Hul

TABLE OF CONTENT

SR.No

Content

Page no.

1.

Executive summary

2

2.

Company Overview

3

3.

Industry & Economic Value

4-6

4.

Competitive Strategy Value Proposition Positioning Trade off  Other Activities

7 7 8 8

Five Forces Analysis Supplier groups Buyers group Substitutes  New Entrants Threat Competitors

9 9 10 10 11

6.

Conclusion

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7.

Bibliography

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5.

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Executive Summary:

Hindustan Unilever Limited is the Indian arm of the Anglo-Dutch company – Unilever. Both Unilever and HUL have established themselves well in the Fast Moving Consumer  Goods (FMCG) category. In India, the company offers many households brands like, Dove, Lifebuoy, Lipton, Lux, Pepsodent, Ponds, Rexona, Sunsilk, Surf, Vaseline etc. A lot of HUL  products have been identified in the „Top 10 brands‟ list each year. HUL is also known for its strong distribution network in India. In order to further strengthen its distribution in the rural areas and to empower the local women, HUL launched a „ project Shakti‟ in 2000 in Andhra Pradesh. The idea behind this project was to create women entrepreneurs and provide them with financing and training in entrepreneur, which would enable them to create Self-Help Groups [SHG] and become direct distributors of HUL  products. FMCG Companies always have a huge market demand which is growing in size and diversified. The strategy analysis of HUL consists of the following: Competitive strategy of HUL which includes: Value proposition: HUL products provide value to its customer be it rural, urban or semiurban. Positioning: HUL products are mainly classified around need based positioning strategy. HUL‟s strong supply chain enabl es it to supply the demanded products to right customer  ahead of its competitor. Trade-Off: HUL strategy to trade-off with profitability and go ahead with low pricing strategy. Porter‟s five forces model analysis for HUL which includes:

Supplier does not have much bargaining power. Buyers are highly price sensitive. Threats of  new entrants are high since FMCG industry is open industry where local brands compete with international brands. The business strategy of HUL has been aligned towards welfare of  society and provides economic growth with its brand popularity. HUL concentrate mainly on its low pricing strategy, due to which it loads the self with various products which are used in day-to-day activities of common man, instead focusing only on premium products unlike some of its competitors.

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I.

Company Overview:

Hindustan Unilever Ltd. is India‟s largest fast moving Consumer goods company . Its Headquarter is in Mumbai.HUL products include foods, beverages, cleaning agents and  personal products. HUL touches the lives of two out of every three Indians everyday

Over 35 brands spanning 20 distant categories such as soaps, detergents, shampoos skin care toothpastes, deodorants, cosmetics, ted, coffee, packaged foods, ice cream, and water purifies In 1931 Lever brothers made first subsidiary in India. In 1931 they joint with Hindustan Vanaspati manufacturing company. In 1935 they joint with United Traders limited. All these 3 players mixed together and form HUL in 1957. HUL offers 10% of its equity to Indian  public Brooke bond is present in India back to 1900 and its Red label band was launched in 1903. In 1912 it joined with lever brothers. Unilever acquired LIPTON in 1972. Ponds India Ltd. is working in India since 1942 and it is acquired by HUL in 1986 by an international acquisition. Tata oils Mills Company merged with HUL in 1993. In 1996 Tata made 50-50%  joint venture for LAKME with HUL and in 1998 it was completely sold to HUL. HUL made 50-50% joint venture with Kimberley Clark corp. in 1994 as Kimberley Clark lever Ltd. which makes Haggies diapers and kotex sanitary pads. In 2002 HUL launched Ayush ayurvedic soap. In 2004 it came into the water purifier segment and launched PUREIT. In 2007 it formally formed as HUL from HUL that is Hindustan Unilever Limited. It has currently more than 16,000 employees, including 1,300 managers. HUL lives by its „ Sustainable Living Concept‟. It makes sure that all their products create more value to its customers by improving health & well-being, reduce environmental footprint, and try to source 100% of agricultural raw materials sustainably. HUL‟s rural development initiative programmes has been a success right from „Project Shakti‟, „Lifebuoy Hand -wash campaign‟ till „Reduce water consumption for w ashing clothes‟.

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II.

Industry:

Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer Goods (FMCG) Company. Fast-moving consumer goods (FMCG) or consumer packaged goods (CPG) are products that are sold quickly and at relatively low cost. FMCGs are those retail goods that are generally replaced or fully used up over a short period of days, weeks, or months, and within one year. FMCG have a short shelf life, either as a result of high consumer demand or because the  product deteriorates rapidly The following are the main characteristics of FMCGs: a.

From the consumers' perspective: 

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Frequent purchase Low involvement (little or no effort to choose the item – products with strong brand loyalty are exceptions to this rule) Low price

From the marketers' angle: 

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High volumes Low contribution margins Extensive distribution networks High stock turnover 

HUL with over 35 brands spanning 20 distinct categories such as soaps, detergents, shampoos, skin care, toothpastes, deodorants, cosmetics, tea, coffee, packaged foods, ice cream, and water purifiers, is a part of the everyday life of millions of consumers across India. Its portfolio includes leading household brands such as Lux, Lifebuoy, Surf Excel, Rin, Wheel, Fair & Lovely, Pond‟s, Vaseline, Lakmé, Dove, Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe, Brooke Bond, Bru, Knorr, Kissan, Kwality Wall‟s and Pureit. H UL has its pr esence in 4 dif ferent i ndustry segments :

1. 2. 3. 4.

Food and beverages Homecare Personal Care Water purifier 

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FOOD & BEVERAGES:

HUL aim and vision for this industry is to improve the taste and nutritional quality of all its products by reducing salt levels, sugar levels, calories, saturated fat, improve heart health and increase essential fatty acids. Company‟s aim is to make great-tasting food which makes a positive contribution to a healthy diet. It has launched various Nutrition Enhancement Programme to increase their  nutritional standards based on globally recognized dietary guidelines.

Some of its products are Anapurna salt and atta, bru coffee, Brooke bond, Lipton tea, kissan squashes and ketchups, kwality wall's and modern bread. HOMECARE:

HUL aim and vision for this industry is to improve health, beauty, remove offensive odour, avoidance of dirt and killing of bacteria. Its target is to reduce water use in the laundry process, produce easy rinse products and  products that use less water, reduce water use in skin cleansing and hair washing, and reduce water use in agriculture and manufacturing process Homecare HUL brands include Active wheel detergent, Rin detergents, Surf excel detergent, VIM dishwash and comfort fabric softeners. PERSONAL CARE:

HUL aim and vision for this industry is to improve hygiene habits by reducing diarrhoea and respiratory diseases through hand washing. HUL make effective, affordable products that improve health, hygiene and well-being. Few personal care brands include Lifebuoy, lux, pepsodent, dove, axe, pears, ponds, rexona, sunsilk, lakme beauty products etc. WATER PURIFIER:

HUL aim and vision for this industry is to provide safe drinking water to 500 million people while reducing the incidence of life-threatening diseases like diarrhoea and respiratory diseases HUL has launched Puriet Water Purifier brand which will enable to improve health through a concerted effort around clean water, sanitation and hygiene.

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III.

Economic value:

Indian FMCG industry- 4th largest in the world Market size: $ 25 billion constitutes 2.5% of India GDP Annual profit: $14.74 billion Market growth rate: Rural- 40%, Urban- 25%

Recorded 16% sales growth last fiscal H UL   

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Revenue: 18220.27 crore with 15000+ employees The domestic consumer business grew by 18% with 9% underlying volume growth. Profit Before Interest and Tax (PBIT) grew by 25% with PBIT margin improving 140  basis points. Profit After Tax but before exceptional items, PAT, grew by 20% to Rs.2,592 crore with  Net Profit at Rs.2,691 crore growing 17%.

 Net Revenue Rs. 22,116 crores

Profit Rs. 2691 crores

EPS Rs. 12.46

EVA Rs. 2250 crores

Segment wise revenue distribution:

Sales Packaged food 6%

Others 3%

Beverages 12%

Personal Products 31%

Soaps and detergents Soaps and detergents 48%

Personal Products Beverages Packaged food Others

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IV.

Competitive Strategy:

Competitive strategy of HUL varies for product to product of various segments. Thus, it is not easy to predict or to find a single strategy at Organizational level. Major competitive strategies of HUL lay behind on basis of market strategies, cost, and quality strategies.

4.1 Value Proposition  –  Creative value proposition : Selling beyond the Media‟s Reach

HUL observed that conventional media reaches only half of the population, thus more than 500 million people are in dark about companies product or brand. Consequently companies that want to grow beyond urban and semi-urban India to access rural customers have had to derive innovative way to get their attention. By launch of Shakti project they targeted those untouched market regions, HUL built upon the infrastructure by offering entrepreneurial opportunities for group members to sell HUL products direct fellow villagers. Border social purpose and business growth:

With Shakti, HUL sought to achieve dual objective of social impact and business growth. The self-helping group entrepreneurs worked as social influences, increasing local awareness and challenging attitude towards using of various products, mostly those targeted for women. By deriving a new and self-sustaining channel for reaching Indian countryside masses, it has  been able to open a new market for its long-standing products 4.2 Positioning:

Positioning the right customer for the products offered forms an important strategy for HUL. HUL offers wide product range to cater the needs of its customer.HUL is constantly evolving with their positioning strategy with changing needs of market. The strategic positioning can  be classified into following types: 4.2.1 Variety-based positioning:

HUL positions its products under umbrella brands, i.e. grouping products under various  product segments and sub-segments, which is very useful in selling the right product to right customer under a segment. HUL clubbed Brooke Bond and Lipton under Packaged Foods category and Rin, Surf and Wheel under Fabric wash category.HUL has withdrawn brands like Sunlight, 501, Dalda and Nihar due to falling demand and concentrate on particular   products in the FMCG industry. HUL recent strategy of focusing on sub-segments of FMCG industry amongst its available segment diversification enables them towards variety-based positioning.

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4.2.2 Needs based positioning:

Address & Identify the needs of the customer and target the customer segment as per their  needs. HUL has aligned its business strategy along Needs based positioning. It strategy of  rural empowerment works closely with identify the problem areas and provide solution to the same. „Project Shakti‟ involved self -employed group [SEG], by financing and provide training for bar soap manufacturing at rural homes and selling it to nearby homes across 1-2 kms. HUL has premium based brand product - „Dove‟ to value-for-money product  –  „Lifebuoy‟, to address different customer needs. HUL is the market leader in the detergent and soap industry in India, P&G despite being the global leader in this segment, has been unable to achieve a critical mass in India due to premium pricing strategy. 4.2.3 Access based positioning:

HUL targets its customer segment from rural to urban areas. HUL sustainable Living Plan for rural development and empowerment enables its product branding being spread across villages. HUL tries to access its target customers according to the geographic locations and economic conditions. 4.3 Trade off:

Against global competition- P&G in detergents and shampoos, ITC in foods (& now in soaps) and; local rivals- Tata, Marico, Godrej, Cavin Kare etc… HUL‟s approach had always been to provide consumers with an exciting portfolio of world class products. Thus, the decision was to make a trade-off between profitability and market share. HUL focused to claw market share by market development and penetration and conversion. It earlier built the detergents and soap market & now, did the same with packaged foods. It was now a fight for market share conversion from home-made foods to ready-to-cook. Therefore, maintaining market share by doubling or trebling the sizes of some markets for products such as Knorr, Kisan, Kwality Wall‟s, Red label, Annapurna, Taaza, Bru, Lipton , Out of Home services, Amaze milk food & snack food, etc is the main target to achieve. HUL, a heavyweight in the FMCG space that has been focusing on making products affordable and make money out of it, but they had been not able to generate profit at premium cost which provide competitors to move towards selling premium products to align with the aspirations of modern day Indian consumers. However, recently it has taking the lead in tapping opportunities in the upper segment as the Indian market evolves. 4.4 Activities tailored to match positioning and their integration

HUL has to prepare a strategy to position its food segment as they had missed the bus in this segment. It needs to replicate the incubation strategy it followed in personal care -- with hand wash, body wash, conditioners and the like -- in foods, and scale up promising categories that are small now. The company has initiated its bakery  business under modern Foods by expanding its distribution and launching products and offerings in categories such as cakes, cookies, idli/dosa batter and dry mix powders, by this it aim to localize Western food products to suit the Indian palate to be able to grow a “strong non- beverages foods business” in the country. HUL has also launched Kwality Swirl's parlours and Bru cafes space with integration of Unilever Food Solutions 8

(UFS) and Out-of-home (OOH) which gives additional merits to food segment. UFS offers  branded food products and services for hotels, restaurants, institutional caterers and flight kitchens. HUL is also using a geographic information system to identify pockets to expand its distribution coverage in urban and rural markets for medium- to long-term distribution of   packaged food and personal products which will be the fastest-growing segments in future. As for rural markets, HUL plans to further expand and strengthen its business with the use of  technology and partnerships, E.g. :- HUL‟s partnership with Tata Teleservices Ltd in 13 telecom circles has helped the company further drive rural growth with enhanced earning  potential for its channel partners, rural distributors and Shakti entrepreneurs. Company also deployed a low-cost mobile IT solution for its 40,000 Shakti entrepreneurs last year.

V.

Porter Five Forces Analysis:

5.1 Bargaining Power of Suppliers:

The bargaining power of suppliers of raw materials and intermediate goods is not very high. In FMCG industry, a lot of substitute suppliers supplying raw material are readily available. There exists no monopoly on supplier side since the suppliers are also competing amongst themselves. Also, most of the raw materials are homogenous in nature. HUL adopts Backward Integration with respect to supply-chain management. It adopts mass production in low cost and does not have dependency on particular vendors. HUL is slowly shifting from centralised raw material procurement to decentralised/locallevel vendor relationship, which helps them to reduce cost and improve production volumes. Hence, bargaining power of suppliers is marginal in FMCG industry.

5.2 Buyers and their power: Bargaining Power: Bargaining power of consumers is very high. 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.  Switching Cost: Customers are never reluctant to buy or try new things off the shelf. Hence, the switching cost of buyers is negligible  Price Sensitive: HUL buyers are distributors, retailers, end-customer and intermediate customers. The distributors provide bulk orders to HUL for their range of products and  bargain hard for huge discounts. Since, all the products in this industry have the same quality; the price factor pays a very important part for buyers. HUL deals with retailers like Wal-Mart, D‟Mart - B2B [Business to Business] by providing exclusive arrangement of huge discounts and bulk ordering facility. These intermediate customers for HUL play an important part in buying power of end consumer. 

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5.3 Substitution and the size of threat: Price Ceiling: There are complex and never ending consumer needs and no firm can satisfy all sorts of needs alone. 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. In FMCG industry, price factor plays an important factor for any substitute products. HUL‟s main competitor like P&G, Dabur, ITC have the same and equal replaceable  product line variant with almost same quality & price. The costumers can switch from HUL substitute products for even slight price variance.  Attractive Price Performance : The substitute products can overcome HUL products only using attractive pricing strategy. Since, the quality aspect does not vary much amongst its competitors‟; the only way to pull customer loyalty towards its substitute is through low  pricing. HUL‟s expertise in distribution channel and low -cost methodology of mass  production makes it very difficult for its competitor to substitute board range of HUL  products.  Size of threat : HUL has equal threat of substitute products across its various segments like Household care, Personal Care and Food & beverages from company like ITC, P&G, Dabur, Nestle, etc. By product variants and their market share, P&G stands closely for  HUL products substitution across its product segments. 

5.4 Competition and its threat:

In the FMCG industry, rivalry among competitors is very fierce. There are scarce customers because the industry is highly saturated and the competitors try to snatch their  share of market. They use all sorts of tactics from intensive advertisement campaigns to  promotional stuff and price wars etc. Hence the overall the intensity of rivalry is very high. In FMCG industry, competition is faced from both domestic, MNCs and also from cheaper  imports. Price wars are a common phenomenon. FMCG industry has domestic players like Dabur, ITC and international MNCs like P&G, Nestle. The competition for HUL brands can be analysed as:  Basis of Competition: All FMCG companies battle fiercely again each other across the same segments by providing wide range of products.  Price discount: HUL spends almost 30%-40% of its revenue on mass marketing. As per  Indian television ad agency rating, 3 out of 5 Consumer goods advertisement is of HUL  products. HUL makes sure its customers are retained for longer time period by providing discounts and attractive offers.  Sustained competition : Innovation of new products is key to sustain market in Consumer  Goods industry. The shelf life of any new products is fast reducing with frequency of   product launches increasing as per increasing customer demands. Price war is intense among FMCG companies.

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Brand Image: HUL capitalises on its brand image not only for launching its new  products to cater to increasing customer demands hereby retaining customer but also is successful in absorbing new customers.  Diverse Consumer Group : HUL products cater to diverse consumer segments and the company enjoys its position from the brand image created for past 50 years. HUL‟s new  product diversification is into packaged food segment which is currently untapped segment in India. 

5.5 New Entrants and the strength of entry barriers in industry:

Resistance to enter a FMCG market is very low. Structure of this industry is very complex which makes the entry of new firms easier which results in tough competition to the existing players due to cost effectiveness. Hence, potential entry of new firms is highly viable. In spite of this there are threats to new entrants: 

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Time and cost of entry : Market is not very growing and HUL has already established its  brand image. Entry of a new firm with a new product needs huge site space to meet HUL  production line and for that needs huge capital investment. Something not easy to cater in today's market scenario. Supply side economies of scale: FMCG industry enjoys supply side economy of scale. HUL products production cost gets lower as production increases. HUL has leveraged this fully by establishing mega-sites and huge production lines for its product manufacturing in all sectors. Its supply chain is stronger. Any new entrant wants to enter in market need huge capital investment to match up with production and price. Cost advantage: HUL has cost advantage as its products are priced low with a huge variety and is providing discounts to the distributors which stands as a disadvantage to a new entrant as to establish itself in a market with profit it is difficult to give discounts and  produce such waste product line. Customer switching costs : Customer switching cost is low as products in FMCG industry cost low and it won't take a customer to switch to a new and a good quality product if it  price less than a HUL product Demand side benefits of scale : Indian FMCG industry is dominated by few established and large players like HUL, ITC, and Dabur etc... These players are trusted by the customers hence customers may not trust the new player immediately. Also, HUL is introducing products as per customer demands like a shift from soap to shampoo or from a  bar soap to wash clothes to detergents. Capital requirements: HUL is a big firm and proved its legacy from past 75 years. It has huge capital to launch a new product and can target a new market segment thus stay ahead of a new entrant who has limited capital to invest and take risks. Incumbent advt. independent of size : HUL presence is across 35 geographic locations in India with established brand identities, production efficiency & experience which are difficult for a competitor to challenge.

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Unequal access to distribution channel : Most of the companies follow B2B (Business to Business) business model. FMCG like HUL has a huge and unmatched distribution network especially in rural areas. Though new entrants can directly approach distributors, it‟s unlikely that distributors would tru st new entrants. VI.    

Conclusion:

HUL has the expertise and industry experience to succeed in highly competitive changing demands of FMCG Industry. HUL‟s current focus is expanding more on untapped Food & Beverages segment. HUL is having better edge over its competitors in terms of its supply chain management. HUL is the only FMCG Company in India, which concentrates more on rural marketing than urban and is involved in economic development of rural through its unique sustainable programme.

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VII.

Bibliography:

In-text a. The India Way., Page 144 talks about HUL value proposition List of  1. Book  references The India Way: How India's Top Business Leaders are Revolutionizing Management, Peter  Cappelli (2010). Retrieved from http://books.google.co.in/books/about/The_India_Way.html?id=KrmGsUh8IK4C In-text

The Five Competitive Forces That Shape Strategy, M. Porter (2008). States about 5 Forces... Facts about HUL states... HUL Sustainable Living Plan explains about... HINDUSTAN UNILEVER LTD: Stock Of The Decade!!!...

2. Website/ web List of   page references The Five Competitive Forces That Shape Strategy, M. Porter (2008). Retrieved from http://hbr.org/2008/01/the-five-competitive-forces-that-shape-strategy/ Facts about HUL. Retrieved from http://www.hul.co.in/Images/HULFactsheettcm114188694.pdf  HUL Sustainable strategy...Retrieved from http://www.hul.co.in/sustainableliving/uslp/ http://www.hul.co.in/Images/USLP%E2%80%93India-2012-ProgressReport_tcm114-241468.pdf  Annual Report http://www.hul.co.in/Images/USLP%E2%80%93India-2012Progress-Report_tcm114-241468.pdf  HUL Financials: http://seekingalpha.com/instablog/2779031-montyuu/614371hindustan-unilever-ltd-stock-of-the-decade

In-text 3. Journal Articles

Forbes: P&G Versus Unilever In India, Para (19, 20) talks about..... HUL Strategies competitive market talks about...

List of  references Forbes: P&G Versus Unilever in India, Indrajit Gupta (2010). Retrieved from http://www.forbes.com/2010/04/12/forbes-india-pg-unilever-soap-opera.html HUL Strategies competitive market. Retrieved from 13

http://articles.economictimes.indiatimes.com/2012-0928/news/34148327_1_unilever-spokesperson-d-e-markets-unilever-ceo

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