Hindustan Lever (a): Leaping a Millenium

HINDUSTAN LEVER (A): LEAPING A MILLENIUM

BACKGROUND SUMMARY

In order to increase their distribution reach to the rural villages which are inaccessible by roads and have a population less than 2000 people, Hindustan Lever has started 'Project Shakti'. They have developed a simple micro model involving Self-help groups (SHG) in villages, NBFCs and NGOs. By the 2002, it had covered more than 400 villages and was still looking good to add a few more. HLL wanted to do a reality check on the sustainability of this model before going ahead on a massive with the campaign. As the 'Project Shakti' focuses on reaching out only the left out distribution network of the country, it cannot pose serious problems to the existing network. Though the model is profitable in the rural areas, it cannot be implemented in areas of large distribution network due to large economies of scale.

Through this project, HLL planned to sell their products through SHGs in the rural areas who will act as the micro distributors in that area. HLL assists these SHGs to access micro credit, which is usually restricted. SHGs buy HLL products and sell them in their villages in a decentralized way, thus creating various opportunities for rural communities.

SITUATION ANALYSIS

STRATEGY:

A) Market Expansion Strategy

HLL is the biggest player in India with vast distribution networks in both Urban and rural India. Rural India served as a market with huge potential with high volume sales at lower margins. But most of the rural area remained unexploited and there was a huge potential for the companies. Thus, HLL adopted a penetrating strategy by leveraging on its innovative distribution model.

B) Promotional strategy

In order to create awareness and penetrate the rural segment, HLL adopted an aggressive promotional strategy. HLL adopted a more aggressive Push based Promotional Strategy of creating awareness among its growing rural consumer base. It used the SHG in the rural areas as the key to their distribution networks. SHG women would work on changing the mindset of the rural consumers; in short they will act as veritable brand promoters, by physically demonstrating products by offering hair washes at religious festivals or at the haat or my performing hand washing experiments to compare washing with soap to simplify washing with water. This was a very effective strategy in the sense that they were able to gain rapid acceptance among their customers.

C) Distribution System

HLL adopted a selected distribution intensity to serve the new markets whereby the firm works with selected intermediaries. In this model HLL has chosen Star sellers and SHG to distribute HLL's products.

REALITY CHECK

The following is the reality check conducted on Project Shakti

PARAMETERS TO BE MET BY PROJECT SHAKTI PROBLEMS /CHALLENGES FACED DURING IMPLEMENTATION

Satisfying the existing share holders Distribution Channel Conflicts between Star Retailers and Self Help Groups(SHGs)

Knowledge about the potential consumer base. It might be difficult to build an awareness about the importance of personal hygiene.

Market penetration with existing products To produce the products at cheaper price

Building HLL's brand image

Managing the time constraints of SHGs as they will not devote their entire time to HLL sales during seasons of harvesting making the sale of FMCG products a seasonal product

Extension of distribution network by including SHG in its distribution channel for better penetration

Profitability in terms of market share and sales volume

Problem Identification

HLL should also be able to foresee the problems that would arise when the project is implemented nationwide.

* HLL plans to maintain two different pricing each for SHG model and the normal retailer model. It has to identify what incentives rural people will obtain from purchasing a product from SHG instead from retailers.

* Creation of Star seller system also creates channel conflict between retailers and SHGs. Undermining retailers will not be a solution as it may result in real threat of initiative's success.

Problem Definition

The major problem that HLL faces in Project Shakti is the viability of the SHG model through which HLL distributes its product to reach rural India.

DECISION CRITERIA

The decision criteria which we have adopted to perform a reality check on the implementation of the new plan adopted by HLL are as follows:

1. Stakeholders Satisfaction

2. Profitability

3. Ease