-

A
RESEARCH REPORT
ON

“A STUDY ON MARKETING STRATEGIES

IN FMCG IN RELATION WITH HIDUSTAN
UNILEVER LIMITED”

SUBMITTED FOR THE PARTIAL FULFILLMENT OF

THE DEGREE OF
MASTER OF BUSINESS ADMINSTRATION

(AFFILIATED TO G.B.T.U., LUCKNOW)

SUBMITTED TO: SUBMITTED BY:

MS. RICHA GARG VIVEK SINGH

(FACULTY) ROLL NO.: 0922470060
LKCE, GHAZIABAD MBA- IVth Sem.

LORD KRISHNA COLLEGE OF ENGINEERING

GHAZIABAD.

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CERTIFICATE

Dated……………

This is to certify that the Research work (A Study on Marketing Strategies in

FMCG in Relation with Hindustan Unilever Ltd) is a bonafide work carried out by
Mr. Vivek Singh under my supervision and guidance. The research report is submitted
towards the partial fulfillment of two-year, full time degree of Master of Business
Administration.

Ms. Richa Garg

(Faculty)

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DECLARATION

I hereby declare that this report is the result of research project undergone by me on

“A Study on Marketing Strategies in FMCG in Relation with Hindustan

Unilever Ltd” submitted to “LKCE”, Ghaziabad and the data and information

which are mentioned this report are true and relevant in my knowledge..

PLACE: Ghaziabad (VIVEK SINGH)

DATE:

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PREFACE

This study gives the comprehensive view of the Indian FMCG Sector. The FMCG
sector being the fourth largest sector in the economy has the total market size of US$
13.1 billion. It is set to treble from US$ 11.6 billion in 2003 to US$ 33.4 billion in
2015. This sector is characterized by products of day-to-day use, products which are
generally treated as low involvement products but still they attract high advertising
spend because of the kind of intense competition among the industry players.

The Indian FMCG industry has experienced a major slowdown and has been on a
recovery path since the past couple of years. This study explains the changing
dynamics in the FMCG sector, which has forced the FMCG majors like HUL to
revamp their product, marketing, distribution formats to meet the changing customer
requirements or preferences.

The recovery in the FMCG sector in India is quite broad-based, covering most
product categories and companies, although the degree of recovery differs.
Importantly, most companies are also demonstrating renewed optimism in the sector
by increasing ad spend and investment in new initiatives. The market is not fully
appreciative of the sustainability of the recovery and hence will likely be positively
surprised.

The Toilet soap industry, which is one of the oldest Fast Moving Consumer Goods
(FMCG) industries in India, is among the highest penetrated category within FMCG
sector reaching an estimated 95% urban and 87% of the rural households. Apart from
that, this segment has witnessed an outburst of sales promotion scheme and the
tremendous Ad spends as compared to other segments of the FMCG industry. This
study also accesses the perceptions of the consumers on these new strategies adopted
by various FMCG companies.

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ACKNOWLEDGEMENT

Through this report, I take the opportunity to express my sincere gratitude and

thankfulness to all those who have helped me in making my dissertation report.

First of all I would like to thank LKCE, for having such a system in place, where

students are given opportunities to learn about their areas of interest.

I would like to thank Ms. Rich Garg (Faculty) for providing with his able guidance

and visionary support to me without which this project would not been possible.

(VIVEK SINGH)

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TABLE OF CONTENTS

Chapter - 1

Introduction

Objective

Scope

Research Methodology

Limitations

Chapter - 2

Company Profile

Data Analysis

Conclusion

Chapter -3

Recommendations

Bibliography

Appendix

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CHAPTER - 1
INTRODUCTION

OBJECTIVE

SCOPE

RESEARCH METHODOLOGY

LIMITATIONS

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INTRODUCTION

MARKET OVERVIEW

The overall picture of the corporate sector emerging after the first quarter result shows

that the tempo of the Indian economy’s integrating into the global economy is

gathering momentum at a rapid pace. This can be seen from the rise in outsourcing in

the Information Technology (IT) and IT-based service sectors, growth in export-

import trade and in global acquisitions.

Rapid urbanization, increased literacy and rising per capita income, have all caused

rapid growth and change in demand patterns, leading to an explosion of new

opportunities. Consumption demand for consumer is increasing which can be seen

from the improvement in the performance of the fast moving consumer goods

(FMCG) companies.

FMCG INDUSTRY – TRENDS AND PLAYERS

TRENDS:

Estimated at around US$ 14.5 billion (approximately Rs.65, 000 crores) in 2005,

India’s fast moving consumer goods (FMCG) sector is the fourth largest industrial

sector in the country’s expanding economy. It has a strong MNC presence and is

characterised by a well established distribution network, intense competition between

the organised and unorganised segments and low operational cost. Availability of key

raw materials, cheaper labour costs and presence across the entire value chain gives

India a competitive advantage.

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The FMCG market is set to treble from US$ 11.6 billion in 2003 to US$ 33.4 billion

in 2015. Penetration level as well as per capita consumption in most product

categories like jams, toothpaste, skin care, hair wash etc in India is low indicating the

untapped market potential. Burgeoning Indian population, particularly the middle

class and the rural segments, presents an opportunity to makers of branded products to

convert consumers to branded products. Growth is also likely to come from consumer

'upgrading' in the matured product categories.

Another is the striking contrast between the rural and urban segments - the average

consumption by rural households is much lower than their urban counterparts. Low

penetration indicates the existence of unsaturated markets, which are likely to expand

as the income levels rise. This provides an excellent opportunity for the industry

players in the form of a vastly untapped market. Moreover, per capita consumption in

most of the FMCG categories (including the high penetration categories) in India is

low as compared to both the developed markets and other emerging economies. A rise

in per capita consumption, with improvement in incomes and affordability and change

in tastes and preferences, is further expected to boost FMCG demand. Growth is also

likely to come from consumer "upgrading", especially in the matured product

categories. Most Indian FMCG companies focus on urban markets for value and rural

markets for volumes. The total market has expanded from US$ 17.6 billion in 1992-

93 to US$ 22 billion in 1998-99 at current prices. Rural demand constituted around

52.5 per cent of the total demand in 1998-99. Hence, rural marketing has become a

critical factor in boosting bottomlines. As a result, most companies' have offered low

price products in convenient packaging. These contribute the majority of the sales

volume. In comparison, the urban elite consume a proportionately higher value of

FMCGs, but not volume.

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PLAYERS:

A distinct feature of the FMCG industry in India is the presence of domestic as well as

global players through their subsidiaries (HUL, P&G, and Nestle).

Domestic Players

Britannia India Ltd (BIL)

Britannia India Ltd was incorporated in 1918 as Britannia Biscuit Co Ltd and

currently the Groupe Danone (GD) of France (a global major in the food processing

business) and the Nusli Wadia Group hold a 45.3 per cent equity stake in BIL through

AIBH Ltd (a 50:50 joint venture). BIL is a dominant player in the Indian biscuit

industry, with major brands such as Tiger glucose, Marie gold, Fifty-Fifty, Good Day,

Pure Magic, Bourbon etc. The company holds a 40 per cent market share in the

overall organized biscuit market and has a capacity of 300,000 tonne per annum.

Currently, the bakery product business accounts for 99.1 per cent of BIL's turnover.

The company reported net sales of US$ 280 million in 2002-03. Britannia Industries

Ltd (BIL) plans to increase its manufacturing capacity through outsourced contract

manufacturing and a Greenfield plant in Uttaranchal to expand its share in the

domestic biscuit and confectionery market.

Dabur India Ltd

Established in 1884, Dabur India Ltd is the largest Indian FMCG and ayurvedic

products company. The group comprises Dabur Finance, Dabur Nepal Pvt Ltd, Dabur

Egypt Ltd, Dabur Overseas Ltd and Dabur International Ltd. The product portfolio of

the company includes health care, food products, natural gums & allied chemicals,

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pharma, and veterinary products. Some of its leading brands are Dabur Amla, Dabur

Chyawanprash, Vatika, Hajmola, Lal Dant Manjan, Pudin Hara and the Real range of

fruit juices. The company reported net sales of US$ 218 million in 2003-04. Dabur

has firmed up plans to restructure its sales and distribution structure and focus on its

core businesses of fast-moving consumer good products and over-the-counter drugs.

Under the restructured set-up, the company plans to increase direct coverage to gap

outlets and gap towns where Dabur is not present. A roadmap is also being prepared to

rationalise the stockists' network in different regions between various products and

divisions.

Indian Tobacco Corporation Ltd (ITCL)

Indian Tobacco Corporation Ltd is an associate of British American Tobacco with a

37 per cent stake. In 1910 the company's operations were restricted to trading in

imported cigarettes. The company changed its name to ITC Limited in the mid

seventies when it diversified into other businesses. ITC is one of India's foremost

private sector companies with a turnover of US$ 2.6 billion. While ITC is an

outstanding market leader in its traditional

businesses of cigarettes, hotels, paperboards, packaging and agriexports, it is rapidly

gaining market share even in its nascent businesses of branded apparel, greeting cards

and packaged foods and confectionary. After the merger of ITC Hotels with ITC Ltd,

the company will ramp up its growth plans by strengthening its alliance with Sheraton

and through focus on international projects in Dubai and the Far East. ITC's

subsidiary, International Travel House (ITH) also aims to launch new products and

services by way of boutiques that will provide complete travel services.

Marico

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Marico is a leading Indian Group incorporated in 1990 and operating in consumer

products, aesthetics services and global ayurvedic businesses. The company also

markets food products and distributes third party products. Marico owns well-known

brands such as Parachute, Saffola, Sweekar, Shanti Amla, Hair & Care, Revive,

Mediker, Oil of Malabar and the Sil range of processed foods. It has six factories, and

sub-contract facilities for production. In 2003-04, the company reported a turnover of

US$ 200 million. The overseas sales franchise of Marico's branded FMCG products is

one of the largest amongst Indian companies. It is also the largest Indian FMCG

company in Bangladesh. The company plans to capture growth through constant

realignment of portfolio along higher margin lines and focus on volume growth,

consolidation of market shares, strengthening flagship brands and new product

offerings (2-3 new product launches are expected in 2004-05). It also plans to expand

its international business to Pakistan.

Nirma Limited

Nirma Ltd, promoted by Karsanbhai Patel, is a homegrown FMCG major with a

presence in the detergent and soap markets. It was incorporated in 1980 as a private

company and was listed in fiscal 1994. Associate companies' Nirma Detergents, Shiva

Soaps and Detergents, Nirma Soaps and Detergents and Nilnita Chemicals were

merged with Nirma in 1996-1997. The company has also set up a wholly owned

subsidiary Nirma Consumer Care Ltd, which is the sole marketing licensee of the

Nirma brand in India. Nirma also makes alfa olefin, fatty acid and glycerine. Nirma is

one of the most successful brands in the rural markets with extremely low priced

offerings. Nirma has plants located in Gujarat, Madhya Pradesh and Uttar Pradesh. Its

new LAB plant is located in Baroda and the soda ash complex is located in Gujarat.

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Nirma has strong distributor strength of 400 and a retail reach of over 1 million

outlets. The company reported gross sales of US$ 561 million in 2003-04. It plans to

continue to target the mid and mass segments for future growth.

Foreign players

Cadbury India Ltd (CIL)

Cadbury Indian Ltd is a 93.5 per cent subsidiary of Cadbury Schweppes Plc, UK, a

global major in the chocolate and sugar confectionery industry. CIL was set up as a

trading concern in 1947 and subsequently began its operations with the small scale

processing of imported chocolates and food drinks. CIL is currently the largest player

in the chocolate industry in India with a 70 per cent market share. The company is

also a key player in the malted foods, cocoa powder, drinking chocolate, malt extract

food and sugar confectionery segment. The company had also entered the soft drinks

market with brands like 'Canada Dry' and 'Crush', which were subsequently sold to

Coca Cola in 1999. Established brands include Dairy Milk, Perk, Crackle, 5 Star,

Éclairs, Gems, Fructus, Bournvita etc. The company reported net sales of US$ 160

million in 2003. The company plans to increase the number of retail outlets for future

growth and market expansion.

Cargill

Cargill Inc is one of the world's leading agri-business companies with a strong

presence in processing and merchandising, industrial production and financial

services. Its products and geographic diversity (over 40 product lines with a direct

presence in over 65 countries and business activities in about 130 countries) as well as

its vast communication and transportation network help optimize commodity

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movements and provide competitive advantage. Cargill India was incorporated in

April 1996 as a 100 per cent subsidiary of Cargill Inc of the US. It is engaged in

trading in soyabean meals, wheat, edible oils, fertilisers and other agricultural

commodities besides marketing branded packaged foods. It has also set up its own

anchorage facilities at Rosy near Jamnagar in Gujarat for efficient handling of its

import and export consignments.

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Coca Cola

Coca-Cola started its India operations in 1993. The Coca-Cola system in India

comprises 27 wholly company-owned bottling operations and another 17 franchisee-

owned bottling operations. A network of 29 contract-packers also manufacture a range

of products for the company. Leading Indian brands Thums Up, Limca, Maaza, Citra

and Gold Spot exist in the Company's international family of brands along with Coca-

Cola, Diet Coke, Kinley, Sprite and Fanta, plus the Schweppes product range. During

the past decade, the Coca-Cola system has invested more than US$ 1 billion in India.

In 2003, Coca-Cola India pledged to invest a further US$ 100 million in its

operations. Colgate-Palmolive India Colgate Palmolive India is a 51 per cent

subsidiary of Colgate Palmolive Company, USA. It is the market leader in the Indian

oral care market, with a 51 per cent market share in the toothpaste segment, 48 per

cent market share in the toothpowder market and a 30 per cent share in the toothbrush

market. The company also has a presence in the premium toilet soap segment and in

shaving products, which are sold under the Palmolive brand. Other wellknown

consumer brands include Charmis skin cream and Axion dish wash. The company

reported sales of US$ 226 million in 2003-04. The company's strategy is to focus on

growing volumes by improving penetration through aggressive campaigning and

consumer promotions. The company plans to launch new products in oral and

personal care segments and is prepared to continue spending on advertising and

marketing to gain market share. Margin gains are being targeted through efficient

supply chain management and bringing down cost of operations.

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H J Heinz Co

A US$ 8.4 billion American food major, H J Heinz Co comprises 4,000 strong brand

buffet in infant food, sauces and condiments. The company was the first to commence

manufacturing and bottling of tomato ketchup in 1876. In India, Heinz has a presence

through its 100 per cent subsidiary Heinz India Pvt Ltd. Heinz acquired the consumer

products division of pharmaceutical major Glaxo in 1994. Heinz's product range in

India consists of Complan milk beverage, health drink Glucon-D, infant food Farex

and Nycil prickly heat powder, besides the Heinz ketchup range.

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Hindustan Unilever Ltd (HUL)

Hindustan Unilever Ltd is a 51 per cent owned subsidiary of the Anglo-Dutch giant

Unilever, which has been expanding the scope of its operations in India since 1888. It

is the country's biggest consumer goods company with net sales of US$ 2.4 billion in

2003. HUL is amongst the top five exporters of the country and also the biggest

exporter of tea and castor oil. The product portfolio of the company includes

household and personal care products like soaps,

detergents, shampoos, skin care products, colour cosmetics, deodorants and

fragrances. It is also the market leader in tea, processed coffee, branded wheat flour,

tomato products, ice cream, jams and squashes. HUL enjoys a formidable distribution

network covering over 3,400 distributors and 16 million outlets. In the future, the

company plans to concentrate on its herbal health care portfolio (Ayush) and

confectionary business (Max). Its strategy to grow

includes focussing on the power brands' growth through consumer relevant

information, cross category extensions, leveraging channel opportunities and

increased focus on rural growth.

Nestle India Ltd (NIL)

Nestle India Ltd a 59.8 per cent subsidiary of Nestle SA, Switzerland, is a leading

manufacturer of food products in India. Its products include soluble coffee, coffee

blends and teas, condensed milk, noodles (81 per cent market share), infant milk

powders (75 per cent market share) and cereals (80 per cent market share). Nestle has

also established its presence in chocolates, confectioneries and other processed foods.

Soluble beverages and

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milk products are the major contributors to Nestle's total sales. Some of Nestle's

popular brands are Nescafe, Milkmaid, Maggi and Cerelac. The company has entered

the chilled dairy segment with the launch of Nestle Dahi and Nestle Butter. Nestle has

also made a

foray in non-carbonated cold beverages segment through placement of Nestea iced tea

and Nescafe Frappe vending machines. Exports contribute to 23 per cent of its

turnover and the company reported net sales of US$ 440 million in 2003.

PepsiCo

PepsiCo is a world leader in convenient foods and beverages, with revenues of about
US$ 27 billion. PepsiCo brands are available in nearly 200 markets across the world.
The company has an extremely positive outlook for India. "Outside North America
two of our largest and fastest growing businesses are in India and China, which
include more than a third of the world's population" (Pepsico's annual report).
PepsiCo entered India in 1989 and is concentrating on three focus areas - soft drink
concentrate, snack foods and vegetable and food processing. PepsiCo's success is the
result of superior products, high standards of performance and distinctive competitive
strategies.

Procter & Gamble Hygiene and Health Care Limited

Richardson Hindustan Limited (RHL), manufacturer of the Vicks range of products,

was rechristened 'Procter & Gamble India' in October 1985, following its affiliation to
the 'Procter & Gamble Company', USA. Procter & Gamble Hygiene and Health Care
Limited (PGHHCL) acquired its current name in 1998, reflecting the two key
segments of its business. P&G, USA has a 65 per cent stake in PGHHCL. The parent
also has a 100 per cent subsidiary, Procter & Gamble Home Products (PGHP). The
overall portfolio of the company includes healthcare; feminine-care; hair care and
fabric care businesses. PGHH operates in just two business segments – Vicks range of
cough & cold remedies and Whisper range of feminine

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hygiene. The detergent and shampoo business has been relocated globally to Vietnam.
The company imports and markets most of the products from South East Asian
countries and China, while manufacturing, marketing and export of Vicks and sanitary
napkins has been retained in India. The company reported sales of US$ 91 million in
2002-03. The parent company has announced its plan to explore further external
collaborations in India to meet its global innovation and knowledge needs.

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PEST ANALYSIS OF FMCG SECTOR

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1.2 Economic
1.1 Political home economy situation
ecological/environmental issues
home economy trends
current legislation home market
overseas economies and trends
future legislation
general taxation issues
European/international legislation
taxation specific to
regulatory bodies and processes product/services
government policies seasonality/weather issues
government term and change market and trade cycles
trading policies specific industry factors
funding, grants and initiatives market routes and distribution
trends
home market lobbying/pressure groups
customer/end-user drivers
international pressure groups
interest and exchange rates

1.3 Social 1.4 Technological

lifestyle trends competing technology
development
demographics
research funding
consumer attitudes and opinions
associated/dependent
media views technologies
law changes affecting social factors replacement
technology/solutions
brand, company, technology image
maturity of technology
consumer buying patterns
manufacturing maturity and
fashion and role models
capacity
major events and influences
information and
buying access and trends communications

ethnic/religious factors consumer buying

mechanisms/technology
advertising and publicity
technology legislation

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innovation potential
technology access, licencing.

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DEMAND ANALYSIS

The Indian FMCG sector is the fourth largest sector in the economy and the demand

for FMCG products is set to boom by almost 60 per cent by 2007 and more than 100

per cent by 2015.

Rapid urbanization, increased literacy and rising per capita income, have all caused

rapid growth and change in demand patterns, leading to an explosion of new

opportunities. This will be driven by the rise in share of middle class (defined as the

climbers and consuming class) from 67 per cent in 2003 to 88 per cent in 2015. The

boom in various consumer categories, further, indicates a latent demand for various

product segments. For example, the upper end of very rich and a part of the

consuming class indicate a small but rapidly growing segment for branded products.

The middle segment, on the other hand, indicates a large market for the mass end

products. India's per capita disposable income, currently at US$ 556 per annum, will

raise to US$ 1150 by 2015 - another FMCG demand driver.

Demand Analysis of various segments of the FMCG industry is done below:

The personal care and detergents segment in India has grown at a CAGR of 7-8 per

cent in the past 3 years. While the premium products of the industry, consisting of

cosmetics, skin care products, fragrances, deodorants and antiperspirants, and shaving

products, are growing at above 10 per cent due to low penetration levels, the mass

market segments like detergents, oral care products, hair care products and toilet

soaps have already achieved high penetration levels and are registering a slowdown in

demand growth. The latter segments also compete with the price- competitive

unorganised segment, which also restricts value growth.

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The oral care market, which grew by 10 per cent in the past, has slowed down in

recent years, due to high penetration levels. Demand in this segment is expected to

grow at about 8 per cent, driven by rural demand. Value growth is likely to be under

pressure due to penetrative pricing for the rural market and slow growth in urban

demand.

The hair care industry, which was growing at 8-9 percent, is also expected to register

a slower growth of 6-7 per cent in future, due to high penetration levels and

competition from unbranded hair oils. Value growth in the segment is expected to be

derived largely through the sale of value-added products.

The demand for toilet soaps will be restricted to 5 per cent over the medium term, as

current penetration levels are already high. However, since the growth will occur on a

higher base, the quantum of increase will remain stable. Value growth in the industry

is likely to be driven by the migration of consumers from low-end products to upper

segments.

The demand growth for detergents has slowed down in the past few years from

historic levels of 7-8 per cent, due to high penetration rate. Future demand growth is

estimated at 4-5 per cent. However, since the growth would occur on a higher base,

the quantum of increase would remain stable. Value growth is likely to be driven by

the migration of consumers from lower-end products to the upper segments.

The Chairman of Hindustan Unilever, after the results announcement for F12/00,

outlined to the investment community his plans for the company and the path for

‘sustainable profitable growth’. Two things clearly emerged from his talk:

1. A greater focus on existing businesses rather than new businesses

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2. Profit growth rather than top line growth is likely to drive future management

action

A change in Strategy

The last few years of HUL’s growth was driven inorganically through acquisitions and

venture into new businesses. The much harped about Millennium Growth Plan of the

company was also based on the same path of growth through expansion. But in sharp

contrast to his predecessor Dadiseth, Banga’s growth plan appears to be based on

‘Contraction’ rather than ‘Expansion. For once there was no mention of new brand

launches.

Thrust on a few brands will mean better growth and higher

profitability

The 30 brands have that been identified cover all key categories and all segments in

each category. The selected brands account for more than 2/3rd of total FMCG brand

sales of the company. And what is more important is that the profit contribution of

these brands is even greater.

So a scenario is created where one will see a greater resource allocation – be it

marketing, innovation or people support towards these 30 brands. The advertising and

marketing support spread over fewer brands is likely to be more efficient, and will

drive volume growth. And stronger growth in the more profitable brand portfolio will

aid margin expansion.

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More efficient utilization of resources

Besides rationalization, a few brands would be migrated, i.e. these brands would

receive a regional rather than a national support, in its specific region of strength.

Where the brands can neither be milked nor migrated, the company is also open at the

option of divesting the same. So, Hindustan Unilever is talking of divesting rather

than acquiring brands!

New product initiatives put on the backburner

The management did not even discuss, until asked, the status on the nine growth

engines that had been previously identified as growth drivers. Already the

management has brought down to five the viable options from the nine identified

earlier. These are in the areas of Confectionery, Consumer Healthcare, Mineral Water,

Direct-To-Home (DTH) distribution and a unique distribution model for rural

markets. But the management is still testing and is going rather slow on the new

initiatives. The final decision on the entry into these categories will be taken only after

rigorous testing of waters throughout the current year. This essentially means that one

is unlikely to see the company venturing into these areas in the very immediate term.

To sum up Banga’s words, the focus will be on "To do what you know best". And that

probably is what is required for the company in the current scenario, where

competition is at its heels in every segment of operation. Rather than divert resources

towards new areas, it makes sense to focus on existing businesses, grow them and

make them profitable. And that is what is going to be HUL’s three pronged thrust in

the coming year.

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Grow the FMCG business - by expanding the market itself, by growing the company’s

share in the market, by generating demand though innovating new channels of

consumption, by leverage on existing brand equity by offering services to the

customer.

Work towards making the foods business profitable - Huge investments have been

made in developing new food categories and setting up a distribution infrastructure in

place for the foods business. Now that the base for the business has been laid, the

company expects to drive the profitability of these businesses. Besides the traditional

beverages and oils and fats business, the new categories of staple foods, culinary

products and bakery products (acquired through Modern Foods) are likely to

contribute to the growth.

Strengthen the non-FMCG business by acquiring technology support -The non-

FMCG product categories include chemicals, fragrances & flavours, specialty

chemicals, thermometers, etc The company is taking steps to secure world class

technology support in these areas for future growth. This could mean a divestment of

these businesses to a separate joint venture in the long term.

ANALYSIS 0F THE STRATEGY:

Will this strategy work?

The outlined strategy is a significant deviation from the path followed by the

company in the past. Rather than grow in breadth at a fast pace, the new strategy

appears to be focusing on consolidation of the already expanded businesses, before

moving on. And this appears appropriate given the current economic and competitive

environment. The overall market demand growth is likely to be constrained by

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adverse economic factors such as poor agricultural and industrial growth. On the other

hand, HUL faces stiff competition from both MNC’s at the premium end and the local

low cost producers at the popular end. The proposed measures are likely to lead to the

following gains:

1. A greater marketing and management focus on rationalized product portfolio would

lead to better growth rates for those brands

2. The contribution to profit of the 30 brands being higher, overall profitability would

rise, as these brands grow at a faster pace.

3. While the overall expenditure on branding and sales promotions be lower as the

number of brands supported decline; also more efficient brands would receive greater

support

4. Cost cutting initiatives extended across the supply chain as well as a conscious

effort towards lowering fixed overheads would aid margin expansion.

5. A slowdown in investments in new businesses, and improved profitability in

existing businesses would mean that ROCE growth would be faster.

We feel that given the economic and competitive environment. HUL stands a much

better chance of improving its operating and financial performance with the outlined

strategy. At the current price of Rs216, the stock trades at 36x F12/00 earnings. A 25%

growth in profitability appears achievable as the portfolio rationalization will drive

margin expansion. Lower restructuring costs would also aid higher net profit growth.

On an estimated F12/01 EPS of Rs7.4, we set a one-year price target of Rs296, which

would yield a 37% return.

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DEMAND PROJECTION

Fast Moving Consumer Goods (FMCG) sector will witness more than 50 per cent

growth in rural and semi-urban India by 2010, according to an analysis carried out by

the Associated Chambers of Commerce and Industry of India.

In totality, it is projected to grow at a CAGR (compounded annual growth rate) of 10

per cent and increase its market size to Rs 100,000 crore from the present level of Rs

48,000 crore.

The growing penchant of rural and semi-urban folks for FMCG products will be
mainly responsible for this development, as manufacturers will have to deepen their
concentration for higher sales volumes.

In the rural and semi-urban areas, FMCG market penetration is currently less than 1
per cent in general as against its total growth rate of about 6.2 per cent.

The analysis is based on the feedback obtained from various district industry centres
all over the country on the future demand-supply situation of FMCG products.

Indian rural market with its vast size and demand base offered a huge opportunity that
FMCG companies cannot afford to ignore. With 128 million households, the rural
population is nearly three times the urban. Though the rural and semi-urban demand
of FMCG products will grow, it will put a severe pressure on the margins of
manufacturers of FMCG products due to cut-throat competition, finds the analysis.
Companies in the sector to benefit will include known names such as Nirma, HUL,
Dabur, ITC, Godrej, Britannia, Coca-Cola, Pepsi, among others. Rural market may be
alluring but it is not without problems such as low per capita disposable incomes and
large number of daily wage earners.

Some of the other problems associated with rural markets are acute dependence on the
vagaries of the monsoon, seasonal consumption linked to harvests, festivals and
special occasions, poor roads and power problems.

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The other difficulty that FMCG companies are likely to face is that of logistics. India's
627,000 villages are spread over 3.2 million sq km. Delivering products to the 750
million Indians living in rural areas will be a tough task.

The net profit of HUL for the full year fell to Rs 1,197.36 crore (Rs 11.97 billion)
from Rs1771.79 (Rs 17.71 billion) last year.

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OBJECTIVE

1. To evaluate current consumer sales promotion schemes in toilet soap market.

2. To get an insight into retailers’ views regarding the schemes being offered in toilet
soap category and consumer perceptions

3. To study consumer perceptions regarding various promotion schemes in this

category and responses toward them.

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SCOPE OF RESEARCH :-

My scope is restricted to consumer perceptions and retailer viewEs regarding various

schemes

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RESEARCH METHODOLOGY

Research Type: Exploratory Research

Data Collection Tool: Questionnaire

In-depth interview

Research Area: Ghaziabad

Sampling Plan

Sample type: Users of the Toilet Soap.

Sample Size: 100 people between the age of 20-40 years.

Primary Data: The primary data is collected through questionnaires and in-depth
interview.

Secondary Data: The sources of secondary data are various researches conducted by
HUL, business magazines and internet.

Reason for opting this Topic

The Indian FMCG sector is the fourth largest sector in the economy with a total
market size in excess of US$ 13.1 billion. It has a strong MNC presence and is
characterized by a well established distribution network, intense competition between
the organized and unorganized segments and low operational cost. Availability of key
raw materials, cheaper labour costs and presence across the entire value chain gives
India a competitive advantage. The FMCG market is set to treble from US$ 11.6
billion in 2003 to US$ 33.4 billion in 2015. Penetration level as well as per capita
consumption in most product categories like jams, toothpaste, skin care, hair wash etc
in India is low indicating the untapped market potential. Burgeoning Indian
population, particularly the middle class and the rural segments, presents an
opportunity to makers of branded products to convert consumers to branded products.

The slow growth rate witnessed through the years 2000 to 2004 by the FMCG sector
was revived in FY’05, registering a growth rate of about 6%. The growth was mainly

32
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driven by improved performance of personal care products such as shampoos,

deodorant, hair dyes, soap, toiletries, etc and penetration into the rural and semi-urban
areas of India. Rural marketing has become a critical factor in boosting bottom lines.

This study will give the detailed insight of FMCG sector in India and how it has
surmounted the downturn faced in the past. How the companies like HUL has
changed their marketing strategies to overcome their shrinking profit margins and beat
competition.

RESEARCH AND SURVEY METHODOLOGY

The research study entailed two major phases.

I. Pre- field Study

a. Unstructured in-depth interviews were conducted to create the initial questionnaire

(the instrument)

b. Expert opinions on the questionnaire were collected and further improvements were
made to the questionnaire.

II. Field Study

a. A structured questionnaire was prepared and the survey was conducted by

explaining the purpose of the research to the respondents and administering the
questionnaire.

b. A split panel test was also conducted to test certain questions that were felt to be
inadequate in their design, to evoke responses from the respondents and to test the
effect of changing the structure of these questions. Most of the questions in the survey
are not disguised; but to assess certain non-factual variables disguised questions are
used. For example, there are some questions pertaining to the effectiveness of email,
internet etc. which measure the attitudes of the respondent and we take these data as
the proxy for that of the organization as a whole. The rational behind this is that the
respondents are typically top management personnel in the Information Technology
department of the organization and they are in a position to assess the impact of these

33
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technologies on their organization. In some cases, to test the relevance of hypotheses

and to assess the impact of the questionnaire on the respondent, personal interviews
were combined with the completion of the questionnaire.

Both the panels received identical treatment. The questionnaire version was changed
but the mode of administration etc. remained the same to preserve the integrity of the
comparisons. Evaluation of the split panel tests was done along with the analysis of
the original questionnaire. The techniques included comparison of response
distributions and examination of item non-response data.

Modifications in some questions/ items used in the questions were made to increase
the response rate and effectiveness of the questionnaire.

Some of the respondents had reservations about some questions in the initial
questionnaire, due to the sensitive nature of the topics addressed. This necessitated
some changes in the later versions of the questionnaire.

RESPONDENTS AND DATA COLLECTION

The population addressed by the survey comprises of those, who use various toiletry
items. The main respondents were the general public as toiletry soaps are used by all
the people.

Its main objective is to know about the buying behavior and the likes and dislikes of
the consumers. Basically the research was done to know what the consumer thinks
before buying the product, what they think about the product and what they want from
the product i.e. their need.

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EXPLORATIVE RESEARCH SYSTEM

The marketing research process adopted by us is as follows:

Define the problem and research objectives: The objective of this research is to study
the past and current marketing and demand trends. The research highlights various
marketing and demand concerns faced by HUL in the soap category.

Develop the research plan: This includes:

Primary data
Focus-group research
Questionnaires
Sampling plan: Urban people of the middle class. Both male and female
between the age of 20 to 40.
Sampling Size: 35

INFERENCES ON IMPLICATIVE RESEARCH

Following are the inferences made from the research which closely matches with the
SWOT Analysis of HUL.

SOME FACTS OBSERVED FROM THE RESULTS SO

OBTAINED:

LUX still rules the soap market with substantial market share. Others which
include DOVE also have some share in higher class thus it serves as the
STARS for HUL.
Most of the customers are satisfied with the product they are using and they
are likely to retain the same product again.
Most of the customers think that the HUL soaps are good with respect to other
brands in the market.
However there is a close tie between the people who will recommend HUL’s
product to others to the people who will probably not recommend it. This may
be a concern for HUL but due to there recent attacking marketing (SRK IN
LUX AD) strategy they are trying to regain there market share.

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LIMITATIONS OF THE STUDY

1. The study was confined to Ghaziabad city only and differences in perception and

profile may exist for other parts of the country.

2. The sampling was based on convenience that could have given rise to errors.

3. These result may not be appropriate for the whole population ( i.e universe).

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CHAPTER – 2
COMPANY PROFILE

DATA ANALYSIS

CONCLUSION

37
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Hindustan Unilever Limited

Meeting Everyday Needs of People Everywhere

38
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COMPANY PROFILE

Introduction

Hindustan Unilever Limited (HUL), a 51%-owned subsidiary of Anglo-Dutch giant

Unilever, has been prying its way into India since 1888. India's largest consumer

goods company, HHL markets products such as beverages, food, and home and

personal care goods. Its brands include Kwality Wall's ice cream, Lifebuoy soap,

Lipton tea, Pepsodent toothpaste, and Surf laundry detergent. HUL markets atta (a

type of meal), maize, rice, salt, and specialty chemicals, and its export division ships

castor oil and fish. The company also sells bottled water and over-the-counter

healthcare products.

Hindustan Unilever Limited (HUL) is India's largest fast moving consumer goods

company, with leadership in Home & Personal Care Products and Foods &

Beverages. HUL's brands, spread across 20 distinct consumer categories, touch the

lives of two out of three Indians. They endow the company with a scale of combined

volumes of about 4 million tonnes and sales of Rs.10,000 crores.

The vision that inspires HUL's 32,400 employees (40,000 including Group

Companies), including about 1,425 managers, is to “meet everyday needs of people

everywhere - to anticipate the aspirations of our consumers and customers and to

respond creatively and competitively with branded products and services which raise

the quality of life.” This objective is achieved through the brands that the company

markets.

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Business nature

HUL is India's largest marketer of Soaps, Detergents and Home Care products. It has

the country’s largest Personal Products business, leading in Shampoos, Skin Care

Products, Colour Cosmetics, and Deodorants. HUL is also the market leader in Tea,

Processed Coffee, branded Wheat Flour, Tomato Products, Ice cream, Soups, Jams

and Squashes.

HUL is also one of the country's biggest exporters and has been recognized as a

Golden Super Star Trading House by the Government of India; it is a net foreign

exchange earner. HUL is India's largest exporter of branded fast moving consumer

goods. The company's Exports portfolio includes HUL's brands of Soaps and

Detergents, Personal Products, Home Care Products, Tea and Coffe

Market leading brands

HUL’s brands have become household names. The company’s strategy is to

concentrate its resources on 30 national power brands, and 10 other brands which are

strong in certain regions. The top five brands together account for sales of over

Rs.3000 crores.

Some of the big brands in Soaps and Detergents are Lifebuoy, Lux, Liril, Hamam,

Breeze, Dove, (all soaps), Surf Excel, Surf, Rin, Wheel (the number one detergent

brand in India, and HUL's largest), 501, Sunlight (all detergents). HUL also markets

the Vim and Domex range of Home Care Products.

In the Personal Products business, HUL's Hair Care franchises are Clinic, Sunsilk and

Lux shampoos; the company markets Nihar oil. In Oral Care, the portfolio comprises

Close-up and Pepsodent toothpastes and toothbrushes. In Skin Care, HUL markets

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Fair & Lovely Skin Cream and Lotion, the largest selling Skin Care Product in India;

a brand developed in India, it is now exported to over 30 countries. It has been

extended as an Ayurvedic cream, an under-eye cream, a soap and a talc, in line with

the strategy to take brands across relevant categories. The other major Skin Care

franchises are Pond’s, Vaseline, Lakme and Pears. In Colour Cosmetics, HUL markets

the Lakme and Elle-18 ranges. In Deodorants, the key brands are Rexona, Axe,

Denim and Pond's, while the Talc brands are Pond's, Liril, Fair & Lovely, Vaseline

and Lifebuoy. Axe and Denim are HUL’s franchises for Men’s toiletries.

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SWOT ANALYSIS OF HUL

STRENGTHS:

strong brand portfolio

consumer understanding
R&D ability
distribution reach
high quality manpower

WEAKNESSES:

Increased consumer spends on education, consumer durable, entertainment,

travel, etc resulting in lower share of wallet for FMCG
limited success in changing the eating habits of people

complex supply chain configuration and unwieldy number of stock keeping

units (SKUs) with dispersed manufacturing locations

price positioning in some categories that allows for low price competition and
high social costs in the plantation business.

OPPORTUNITIES:

market and brand growth through increased penetration especially in rural

areas
Brand growth through increased consumption depth and frequency of usage
across all categories.

Upgrading consumers through innovation to new levels of quality and

performance.

Emerging modern trade to be effectively used for introduction of more upscale

personal care products.

Growing consumption in out of home categories.

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Positioning HUL as a sourcing hub for Unilever companies elsewhere and

leveraging the latest IT technologies.

THREATS:

low-priced competition now being present in all categories

grey imports

Changes in fiscal benefits and unfavorable prices in oils, tea commodity, etc.

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TOILET SOAP INDUSTRY IN INDIA –Implicative Study

Toilet soap industry is one of the oldest Fast Moving Consumer Goods (FMCG)

industries in India. It is among the highest penetrated category within FMCG sector

reaching an estimated 95% urban and 87% of the rural households. In value terms the

industry is worth Rs.45000 million and in volume terms it is worth .53 million (in

2001 as reported by Operations Research Group (ORG) Survey). The main

characteristic of the industry was severe competition and high level of brand

proliferation. The industry witnessed 7% decline in value in year 2001.

There were 45 leading national brands. None of the national brands had more than 5%

market share and many more regional and unorganized sector/local brands. Hindustan

Unilever was the market leader with about 30 (number) of toilet soap brands with a

total market share of 67% in 2000-2009 in organized sector as seen from Table below,

which gives the lead players and their respective market share

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The leading brands in the market are Dove, Pears, Lux, Dettol, Liril, Rexona,

Lifebouy, Nirma, Palmolive and Hamam. The industry had witnessed many

innovative sales promotion activities in the recent past. Numerous factors were

responsible for such a phenomenon. The reasons are:

The market being sluggish, companies were trying to increase market share in

stagnant to declining (volume terms) market in order to retain consumers, to

encourage switching, to induce trials and liquidate excessive inventories.

With the presence of so many brands the competition had increased severally

leading to fight for market share and shelf space.

Hence, sales promotion activities in toilet soap industry posed a very interesting

study and consumer and retailer perceptions thereof.

The brands in popular segments were found to be frequently promoted as there was

intensive price competition in this segment. The brands could also be classified based

on medicinal benefits, cosmetic benefits, perfumes, natural/herbal properties.

After posting a modest single digit growth in 1997-2000, figures for the first seven

months of this year suggest that the market for toilet soaps has actually shrunk.

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Estimates about the extent of the decline of market size vary. Hindustan Unilever,

which straddles the category with a 59.9 per cent market share by value, says the

market shrank by 4.4 per cent in value terms in the first half of 2001.

The Indian Soaps and Toiletries Manufacturers Association, puts the decline at 1 per

cent. Other industry sources suggest that the extent of `de-growth' in the first eight

months of 2001 could be as high as 7 per cent.

This is despite the fact that this usually sleepy category has seen a spate of new

players debut new offerings in recent times. Over the past couple of years, Nirma has

launched a slew of low-priced soaps under the banner of Nima and Nirma Beauty.

Godrej Consumer, a long-standing player, has relaunched old brands such as Cinthol,

apart from new ones such as FairGlow, Allcare, and Nikhar.

But if the shrinking market size suggests that Indian consumers have actually been

cutting back on their use of toilet soaps, this is not really the case. In volume terms,

the market for toilet soaps has continued to show a growth of 6 per cent in the first

eight months of 2001.

The major players have certainly managed to sell more toilet soaps by volume. But

price competition in the segment and a slew of promotional campaigns have reduced

the effective realisations per unit sold. This has probably neutralised the gains from

volume expansion. Theories about the reasons for the shrinking the market size vary.

Low-priced brands

Industry players commonly attribute the `de-growth' in the soap market to

downtrading. Toilet soaps are among the highest penetrated products within the

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FMCG market, reaching an estimated 95 per cent of the urban and 87 per cent of the

rural households. The fairly high contribution from the rural market makes this

category sensitive to the fortunes of the agricultural economy.

The prolonged drought in the North and West of the country (until 2000) and the

sharp fall in farm disposable incomes (brought on by falling farm product prices) has

probably persuaded low-income households to downtrade, that is, switch from high-

to low-priced brands.

HUL, too appears to endorse the phenomenon of downtrading. ``There has been an

inter-sectoral shift in the soap market, with consumers downtrading from premium

and popular to discount soaps'', explains the company's spokesperson.

However, Mr Hoshedar K. Press, Godrej Consumer Care, begs to differ. ``We think

consumers have already pre-committed their incomes for instalments on durables. The

substitution of soap with shampoos for hair wash has also impacted growth'', he said.

Better quality

The crowded market place has also brought a few benefits to the consumer as

marketers of soap have tried to woo consumers through upgraded offerings and better

quality soaps. Aided by low input prices, the marketers of toilet soaps have increased

the TFM (total fatty matter) content in their brands, to offer better quality soaps at a

lower price. Industry watchers say that the TFM content on some brands has moved

up from the 50-60 per cent earlier to over 70 per cent of late.

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Therefore, per unit realisations on soaps have declined, the marketers of soaps have

actually sacrificed a part of their margins on hiking the TFM content.

Tough times ahead

With competitive pressures on the rise and a larger number of brands jostling for

consumer attention in a sluggish market, the soap market is likely to remain a difficult

one for most players. Smaller players such as Godrej Consumer and Henkel SPIC

have been in a position to report robust sales growth in the category over the past year

despite the bruising competition.

However, this is partly due to a relatively small base of comparison. Unless the

market expands, the frenetic promotional activity may soon tell on the growth rate of

the players. And when it comes to sustaining a high decibel promotional campaign,

HUL's size certainly gives it the wherewithal to do it.

Rural revival -- A wild card

It appears that a genuine boost to the market size for toilet soaps will still have to

come from a revival in rural demand. Evidence from the past does appear to suggest

that a sharp rise in rural incomes would have a cascading effect on FMCG demand.

The pick-up in volume growth in the soap market in 1999, after a year of sluggish

growth in 1998, demonstrated that a recovery in agricultural output does have an

indirect impact on sales volumes of FMCG products.

This year, reports of a good monsoon in the northern and western parts of the country

have sparked off speculation about a revival in FMCG growth rates. The fact these

two regions account for 55 per cent of the demand for FMCG products strengthens

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this argument. However, it appears to be a bit early in the day to call it a revival. For

one, while the northern and western regions have received satisfactory rains, southern

India has been the victim of a very erratic monsoon. Second, given that the good

monsoon in the current year succeeds two or three consecutive years of drought in

some regions, there could be a substantial time lag before higher rural incomes

translate into better FMCG demand.

Third, the key crisis in agriculture over the past year has been that farm product prices

have dropped sharply in response to a build up of surplus foodgrain stocks. Therefore,

even if a good monsoon translates into a higher agricultural output, there is the

question of whether this will actually expand or shrink farm incomes.

These factors suggest that it may be premature to take investment exposures in

companies focussed on toilet soaps in the hope of a revival. It may be better to wait

for concrete signs of a pick-up in rural demand, which is certainly some way off.

THE FOUR COMPONENTS OF THE MARKETING MIX

In toilet soap market HUL has 63% market share. This is the product segment where

HUL has seen growth over last year but the growth is not as high as there is expansion

in the market for toilet soaps. The cash cows for HUL include Life boy, Lux, Liril,

Rexona and Breeze. The company's premium soap include Dove, Pears. The company

has come up with a new product offering i.e. Fair & Lovely soap. The strategy for

2006-07 would be to increase the market share from existing 63% to 70%. The

strategic changes taking 4 P's into consideration would be:

Product: HUL would continue with the existing portfolio of the products and would

concentrate on coming with new fragrances on different soaps than launching new

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soaps. It would position Dove and Lux International soap very urban rich women who

are extra conscious for their complexion. Pears, Lux International would be

positioned for the urban and rural rich. For the consuming urban class, Liril, Rexona,

Pears and Lifebouy International would be positioned. It would also come up with

40gm packaging for different products. It will also be thinking of extending popular

brands of cosmetics in the toilet soap segment by that decision would be based on the

popularity and acceptance of that particular brand (Brand Extension).

Price: HUL would be trying to customize the packaging of various products on the

basis of price points. e.g. it will come up with the pricing of Rs 5, Rs 10 and Rs 15 for

different products. It would try to experiment it with the products positioned for

consuming class.

Promotion: For promotion, apart from continuing the existing strategy of

concentrating on T.V. channels, HUL would try to focus on the promotional campaign

in rural sector. It would also concentrate on promoting through radio and sponsoring

the programs e.g. ‘Krishi Darshan' and ‘Aap ka Swasthaya' programs that have greater

number of audience. The advertising for them would have a pastoral and cultural

looks. It would chalk out the rural promotion scheme for those areas where the cable

T.V. has not reached. Under this scheme It would try to include ‘Gram Panchayat',

‘Swasthaya Parishad' and other local bodies by offering knowledge for using good

and anti-germ products.

Place: As the marketing channels of the company are already established HUL would

try to increase the penetration in the rural sector to the extreme remote areas which

are not touched till now. It would try to reduce the delivery time of the products by

choosing and increasing the strategic locations of warehouses. It would also track the

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distribution path of the wholesalers in small cities through marketing team and would

establish a platform or team at a zonal level for all the wholesalers and would try to

take their feedback on the market developments.

These kinds of congregations could also increase the brand loyalty in the wholesalers

and they would be motivated to push HUL products.

The Real Challenge: Bridging the gap between Philip Kotler and

Countryside India

Marketing in developing countries like India have often been borrowed from the

western world. Concepts like Brand identity, Customer relationship management, 4

P’s of the marketing mix, Consumer behavior process; Segmentation, targeting and

positioning etc. have often been lifted straight from the marketing intelligentsia

abroad and adopted in Indian conditions, often with minimal success. Reason lies not

in the fault of such concepts, but their integration with the Indian ethos and

culture. The rural India offers a tremendous market potential. Nearly two-thirds of all

middle income households in the country are in rural India and represents half of

India’s buying potential. Despite, the strong potential the rural markets are by and

large less exploited.

HUL Bridging the Gap by Extending 4P’s Of the Marketing Mix to the 5 P’s And 2

E’s

HUL has modified 4 P’s of the marketing mix by including an additional P i.e.

Packaging. Further to ensure the sustainability of the marketing mix two E’s i.e.

Education and Empowerment have to be at the core as they help in generating

widespread participation from the rural client by enhancing their standard of living.

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PACKAGING:

The reason for putting packaging out of the product as a special focus area is that due

to low literacy levels the importance of symbols and packaging become more

important in having a high brand recall.Thus, after the 4 p of marketing, it is 5th P

which is packaging going to play a key role in rural markets. Also since the rural

customers are usually daily wage earners and they don’t have monthly incomes like

the ones in the urban areas have. So the packaging is in smaller units and lesser-priced

packs that they can afford given their kind of income streams.

THE CORE – 2E’S

The two biggest problems that the rural India faces are Illiteracy and Unemployment.

To integrate them in one’s Marketing mix ensures that the product or service offered

ensures wider participation and better chances of success. Hence, it gives the rise to

the concept of two E’s: Education and Empowerment at the core of our improved

Marketing Mix. This concept presents an opportunity to improve the life of rural

Indians and thus, ensure that they actively patronize the company’s products.

1.) Education: Since vast majority of rural India lacks even basic education levels and

modern outlook, it is important that the company introducing a new product should

look at building category and not just selling products. It is important to consistently

drive home the point that the customer’s life is going to be enhanced because of

product’s consumption.

2.) Empowerment: Because of huge disguised unemployment levels in agriculture and

lack of employment opportunities in other sectors, any concept which uses any scope

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for income generation would be favored more than the traditional marketing mix

concepts.

HUL runs the program of Self-Help Groups (SHG), which operate like direct-to-home

distributors. The model consists of groups of (15-20)

villagers below the poverty line (Rs.750 per month) taking micro-credit from banks,

and using that to buy HUL products, which they will then directly sell to consumers.

RETAILER:

Data on rural consumer buying behavior indicates that the rural retailer influences

35% of purchase occasions. Therefore, sheer product availability can determine brand

choice, volumes and market share. So, role of retailer is also very important in rural

markets, because he would be one who provides information regarding quantity of

pack, promotional schemes, influences of advertisement, consumer feedback etc to

company. So the retailer plays a very big role here. The rural customer goes to the

same shop always to buy his things. And there is a very strong bonding in terms of

trust between the two. The buying behavior is also such that the customer doesn't ask

for the things by brand but like -- "paanch rupey waala sabun dena". Now it is on

the retailer to push whatever brand he wants to push as they can influence the buyer

very easily and very strongly on the preferences. Hence, there is the need to get his

support through proper trade promotion activities to get more retail shelf and

convincing on his side to make the customer buy the brand.

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DISTRIBUTION STRATEGIES OF HUL

The need for innovative and effective distribution network for rural areas is evident
from the fact that HUL has come up with new distribution channels to cater to rural
markets.

For eg, Project Streamline was conceptualized to significantly enhance the control
on the rural supply chain, through a network of rural sub-stockist, who are based in
these very villages. As part of the project, higher quality servicing, in terms of
frequency, credit and full-line availability, was be provided to rural trade. The pivot of
Streamline is the Rural Distributor (RD), who has 15-20 rural sub-stockists attached
to him. Each of these sub-stockists is located in a rural market. The sub-stockists then
performs the role of driving distribution in neighboring villages using unconventional
means of transport such as tractor, bullock cart, et al. The Streamline system has
extended direct HUL reach in these markets to about 37% of India's rural population
from 25% in 1995 and the number of HUL brands and SKUs stocked by village
retailers has gone up significantly.

HUL MODEL:

HUL have adopted the 4 P’s in addition to 1 more P, 1 R (RETAILER) AND 2 E’s.
So the new MARKETING MIX model adopted by HUL look like:

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55
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CONSUMER SALES PROMOTION

The importance of consumer sales promotion in the marketing mix of the fast moving
consumer goods (FMCG) category throughout the world has increased. Companies
spend considerable time in planning such activities. However, in order to enhance the
effectiveness of these activities, manufacturers should understand consumer and
retailer interpretations of their promotional activities. A study of these perceptions will
reveal their preferences, their knowledge, and motivations.

In India fast moving consumer goods (FMCG) category has witnessed an outburst of
sales promotion activities in the post-liberalization era. This project study though
exploratory has considered perceptions for price as well as non-price promotions in
toilet soap category.

The reasons for the study were:

i) The widespread use of sales promotions in toilet soap category

ii) Historically, whenever there was a downward trend in growth, sales promotion
activities took the front seat of promotional mix.

iii) Companies planned these activities with inward looking view hence it was felt that
it would be useful to understand the perceptions of consumers and retailers regarding
sales promotion activities to improve the effectiveness of these activities.

LATEST ADVERTISING TRENDS

Last three-four years have seen a tremendous increase in the number of regional
channels as well as the amount of advertising on it. The entire advertising scenario is
dominated by FMCG categories and more recently, in the last one or two years, by
cellular phones/ cellular phone service categories. FMCG categories, which dominate
the market scenario, include toilet soaps, tooth pastes, shampoos, ready to eat food
and fairness creams. But out of all these categories, the most heavily advertised
category across the entire channel whether regional or national is the toilet soaps
category.

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DATA ANALYSIS

Volume Growth of Soaps* on TV during January - May 2010.

 During January -May 2010, advertising of Soaps* category on TV has seen a

rise of 19 per cent compared to same period in year 2009.

Note: Soaps* Category only includes Bathing/Toilets Soaps and not the
Laundry/Washing Soaps.

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Share of Variants of Soaps* on TV during Jan - May 2010.

 During January - May 2010, 'Protection-Ayurvedic/Medicated' segment had

the largest share (i.e. 49 per cent) of overall advertising share of Soaps* on
TV, followed by 'Nourishing-Beauty' and 'Hydration-Moisturising' Soaps with
26 per cent and 13 per cent share respectively.

Note: Soaps* Category only includes Bathing/Toilets Soaps and not the
Laundry/Washing Soaps.

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Top Advertisers of Soaps* on TV during Jan - May 2010.

 'Hindustan Unilever Ltd', 'ITC Ltd' and 'Reckitt Benckiser (India) Ltd' were
the Top three advertisers, contributing 76 per cent share of overall Soaps*
category ad pie on TV during January - May 2010.

Note: Soaps* Category only includes Bathing/Toilets Soaps and not the
Laundry/Washing Soaps.

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New brands of Soaps*advertised on TV during Jan-May2010

 'Vivel Satin Soft', 'Lux Strawberry & Cream' and 'Vivel Di Wills Toilet Soap'
were top three new Soap* brands advertised on TV during January - May
2010.

Note: Soaps* Category only includes Bathing/Toilets Soaps and not the
Laundry/Washing Soaps.

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Top States in Soaps* advertising on TV during Jan - May 2010

 During January -May 2010, Soaps* category advertising on Regional and

National channels in the ratio of 61:39.
 'Maharashtra', 'Andhra Pradesh' and 'Karnataka' were the top three states
accounting for more than 50 per cent advertising share of Soaps* category on
Regional channels during January - May 2010.

Note: Soaps* Category only includes Bathing/Toilets Soaps and not the
Laundry/Washing Soaps.

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Average advertising frequency of Soaps* on TV during

Jan-May2010

 Compared to January - May 2009, average advertising frequency of Soaps*

saw a rise of 14 per cent on TV during January - May 2010.

Note: Soaps* Category only includes Bathing/Toilets Soaps and not the
Laundry/Washing Soaps.

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Celebrity Endorsements for Soaps* on TV during Jan-May 2010.

 'Priyanka Chopra' with 24 per cent share leads in Celebrity endorsement of

Soaps* on TV closely followed by 'Kareena Kapoor' with 23 per cent share
during January - May 2010
 The third spot of the Celebrity Endorsement chart for Soaps* was occupied by
'Yuvraj Singh' during January - May 2010.

Note: Soaps* Category only includes Bathing/Toilets Soaps and not the
Laundry/Washing Soaps.

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 During 2010, TV advertising of Personal Care sector saw a rise of 22 per cent
compared to 2009.

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Share of Personal Care Categories on TV during 2010

 During 2010, 'Personal Hygiene' category had maximum share i.e. 44 per cent
of overall Personal Care sector advertising on TV followed by 'Hair Care' and
'Personal Healthcare' with 26 per cent and 16 per cent share respectively.

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Top Sub Categories of Personal Care Brands advertised on TV

 'Toilet Soaps' , 'Shampoos', 'Tooth Pastes' were the top 3 sub categories
contributing 39 per cent share of overall Personal Care sector advertising on
TV during 2010.

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Top Advertisers of Personal Care brands on TV during 2010

 'Hindustan Unilever Ltd', 'Procter and Gamble', 'Reckitt Benckiser (India) Ltd'
were the top 3 advertisers, they contributed 36 per cent of overall Personal
Care sector advertising on TV during 2010.

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New Brands of Personal Care sector launched on TV during2010

 'Lux Strawberry and Cream', 'Axe Dark Temptation' and 'Sunsilk Hair Fall
Solution' were the top 3 new Personal Care brands advertised on TV during
2010.
 During 2010, 4 of the Top 10 new Personal Care brands advertised on TV
were 'ITC Ltd' and 3 belonged to Hindustan Unilever Ltd which had occupied
the Top 3 places.

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Top Celebrities endorsing Personal Care Brands on TV

 'Priyanka Chopra' was the top celebrity endorsing Personal Care brands on TV
followed by 'Kareena Kapoor' and 'Sushmita Sen' during 2010.

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Top 10 Brands in the Indian market

STUDY ON CONSUMER PERCEPTIONS:

1. Current usage of toilet soap Brands:

Table below gives current usage of toilet soaps across different income categories
(research was conducted with 30 people):

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2. REASONS FOR SWITCHING BRANDS:

This could be seen from Table below:

As obvious from the above table, sales promotion was not the main reason for
switching brand in this category. Need for variety was the predominant reason. It was
found through deeper probing that even though consumers would have switched
brands due to sales promotion, there was reluctance about admitting the same and
variety was given as a reason for switching. It was further found that consumers had
positive disposition towards promoted brand. As a result when toilet soap brand was
changed for variety, the brand which was promoted had higher probability of purchase
than non-promoted brands.

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3. RECALL OF BRANDS BEING PROMOTED:

It could be seen from Table below:

As seen from above, Lux (Gold Star offer – most promoted and advertised brand) had
the maximum recall. This brand used TV advertisement heavily to announce sales
promotion offers.

Six out of 30 did not recall any sales promotion scheme on any brand. It could be
inferred that

i) hard core loyals to a particular brand (eg. Hamam) would never (pay attention to
any announcements of any other toilet soap brand.

ii) Unless sales promotion offers were properly communicated to the target audience,
required impact might not be created and

iii) Unless promotional offers were of significant value to a consumer, it was likely to
get unnoticed and/or ignored.

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4. WILLINGNESS TO BUY ON SALES PROMOTION OFFER

Sixty-three per cent of the sample did not show willingness to buy a brand due to
promotion while 27% showed willingness and 10% were not sure. This indicates that
when 27% showed willingness, and 10% consumers who were not sure, these groups
might be lured through innovative and lucrative sales promotion offer.

5. ABILITY TO INDUCE TRIAL

Forty per cent of the respondents had said that sales promotion had the ability to
induce trial which reinforces the above inference.

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CONCLUSION:

After conducting the survey, observed can be made that HUL still rules the FMCG
market. There premium class like LUX and LIFEBUOY acts as the CASH COW for
them and others like DOVE is growing fast in the market.

HUL is in a “sticky ground” and finds itself between devil and deep sea, on one end is
local and international competitors while on other is humongous population in
villages . FAST Moving Consumer Goods (FMCG) sector will witness more than 50
per cent growth in rural and semi-urban India by 2012, according to an analysis
carried out by the Associated Chambers of Commerce and Industry of India.

HUL has learned its lesson the hard way that INDIA is full of vagaries in spite of the
fact that HUL has so many products in the market , to cater to the whims of customer
is almost impossible. There is very peculiar market dynamics prevalent in the rural
parts so multi national like HUL find it difficult to follow the trends here in
comparison of local manufacturers. The rural market may be alluring but it is not
without problems such as low per capita disposable incomes and large number of
daily wage earners. Some of the other problems associated with rural markets are
acute dependence on the vagaries of the monsoon, seasonal consumption linked to
harvests, festivals and special occasions, poor roads and power problems.

The other difficulty that FMCG companies are likely to face is that of logistics. India's
627,000 villages are spread over 3.2 million sq km. Delivering products to the 750
million Indians living in rural areas will be a tough task.

Moreover our findings indicate that with respect to the nature of the schemes,
premiums (free gifts) were found to be the most frequently used in both premium and
popular toilet soap category, followed by price offs. Retailer’s perceived price offs to
have relatively greater impact compared to any other forms of sales promotion. In line
with the retailers’ perceptions, the findings of consumer perceptions indicated that
price offs was the most preferred type of sales promotion. Retailers stated that role of
word of mouth and television advertising was very important in providing information
inputs to the consumers regarding sales promotion activities. This perception of
retailers was supported by the consumer unaided recall of sales promotion schemes

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which were widely advertised. As the retailer interacts and observes consumers more
frequently and closely than the manufacturer, it would be useful for the companies to
incorporate perceptions . We believe that younger age-groups are more experimental
in nature, amenable to trying new brands, and sought/looked for or asked whether
there were any) sales promotion schemes running on any toilet soap at the time of
purchase. Also the person going to the shop for the purchase of soap is the final
decision maker of the brand. Hence it is essential that companies need to design
attractive, striking, visible POPs for scheme announcements.

Also following inference can be made that UNILIVER is using new innovative media
campaigns which are not only alluring customers but also increasing brand awareness. The
theme for media campaign is almost common for Uniliver but it changes the application for
e.g. “DIRT IS GOOD” is transformed into “DAAG ACHHEY HAIN” in INDIA.

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CHAPTER – 3
RECOMMENDATIONS
BIBLIOGRAPHY
QUESTIONNAIRE

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RECOMMENDATIONS

The two point remedies for HUL through which it can recover its lost grounds are:

1. Retailing is the new mantra in marketing these days, HUL should come up with its

exclusive stores in metros and sub-urban areas. In this way it can not only decrease

number of intermediaries but also direct contact with the customers can be

established.

2. HUL should identify that there are two segments in Indian market that have vast

potential which are youth and rural market. So, HUL should introduce product

specifically to this segment, there is specific soap in the market which leverages on

the youth and rural aspect of India.

The organizational pressure, tight financial control and overall dull ness make the

marketers to sulk and squeeze. But, marketers have to be more focused just apply

themselves. Then they can rejoice that the spring will not be too far. Apart from the

usual 4Ps, its all in the recessionary 3P’s, perception, planning and plundering of the

market to find growth out of de-growth. One who finds the opportunity reaps the

benefit. Some time, slow down may be a blessing in disguise for some companies.

Upon compulsions, some companies may be forced to enter some new categories and

either knowingly or unknowingly they may end up having hit the jackpot with some

niche brand winners!

Customers become a rare commodity in a slow down. Increase promotions and

incentives to lure them. The Indian market has become so intense that every player,

including the local brand player has become intelligent enough to come out with

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some scheme or the other. As a great brand builder and with principles of strategic

marketing, companies may have a tendency to give a stoic smile on the lesser

mortals. It’s a trap and do not ever dare to miss the race. Its time to be an Indian in

India.

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Bibliography

Philip kotler, V.A., “Marketing management”, First edition (2007),

Himalaya Publishing House, Mumbai

McDonald, W.J., “Direct Marketing-an Integrated Approach”, First

edition (2008), Irwin/McGraw Hill

Roberts, M.L., Berger, P.D., “Direct Marketing Management”,

sixth

edition (2008), Prentice Hall International Inc., USA

Shankar, Ravi, “Services marketing”, Second edition (2002),

South Asia Publications, Delhi

Sheth, J.N., Mittal, B., Newman, B.I., “Consumer Behavior”, First

edition (1999), The Dryden Press, USA

WWW.economictimes.com

WWW.hul.com

WWW.fmcg.com

WWW.google.com

WWW.adexindia.com

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Annexure

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QUESTIONNAIRE

Name: ______________________________________

1. Age (in Years):

(a) 20-25 (b) 30-35

(c) 25-30 (d) Above 35

2. Occupation:

(a) Student

(b) Housewife

(c) Working/Professional

(d) Others, Specify_____________________

3. Annual Household Income:

(a) Less than Rs. 1 Lakhs

(b) 1-2 Lakhs

(c) 2-3 Lakhs

(d) Greater than 3 Lakhs

1. Which HUL’s soap do you use?

Lux
Liril
Lifebuoy
Rexona
Others (dove, pears…..)

2. Overall how satisfied are you with the product?

Very unsatisfied
Unsatisfied
Somewhat satisfied
Satisfied
Extremely satisfied

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3. How likely are you to use/purchase (product) again?

Definitely
Probably yes
Probably not
Definitely not

4. How would you rate HUL’s soap with respect to others?

Excellent
Very good
Good
Average
Poor

5. Would you continue buying or start buying lux after srk’s appearance in
lux’s advertisement?
Definitely
Probably yes
Probably not
Definitely not

6. Would you like to recommend the product to others?

Definitely
Probably yes
Probably not
Definitely not

7. Would you suggest any improvement from the following?

Quality improvement
Price reduction
More diversified
Any other suggestion…………………………………….

8. On which parameter do you buy soap

Company name
Soap name
Price
Need

9. Are you satisfied with the quality of HUL products.

Satisfied
Unsatisfied

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10. Have you get attracted from the brand ambassador.

Yes
No

11. How often do you switch to another product

Very frequently
Frequently
Rarely
Never

12. Who buys the soap in your family?

Mother/wife
Father/husband
Yourself
Hardly matters

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