PGDM 2009-11A

Project Reporton

Sales and Distribution of HUL

Submitted By:

Akshay Kumar Mandal

Roll No.203

Submitted To:

C.P Giri

(Faculty in Marketing)

AFFINITY BUSINESS SCHOOL

1 | P a g e

As any one who has written a project work, or research work, it is quite impossible to acknowledge by name every individual who has played some part in this work. I feel it difficult to express in words my profound sense of gratitude to most respected persons who helped me to make this work possible.I acknowledge my gratitude to respected faculty Mr. Chaytanya Prasad Giri(Facility in Marketing) who have been kind enough to suggest improvement of this work and make it broad, based.

Finally of course great debts are owed to my all-friends whose wholeheartedsupport has given me the inspiration and

dedication to complete this

2 | P a g e

Acknowledgement

Akshay

Kumar Manda

Table of Content

Objective of the study :……………………………………………4

Introduction :……………………………………………………..5

About the company:………………………………………………5

Trend of the hul:………………………………………………….5

Distribution network:……………………………………………..8

Incentive schemes:………………………………………………..9  

Changed Distribution Strategy:………………………………......11

Channel Management Strategy

Comparative analysis:………………………………………… ..11

Evolution of the Distribution Model:…………………………..12

Redistribution Stockiest Network:……………………………...13

Conclusion:…………………………………………………….14

Suggestion:…………………………………………………….15

 

3 | P a g e

Objective of the study :

To find objective of this project is to find, what are the steps Hindustan Unilever Ltd. is adapting to be market leader and to differentiate itself from its competitors.

it has to differentiate its products taking into account the needs and demands of all the sectors of the society.

To find out the factor which motivating the channel people ,for giving maximum out put.

To find out the conflict arising in the HUL

4 | P a g e

Introduction :

Distribution channels make possible the routinization of purchasing decisions which results in a

reduction of cost of marketing operations. In this report I required to study the distribution

network and the multiple marketing channels of the same product. The company chosen by me

for the project is Hindustan Unilever Limited (HUL).

During the course of study we discovered that there are many channels for the distribution of

Lux. Also the company adopts different starategies for distributing products at the Rural level.

We would be discussing that in details in the report. The report is completed with the telephonic

interviews with the dealers at some of the stores in different parts of India. But also a part of our

report is based on the Secondary Research where we could not find substantial Primary Data.

About the company

Hindustan Unilever Limited (abbreviated to HUL), formerly Hindustan Lever Limited, is India's

largest consumer products company and was formed in 1933 as Lever Brothers India Limited. It

is currently headquartered in Mumbai, India and its 41,000 employees are headed by Harish

Manwani, the non-executive chairman of the board. HUL is the market leader in Indian products

such as tea, soaps, detergents, as its products have become daily household name in India. The

Anglo-Dutch company Unilever owns a majority stake in Hindustan Unilever Limited.

5 | P a g e

Hindustan Lever Limited's distribution network comprises about 4,000 redistribution stockists,

covering 6.3 million retail outlets reaching the entire urban population, and about 250 million

rural consumers. HLL is also one of India's largest exporters.

Trend of HUL:

1888: Sunlight introduced in India1918: Vanaspati launched through imports1931: Unilever registers company in India – Hindusta Vanaspati Manufacturing Company1933: Lever Brothers India Limited incorporated tomanufacture soaps1935: United Traders Limited incorporated in India to marketpersonal products1956: HVM, LBIL, UTL merge to form HLL1958: HLRC starts functioning1979: Chemicals complex commissioned in Haldia1993: TOMCO merges with HLL1994: JV, Kimberley-Clark Lever formed1995: Lakme Lever formed1996: HLL and BBLIL merge1998: Pond s India Ltd merges with HLL . HLL acquire Lakme2000: HLL acquires Modern Foods2001: Project Shakti, HLL s partnership with rural SelfHelp Groups. Launch of HLL s e-tailing service-SangamMax confectionerieslaunched2002: Lever Ayush launched2003: Launch of Hindustan Lever Network2005 Launch of Pureit water purifier

Present Status:

Apart from dealing with soaps, detergents, personal products, tea, coffee, branded staples, ice

cream and culinary products business, HUL is also one of the country's largest exporters; it has

been recognised as a Golden Super Star Trading House by the Government of India. 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 has traditionally been a company, which incorporates latest technology in all its operations.

The Hindustan Unilever Research Centre (HLRC) was set up in 1958, and now has facilities in

Mumbai and Bangalore. HLRC and the Global Technology Centers in India have over 200

highly qualified scientists and technologists, many with post-doctoral experience acquired in the

US and Europe.

6 | P a g e

Distribution network:

HUL’s distribution network is recognized as one of its key strengths -- that which helps reach out

its products across the length and breadth of this vast country. The distribution network of LUX

is no different. The need for a strong distribution network is imperative, since Lux has to gain the

visibility and has to capture the minds of Indians everywhere

It has 2000+ suppliers and associates 7,000 stockiest and direct coverage in around 1 million

retail outlets across India.

To meet the ever-changing needs of the consumer, HUL has set up a distribution network that

ensures availability of all their products, in all outlets, at all times. This includes, maintaining

favourable trade relations, providing innovative incentives to retailers and organizing demand

generation activities among a host of other things. It boasts of placing a product across the

country in less than 72 hrs.

7 | P a g e

Stock Keeping(wholeseller)- The first phase of the distribution network had wholesalers placing bulk orders directly with the company.Factory – Wholesaler & Big retailers (Bulk orders) – 30% Sales Retailers- It has covering 1 million retail outlets in India.Large retailers also placed direct

orders, which comprised almost 30 per cent of the total orders collected.

Today, the goods are transferred from the factory to the company warehouses and are sent to the

distributor from there on a daily basis. From the distributor, the stock reaches the market through

daily sales. Typically, these include the salesman registering the order of a retail outlet and

delivering the goods the next day.

Incentive schemes:    Company  programs  (Scheme  Discounts  +  Cash  Discounts)  

TPR  schemes  based  on  Sales  (1  %  to  4  %)  

Vijeta  scheme  is  not  for  retailers.

8 | P a g e

Setting  up  of  a  full‐scale  sales  organization  comprising  key  account  management

and  activation  to  impact,  fully  engage   and  service  modern  retailers  as  they

emerge.  

Servicing  Channel  partners  and  customers  with  continuous  daily  replenishment.   

Leveraging  scale  and  building  expertise  to  service  Modern  Trade  and  Rural

Markets.  

Delaying  of  sales  force  to  improve  response  times  and service  levels

Launching  the  Unicare  scheme  with  upmarket  pharmacies  and  retailers  to  sale  its

premium  brands.  

Launching  of  several  promotional  schemes  for  existing wholesalers  and  distributors.

Changed Distribution Strategy:

Recently it has changed its traditional way distribution and came out with a new strategy of

distribution. It‘s because of the change in buying pattern of the consumer due to more disposable

income. There are different chann els of distribution like Modern Trade, which covers all chains

of super markets, who get the stocks directly from the company. Wholesalers and second leg of

big retail outlets called Super Value stores come under the surveillance of the distributor along

with the mass retail outlets. There is also this new concept in the it’s distribution channel called

Kiosk. Kiosk is a small shop that sells only sachets and low priced items (below Rs.10/-). Kiosk

also does not come under the surveillance of the distributor.

In addition to the ongoing commitment to the traditional grocery trade, it is building a special

relationship with the small but fast emerging modern trade. It's scale enables it to provide

superior customer service including daily servicing, improving their range availability whilst

reducing inventories. It is using the opportunity of interfacing more directly with consumers in

this retail environment through specially designed communication and promotions. This is

building traffic into the stores while yielding high growth for the business.

9 | P a g e

Channel Management Strategy

Distribution in Rural Market:

It is reaching 250 million rural consumers in India. The strategy of distribution should take into

account the purchasing habit of the rural people. While consumables are purchased in the village

shop or Shandies or in bigger villages, the consumer durables are purchased only in Mandi

centers, large towns or nearby cities. Hence the distribution centre has to take the purchasing

habit of the rural people into account, so that product may be available at the appropriate

location.

In villages beyond the reach of the distribution system, the shopkeepers make their own

arrangement for the procurement. Most of them commute to the nearby town to get the supply.

But the expenses incurred resulted in the village shopkeepers charging consumers more than the

maximum retail price. Generally, the village shopkeeper invest their funds in purchases and

rarely ever get credit facilities, which if available is made available for very short duration only.

Since the quantum of purchase by the village shopkeeper is very small, the margins are also very

meager. The ultimate consumer product reflects the lack of distribution network.

10 | P a g e

Distribution Strategies in Rural Market

1. Coverage of Villages: With improved communication facilities, it is possible to reach

distribution van to the villages. The frequency of visits may be fixed, depending upon the

off- takes or sales realization, so that the distribution cost can be minimized, but not at the

cost of cutting down or rural population. These distribution cabs can be used for

promotion works also. For villages with very less population, the distribution can be left

to the initiative of the shop keepers and dealers in larger villages and to the shopkeepers

of the small villages. The distribution arrangement requires serious consideration by

manufacturing and marketing men, if they have to exploit the potential of the rural

market

2. Use of Cooperative: Over three lakh cooporative society operate in the rural areas for or

different purposes like, marketing cooperatives, dairy corporative, farmer service

corporative societies, consumer corporative and other multipurpose corporative. Given

the number of such societies, there is at least one corporative society of one form or

another for every two or three villages. These societies are linked to higher level of

society like taluk, district or state level. Thus these corporative have an arrangement for

centralized procurement and distribution through their respective state level federation.

Such state level federation can be motivated to procure and distribute consumables items

and low level durables items to the member societies for selling to the rural consumers

3. Utilization of Public Distribution System: The Public Distribution System (PDS) in the

country is fairly well organized. The revamped PDS places more emphasis on reaching

remote rural areas like hills and tribal areas. Effective utilization of the PDS system

should be explored by the manufacturing and marketing men, since they already have a

distribution set up.

4. Distribution to Feeder Markets / Mandi Towns: The villagers visit these town at

regular intervals not only for selling the agricultural produce but also for the purchase of

11 | P a g e

cloth, jewellery , hardware, radios, torch cells and other durables and consumer product.

Lux has established a good distribution network in the identified feeder market and

mandi towns. From the feeder market and mandi town, the stockiest or wholesaler

arranges for distribution to the village shop in the interior places.

Comparative analysis Rural:

For rural India, HUL has established a single distribution channel by consolidating categories. In

a significant move, with long-term benefits, HUL has mounted an initiative, Project Streamline,

to further increase its rural reach with the help of rural sub-stockists. As a result, the distribution

network directly covers about 50,000 villages, reaching about 250 million consumers.

Consolidation has to be done in the rural setup as the road and transport facilities are not very

good hence one channel is used.

Urban:

An IT-powered system has been implemented to supply stocks to redistribution stockists on a

continuous replenishment basis. The objective is to catalyse HUL’s growth by ensuring that the

right product is available at the right place in right quantities, in the most cost-effective manner.

For this, stockists have been connected with the company through an Internet-based network,

called RSNet, for online interaction on orders, dispatches, information sharing and monitoring.

RS Net covers about 80% of the company's turnover.

12 | P a g e

In the urban setup there is no consolidation as there is fast communication and available

transport and road facilities.

Evolution of the Distribution Model

To meet the ever-changing needs of the consumer, HUL has set up a distribution network that

ensures availability of all their products, in all outlets, at all items. This includes, maintaining

favorable trade relations, providing, innovative incentives to retailers and organizing demand

generation activities among host of other things.

It has followed a strategy of building its distribution channels in a transitional manner; and in

different successive phases of the evolution of its distribution system, has penetrated well into

the rural market.

Phase I

The first phase of its distribution network had wholesalers placing bulk orders directly with the

company. Large retailers also place direct orders, which comprised almost 30 percent of the total

orders collected.

The company salesman grouped all these orders and placed an indent with the Head Office.

Goods were sent to these markets, with the company salesman as the consignee. The salesman

then collected and distributed the products to the respective wholesalers, against cash payment,

and the money was remitted to the company.

Phase II

The focus of the second phase, which spanned the decades of the 40s, was to provide desired

products and quality service to the company’s customers. In order to achieve this, one wholesaler

in each market was appointed as a “Registered Wholesaler,” a stock point for the company’s

products in that market. The company salesman still covered the market, canvassing for orders

from the rest of the trade. He would then distribute stocks from the Registered Wholesaler

13 | P a g e

through distribution units maintained by the company. The Registered Wholesaler was given a

margin of 1 per cent to cover the cost of warehousing and financing the stocks held by him. The

Registered Wholesaler system, therefore, increased the distribution reach of the company to a

larger number of customers.

Phase III

The highlight of the third phase was the concept of “Redistribution Stockist” (RS) who

replaced the Registered Wholesalers. The Redistribution Stockist was required to provide the

distribution units to the company salesman. The Redistribution Stockist financed his stocks and

provided warehousing facilities to store them. The Redistribution Stockist also undertook

demand stimulation activities on behalf of the company.

The second characteristic of this period was the changes brought in as the company realised that

the Redistribution Stockist would be able to provide customer service only if he was serviced

well. This knowledge led to the establishment of the “Company Depots” system. This system

helped in transshipment, bulk breaking, and acted as a stock point to minimise stock-outs at

the Redistribution Stockist level.

In the recent past, .significant change has been the replacement of the Company Depot by a

system of third party; the Carrying and Forwarding Agents (C&FAs). The C&FAs act as buffer

stock-points to ensure that stock-outs did not take place. The C&FA system has also resulted in

cost savings in terms of direct transportation and reduced time lag in delivery. The most

important benefit has been improved customer service to the Redistribution Stockist.

Redistribution Stockiest Network

HUL has 4000 Redistribution stockists in India. An IT-powered system has been implemented to

supply stocks to redistribution stockists on a continuous replenishment basis. The objective is to

catalyse HUL’s growth by ensuring that the right product is available at the right place in right

quantities, in the most cost-effective manner. For this, stockists have been connected with the

company through an Internet-based network, called RSNet, for online interaction on orders,

dispatches, information sharing and monitoring. RS Net covers about 80% of the company's

14 | P a g e

turnover. Today, the sales system gets to know every day what HUL stockists have sold to

almost a million outlets across the country. RS Net is part of Project Leap, HUL's end-to-end

supply chain, which also includes a back-end system connecting suppliers, all company sites and

stretching right up to stockists. Powered by the IT tools it has improved customer service, while

ensuring superior availability and impactful visibility at retail points.

Rural Areas and Tier 2 Cities

Lux has high penetration in the urban and semi urban areas. However, it has only 19.8%

penetration in the rural areas. The rural market has great untapped potential, which is not

concentrated on till now. Consumers are becoming more and more aware and undergoing a surge

in disposable income. This huge opportunity can be explored by Lux. It already has a strong

distribution channel in almost all regions. What is needed here is a change in the communication

strategy to reach out to the rural customers. The various channels of communication should be

made more appealing to this rural segment of customers.

Over the past two decades, the company has built a remarkable distribution system that moves its

soaps to every corner of India. Now it has started to leverage that valuable infrastructure to

expand its reach to a huge and overlooked group of consumers: the rural poor.

For rural India, HUL has established a single distribution channel by consolidating categories. In

a significant move, with long-term benefits, HUL has mounted an initiative, Project Streamline,

to further increase its rural reach with the help of rural sub-stockists. As a result, the distribution

network directly covers about 50,000 villages, reaching about 250 million consumers.

Conclusion

In recent years, the FMCG sector declined due to down trading. Also because of presence of

large number of companies trying to seize this opportunity, this force the old HLL for the change

and thus, their transformation has resulted in a new HLL, which has successfully faced this

challenge and reversed this trend. It has done so by substantially strengthening their brands and

building capabilities. This has already begun to yield benefits and they are returning to growth.

Volume growth is being followed by value growth, which in turn is bringing profit growth. India

15 | P a g e

is one of the most exciting markets offering great potential. Over the next 10 years, the per capita

income in India is likely to double. In FMCG, there is an opportunity to catalyze penetration,

increase usage, and upgrade consumers. As a result, the FMCG market is expected to grow to

over Rs.100,000 crores from its current base of Rs.40,000 crores.

The new Hindustan Lever see an exciting opportunity for growth. They have 35 powerful brands

covering all segments, with leading market positions in most. Today, these are stronger and more

relevant to the consumer than ever. The people are energized by the scale of the opportunity and

determined to seize it. The scale of the business and operations gives them the resources needed.

They are delivering good services and the changes they brought in the products are well taken by

the customers, by this they are generating sustainable profitable growth.

Suggestion:

As per the findings of the survey the monetary as well as the non-monetary awards both are equally important but the main aim is to reward or recognize employees time to time

Performance should be considered as the criterion for rewardingThe area of operation by the Sub-stockiest/Stockiest should belocated properly.

Sub-stockiest should be directed to cover the nearby rural market at least once in a month or a fortnight to the village offering low sales. World-of-mouth communication strategy works better in rural markets as these markets

enjoy limited reach of media. Once people become familiar with these products, they would perceive them as necessities.

Closely monitor the Stockiest points & encourage the Sub-stockiest to sell the products with a remarkable margin to the rural customers & retail outlet.

16 | P a g e