Project Shakti - A Win Win Situation

"Our partnership with rural entrepreneurs HUL offers a profitable business model during the operation of i-Shakti kiosks. The low-cost delivery and customer-specific products will result in higher benefits because of greater economic benefits for rural consumers. "

~ Mr. Nachiketa More

Executive Director, Wholesale Banking Group
ICICI

"It 's tremendous potential in rural markets.'s Where the growth is."
~ Sharat Dhalla, director of Hindustan Lever newVentures and Marketing Services

Sankaramma is one of the leaders of the local Kanaka Durga-group (SHG) of K. Mandal in Cuddapah district of Andhra Pradesh village Muddaner Thimmapuram. The village has 350 households with a total population of 1200 Sankaramma's 5 acres of agricultural land was not sufficient for a family of six due to the severe drought in the region. He started a business in April 2003 with Hindustan Unilever Ltd. In 2005 he had a regular monthlyTurnover of Rs.10, 000 per month. Before he sold door to door, but then began to visit their old customers for products. Shakti sees the project as a means for the Bright Futures of their children. Project Shakti has allowed her to also offer midday meals for primary school in their village. Today Sankaramma a central figure in the development in their village.

Sarvatai Usha, a mother of two children, traveled 32 km to work every day. husband's income was not enough for the twoChildren and their elderly parents. But forcing the long distance and working odd hours Usha to terminate the process. Then he got a call from the ward government. attend a meeting, convened by the Shakti Project. Usha was Shakti Amma, and began a new adventure. In a short period of time to do the good relations that helped develop with the villagers is a good deal. He says: "I'm happy, my family and meet the needs of people give me a lot of respect today." And now she is very excitedtheir business to grow in the years to come.

The list goes on. Hindustan Lever Ltd, a subsidiary of Unilever is to sell thousands of women like Usha Sarvatai Sankaramma and count their products to rural consumers could not reach before. Until 2005, the products of 13,000 poor women in society, in 50,000 villages in India to sell 12 countries and has contributed 15% of sales of rural society in these countries. Women usually earn between $ 16 and $ 22 per month"The often doubling their household income to be used to educate their children. Overall, approximately 30% of revenue from Hindustan Lever rural markets in India

Began in late 2000, Project Shakti, Hindustan Lever activated, access to 80,000 of the 638,000 villages in India. Hindustan Lever director of new business with pride to the phrase: "At the end of the day we in the business. But if we can do something positive through the shops, is a great win-win model. Hindustan Lever wasnot the only company to recognize the great potential of marketing in rural India. With the saturation of the urban market, the company began re-engineering their businesses and products to consumers, the rural poor, but rich in aspirations fueled by the media and other forces of destination.

Unilever in India and business growth

Unilever is the world's largest, Fast Moving Consumer Goods (FMCG) companies with a global turnover of 55 billion U.S. dollars in 2005. And 'Indian subsidiary HindustanUnilever Limited (HUL) was the largest company in the country with a volume of consumer goods combined about 4 million tonnes and a turnover close to about $ 2,430,000,000 HUL key brands including Lifebuoy, Lux, Surf Excel, Rin , Wheel, Fair & Lovely, Pond's, Sunsilk, Clinic, Pepsodent, Close-up, Lakme, Brooke Bond, Kissane, Knorr-Annapurna, Kwality Wall, etc. These products were over 40 factories across the country.

In 1931, Unilever set its first Indian subsidiary Hindustan VanaspatiManufacturing Company. Then, the lever Brothers India Limited and United Traders Limited were each founded in 1933 and 1935. In November 1956 the three companies merged and HUL form. Unilever's share was 51.55% in HUL in 2005 and the remaining shares were distributed among 380,000 individual shareholders and financial institutions. A tour of acquisitions followed. In 1984 Brooke Bond joined the Unilever fold. Lipton has been acquiredPonds in 1972 and 1986. HUL has followed a growth strategy to diversify more in line with Indian opinions and aspirations.

The economic and political development in 1990 had a marked decrease in Hul, and the growth curve of the group. The liberalization of the economy can explore the company each product and opportunity segment, without capacity constraints. On the other hand, allows deregulation alliances, mergers and acquisitions. In 1993, HULTata Oil Mills Company with the merger (TOMC) 1993. In 1995, HUL 50:50 joint venture with another Tata company, Lakme Limited.

The company had also made a series of mergers, acquisitions and alliances in the food and drinks. Some of them were the acquisition of Kothari General Foods (1992), Kissane (1993), piles Icecream business from Cadbury India (1993), Modern Foods (2002), boiled shrimp and pasteurized crab meat business Group bondingCompanies (2003).

With 12.2% of the world population lives in villages of India, the rural FMCG market population had huge potential. The Indian FMCG sector is the fourth largest sector of the economy, with a market of 13.1 billion U.S. dollars th The sector was expected to grow by over 60% in 2010. In 2005-2006, the urban India is 66% of total consumption of consumer goods, with rural India, the remaining 34%. However, rural India accounted for more than 40% of consumptioncategories of consumer goods such as large personal care, textile care and hot drinks. FMCG companies bidding as HLL, Nirma, and ITC is the attack on the huge potential to exploit.
In 1990, a local Indian company, Nirma Ltd., began supplying cleaning products to the rural population at the lowest cost. The company had a business system with a formulation of new products created, low cost of production, distribution channels, value packages and special prices. After a decade, Nirma was the largestresponsible detergent brand, with a market share of 38% and 121% return on invested capital.

In 2002, ITC set up a network of Internet-based kiosks, e-Choupal, to help farmers in their procurement process. The initiative began with soya farmers in Madhya Pradesh and subsequently extended to cotton, tobacco, etc. Based on shrimp and had logged-Choupal in June 2000, ITC Internet-based initiative with rural Indian villages 6000 about 1,200 e-Choupal from the 2002nd planteach e-Choupal is an investment of Rs 3.1 lakh. The objectives behind e-Choupal WAS procurement place so unique and point of purchase, so that farmers sell their produce directly to ITC on the basis of the latest current prices prevailing in the market. These mid-off and thus helped to reduce ITC and its costs.

In 2007, approximately 34% of FMCG products sales were from rural areas. The number of households that consumer products used in rural India had grown from 13.6 crore in2004 to 14.3 crore in 2007. This growth was on average 1.8% year over year growth in the number of households reached by using at least a FMCG product. However, the growth of penetration rate for all consumer products are not the same. According to a study by market research firm IMRB, the monthly consumption of detergents and soaps largely stagnant, with a penetration of 92%, but the shampoo liquid by 68% in 2004 grew by 83% in 2007. These data showedShift towards products with higher added value between the rural market, tooth powder, toothpaste or unbranded to branded products. According to the Senior Project Director of IMRB International, Manoj K. Menon, "One of the main changes include the increasing preference towards branded products. Is increased, for example in food and beverages segments, penetration of branded Atta over the years by 8 percent and salt brand decreased 3 percent. penetration Brand Atta1 percent and 3 percent salt. "

HLL marketing effort: Transition rural market

HUL competitive advantage generated from three sources. First, there is also strong brands and, secondly, its local production capacity and supply chain and the third of its vast distribution system set up. Soon the vision was that the HUL sales and distribution system that had protected will soon be replicated by their rivals and maintain its lead over competitors was the companytheir reach urban markets increased. So far, the activity of HUL has more than 2,000 suppliers and employees included. The distribution network of 4,000 dealers existed for 6.3 million retail outlets reaching the entire urban population, and about 250 million rural consumers.

Generally, the goods in each of the 40-HUL factories were established in a warehouse with a transport and forwarding (CFA) sent. The company had its depot in every state in the country.The CFA is the third and got a service charge storage and delivery of products. In every town there was a redistribution Dealers (RS), which took the goods from the CFA and sell them to retailers. Since the late 1990 HUL recognized management problems at the existing distribution model. First, the model was not possible for small towns with a population of small and small businesses. HUL are getting expensive to appoint an exclusive dealer for each city. Second: The retail revolutionChanges in the country, the model customers of the store. Large self-service shops have been established. In response to these problems, HUL reformed its sales channel and distribution and the new system was a "diamond" model known in the company. At the upper end of the diamond, there were the self-service branches, of which 10% of the market for consumer goods is total. Downtown, most often a part of the diamonds represent the center-based team of sales profit. At the bottom of the pyramid wasrural marketing and sales, which represent 20% of the business.

Almost three quarters of the total 1.2 billion Indian population lives in rural areas and most of them had a very low per capita income (about 44% of the urban India). Urban, if the market reaches saturation point, which focus on rural India. Compared to only 5,161 cities in India, there are 6,38,365 villages in India Show [I]. In addition, there were more than 70% of Indian population inVillages and has a large market for consumer goods sector due to rising disposable income and visibility.

Show
Distribution of villages in India

Source: Kash Rangan, Dalip Sehgal et al. Al "Global Poverty: Business Solutions and approaches," http://www.hbs.edu/socialenterprise/pdf/3-Rangan&Rajan-Presentation.pdf

If HLL moved to rural India, there were many problems. In contrast with low per capita income of citizens, we have been comparedsome areas with enough money, but their knowledge and use is very low. Secondly, the demand for consumer goods rural agricultural situation, which was in turn depended on the monsoon. Transport was also a major obstacle. Many rural areas were not connected by rail. The streets were Kacha isolated interior villages during the monsoon and get unusable. Furthermore, transportation, distribution and there was a problem of communication such as telephone, faxand the Internet. Even in rural areas is still alive and people of ethnic traditions and unregulated easy to get used to new behaviors. For example, the rich and educated class of farmers also do not wear jeans and shoes of the brand. The buying in the villages were slow and late. They wanted to give it a try, and buy only after being satisfied. And more importantly, finally, the poor illiterate peasants regarded as formal education and experience, estimated that sales staff couldpractical solutions to their problems.

HLL approached the rural market, with two criteria - the accessibility and vitality [Annex II]. About 40% of accessible rural market, was high business potential. This segment was service, has appointed a professional HLL common, responsible for all sales and all the affairs of his city in particular. assigned in 25% of accessible markets with low entrepreneurial potential, access to detailed stokist HLL was responsible for allVillages stocks at least once in two weeks and send these markets. In this way, the HLL stock dealers and quantity affect the expansion of credit and sold under the trade discounts. HLL started this cover indirect (IDC) in 1960.

Thereby ensuring the needs of the market with inaccessible high-potential companies Streamline HLL launched an initiative in 1997. HLL rural appointed distributors and Star Sellers. The seller, star bought goods from rural actors and distributed them toDealers in small villages with transport means. This was about 35% of the market inaccessible rural areas under the control of HLL. But an untapped market - the inaccessible, but market activity in low potential has been left out. The size of this untapped market has left some 500,000 villages with a population of over 500 million. At this point the Shakti project was conceived.

Exhibit II
HLL approach to Rural Market

Low business with high potentialBusiness potential
accessible markets indirect coverage (25%) of direct coverage (40%)
Inaccessible markets for space Shakti Stream Line (35%)
Source: See Kasturi Rangan Rohithari Rajan, "Unilever in India: Hindustan Lever a project Shakti - Marketing FMCG rural http://www.caseplace.org/d.asp?d=244 - 27k

Project Shakti

HLL soon realized that, even enjoyed a greater market penetration in rural market, where she and her rivals such as Nirma and ITC in relation to theirdirect reach was limited to only 16%. The FMCG giant was desperate to increase this percentage. HUL saw his dream of the great Indian rural market. The company was already involved in rural development with the introduction of integrated rural development program in 1976 in the Etah district of Uttar Pradesh. This program has been in tandem with HUL's Dairy operations and 500 villages falling Etah. Subsequently, the company has introduced similar programs in nearby villages. ThisActivities focused mainly on training of farmers, animal husbandry, development of alternative sources of income, health and sanitation and infrastructure development. The most important issue for rural development was to create income-generating opportunities for poor farmers. These initiatives, together with the core business of the company, was positive and proved to be sustainable and mutually beneficial to both ant rural society customers. However, much remains to be done. Shakti-project wasdesigned.

performed by the pioneering work of Grameen Bank in Bangladesh have been self (SHG) of women in rural areas of various institutions, NGOs and government agencies in villages throughout India format. This group usually has 15 members contributed a small amount of money to a common pool and then offered a micro-credit to a member of the group to invest in an approved general economic activity. Partnerships with these SHGs, the project began HLL Shakti in Nalgonda districtAndhra Pradesh in 50 villages in 2000. The social side of the Shakti-project WAS That the aim is to create income-generating opportunities for women in disadvantaged rural areas by providing an opportunity to Improve Sustainable micro enterprise, and rural living standards through health and hygiene awareness. Most women viewed the project Shakti SHG as a powerful business proposition and are keen participants in it. It 'was, after other states with the power of time40,000 Shakti entrepreneurs.

HLL offers a wide range of products to the SHGs that were relevant to rural customers. HUL is investing significant resources to work with women in the field and with their training in the workplace and support. HUL provided the necessary training for these groups the basics of business management, women need to manage their businesses. For the SHG women, this means a great need, the sustainable income, contributing tobetter living conditions and welfare. Armed with micro-credit, women from SHGs direct-to-home distributors in rural markets [Exhibit III].

Exhibit III
Structure of market coverage in India HLL

Source: Kash Rangan, Dalip Sehgal et al. Al "Global Poverty: Business Solutions and approaches," http://www.hbs.edu/socialenterprise/pdf/3-Rangan&Rajan-Presentation.pdf

Shakti: How it works

In general, a member of a SHG as Shakti entrepreneurs, selected generalcalled "stocks got Shakti Amma" from HLL rural retailer. After training by the company, Shakti entrepreneurs then sold the goods directly to consumers and retailers in the village. Each Shakti entrepreneur generally maintained villages in the 10:06 population of 1000-2000 people with 4-5 major brands of HLL - Lifebuoy, Wheel, Pepsodent, Annapurna and Clinic Plus In addition to these, other brands including Lux, Ponds, Nihar and 3 Roses tea. Shakti entrepreneursHLL certain goods on "cash and carry basis." However, if the local self-help groups or microfinance banks, if necessary. According to Dalip Sehgal, executive director, new ventures and Marketing Services, HLL Project Shakti is the addition of up to 15% of sales HLL in rural Andhra Pradesh. He also indicated that there would try, given the size of the country and the backwardness of their wives, Project Shakti, as everywhere in a win-win situation.

I-Shakti: Crossingborder

Encouraged by the success of the business or goodwill and Shakti-project, in August 2003 launched an information service HLL Web-based rural areas, called I-Shakti in Andhra Pradesh, in collaboration with the Government of Andhra Pradesh Rajiv Internet Village Programme. I-Shakti is an IT information service for rural areas, provide important information for rural populations in areas such as agriculture, education and training, health, hygiene and the like [Annex IV]. The objective behind thei-Shakti model is to give, they need information on-demand services in the villages.
The Shakti-Shakti kiosks managed by the entrepreneur. This was expected to strengthen relations with customers. HUL expects this to improve the productivity of the rural population and unlock the economic and social progress.

IV Show
A snapshot of the website 'i-Shakti'

Source: HUL Shakti-Changing Lives in Rural India. "http://www.hllshakti.com/sbcms/temp1.asp?pid=46802256 - 41k

I-Shakti has been developed on an interactive discussion patented technology and enabled by the Unilever Corporate Research Team, UK The system has a thorough understanding of the specific needs of users and thus improve the quality of services offered. The APonline, had tied with i-Shakti, to start various services. Furthermore, i-Shakti, ICICI Bank and HUL together services provided by various financial products andas life and general insurance, investment products (stocks, mutual funds, bonds), ICICI Bank Pure Gold (gold), Personal Credit, the rural savings and remittances to rural customers.

Redefining Rural Distribution: Changing Lives

After the success in Nalgonda, planned in 2003, HLL Shakti expand to 100 districts in Madhya Pradesh, Gujarat and UP. There have been other projects, such as to allow other companies (except competitors HLL) as Nippo, TVS Motor toMopeds, to insurance companies for LIC policy Shakti network to sell their stocks. Sehgal was proud when he announced: "We wanted to stabilize before it can appear as the project to other companies. It requires a person with size of scale and build a platform and then to other businesses on that platform." He also stressed that Shakti was to create a win-win partnership between HLL and its consumers.

There were about 4.36 lakh women self-help groups in AP with almost58.29 lakh poor women. AP only had about half of the SHGs in the country. By 2005, the RS 1500 crore had mobolised SHGs had mobilized as corpus. Rural women were organized into "savings and credit" groups with a saving of Re.1 a day, a fund of over Rs 800 crore created. While savings were among the groups, there was no channel of investment. HLL knocked to overlook this huge networking project Shakti to start. Tp HLL has been able to provide a window to view and invest. Earn

The impact of HLL was not all at once. HLL witnessed 15% of additional sales from the villages of AP, which accounted for 50% of the total turnover of HLL products in AP. Market analysts have been receiving a huge potential in rural thrust of HLL. Nikhil Vora, Sr. Vice President of Research Group ASK Raymond James believes that if a company can take the burden of rural markets, it was HLL. He further continued, "HLL contributes 20 percent of the totalFMCG companies in the country. So, clearly, the burden is HLL to grow the market. Shipping costs can not happen in the next five years, but a lot of understanding of consumer insights and comes from such an exercise as Project Shakti, which in turn can lead to product innovations. "

HLL Project Shakti recognized that to be the company for rural penetration is successful, retailers and communicators must be well trained. It was unclear how the dealer behaves in expanded infrastructure. AlthoughHLL rural initiatives creates huge costs for the company, it was expected that with the resumption of the monsoon and more income in the country could sink the payback period for projects such as Shakti. The decline in consumer loyalty among the rural population of the city market was an imperative. KN Siva Subramanian After shares, Sr. Vice President, Franklin Templeton India Ltd, "The (HLL) management was imminent saturation of urban markets has long recognized and has begunaggressive plans to capture the rural markets. However, a slowdown in agriculture caused rural incomes still flat and the impact on sales. We believe that lower prices and targeted the further expansion of the network, businesses can unlock the potential of rural markets. Initiatives such as Project Shakti will help to establish and consolidate its base in rural markets. "

HLL would have to determine whether the project could be repeated in other-ShaktiCountries. The structure of the family and the Indian village of interaction of a single mechanism of diffusion is an effective vehicle for the Shakti. If this model in other countries could be implemented successfully it is necessary to work. They also need to know if the project Shakti, or e-Choupal initiatives such as may be increased. There was no doubt that companies FMCG brands regional, or even higher to reach not the kind of distribution that HLL had founded andIn the long run it could prove a winning strategy for HLL.

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