Hindustan Lever Limited Case Study

INTRODUCTION

The largest FMCG player with a presence in almost every FMCG product category; market leadership or #2 position in most of these categories, a strong brand portfolio, unmatched distribution network; a business with a vast growth potential - given India's population size & current per capita consumption levels; and the most respected management in the country - What more can you ask for?

Hindustan Lever Limited (HLL) is India's largest fast moving consumer goods company, with leadership in Home & Personal Care Products and Foods & Beverages. HLL's brands, spread across 20 distinct consumer categories, touch the lives of two out of three Indians. HLL's brands - like Lifebuoy, Lux, Surf Excel, Rin, Wheel, Fair & Lovely, Pond's, Sunsilk, Clinic, Pepsodent, Close-up, Lakme, Brooke Bond, Kissan, Knorr-Annapurna, Kwality Wall's- household names across the country. They endow the company with a scale of combined volumes of about 4 million tonnes and sales of Rs.10, 000 crores. They are manufactured in close to 80 factories. The operations involve over 2,000 suppliers and associates. HLL's distribution network, comprising about 7,000 redistribution stockists, directly covers the entire urban population, and about 250 million rural consumers.

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 HLL in November 1956; HLL offered 10% of its equity to the Indian public, being the first among the foreign subsidiaries to do so. The mission that inspires HLL's 36,000 employees, including about 1,350 managers, is to "add vitality to life". With 35 Power Brands, HLL meets everyday needs for nutrition, hygiene, and personal care with brands that help people feel good, look good and get more out of life.

HLL has five main divisions, Soaps & Detergents, Personal Products, Beverages, Foods and Ice creams. HLL 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. The company's exports include soaps and detergents, personal products, home care products, tea and coffee and other items such as marine products, basmati rice, castor oil and its derivatives.

Hindustan Lever Ltd (HLL) has a 55% market share in toilet soaps, 28% share in detergent powders, 48% in detergent bars, 60% share in dish cleaning segment, 53% share in shampoo, 60% share in skin care and 33% share in oral care. In the foods business also, where the focus has increased in last few years, HLL has established a significant presence in all segments. Market share figures for major foods businesses are Packet Tea (41%), Coffee (43%), Jams (75%), Ketchup (26%), Vanaspati (28%), Staple foods (20%).HLL has been doing exceptionally well in the year 2004-05. While the market growth rate in the category of products manufactured by HLL was 4% in Jun'05, HLL alone showed a growth rate of 11.9% in Jun'05.

STRENGTHS

* Strong brand portfolio

HLL is a trusted brand and has over the years gained much brand loyalty and customer support. The management is well known for its marketing savvy. It has over the years studied and understood the Indian markets as no other MNC player has. It has adapted its products to suit the Indian tastes. A lot of wars have been played and won on the price front, acknowledging that the Indian consumer is extremely price sensitive. The financial strength to cross subsidize new initiatives with existing profitable businesses has enabled the company to achieve its zeal of being the dominating player in all markets that it enters into.

* Consumer understanding

If Hindustan Lever straddles the Indian corporate world, it is because of being single-minded in identifying itself with Indian aspirations and needs in every walk of life. They have always used emerging modern trade effectively for introduction of more upscale personal and home care products.

* Good progress on key competitive battles- laundry and hair

The shampoo brands of HLL showed a growth rate of about 20% which is reflected in the fact that it occupies about 54% of share volume in the shampoo market. Sunsilk has recently come out with 2 new variants; 'Fresh and Cool' and 'Velvety Soft' which are doing fairly well in the market. Fabric wash growth accelerated with double digit growth in all brands. HLL occupies a share volume of 27.9% in the detergent market.

* R&D ability

Hindustan Lever's mission is to meet everyday needs for nutrition, hygiene, and personal care, with brands that help people feel good, look good and get more out of life. HLL's research & development base, one of the largest in Indian industry, helps achieve this mission, with novel products and new processes. The company has over 380 patents, demonstrating its leading edge in consumer-relevant R&D. The Hindustan Lever Research Centre (HLRC) was established in 1958 with facilities in Mumbai and Bangalore and global technology centres across India. It has over 200 highly qualified scientists and technologists working towards constant innovations and developments. The company has the capability to design and manufacture machines in-house. This enables the company to set up plants at half the cost of others. Such technological developments have also led to significant improvement in productivity.

* Unmatched distribution network

HLL boasts of a great distribution network. HLL products are easily available across the country and at each and every local grocery store. It is the only company which distributes its products to more than 50000 villages. Innovative programmes like Project Bharat have been undertaken which aim to make available to every consumer in the remotest corner of the country, products that meet his day to day requirements.

* High quality manpower- the most respected management in the country

HLL and Group companies have about 36,000 employees, including 1350 managers.The fundamental principle determining the organisation structure is to infuse speed and flexibility in decision-making and implementation, with empowered managers across the company's nationwide operations. Its Board of Directors includes highly respected managers like Malvinder Singh Banga S. Ramadorai, C. K. Prahalad, D. S. Parekh, V.