Project Shakti - A win-win situation

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

~ Mr. Nachiketa More

Executive Director, Wholesale Banking Group
ICICI

"There is tremendous potential in rural markets. This is where the growth is coming from."
~ Sharat Dhall, director of Hindustan Lever's newVentures and marketing services

Sankaramma, the leader of the local self-help Kanaka Durga (SHG) is a village Thimmapuram K. Muddaner Mandal in Kadapa district of Andhra Pradesh. The village has 350 households with a total population of 1200 Sankaramma of 5 hectares of agricultural land was not sufficient for six Member States of the family 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 he started the clients visiting their homeland for the products. Project Shakti sees as a means for the bright future of their children. Shakti-project has also provided lunch for primary school in their village. Today Sankaramma an important figure in the development of their village.

Sarvatai Usha, mother of two children, traveled 32 km to work every day. husband's income was not enough for the twoThe children and their elderly parents. But forcing the long distance and time working odd Usha, to finish the job. Then he got a call from the department of government. A meeting convened by the Project Shakti. Usha was Shakti Amma and began a new adventure. A short time they have developed good relations with the villagers helped to make a good deal. She says: "I am happy to meet my family needs me and the people give a lot of respect today." And she is very excitedgrowth of their business in the years to come.

The list goes on. Hindustan Lever Ltd, a subsidiary of Unilever, is on thousands of women like Usha Sarvatai Sankaramma and count their products to rural consumers could not reach them before the sale. Until 2005, about 13,000 poor women to sell its products in 50,000 villages in India, and carried 12 states for 15% of rural enterprises in sales in those states. Women typically earn between $ 16 and $ 22 per month, Often doubling their household income, which was to educate children. A total of about 30% of revenue from Hindustan Lever rural markets in India

Started in the late 2000 Project Shakti, Hindustan Lever was allowed 80,000 of the 638,000 villages in India for access. Hindustan Lever's director of New Ventures has expressed pride: "At the end of the day we are in business to business, but if we can do something positive, it is a great win-win model .." Hindustan Lever wasis not the only company to recognize the great potential of marketing in rural India. With the saturation of the urban market, the company began to focus its activities and products for rural consumers who are poor, but rich in efforts by the media and other forces target range.

Unilever in India: business and growth pact

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 'the Indian subsidiary HindustanUnilever Limited (HUL) was the largest company in the nation's consumer goods with a volume of about 4 million tons and revenues of nearly $ 2430000000th HUL major brands including Lifebuoy, Lux, Surf Excel, Rin, Wheel, Fair & Lovely, Pond's, Sunsilk, Clinic, Pepsodent, Close-up, Lakme, Brooke Bond, Kissan, Knorr-Annapurna, Kwality Wall, etc. These were manufactured by 40 factories across the country.

In 1931, Unilever with its first Indian subsidiary Hindustan VanaspatiManufacturing Company. Subsequently, the Lever Brothers India Limited and United Traders Limited was launched in 1933 and 1935. In November 1956 the three companies merged and HUL form. Unilever HUL shares was 51.55% in 2005 and the rest of the investment was distributed among 380,000 individual shareholders and financial institutions. A tour of acquisitions followed. In 1984 Brooke Bond joined the flock of Unilever. Lipton was purchasedPonds 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, HUL had a decline in the growth curve and mark the group. Economic liberalization has allowed the company to every product segment and opportunity to explore, without restrictions on capacity. On the other hand, deregulation has allowed alliances, mergers and acquisitions. In 1993, HULmerged with the Tata Oil Mills Company (TOMC) 1993. In 1995, HUL a 50:50 joint venture with another Tata company, Lakme Limited.

The company had also produced a series of mergers, acquisitions and alliances in the food and beverage industry. Some of them were the acquisition of Kothari General Foods (1992), Kissan (1993), heaps of Icecream business from Cadbury India (1993), Modern Foods (2002), boiled shrimp and pasteurized crab meat business of the group 's amalgamCompanies (2003).

Living with 12.2% of the world population in the villages of India, had the rural FMCG market has huge potential. The Indian FMCG sector was the fourth largest sector of the economy, with a market volume of 13.1 billion U.S. dollars th industry was expected to grow by about 60% by 2010. In the years 2005-2006, the urban India is 66% of the total consumption of consumer goods, with rural India accounted for the remaining 34%. However, rural India accounts for more than 40% of consumptionmajor categories of consumer goods such as personal hygiene, washing, and hot drinks. FMCG companies like HLL bid, Nirma, and ITC is trying to exploit the enormous potential.
In 1990, a local Indian company has started clean Nirma Ltd. offers the rural poor at the lowest cost. The company had created a business with a formulation of new products, low-cost manufacturing, channel distribution, packaging and value prices. After a decade, Nirma was the largestdetergent brand makers with a stake of 38% and 121% return on invested capital.

In 2002, ITC established a network of Internet-based kiosks, e-Choupal to farmers to help in the procurement process. The initiative began with soya farmers in Madhya Pradesh and then on cotton, tobacco, foam, shrimp, etc. Based on the e-Choupal six in June 2000, ITC Internet-based, rural villages in India Initiative 6000 with about 1,200 E -Choupal The institution related to the 2002ndand each-Choupal, an investment of Rs 1-3 lakh. The objectives behind e-Choupal position was allowed a single point of procurement and purchasing, so that the farmers sell their produce directly to ITC on the basis of prices prevailing in the current market. This eliminates the middleman and thus helped to reduce ITC and its costs.

In 2007, approximately 34% of consumer products sales were from rural areas. The number of families that are consumer products used in rural India has grown from 13.6 crore in2004 to 14.3 crore in 2007. This growth was on average 1.8% year on year increase in the number of families who have achieved at least product usage consumer goods. However, the increase in the level of penetration for the entire consumer products are not equal. According to a study conducted by a market research firm IMRB, the monthly consumption of detergents and soaps largely stagnant at 92% penetration, but the shampoo liquid is increased by 68% in 2004 to 83% in 2007. These data showed aShift to higher value products in the rural market, from the dust of the teeth, toothpaste or unbranded to branded products. After the senior project manager of IMRB International, Manoj K Menon, "One of the main changes include the increasing preference for branded products. For example, in food and beverage sector, has increased the penetration of the brand in comparison with Atta ' years and 8 per cent salt brand of 3 percent. The penetration of unbranded Atta was reduced bySalt and 1 to 3 percent. "

HLL's marketing efforts: Transition Rural Market

HUL competitive advantage generated from three sources. First, it is steady and strong brands, secondly, its local production capacity and supply chain and the third of its sales of large size and the distribution system. He soon found that the HUL sales and distribution system that had protected will soon be replicated by their rivals and maintain their advantage over competitors, the company hadIncrease the urban markets. So far the operations of HUL have over 2,000 suppliers and partners. The distribution network consists of 4,000 stocks to 6.3 million points of reaching the entire urban population, and about 250 million rural consumers.

In general, the goods in each of the 40 factories HUL in a vehicle 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 the cost of the storage service and product delivery. In every town there was a merchant of redistribution (RS), which took the goods from the CFA and sell them to retailers. At the end of 1990 recognized the HUL-level management problems with the existing distribution model. First, the model was not profitable for small cities with small populations and small businesses. HUL found it expensive to appoint only one dealer for each city. Second, the retail revolutionin the country will change the model of the store customer. The retail self-service stores have been established. In response to these problems HUL redesigned its sales channel and distribution and the new system became known as the "diamond pattern" in the company. At the upper end of the diamond, there was the self-service branches, of which 10% of the market for consumer goods is total. The center, part of the diamonds in bold are the profit center based on the sales team. At the bottom of the pyramid wasRural marketing and sales as a percentage of 20% of the business.

Nearly three-quarters of the 1.2 billion Indian population residing in rural areas and most of them is very low per capita income (about 44% of the urban India) had. Urban market had reached saturation point, which focus on rural India. Compared to only 5,161 cities in India are 6,38,365 villages [Exhibit I] India. Also lived more than 70% of the Indian population inVillages and has a large market for consumer goods sector due to rising incomes and awareness of waste.

Annex I
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 a low per capita income of citizens, we have been comparedsome areas with enough money, but their awareness and use was very low. Secondly, the demand for consumer goods for the agricultural situation in rural areas, which in turn depended on the monsoon hung. Transportation was also a serious obstacle. Many rural areas have not been connected by rail. The roads were cut off during the monsoon Kacha be unusable and villages of the interior. In addition, the transport, there was a problem of distribution and communication tools such as telephone, faxand the Internet. Even in rural areas is still alive and ethnic traditions and peoples ruled not easy to get used to the new practices. For example, the rich and educated class of farmers do not wear jeans or shoes brand. Purchasing decisions in the villages were slow and late. They wanted to give it a try and buy only after being satisfied. And finally, the poor illiterate villagers considered the most important experience of formal education and evaluates vendors that couldpractical solutions to their problems.

HLL approached the rural market, with two criteria - the accessibility and [Annex I] profitability. About 40% of rural Internet market, had high business potential. To service this segment, HLL appointed a common retailer, which was for all the shops and all business processes within his hometown. In 25% of the market available with a low potential for business, retail stokist HLL responsible for all access grantedVillages at least once in two weeks and send stocks on these markets. This allows retailers to influence the actions HLL and loan volumes and reductions in selling prices. HLL launched this indirect communication (IDC) in 1960.

In order to meet the needs of the market inaccessible to the high-potential companies Streamline HLL launched an initiative in 1997. HLL rural appointed distributors and retailers Star. The seller purchased the goods from the star rural distributors and distributed themDealers in small villages with the average local traffic. In this way, approximately 35% of the market inaccessible rural areas came under the control of HLL. But an untapped market - the business market inaccessible, but low potential has been left out. The size of this market still has left some 500,000 villages with a population of over 500 million €. At this time the project was conceived Shakti.

Exposure II
HLL approach to rural market

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

Project Shakti

HLL soon realized that while he enjoyed a greater distribution in the rural market, where she and her rivals such as Nirma and ITC in relation to itsdirect reach was limited to only 16%. The FMCG giant was desperate to increase this percentage. HUL saw his dreams in the vast Indian rural market. The company was already in rural development with the introduction of integrated rural development program in 1976, he worked in the Etah district of Uttar Pradesh. This program has been in tandem with the operations of HUL dairy products, and covers 500 villages in Etah. Subsequently, the company has introduced similar programs in nearby villages. ThisActivities, including training of farmers, animal husbandry designed to create 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 are an effective and sustainable and has been shown to be beneficial to both the ant farm to his rural customers. However, much remains to be done. Shakti-projectdesigned.

After the pioneering work of Grameen Bank in Bangladesh, self-help groups (SHGs) of rural women from various institutions, NGOs and government bodies in villages across India have been made. This group of 15 members has contributed largely a small sum of money to a common pool and then offered a micro-credit to a member of the group to invest in a business generally accepted. The partnership began with this SHG, HLL's Project Shakti in Nalgonda districtAndhra Pradesh in 50 villages in 2000. The social side of the Shakti project was that the goal was to create income-generating skills to disadvantaged women in rural areas through the improvement of sustainable micro enterprise opportunity, and rural living standards through health and awareness of hygiene. The majority of women having SHG Project Shakti as a powerful business proposition, and we want the participants in it. E 'state, after about in other states by force of the long40,000 Shakti entrepreneurs.

HLL offered a wide range of products for the SHGs, which are relevant to rural customers. HUL resources invested heavily in working with women in the field and on-the-job training 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 translates into a much needed, sustainable income, contributing tobetter living conditions and welfare. Armed with micro-credit, women from self-help groups, the direct-to-home distributors in rural markets [Exhibit III].

Annex 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 was chosen as the Shakti entrepreneurs, usuallystocks has been called "Shakti Amma" from the dealer HLL rural. After training Shakti entrepreneurs then sold the goods directly to consumers and retailers in the village. Each entrepreneur is usually maintained Shakti 60-10 villages in the 1000-2000 population of people with 4-5 big brands of HLL - Rescue Ring, Wheel, Pepsodent, Annapurna and Clinic Plus In addition to these, other brands such as Lux, Ponds , Nihar and 3 Roses tea. Shakti entrepreneursHLL products received a "cash and carry basis." However, local self-help groups or microfinance banks, if necessary. According to Dalip Sehgal, executive director of new initiatives and marketing services, HLL Project Shakti was adding up to 15% of sales HLL in rural Andhra Pradesh. He also argued that given the size of the country and the backwardness of their wives, all Project Shakti-like was seeking a win-win situation.

I-Shakti: Crossingthe border

Encouraged by the goodwill and the success of Project Shakti, August 2003, HLL launched an Internet-based information service for Rural Development, called I-Shakti, in Andhra Pradesh, in collaboration with the Government of Andhra Pradesh Rajiv Internet Village program. I-Shakti is an information service-based IT major awareness campaign to empower the rural poor in areas such as agriculture, education, training, health, sanitation and similar [Annex IV]. The objective behind thei-Shakti must be based on information needs and services based in the villages.
The i-Shakti kiosk run by Shakti entrepreneurs. This was expected to strengthen their customer relationships. HUL expects this to improve the productivity of rural communities and unlock the economic and social progress.

Annex IV
A snapshot of the web site of the 'i-Shakti'

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

I-Shakti developed a technology for interactive discussion and manufactured by Unilever Corporate Research Team based patented, UK The system enables a deeper understanding of the specific needs of users and thus improve the quality of services they offer. The APonline, had tied up with i-Shakti to start various services. In addition, i-Shakti, ICICI Bank and HUL together the various financial products and servicesas 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: change your life

After the success in Nalgonda, in 2003 HLL plans to Shakti, to extend a 100 districts in Madhya Pradesh, Gujarat and UP. There were other plans, like other companies (apart from competitors HLL) Nippo as TVS Motor, which allowsmopeds insurance companies, LIC policy for the network Shakti you get to sell their shares. Sehgal looked proud when he announced. "We wanted to stabilize before we can look at other companies, the project, it requires a person with the scope and scale to 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 had only about half of the SHGs in the country. In 2005 he had the SHG RS 1500 crore as corpus mobolised mobilized. Rural women have organized themselves into "savings and credit groups" with a saving of Re.1 a day, a fund of over Rs 800 crore created. While the savings were among the self-help groups, there was no channel of investment. HLL used to miss this great network to start the project Shakti. Tp HLL has been able to provide a window to view and invest. Earn

The effects of HLL was not all at once. Tools HLL 15% additional sales from the villages of AP, which takes into account 50% of the total turnover of HLL products in AP. Market analysts have been sensing a lot of potential in the rural foray of HLL. Nikhil Vora, Senior Vice President of the research team at ASK Raymond James believes that if a company can take responsibility for the development of rural markets, it was HLL. He continued: "HLL with 20 percent of the totalFMCG companies in the country. So, clearly, the burden is HLL to grow the market. There can happen over the next five years, but a lot of understanding of consumer insights and results from an exercise like Shakti project, which in turn can lead to product innovation. "

HLL Project Shakti acknowledged that the company be successful rural penetration, retailers and communicators must be well trained. It was unclear how distributors should play in extended infrastructure. AlthoughHLL rural initiatives creates huge costs for the company, it was expected that with the revival of the monsoon and rising incomes in rural areas could reduce the payback period for projects such as Shakti. In addition, the decline in brand loyalty with consumers was imperative urban rural market. KN Siva Subramanian After shares, Senior Vice President, Franklin Templeton India Ltd: "L '(HLL), the management had the imminent saturation of urban markets recognized some time ago and startedaggressive plans to capture the rural markets. However, a slowdown in the agricultural sector led rural incomes remaining flat and the impact on sales. We believe that seeks the lowest prices and the continued expansion of the network, companies can leverage the potential of rural markets. Initiatives such as Project Shakti will help to establish and consolidate its base in rural markets. "

HLL Project Shakti will determine whether the technique could be applied in otherCountries. The Indian family and the structure of entire villages to provide a single diffusion mechanism is an effective tool for Shakti. If this model could be applied successfully in other countries, should be studied further. They also need to know if the project could Shakti or e-Choupal as initiatives to increase. There was no doubt that the regional brands or even the largest FMCG companies to reach not the kind of distribution that HLL had identified andIn the long run, it could prove a winning strategy for HLL.

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