, and South Africa). Domex is sold in 35 countries globally. There are more than €250 million sales of

Hindustan

Domex every year. •

Domex is also sold as Domestos, Glorix, and Klinex.

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Rin was launched in India as a bar in 1969 with the iconic lightning mnemonic. Rin powder was launched in 1994 as Rin Power White Rin Matic for washing machines, launched in July 2008. Sold in developing markets in Africa, Asia and Latin America.

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Sold as Brilhante (Brazil), Rin (India) and under other local brand names.

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First Brand of uniliver in India

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No 1 brand in Kerala and West Bengal

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Surf Excel was introduced in 1959

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Vim was the original hand dishwashing brand: so we invented the whole category! Vim is sold in four continents, is the leading hand dishwashing brand in twenty countries, and is available to more than 2 billion people around the world.

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Vim began life as a soap (both in England, and in Thailand, where King Rama V asked Hindustan

Unilever to supply his household with soap), but is now available as a complete range of hand dishwashing – including bars, powders and liquids.

(Companies official website)

3. Personal

care brands: Our personal care brands, including Axe, Dove, Lux, pond's, Rexona and Sunsilk, are recognised and love by consumers across India. They help consumers to look good and feel good – and in turn get more out of life.

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Brands

Key Facts

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Number 1 male deodorant brand in India. Available in over 60 countries.

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Largest selling shampoo in India. Largest distributed shampoo in India. Its known as ‘Lifebuoy’ in Pakistan, Sri Lanka, Indonesia and Vietnam and in Philippines its known as ‘Vaseline’

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Comes in 5 attractive variants Lemon Twist, Rose Mallika, Sandal Sparsh, Rajni gandha & Morning Muskaan Presence in countries like Indonesia, Thailand, Philippines, Vietnam, Arabia, Russia, turkey etc USP: Clinic is clear is the only brand that offers specially formulated Anti dandruff shampoo for men. Clinic All Clear also has Anti Dandruff Hair Oil that fights dandruff gently and effectively, giving you dandruff free hair.

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Free from harmful levels of heavy metals like Arsenic, Mercury and Lead; Pesticides and Bacterial contamination. Launched in 1988 as a family beauty soap with the promise of a fresh feeling of nature

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LEVER Ayush has five categories across health care and personal care range LEVER Ayush is a unique combination of the Truth of Ayurvedic with the Proof of Science. It is also endorsed by Arya Vaidya Pharmacy, Coimbatore

It’s a huge $200mn brand across the 6 countries Launched first in the US in 1957; is one of the leading brands of Unilever globally. Dove has its footprint in 80 countries worldwide with a range of superior products from bar, lotions, body washes, face care and creams. It is the leading bar brand in UK, US and Canada.

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Fastest growing hair category brand in India First HUL offering in the oral care category First gel toothpaste in India – launched in 1980 Market leader in the gel-segment for almost 3 decades

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Making stars out of models (Present-day stars like John Abraham, Deepika Padukone, Salman Khan, etc. are some of many who have been models of Closeup in the early days of their careers)

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Only 400 crores Herbal soap brand in the personal care segment.

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21.36% market share in the South Indian state of Tamil Nadu. Lakme was the first major beauty brand in India and takes pride in being the expert on Indian Beauty for over 50 years. It is complete beauty brand spanning color cosmetics, skin care & hair styling products and extending to beauty services through the network of Lakme Beauty Salons. Its bond with beauty and fashion is manifested through the Lakme Fashion Week, which is now the largest fashion event of its kind in the country.

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Lakme has a foot print of over 1200 assisted sales outlets, which is the largest span of outlets with “Beauty Advisors” in the country. Undisputed Leader in the soaps market of India, with 18.4% share. Turnover of €350 million a year globally, € 200 million in India. Hindustan

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Has a consumer base of 140 Million households in India The iconic jingle of Lifebuoy – “tandrusti ki raksha…..” is almost like the health anthem of India and Indians. Recent Awards: Voted in the top 10 most trusted brands in India in the “Brand Equity Survey” (came in at No. 9 in 2008 as well)Marketing excellence awards for its recent innovations and activations: o “Gold” at the Emvies 2008 for best use of media innovation ASIA Pacific CSR Award 2007, for Lifebuoy Swasthya Chetna Liril was launched in 1977. Its 30 years old! Liril has been a trendsetter over times. The soap & its advertising have been considered to be revolutionary! The first TV ad dates back to 1985. The Liril expressions, associations & the Liril ads are recalled even till now! o

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Lux stands amongst India’s top 10 most trusted brands

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The story of this popular soap was first created in 1789 by a young man called Andrew Pears. This is from whom it derived its name! The most famous Pears 'face' is 'Bubbles', from an original painting by Sir John Everett Millais in 1866. The painting later came to be the very first advertising on the brand!

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Endorsed by FDI ( the largest dental association globally) Among the most trusted brands in India (Brand Equity, Economic Times, India)

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Also sold as Mentadent, Zhonghua, PS and Signal in other countries

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World’s leading Deodorant Brand Number one Deodorant brand in more than 40 countries.

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First Deodorant Brand to be launched in India, launched in 1995 • Number 1 in Asia, Latin America and the Middle East • Sales of more than €1 billion a year. • Selling in 80 countries. • Their main target market is females between the age group 16-40 belonging to the two upper income classes. • But in their promotional activities, they cover the whole market irrespective of these classes. ( http://www.slideshare.net/Onlyurs/sunsilk-vsheadshoulders) •

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(Companies official website)

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CURRENT PERFORMANCE

Human Resource The belief that 'great people create great organizations’ has been at the core of the Company's approach to its people. Their human resource policy focused on nurturing talent and motivating and empowering their work force. Hence they continued to make significant investments for training in the areas of marketing excellence, customer service and building capabilities for organized retail trade. Many training programmes were delivered through classrooms, new capability building courses and external learning sessions. There elearning platform offers a bouquet of 3000+ courses via internet. Nearly 20,000 course registrations took place in 2009 providing access to learning anywhere, anytime.

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The technology applications have been made available on a self service portal which has increased the productivity of every line manager and HR manager by freeing up their time from managing routine and transactional workload. The year 2009-10 marked the completion of this exercise as the HR transactions were successfully transferred to Accenture with high standards of delivery and performance. (Annual Report 2009-10, p.34) Companies’ ability to attract the best talent in the market has been a key factor for success. The HUL employer brand made significant progress in 2009 and continued to retain top spot as the 'Dream Employer' on all top B-School campuses. (AC Nielson Study) Education and training are important components of the HUL’s approach to people and in consonance a License to operate programme was created for Supply Chain officers which resulted in every officer undergoing at least three e-learning courses during 2009. HUL’s focus on proactive and employee focused shop floor practices, quick grievance resolution mechanisms and alignment to overall business goals ensured that there was practically no loss of man days due to industrial issues in 2009. Seven productivity linked long term settlements were signed through the process of collective bargaining involving over 2,200 employees. All these settlements were signed with zero disruption to business activity reflecting the maturity of workmen collectively. The process of rehabilitation was undertaken with utmost concern for our people. One unit went through a process of consolidation and there were some separations in the field force and Head Office. The process of separations was handled with the utmost care and sensitivity to our people's needs. (Annual Report 2010, p.35)

Information Technology HUL continued to invest in IT infrastructure to support their business applications. They have leveraged the expanded telecom footprint in the country to provide high bandwidth terrestrial links to all operating units. Video conferencing is extensively used to collaborate across locations while reducing travel costs. As part of the backbone IT capability for Sales and Customer Development, HUL successfully established a common transaction system that is used by all Redistribution Stockiest and that is fully integrated with Company's 27 | P a g e Unilever Limited

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systems. For this, stockiest have been connected through an Internet-based network, called RS-Net, for online interaction. Distributor salesmen use a Hand Held Terminals as an aid for taking retail orders. In 2009, they have enhanced this capability for analytics and intelligent sales calls. As part of the thrust of further improving their direct coverage in rural areas, they are leveraging geospatial aids extensively. HUL have also established an IT enabled consumer interaction centre for addressing complaints and suggestions. (Annual Report 2010, p.36)

Operations HUL has traditionally been a company, which incorporates latest technology in all its operations. The company priorities speed and flexibility in their supply chain to deliver growth. They are doing this through simple ideas. For example, in some of company’s detergent factories they are running 'twin track' on single production lines. This has helped to nearly double the production thus enabling better customer service while improving operating efficiencies. Apart from this, today most of their production lines have developed the capability of quick changeovers to meet the market demand. The principles of Total Productive Maintenance were applied and progress tracked across all the manufacturing sites during past year. This resulted in an increase in asset productivity levels. HUL’s buying function also delivered improved efficiencies and reduction in procurement costs, fully leveraging benefits of scale and synergy through Unilever's global buying network. (Annual Report 2010, p.12)

Marketing Hul’s team are now relying more on tried and tested marketing models such as the 6P model, which focuses on getting right the product, price, package, proposition, place and promotion to attract a consumer, to expand the market and outpace competitors. (Livemint online newspaper) 28 | P a g e Unilever Limited

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Key points

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The Company deployed its full portfolio effectively with relaunch of most of the brands on the back of high quality innovations and intensive consumer activation. For e.g.: The 'Lifebuoy' brand was re-invigorated through its re-launch, bolstering its health credentials with its strong ability to kill germs. Moreover the company had a excellent product mix, in the last one year alone, HUL had 30 product launches like: 'Pure it',. Further Hul is driving up gradation .For e.g. It has expanded its portfolio in packet tea by launching a new brand to participate in the mass segment with differentiated offering. HUL has rolled out the new Go-To-Market distribution model in 32 Cities across the country. Through this the frequency of dispatches to the distributor increased, enabling him to stock less and use the benefits to build scale and superior talent. Company has also made great strides in expanding its rural distribution network, with significant investment made in expanding the infrastructure. Across the country rural markets were brought under the direct coverage enabling better service and control. The number of distributors in rural markets has been scaled up. HUL also rolled out a unique and innovative concept of 'Perfect Stores' as part of endeavor to win with consumers at the point of sale. Hul is focusing on its cherished regional brands such as ‘Hamam’ & ‘Rexona’. HUL has gone into strategic partnerships with technology companies for deeper market penetration. In the soaps and detergents cuts in the prices of Wheel and Lifebuoy and gram mage increases in Lux were done.

Financials 29 | P a g e Unilever Limited

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HUL’s focus on cash generation continued and the company delivered a strong operating cash flow during the year; this was driven by the business performance, efficiencies and cost savings across Supply Chain and greater focus on working capital management. The Company managed the investments prudently by deployment of cash surplus in a balanced portfolio of safe and liquid instruments. Capital Expenditure during the year was at Rs. 572 crores and was in the areas of capacity expansion, consolidation of operations, information technology, energy and other cost savings. The Company has not accepted any fixed deposits during the year. There was no outstanding towards unclaimed deposit payable to depositors as on 31st March, 2010.

(Annual Report 2010, p.35)

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PORTER’S FIVE FORCES ANALYSIS BUYER POWER: •

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Bargaining power of consumers is also very high. This is because in FMCG industry the switching costs of most of the goods is very low and there is no threat of buying one product over other. Customers are never reluctant to buy or try new things off the shelf. Verdict: strong buyer power of consumers

SUPPLIER POWER •

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The bargaining power of suppliers of raw materials and intermediate goods is not very high. There is ample number of substitute suppliers available and the raw materials are also readily available Verdict: limited supply power

THREAT OF NEW ENTRANTS: •

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Given the amount of capital investment needed to enter certain segment in house hold Consumer products, the threat of new entrant is fairly low. Whether the new entrant can get its products on the shelves of the same retailers as its much larger rivals to derive sales would be difficult for him. Verdict: low threat of new entrants.

THREAT OF SUBSTITUTES: •

There are complex and never ending consumer needs and no firm can satisfy all sorts of needs alone. 31 | P a g e

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• • •

There are plenty of substitute goods available in the market that can be replaced if consumers are not satisfied with one. The wide range of choices and needs give a sufficient room for new product development that can replace existing goods. Verdict: high threat of substitutes.

DEGREE OF RIVALRY • •

•

Consumer in the category which HUL deals in enjoy multitude of choices. It does not cost anything for a consumer to buy one brand of shampoo instead of another, making the industry quite competitive. As the switching costs are negligible. Moreover competitors use all sorts of tactics from intensive advertisement campaigns to promotional stuff and price wars etc. so overall the intensity of rivalry is very high. (Scribd 2010)

http://www.scribd.com/doc/5227464/Hindustan-Lever

SWOT ANALYSIS Strengths •

Uniliver Group: Hul is a subsidiary of Unilever, which sells Foods, home and Personal Care brands in about 100 countries worldwide. Hul gain lots of advantages from the parent company in terms of knowledge sharing, fully leveraging benefits of scale and synergy through Unilever's global buying network.

•

Largest market share: HUL is India’s largest consumer products company by sales.

•

Strong Product Portfolio : HUL, unlike international and local competitors such as Nestle India Ltd or Godrej Consumer Products Ltd that are focused on one or two categories, HUL straddles several sectors right from food to personal care products.

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•

Strong Distribution Network: Hindustan Unilever's distribution network is recognised as one of its key strengths. Its focus is not only to enable easy access to our brands, but also to touch consumers with a three-way convergence - of product availability, brand communication, and higher levels of brand experience. HUL's products, manufactured across the country, are distributed through a network of about 7,000 redistribution stockiest covering about one million retail outlets HUL's distribution network in rural India already directly covers about 50,000 villages, reaching about 250 million consumers, through about 6000 sub-stockists.

•

Strong R&D: HUL has build on its R&D by further strengthening the R&D Units in Bangalore and Mumbai with stronger integration with Unilever Global. R&D technology centers in India have over 200 highly qualified scientists and technologists. With the strong support from Unilever R&D as well as the brand development capabilities, the company is well placed to meet the challenges arising from the increased competition intensity.

•

Highly Skilled human resource: The ability to attract the best talent in the market & to retain it has become one of the key factors of HUL’s success. Currently HUL have an efficient manpower of 15000 employees over 13000 mangers. (Scribd 2010) (Annual Report 2010, p.38)

Weakness •

High Competition: HUL is facing high competition from companies like ITC,P&G,Dabur etc. P&G and HUL have entered into a price-war, as P&G is giving tough competition to HUL soaps and detergents brands. The 2010 price war, though lower in quantum, has just started and is likely to significantly impact HUL's Earnings

•

Losing Market share: Hul is steady losing its market share in segments including soaps, hair, oral & skincare. (Economic times)

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•

High Advertising Costs: HUL is incurring high advertisement costs in current fiscal year. There is 66% increase in the advertising budget.

•

Changing Consumption Patterns: Demand for high-end products is dropping. Indian consumers are still buying; it's just that they're avoiding the most expensive brands. That's why HUL will need to become more sensitive to price by offering price reductions on some of the existing products and introducing more new innovative products at low price points. (Businessweek.com)

Opportunities •

Large domestic market: There is huge market development opportunity in countries like India with population of over a billion, as consumption is still one-third that in Indonesia and one-seventh that in China.

•

Changing Lifestyles: Per capita income of Indian customer is increasing and FMCG products are relatively elastic in nature hence the expected sale should increase.

•

Diversification: HUL can enter into the new brand segments like confectionery, medicines etc.

•

Opportunity in Food Sector: The advent of modern trade has opened up greater opportunities for HUL to diversify its brand and strength its food division. It could look at introducing products from its parents stable like margarines and could also look at expanding its Knorr range of products. Moreover consumer expenditure in food sector rose by 13%.

•

Untapped rural Market: With the presence of 12.2% of the world population in the villages of India, the Indian rural FMCG market is something of high importance for HUL.

(Authourstream.com)

Threats •

Increasing costs of raw material: input costs have been on a rise. Prices of palm oil and copra--key components in products like hair oils and toilet soaps--have surged. Copra prices have gone up 4% in the last month and in this financial; rates are expected to advance around 10% from a year ago. Palm oil prices have seen a sharper rise of around 14%. 34 | P a g e

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"Every 10% change in palm oil prices affects Hindustan Unilever's operating profit margin by 60 basis points.”

(NDTV.com) •

ITC Entry: ITC has reduced its dependence on the cigarettes business. TC has extended its presence into areas like foods, retailing, hotels, greetings, agri, paper, etc. With ITC gaining momentum in each of these businesses, it is turning into a consumer monolith, and hence, the greatest threat to HUL's Business.

•

Segment threat: Laundry is important business for HUL and we have strong share position.HUL faces competition not only from rival multinational company, Procter & Gamble, but also from a slew of new price-warrior brands that have emerged in the mass segment. There is an extraordinary situation in the laundry market, over 500 new brands of laundry and over 200 washing powders are posing a new threat to Hul. (Times of India 2010)

•

Tax & Regulatory Structure: Some FMCG products such as shampoos, processed food, soft drinks and toiletries containing alcohol attract high rates of excise duty and sales tax. Such high tax incidence hampers growth of these product categories.

(www.slideshare.net)

EXTERNAL FACTOR ANALYSIS SUMMARY External Weight

Rating

Strategic Factors

Weighte d

Comments

Scores

Opportunities Large domestic market

0.10

4

0.40

Economies of scale

Changing lifestyle

0.05

3.5

0.18

0.05

3.5

0.18

0.15

5

0.75

Higher sales & demand Can help in achieving higher sales. Greater market penetration

Diversification Untapped rural market

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0.10

4

0.40

May increase the margins

Threats Increasing raw material costs

0.15

3

0.45

Higher finished products costs

ITC Entry

0.15

2.5

0.38

reducing the demand

Opportunity in food sector

Threat to laundry segment

0.10

2

0.20

Reduce the margins

Tax and regulatory structure

0.15

2.5

0.38

Hindrance to growth

TOTAL SCORES

1.00

3.30

EFAS Analysis:

A total score of 3.30 shows that the company’s strategies are very well aligned to deal with potential threats. There are various opportunities that the company can take advantage of as introduction of new products in rural market with greater usability and utility for the customers.

INTERNAL FACTOR ANALYSIS SUMMARY Internal

Weighted Weight

Rating

Strategic Factors

Comments Scores

Strengths

Subsidiary of Unilever group

36 | P a g e Unilever Limited

0.15

4

0.60

Enhance brand image

Hindustan

Largest market share

0.10

4

0.40

Higher growth & revenues

Strong product portfolio Strong Distribution network

0.10

3.5

0.35

0.15

5

0.75

Competitative edge point High customer loyalty & satisfaction

Strong R&D Highly skilled Human resource

0.15

4.5

0.68

0.10

3

0.30

Higher innovation level High Management efficiency

Intense competition

0.10

2.5

0.25

May hamper revenues

Losing market share

0.05

2

0.10

May hurt goodwill

Weaknesses

High advertising costs Changing consumption pattern

TOTAL SCORES

0.05

2.5

0.13

May increase operational costs

0.05

2

0.10

Decline in sales

1.00

3.65

IFAS Analysis: A total score of 3.65 of HUL shows that the company is doing very well internally. It is efficiently utilizing its strengths and eradicating the weaknesses to improve its performance.

STRATEGIC FACTOR ANALYSIS SUMMARY Weight

Rating

0.15

5

Weighted Scores

Comments

Opportunities

Untapped rural market 37 | P a g e Unilever Limited

0.75

Can help in achieving higher sales. Hindustan

Opportunity in food sector

0.05

4

0.05

4

ITC Entry

0.10

Increasing raw material costs Tax and regulatory structure

0.20

May increase the margins Increased revenues with low investment

2

0.20

reduce the demand & margins

0.15

2.5

0.38

Higher finished products costs

0.05

2

0.10

Hindrance to growth

Subsidiary of Unilever group

0.10

4

0.40

Economies of scale

Strong Distribution network

0.15

5

0.75

Competitative edge point

Strong R&D

0.05

4

0.20

Higher innovation level

Intense competition

0.05

2

0.20

May hamper growth

High advertising costs

0.10

2.5

0.25

May reduce revenues

Large domestic market

Threats

Strengths

Weaknesses

TOTAL SCORES

1.00

3.18

SAFS scores show that HUL’s response to external & internal environment is good.

FINANCIAL PERFORMANCE OF HUL There was strong volume growth at 14 per cent which led FMCG major Hindustan Unilever (HUL) to post a 32.1 per cent jump in net profit to Rs 566.12 crores (Rs 428.53 crores) for the quarter ended September 30, 2010, over the same period last fiscal.

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The net profit included an exceptional gain of Rs 40 crores that the company received through sale of property, provision for expenses related to buyback of shares and restructuring costs. During the quarter, HUL recorded a 10.7 per cent increase in net sales to Rs 4,680.87 crores (Rs 4,228.11 crores). Domestic Consumer Business (FMCG and water) grew by 10.5 per cent with an 8.9 per cent growth in HPC (Home and Personal Care) and 13.2 per cent in the foods category.

KEY FINANCIAL RATIO’S OF HUL 1. Investment Valuation Ratios Dec '05 Face Value Dividend Per Share Operating Profit Per Share (Rs) Net Operating Profit Per Share (Rs) Free Reserves Per Share (Rs) Bonus in Equity Capital

Earnings Per share Book Value

1 5 7.19 50.85 9.34 59.82

Dec '06

Dec '07

Mar '09

Mar '10

1 1 1 1 6 9 7.5 6.5 8.18 9.54 13.6 12.82 55.48 63.75 94.06 81.45 11.2 5.45 8.3 10.7 59.67 60.47 60.4 60.36 (Source: Religare Technova)

Dec '05

Dec '06

Dec '07

Mar '09

Mar '10

6.4 10.47

8.41 12.34

8.12 6.61

11.47 9.45

10.09 11.84

Interpretation: i. ii.

The face value of equity share of HUL is Rs.1. The EPS has declined in year 2010 compared to previous year; this indicates HUL has earned lesser profits for shareholders in this year compared to last year.

2. Profitability Ratios

Operating Profit Margin (%) Profit Before Interest And Tax 39 | P a g e Unilever Limited

Dec '05

Dec '06

Dec '07

Mar '09

Mar '10

14.14 12.87

14.74 13.5

14.95 13.78

14.46 13.39

15.74 14.59

Hindustan

Margin (%) Gross Profit Margin (%) Cash Profit Margin (%) Adjusted Cash Margin (%) Net Profit Margin (%) Adjusted Net Profit Margin (%)

15.03 13.52 12.43 12.42 11.33

15.8 15.99 13.21 14.94 12.16

Return On Capital Employed (%)

67.66

65.89

Return On Net Worth (%)

61.09

68.14

Adjusted Return on Net Worth (%) Return on Assets Excluding Revaluations Return on Assets Including Revaluations

55.75

Return on Long Term Funds (%)

13.5 12.29 12.29 12.09 12.09 118.5 9 121.3 4 113.8 5

14.7 12.76 12.76 12.29 12.29 106.7 8

55.43

15.86 13.56 12.9 12.58 11.91 138.7 2 122.9 7 116.4 9

20.91

24.45

6.61

9.45

11.84

20.91

24.45

•

Net Profit Margin %: It has increased in 2010 compared to previous year which shows there was improvement in HUL’s operational efficiency.

•

The gross profit margin have increased compared to last year this implies increased cost savings and improved buying efficiencies. The profit distribution ability of HUL is good with return on net worth (RONW) being around 85% during the current year. Return on capital employed measures the profit, which a firm earns on investing a unit of capital. The profit being the net result of all operations, the return on capital expresses all efficiencies and inefficiencies of a business. The ratio has reduced in past 3 yrs from dec’07 to marc’10 from 138.72% to 106.78%. This indicates that the firm’s earning has reduced on investing. This also indicates that the management is not working that efficiently. The operating profit margin % has increased which indicates HUL earns profits from its business operation and not from the other sources. It shows

•

•

the business is able to stand in the market.

40 | P a g e Unilever Limited

81.4

6.61 9.46 11.84 147.2 142.8 106.7 69.33 67.65 6 8 8 (Source: Religare Technova)

Interpretation:

•

85.25

Hindustan

3. Liquidity and Solvency Ratios

Current Ratio Quick Ratio Debt Equity Ratio Long Term Debt Equity Ratio

Dec '05

Dec '06

Dec '07

Mar '09

Mar '10

0.7 0.33 0.02

0.73 0.34 0.03

0.68 0.25 0.06

0.92 0.51 0.2

0.84 0.46 --

--

--

--

--

--

(Source: Religare Technova)

Ratio •

Current Ratio Liquidity & Solvency Ratios

41 | P a g e Unilever Limited

•

Analysis Current ratio of HUL has been less than 1 for past 5 years. This implies that working capital of HUL is always negative. This is generally considered an aggressive strategy i.e. to financing its long term asset by short term sources that increases profitability because current liabilities are non interest bearing items. The Current ratios have decreased from previous year which shows that HUL has reduced its liquidity further.

Quick Ratio

•

There is significant difference between Current Ratio and Quick Ratio which indicates that the current asset of HUL consists of good amount of inventory.

Debt Equity Ratio

•

Zero debt equity means implies negligible financial risks for HUL.

Hindustan

4. Management Efficiency Ratios Dec '05

Dec '06

Dec '07

Mar '09

Mar '10

Inventory Turnover Ratio Debtors Turnover Ratio Investments Turnover Ratio Fixed Assets Turnover Ratio Total Assets Turnover Ratio Asset Turnover Ratio

8.57 22.12 9.97 8.47 5.14 5.11

8.02 25.42 9.27 9.3 4.67 5.35

7.2 31.41 8.2 9.8 10.53 5.64

9.26 41.83 9.26 7.81 9.22 7.81

8.99 29.24 8.99 5.35 7.66 5.35

Average Raw Material Holding Average Finished Goods Held Number of Days In Working Capital

66.11 23.6

68.95 27.53

84.2 29.81

72.27 34.18

51.08 32.05

-40.83 -36.37 -42.05 1.58 -22.62 (Source: Religare Technova)

Interpretation: i.

ii. iii.

iv.

v.

The total Asset Turnover ratio of 7.66 times implies that HUL generate a sale of Rs.7.66 for one rupee investment in fixed & current assets together. The inventory Turnover Ratio is higher as compared to 2005 in year 2010; this indicates HUL have good inventory management. The Debtor turnover ratio has decreased in 2010 compared to previous year; this indicates that HUL’s debt recovery system is not efficient. And this is not good for liquidity. The Average Raw material Holding has been declining from past two years from 84.2 to 72.27 to 51.08, this indicates that HUL’s efficiency in turning its inventory is deteorating. The yearly holding of all types of inventories is increasing.

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HUL-BUSINESS MODEL Hindustan Unilever devised a model that broke through the income and access barriers that keep hundreds of millions of non consumers from the market. Reaching out to government-supported and micro financed village self-help groups, the company identified and trained a sales force of women who had few business skills but great entrepreneurial ambition. Termed "Shakti Ammas" ,they represent the company and sell its home-care, health, and hygiene products in their villages. Rethinking the Business Model The Mumbai-based company tapped this vast market by rethinking entirely the "four boxes" that work together to make up any business model: customer value proposition, profit formula, key processes, and key resources. The customer value proposition—the product, service, or combination of the two that helps customers solve an important problem—represented a major departure for Hindustan Unilever (HUL). In the traditional packaged consumer-goods business, the retailer is the customer and the product is distributed through third parties in population centers. But in this case, the Shakti Ammas are the customers to whom the company delivers not just products but also a business opportunity that often doubled their incomes and gave them greater prestige because of their role in producing social benefits like better hygiene. HUL also revised its profit formula, which defines the way a company captures value and includes the revenue model, cost structure, target unit margin, and resource velocity. Traditionally, packaged consumer-goods 43 | P a g e Unilever Limited

Hindustan

companies make profits through low per-unit cost and economies of scale. Until it came up with its radically new approach to distribution, HUL had thought it not possible to devise a scalable way to reach India's widely dispersed populations in its small villages. Although the Shakti model does produce lower margins, it makes up for it with much higher volume. Key resources and key processes are the skills, activities, and assets through which the company delivers value to customers and to itself. HUL's network of partners broke with the company's longtime distribution practices, which had previously kept its distribution system entirely inhouse. Further, the company had to conceive new ways to provide sales training for the Shakti Ammas—who had varying levels of education—and new ways to provide compelling brand messages to people for whom traditional brand messages meant little. http://www.businessweek.com/managing/content/may2010/ca2010055_760 459.htm

HUL: Project Shakti business model With the urban market saturated, FMCG companies are now targeting the rural markets. In spite of the income imbalance between urban and rural India, rural holds great potential since 70% of India’s population lives there. Due to the recent government measures like waiver of loans, national rural employment guarantee scheme and increasing minimum support price, disposable income in rural India has been rapidly increasing. However, rural markets present their own sets of problems. These include poor infrastructure, dispersed settlements, lack of education and a virtually nonexistent medium for communication. Furthermore, retailers cannot be present in all the centers as many of them are so small that it makes them economically unfeasible and hence for through Shakti HUL plans to offer appropriate products in an affordable way in relatively remote locations. Hindustan Unilever Limited (HUL) to tap this market conceived of Project Shakti. This project was started in 2001 with the aim of increasing the company’s rural distribution reach as well as providing rural women with income-generating opportunities. This is a case where the social goals are helping achieve business goals.

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The recruitment of a Shakti Entrepreneur or Shakti Amma (SA) begins with the executives of HUL identifying the uncovered village. The representative of the company meets the panchayat and the village head and identify the woman who they believe will be suitable as a SA. After training she is asked to put up Rs 20,000 as investment which is used to buy products for selling. The products are then sold door-to-door or through petty shops at home. On an average a Shakti Amma makes a 10% margin on the products she sells. An initiative which helps support Project Shakti is the Shakti Vani programme. Under this programme, trained communicators visit schools and village congregations to drive messages on sanitation, good hygiene practices and women empowerment. This serves as a rural communication vehicle and helps the SA in their sales. The main advantage of the Shakti programme for HUL is having more feet on the ground. Shakti Ammas are able to reach far flung areas, which were economically unviable for the company to tap on its own, besides being a brand ambassador for the company. Moreover, the company has ready consumers in the SAs who become users of the products besides selling them. Although the company has been successful in the initiative and has been scaling up, it faces problems from time to time for which it comes up with innovative solutions. For example, a problem faced by HUL was that the SAs were more inclined to stay at home and sell rather than going from door to door since there is a stigma attached to direct selling. Moreover, men were not liable to go to a woman’s house and buy products. The company countered this problem by hosting Shakti Days. Here an artificial market place was created with music and promotion and the ladies were able to sell their products in a few hours without encountering any stigma or bias. This model has been the growth driver for HUL and presently about half of HUL’s FMCG sales come from rural markets. The long term aim of the company is to have 100,000 Ammas covering 500,000 villages and reaching 600 m people. We feel that with this initiative, HUL has been successful in maintaining its distribution reach advantage over its competitors. This programme helped to provide HUL with a growing customer base which will benefit the company for years to come. (OUTLOOK ARENA)

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LIFEBUOY SOAP-BUSINESS MODEL Product Category Lifebuoy falls under the category of toiletry product in hygiene market.HUL is offering a standard product of Lifebuoy soap and shampoo by standardized packaged product. Value Proposition: •

•

Lifebuoy provides total protection and positioned as “health and hygiene” soap. The brand USP is ‘Lifebuoy provides 100% better protection from germs as compared to ordinary soaps.’ Have long life compared to other competitive soaps.

Market Segmentation Lifebuoy is mainly targeted hardworking people those who relatively earn less money but give more labor. For example I can say village people. Lifebuoy with its distinct perfume and catchy jingle was associated with 46 | P a g e Unilever Limited

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health and well-being, making it the world’s largest selling soap brand. Its ads carried the message that Lifebuoy washed away germs and kept one protected and healthy. Now a day’s lifebuoy came up with new color and new flavor for the different target market but the main target market is still same, lower middle class people. Lifebuoy is now an entirely new mix with a superior formulation, fragrance, lather profile and a contemporary shape. It offers an improved bathing experience and skin feel. The new Lifebuoy is targeted at today’s astute housewives who seek family health protection. It made a thoughtful shift in positioning from being a male soap, champ of health to a family soap with a more reliable health protection against germs for the entire family

Demographic segmentation Age Gender Family Size Income Target Area Social class

6 to 50 + Anyone 2,3-4,5+ Rs.4000+ Lower Income group Middle & lower class

Geographic Segmentation World region Country & cities Target area

Asia Developing countries like India & Pakistan Sub-urban & Semi-urban & rural areas

Behavioral Segmentation Benefits User status Loyalty status Usage rate Buyer readiness

Total protection anti-bacterial soap Regular user Split-loyal Medium Informed & interested

Psychographic segmentation 47 | P a g e Unilever Limited

Hindustan

Attitude Lifestyle

Health-conscious & energetic For people who are involved highly in Indoor as well as Outdoor oriented & sports oriented activities

http://www.scribd.com/doc/23714565/soap-industry Positioning The 100 plus years old brand Lifebuoy, which was positioned purely as a health soap targeted at a male population, has now got rid of its carbolic nature, smells different and is positioned as a family soap. This was a conscious move from HUL in 2002 to do away with the carbolic soap. Rechanilised its product cycle by introducing new variants like • • • • •

Lifebuoy Lifebuoy Lifebuoy Lifebuoy Lifebuoy

Active Red Active Orange International Plus International Gold Nature (Neem & Tulsi)

The re-launch of lifebuoy brand is a shift from being a masculine soap to a family soap which is elucidated in the new packaging. Moreover, the positioning of health will now be aggressively communicated to women in the Indian household. Unilever position Lifebuoy when come in red colors as a brand of low income group. They choose their segment and position their brand according to the needs and wants of the segments. This segment wanted long life of the soap and the chemical formula of Lifebuoy enables it to have long life. Competitive Strategy Focused cost leadership strategy & price differentiation strategy followed in case of lifebuoy soap. As per there market positioning strategy they follow the cost leadership strategy where the business focuses on selling existing lifebuoy variant products into existing markets to loyal customers. These stratgeicies seeks 48 | P a g e Unilever Limited

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to achieve increased market share which is currently 17% – & this can be achieved by a combination of competitive pricing strategies, advertising, sales promotion and perhaps more resources dedicated to personal selling. While the soap market is declining by 15 to 20 per cent Lifebuoy will still try and manage a double digit growth as an extension to the seamlessly knit competitive strategies. Value chain Existing strategy: Hindustan Unilever limited uses a lot of distributors and retailers to supply its products in each market where the final customer might reasonably look for it. While appointing a distributor for a particular area, management uses its own judgment to select such a person that has a potential to operate effectively. HUL uses an intensive distribution strategy for lifebuoy soap while at the same brand but in shampoos category it introduces only extensive strategy. HUL did not fight for the better shelf space for lifebuoy soap rather. Lifebuoy is targeting middle and low income consumers so shelf space is not important their main focus is on intensive distribution and ideal price with some innovation. In the intensive distribution of lifebuoy it is kept with wholesaler and retailers in the areas where rate of consumption is usually very greater than that of the other areas where comparatively rate of consumption is not so attractive. Lifebuoy is available at every outlet and at every big, medium and even at very small stores. While deciding about the selection of Channel HUL considered the customer buying patterns and the nature of the lifebuoy target market. (Scribd.com)

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http://www.scribd.com/doc/33596240/HUL-Market-Strategies-for-Life-BuoySoap

MARKETING MIX OF LIFEBUOY Product •

•

• • • •

• •

At the very first HUL has launched the red brick lifebuoy with its own unique fragrance. It has been repositioned itself in 2002 marking a new turning point in history from carbolic to Total Fatty Material soap and been positioned as family soap with variants like Lifebuoy Gold, Green. The new Lifebuoy range now includes Lifebuoy Active Red(125gm, 100 gm and 60 gm) and Lifebuoy Active Orange (100gm). Lifebuoy Active Orange offers the consumer a differentiated health perfume while offering the health benefit of Lifebuoy. At the upper end of the market, Lifebuoy offers specific health benefits through Lifebuoy International (Plus and Gold). Lifebuoy International Plus offers protection against germs which cause body odour. Lifebuoy International Gold helps protect against germs which cause skin blemishes. Now Lifebuoy stood for - perfume, formulation, size and shape. 50 | P a g e

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• • •

• •

Lifebuoy has also launched Total, Lifebuoy DeoFresh, Lifebuoy Nature and Lifebuoy Gold Care. The latest one is launched, called Lifebuoy Skin Guard. Lifebuoy has also launched soap with neem and tulsi. The soap for total family protection, Offers clinically proven, long lasting protection from infection causing germs. Recently it has launched talcum powder under the brand name of lifebuoy.

Price Lifebuoy DeoFresh has been introduced especially for young adults who lead active life. Lifebuoy Total is for all those mothers with active kids who constantly fear hygiene threats from germs leading to stress and anxiety for the mothers and is available at Rs 12 for 125g, Rs 10 for 100g and Rs 5 for 55g. Lifebuoy Nature, on the other hand, comes with neem and tulsi and is available at Rs 10 for 100g. Lifebuoy Gold Care is specifically designed for sensitive skin and is available at Rs 10 for 100g.

Promotion Company has done a strong promotion for its brand product lifebuoy. It uses to launch so many health programmes in so many countries to make people aware of health. And many Advertisements across various countries like:

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•

Lifebuoy – You Eat What You Touch

http://theinspirationroom.com/daily/2009/lifebuoy-handwash-animals/

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•

2Nd

Ad’s from rural India Campaigns

53 | P a g e Unilever Limited

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54 | P a g e Unilever Limited

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Earlier 70’s Ad

Place Today Lifebuoy is mainly sold in Asia and parts of Africa. It is market leader in every Asian market where it is sold by its health care programmee it covers many villages. Basically if we talk about India 70% of the population lives in villages, so company sees a great opportunity in villages & trying to cover that. It basically covers 2 teirs cities & rural areas. It has made his strategy like that in every small or big shop customer will be able to find out the product. (Slideshare.com)

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Recommendations Hindustan Lever Limited has established it roots successfully in the Indian market with HUL products becoming a household preference in almost all the major cities. But with the increasing number of competitors in the FMCG industry, HUL should gear up to compete with them. The biggest rival in the market is Procter & Gamble that is threatening HUL’s strong hold by introducing cost leadership strategies and price cuts. Whereas, at the local from numerous small to medium sized firms are enjoying the benefit of local presence thorough TV ads and low cost products. For some time now HUL pursued the strategy of P&G but it could not reap similar benefits and the strategy is now shrinking HUL’s profit margins. Moreover, with increased saturation in the industry HUL is facing problems positioning its power brands as consumers buying pattern is changing. It is found out that the problems with the HUL are primarily related to the environment in which the company is operating. The HUL management should scan and evaluate its internal and external environment and then realign its strategies accordingly. Here are some recommendations for HUL after the analysis we have conducted above: •

•

•

HUL should allocate its advertisement budgets more evenly among the major cities and small towns to compete with the international as well as local competitors alike. HUL should focus on market research and product development more. This is very crucial activity if the company wants to see steady growth in future. Innovation is the key to success here. HUL should seriously start developing improved products to cater the emerging needs of the consumers. HUL should not use price-cuts to compete with its key rivals like P&G, instead it should promote its power brands as premium and value added products for the following reasons:

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Price competition among rival firms is stern and it is not possible for HUL to maintain its profit margins without compromising on product quality. Products of other firms are quite similar to what HUL is offering. Buyers have low switching costs and thus low brand-loyalty. There are few ways of differentiating a product from other than developing a new one. Thus, I strongly recommend that HUL should adopt value leadership strategy to skim profits. HUL should maintain its presence as an international brand differentiated by superior quality products. This can be achieved through proper pricing, efficient advertisement and promotion and innovation in product development and brand extension. This will help achieve financial stability and generate cash flows that can be used to support the weaker brands in local markets.

REFERENCES

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Content

Reference List •

Hindustan Unilever Limited. Archived from the original on 2008-0802, Retrieved on 08-15-2010 from http://web.archive.org/web/20080802090951/http://hul.co.in/knowus/ present_stature.asp

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Retrieved on 26 September from http://trak.in/tags/business/2010/09/01/top-50-most-trusted-brandsindia/

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Retrieved on 26 September 2010 from http://www.hul.co.in/aboutus/ourhistory/ Archived on Scribd 2010. Retrieved on 12 September 2010 from http://www.scribd.com/doc/37102748/hul

Company Profile :

History Mission

•

(Companies official website)

Vision

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Retrieved on 24-sep-2010 http://www.hul.co.in/aboutus/ourvision/

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Archived on Scribd.com n.d, Retrieved on Aug 31, 2010 from http://www.scribd.com/doc36686641//hul

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Organizational Structure : Retrieved on 26-sep-2010 from http://www.hul.co.in/aboutus/companystructure/

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Awards & Recognitions : Retrieved on 27-Sep-2010 from http://www.hul.co.in/aboutus/sustanbilityreports/awards

Values

Manageme nt

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Corporate Social Responsibility : Retrieved on 27-sep-2010 from Annual Report 2010, ‘CSR’ p.38 & Sustainability Report 2010, p.10

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Hindustan Unilever Limited. Archived from the company website on 25-sep-2010. Retrieved on 08-15-2010 from i.

Product Profile

ii.

iii.

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from

http://www.hul.co.in/brands/foodbrands/ http://www.hul.co.in/brands/homecarebrands/? WT.LHNAV=Home_care_brands http://www.hul.co.in/brands/personalcarebrands/? WT.LHNAV=Personal_care_brands

Hindustan

Current Performan ce

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Human Resource: Annual Report 2010, ‘Human Resource’, pg.34. Retrieved September 26, 2010, from http://www.hul.co.in/Images/AnnualReport0910_tcm114-225889.pdf

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Information Technology: Annual Report 2010, ‘IT, pg.36. Retrieved September 26, 2010, from http://www.hul.co.in/Images/AnnualReport0910_tcm114-225889.pdf

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Marketing : Archived on Livemintonlinenewspaper Retrieved on 27-sep-2010 from http://business.rediff.com/report/2010/jul/29/hulsmarketing-mantra-4m.htm

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Operations: Annual Report 2010, ‘Supply Chain, pg.12. Retrieved September 26, 2010, from http://www.hul.co.in/Images/AnnualReport0910_tcm114-225889.pdf

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Finance: Annual Report 2010, ‘Finance & Accounting, pg.35. Retrieved September 26, 2010, from http://www.hul.co.in/Images/AnnualReport0910_tcm114-225889.pdf

SWOT Analysis

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Strengths : Archived on scribd.com.Retreived on 27-sep-2010 fromhttp://www.hul.co.in/Images/AnnualReport0910_tcm114225889.pdf

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Weakness: Archived on Businessweek.com. Retrieved on 27-sep2010 from http://www.businessweek.com/globalbiz/content/jun2009/gb2009061 2_706157.htmmainstream consumers.

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Opportunities: Archived on authorstream.com. Retrieved on 27-sep2010 from http://www.authorstream.com/Presentation/vickyvishalshah-486442hul/

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Threats : i.

http://profit.ndtv.com/news/show/hindustan-unilever-hikes-priceof-lifebuoy-soap-cuts-lux-pack-size-91476?cp

ii.

http://timesofindia.indiatimes.com/business/india-business/Pricewar-HUL-reduces-tags-of-select-laundrypacks/articleshow/5529324.cms#ixzz10k2r6Mie

iii.

http://www.slideshare.net/hardikldrp/swot-analysis-of-fmcg-

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industry

Competito r Analysis • Ratio Analysis

All 6 Ratio’s : Source : Religare Technova, Archived from the moneycontrol.com, Retrieved on 26-9-2010 from http://www.moneycontrol.com/financials/hindustanunilever/ratios/HU

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