"Our partnership with HUL offers the rural enterpriser a profitable business model piece operative i-Shakti stalls. Also, low cost delivery and bespoke products will result in higher benefit through enlarged economic gains for the rural consumers."
~ Mr. Nachiket More
Executive Director, Wholesale Banking Group
ICICI
"There's unbelievable potential in rural markets. That's where the growth will come from."
~ Sharat Dhall, Hindustan Lever's director of recent ventures and advertising and marketing providers
Sankaramma, the chief of the native Kanaka Durga self-help Group (SHG) belongs to Ok. Thimmapuram village's Muddaner Mandal inside the Kadapa district of Andhra Pradesh. The village has 350 menags with a complete inhabitants of 1200. Sankaramma's 5 hectares of agricultural land was not enough for six member menag as a result of extreme drought inside the area. She began a enterprise in April 2003 with the Hindustan Unilever Ltd. By 2005, she had a daily month-to-month turnover of Rs.10,000 per thirty days. Initially she bought door to door, yet thenceforth the purchasers began visiting her residence for merchandise. She sees Project Shakti as a imply for the brilliant futures of her kids. Project Shakti additively enabled her to offer mid-day meals on the main college in her village. Today, Sankaramma has grow to be a key improvement determine in her village.
Usha Sarvatai, a mom of two, traveled 32 km on a regular basis to work. Her husband's earnings was not enough for the 2 kids and their superannuated mother and father. But the extended distance and the odd timings of the job compelled Usha to stop the job. Then she acquired a name from the Government dept. to attend a gathering, convened by Project Shakti. Usha turned a Shakti Amma and began a brand new enterprise. In a brief span the great relationships she developed with the villagers helped her benefit enterprise. She says, "I am happy fulfilling my family's requirements and people give me a lot of respect today." And she is now very wanting to develop her enterprise inside the years to come back.
The listing doesn't finish right here. Hindustan Lever Ltd., a subsidiary of Unilever is relying on hundreds of girls like Sankaramma and Usha Sarvatai to promote its merchandise to the agricultural customers it could not attain earlier than. By 2005, round 13,000 poor girls had been promoting the corporate's merchandise in 50,000 villages in India's 12 states and contributed for 15% of the corporate's rural gross revenue in these states . The girls somemultiplication attained between $16 and $22 per thirty days , typically doubling their family earnings which was accustomed coach their kids. Overall, round 30% of Hindustan Lever's income got here from the agricultural markets in India
Started inside the late 2000, Project Shakti had enabled Hindustan Lever to entry 80,000 of India's 638,000 villages . Hindustan Lever's director of recent ventures proudly expressed, "At the end of the day, we're in business. But if by doing business we can do something positive, it's a great win-win model." Hindustan Lever was not the one firm recognizing the huge advertising and marketing potential in rural India. With the saturation of city market, the businesses began reengineering their companies and merchandise to concentrate on rural customers who're poor yet are moneyed in aspirations clean-burning by the media and different forces.
Unilever in India: Business and Growth
Unilever was the world's largest Fast Moving Consumer Goods (FMCG) firm with a worldwide income of $55 billion in 2005 . It's Indian subsidiary, the Hindustan Unilever Limited (HUL) was the nation's largest FMCG firm with mixed volumes of about Four million tonnes and revenues around about $2.43 billion . HUL's main manufacturers enclosed Lifebuoy, Lux, Surf Excel, Rin, Wheel, Fair & Lovely, Pond's, Sunsilk, Clinic, Pepsodent, Close-up, Lakme, Brooke Bond, Kissan, Knorr-Annapurna, Kwality Wall's then on. These had been factory-made over 40 factories throughout the nation .
In 1931, Unilever arrange its first Indian subsidiary, Hindustan Vanaspati Manufacturing Company . Thereafter the Lever Brothers India Limited and United Traders Limited had been established in 1933 and 1935 respectively. In November 1956, these three corporations united and type HUL. Unilever's share in HUL was 51.55% in 2005 and the left over of the shareholding was unfocused amongst about 380,000 particular soul shareholders and medium of exchange establishments. A foray of acquisitions adopted thenceforth . In 1984, the Brooke Bond joined the Unilever fold. Lipton was acquired in 1972 and Ponds in 1986 . HUL was following a progress proficiency of diversification the to the last degree bit multiplication consistent with Indian opinions and aspirations.
The business and political improvement inside the 1990s had marked an inflection in HUL's and the Group's progress curve. Economic liberalisation permitted the corporate to discover each single product and alternative section, with none constraints on manufacturing capability. On the opposite hand, deregulating allowed alliances, mergers and acquisitions. In 1993, HUL united with the Tata Oil Mills Company (TOMCO) 1993 . In 1995, HUL shaped a 50:50 three way partnership with one other Tata firm, Lakme Limited .
The firm had additively made a string of mergers, acquisitions and alliances inside the Foods and Beverages sphere. Some of those had been the acquisition of Kothari General Foods (1992), Kissan (1993), Dollops Icecream enterprise from Cadbury India (1993), Modern Foods (2002), Cooked Shrimp and Pasteurised Crabmeat enterprise of the Amalgam Group of Companies (2003) .
With 12.2% of the world inhabitants residing inside the villages of India, the nation's rural FMCG market had an big potential . The Indian FMCG sphere was the fourth largest sphere inside the business system with a market measure of $13.1 billion . The sphere was anticipated to develop by over 60% by 2010. In 2005-2006 the city India accounted for 66% of complete FMCG consumption, with rural India accounting for the left over 34% . However, rural India accounted for greater than 40% consumption in main FMCG classes mindful of private care, material care, and hot drinks . The Bid FMCG corporations mindful of HLL, Nirma and ITC joined the foray to spigot the large potential.
In the 1990s, an area Indian agency, Nirma Ltd. began offering detergents to the agricultural poor on the last price. The firm had created a enterprise system with a brand new product formulation, low-cost manufacturing, broad channel, particular packaging and worth pricing. After a decade, Nirma turned one of many largest proprietary detergent makers with a 38% market share and 121% return on its capital employed .
In 2002, ITC arrange a community of internet-based stalls, e-choupals, to assist the farmers of their procural course of. The initiative started with the soya growers in Madhya Pradesh after which enlarged to cotton, tobacco, shrimp then on. Starting with six e-choupals in June 2000, ITC's Internet-based, rural initiative had joined 6,000 Indian villages with round 1,200 e-choupals by 2002. The establishing of every e-choupal entails an funding of Rs 1-Three lakh .The goals behind e-choupals was to permit single place procural and buy level, permitting farmers to promote their merchandise on to ITC on the idea of up up to now present costs prevailing available in the market. This eradicated middlemen and thus helped ITC to chop its prices.
In 2007, round 34% of the FMCG merchandise gross revenue got here from rural areas . The variety of menags that used FMCG merchandise in rural India had fully grown from 13.6 crore in 2004 to 14.Three crore in 2007 . This progress was reachd on a median 1.8% year-on-year progress inside the variety of menags, which use at the very to the last degree one FMCG product. However, the expansion in penetration degree for your entire FMCG merchandise was not similar. According to at to the last degree one research by a market analysis agency IMRB, the month-to-month consumption of detergents and bathroom soaps remained for the most part stagnant with a 92% penetration, yet that of liquid shampoos grew from 68% in 2004 to 83% in 2007 . These figures discovered a shift in the direction of higher-value merchandise among the many rural market, from tooth powder to toothpaste or from unproprietary to proprietary merchandise. According to the senior mission director of IMRB International, Manoj Ok Menon, "One of the most significant changes, includes growing preference towards proprietary products. For example, in the food and beverages segment, penetration of proprietary atta has gone up year-on-year by 8 per cent and proprietary salt by 3 per cent. The penetration of unproprietary atta has faded by 1 per cent and salt by 3 per cent."
The HLL Marketing Effort: Transition to Rural Market
HUL's aggressive benefit generated from three sources. First it is robust nicely established manufacturers, second, its native manufacturing capability and provide chain and third its huge gross revenue and distribution system. It was quickly felt that HUL's gross revenue and distribution system which had protected it from rivals could be quickly replicated by its rivals and to take care of its edge, the corporate necessary to improve its attain past the city markets. So far the operations of HUL enclosed greater than 2,000 suppliers and associates. The distribution community, consisted of 4,000 stockists, masking 6.Three million stores reaching your entire city inhabitants, and about 250 million rural customers .
Typically, the products produced in every of the HUL's 40 factories had been despatched to a depot with the assistance of a carrying and promotion agent (CFA). The firm had its depot in each state of the nation. The CFA was a 3rd occasion and acquired service defrayment for inventory and supply of the merchandise. In every city, there was a redistribution stockist (RS) who took the products from the CFA and promote them to stores. By the late 1990s, the HUL administration completed sure issues with the present gross revenue mannequin. First, the mannequin was not viable for small cities with small inhabitants and small enterprise. HUL discovered it costly to nominate one stockist alone for every city. Secondly, the retail gyration inside the nation adjustments the sample the purchasers store. Large retail self service retailers had been established. In the response of those issues, HUL redesigned its gross revenue and channel and the brand new system was referred to as 'diamond mannequin' inside the firm. At the highest finish of the diamond, there have been the self service retail shops which deep-rooted 10% of the whole FMCG market. The center, fatter a part of the diamond diagrammatic the profit-center based mostly gross revenue group. In the bottom of the Pyramid was the agricultural advertising and marketing and distribution which accounted for 20% of the enterprise .
Almost three-fourth of the whole 1.2 billion Indian inhabitants resided inside the rural areas and majority of them had a really low per capita earnings (round 44% of that of city India) . Urban market had reached the saturation level, thus fixing give attention to rural India. In comparison to only 5,161 cities in India there are 6,38,365 villages in India [Exhibit I]. Moreover, greater than 70% of India's inhabitants lived in villages and made a giant marketplace for the FMCG trade ascribable growing disposal incomes and consciousness degree.
Exhibit I
Distribution of Villages in India
Source: Kash Rangan, Sehgal Dalip et. Al., "Global Poverty: Business Approaches and Solutions", http://www.hbs.edu/socialenterprise/pdf/3-Rangan&Rajan-Presentation.pdf
When HLL shifted to the agricultural India, it confronted many issues. In distinction with a low per capita earnings comparative to the city residents, there have been some areas with enough cash yet their consciousness degree and consumerism was very low. Secondly, rural FMCG demand was depended upon agricultural state of soulal matters which was once again depended upon monsoon. Transportation was additively a serious hindrance. Many of the agricultural areas weren't joined by rail transport. The Kacha roads had been unserviceable throughout the monsoon and inside villages get remoted. Besides transportation, there was an issue of distribution and communication services mindful of phone, fax and web. Moreover, the lives in rural areas had been notwithstandin subordinate by ethnicity and traditions and folk didn't just get accustomed new practices. For instance, even moneyed and educated class of farmers doesn't put on denims or proprietary sneakers. The shopping for choices in villages had been sluggish and delayed. They wished to provide a trial and purchase alone after being glad. And, last the poor illiterate villagers seen expertise extra necessary than formal training they unremarkably valued gross revenue individuals who power present sensible options to their issues.
HLL approached the agricultural market with two standards - the accessibility and viability [Exhibit II]. Around 40% of the accessible rural market had excessive enterprise potential. To service this section, HLL appointed a standard stockist who was responsible all shops and all enterprise inside his specific city. In the 25% of the accessible markets with low enterprise potential, HLL allotted a retail stokist who was responsible to entry all of the villages at the very to the last degree as soon as in a fortnight and ship shares to these markets. This permits HLL to affect the retailers shares and portions bought via credit score extension and commerce reductions. HLL launched this Indirect protection (IDC) in 1960s.
To cater the wants of the inaccessible market with excessive enterprise potential HLL initiated a Streamline initiative in 1997. HLL appointed rural distributors and Star Sellers. The star vender bought items from rural distributors and unfocused them to retailers in small villages utilizing the native imply of transport. In this fashion round 35% of the inaccessible rural market got here below the direction of HLL. But a notwithstandin unbroached market - the inaccessible yet low enterprise potential market was left outdoors. The measure of this unbroached market was estimated to be round 500,000 villages with a inhabitants over 500 million . At this stage, Project Shakti was conceived.
Exhibit II
HLL's Approach to Rural Market
Low Business Potential High Business Potential
Accessible Markets Indirect Coverage (25%) Direct Coverage (40%)
Inaccessible Markets Space for Shakti Streamline (35%)
Source: V. Kasturi Rangan Rohithari Rajan, "Unilever in India: Hindustan Lever's Project Shakti--Marketing FMCG to the Rural", http://www.caseplace.org/d.asp?d=244 - 27ok
Project Shakti
HLL quickly completed that though it was having fun with a big penetration inside the rural market in comparison with its challenger mindful of Nirma and ITC, its direct attain was restricted to alone 16% . The FMCG large was determined to extend this share. HUL detected its dream winner inside the huge Indian rural market. The firm was already engaged in rural improvement with the launch of the Integrated Rural Development Programme in 1976 inside the Etah district of Uttar Pradesh. This program was tandem with HUL's dairy operations and coated 500 villages in Etah. Subsequently, the corporate launched comparable applications in adjacent villages. These actions primarily aimed toward coaching farmers, animal husbandry, producing various earnings, well being & hygiene and infrastructure improvement. The foremost situation in rural improvement was to create income-generating prospects for the poor villagers. Such initiatives, joined with the corporate's core enterprise, turned profitable and property and well-tried to be reciprocally useful to each the corporate ant its rural clients. However, a lot remained to be performed. Project Shakti was conceived.
Following the pioneering work carried out by Grameen Bank of Bangladesh , Self Help Groups (SHGs) of rural girls had been shaped by a number of establishments, NGOs and government our bodies in villages throughout India. This group of unremarkably 15 members contributed a small amount of money to a standard pool after which supplied a small-credit to a member of the group to put money into a generally authorized business exercise. Partnering with these SHGs, HLL began its Project Shakti in Nalgonda district of Andhra Pradesh in 50 villages inside the yr 2000. The social aspect of the Project Shakti was that it was aimed to create income-generating capabilities for underclass rural girls, by offering a property small enterprise alternative, and to enhance rural abode requirements via well being and hygiene consciousness. Most SHG girls seen Project Shakti as a strong enterprise proposition and are eager contributors in it. There after it was prolonged in different states with the whole power of over 40,000 Shakti Entrepreneurs.
HLL supplied a variety of merchandise to the SHGs, which had been connate rural clients. HUL endowed well in sources who work with the ladies on the sphere and supply them with on-the-job coaching and help. HUL offered the mandatory coaching to those teams on the fundamental principle of enterprise administration, which the ladies have to handle their enterprises. For the SHG girls, this translated right into a much-necessary, property earnings conducive in the direction of higher abode and prosperity. Armed with small-credit, girls from SHGs grow to be direct-to-home distributors in rural markets [Exhibit III].
Exhibit III
Structure of HLL's Market Reach in India
Source: Kash Rangan, Sehgal Dalip et. Al., "Global Poverty: Business Approaches and Solutions", http://www.hbs.edu/socialenterprise/pdf/3-Rangan&Rajan-Presentation.pdf
Shakti: How it really works
In common, a member from a SHG was chosen as a Shakti enterpriser, generally referred as 'Shakti Amma' obtained shares from the HLL rural distributor. After practiced by the corporate, the Shakti enterpriser then bought these items on to customers and retailers inside the village. Each Shakti enterpriser unremarkably serviced 6-10 villages inside the inhabitants strata of 1,000-2,000 folk with 4-5 main manufacturers of HLL - Lifebuoy, Wheel, Pepsodent, Annapurna salt and Clinic Plus. Apart from these, different manufacturers enclosed Lux, Ponds, Nihar and three Roses tea. The Shakti enterprisers got HLL merchandise on a `money and carry foundation.' However, the native self-help teams or Sir Joseph Banks offered them small credit score wherever required. According to Dalip Sehgal, Executive Director, New Ventures & Marketing Services, HLL Project Shakti was including as a lot like 15% of HLL gross revenue in rural Andhra Pradesh. He additive declared that given the largeness of the nation and backwardness of its girls, Project Shakti-like endeavor would place everyone in a win-win state of soulal matters.
I-Shakti: Crossing the Border
Encouraged by the goodwill and winner of Project Shakti, in August 2003, HLL launched an Internet-based rural data service, celebrated as I-Shakti, in Andhra Pradesh, in tie with the Andhra Pradesh Government's Rajiv Internet Village Programme. I-Shakti was an IT-based rural data service to offer important data to the agricultural folk in W. C. Fields like agriculture, training, business coaching, well being, hygiene and like [Exhibit IV]. The goal behind the i-Shakti mannequin was to provide want based mostly demand pushed data and providers inside the villages.
The i-Shakti stall was operated by the Shakti Entrepreneur. This was anticipated to strengthen their relationship with their clients. HUL anticipated that this may enhance the productiveness of the agricultural neighborhood and unlock business thencial progress.
Exhibit IV
A shot of the 'i-Shakti' web site
Source: "HUL Shakti-Changing lives in rural India.", http://www.hllshakti.com/sbcms/temp1.asp?pid=46802256 - 41ok
I-Shakti was based mostly on an interactive dialogue expertise developed & proprietary by the Unilever Corporate Research Team, U.Ok. The system enabled an in-depth understanding of every consumer wants and thereby imwell-tried the standard of providers supplied to them. The APonline , had busy with i-Shakti to launch varied providers. Moreover, via i-shakti, the ICICI Bank and HUL conjointly offered varied medium of exchange services and products mindful of life and common coverage, funding merchandise (Equity, Mutual Funds, Bonds), ICICI Bank Pure Gold (gold cash), Personal Credit, Rural Savings Accounts and Remittances to the agricultural buyer.
Redefinition Rural Distribution: Changing Lives
Having profitable in Nalgonda, in 2003 HLL deliberate to broaden Shakti to a 100 districts in Madhya Pradesh, Gujarat and UP. There had been different plans mindful of to permit different corporations (besides HLL's rivals) mindful of Nippo, TVS Motor for mopeds, coverage corporations for LIC insurance policies to door latch on the Shakti community to promote their shares. Sehgal was wanting proud when he introduced, "We wanted to first stabilise the project before we can look at other companies. It requires mortal with scale and size to build a platform then invite other companies onto this platform." He additive accented that Shakti was making a win-win partnership between HLL and its customers.
There had been about 4.36 lakh girls SHGs in AP with almost 58.29 lakh poor girls. AP alone had about half of the SHGs of the nation. By 2005 the SHGs had mobolised Rs 1500 crore had mobilised as corpus. The rural girls unionised themselves into `thrift and credit score' teams with a saving of Re.1 a day which created a fund of greater than Rs 800 crore. While the business nest egg was there among the many SHGs, there was no channel of funding. HLL broached this big neglected community to launch Project Shakti. HLL has in a position tp present a windowpane of prospect to take a position and earn.
The influence of HLL was not hastily. HLL witnessed 15% additive gross revenue from the villages of AP, which accounted 50% of the whole gross revenue of HLL merchandise in AP. Market analysts had been perceiving an big potential inside the rural foray of HLL. Nikhil Vora, Sr. Vice President of analysis group ASK Raymond James believed that if there was one firm that power tackle the onus of growing the agricultural markets, it was HLL. He additive continued, "HLL contributes 20 per cent of the total FMCG business in the country. So, clearly, the onus is on HLL to grow the market. Returns may not happen in the next five years, but a lot of consumer understanding and insights comes from an exercise like Project Shakti, which winnerively can lead to product innovation."
HLL acknowledged that for Project Shakti to reach winner for the corporate's rural penetration, Sellers and communicators should be nicely practiced. It was unclear how Sellers would carry call at an enlarged infrastructure. Although HLL's rural initiatives incurred big prices to the corporate, it was anticipated that with the monsoon revival and big rural incomes power decline the retribution interval for tasks like Shakti. Moreover, the lowering model loyalty amongst city customers rural market had grow to be an crucial. According to the Concurs Ok.N. Siva Subramanian, Sr. Vice President, Franklin Templeton India Ltd, "The (HLL) direction had recognized the imminent saturation of the urban markets some time back and launched aggressive plans to capture the rural markets. However, a lag in the agricultural sphere resulted in rural incomes left over flat and poignant sales. We believe that by targeting lower price points and further expanding the distribution network, companies can tap the potential of rural markets. Initiatives like Project Shakti will help them in establishing and consolidating their base in rural markets."
HLL must decide whether or not Project Shakti power be quotable in different international locations. The Indian menag construction and village interplay present a singular diffusion mechanism that's an efficient car for Shakti. Whether this mannequin power be efficiently carried call at different international locations should be additive explored. Moreover, it want to seek out out whether or not the Project Shakti or e-choupal like initiatives power be elevated. There was little doubt that the regional manufacturers, and even big FMCG corporations, didn't have the rather distribution attain that HLL had established and in the long term, that power show a winner for HLL.
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