DISSERTATION REPORT

ON
COMPARATIVE STUDY OF DISTRIBUTION CHANNEL
OF ‘HUL’ AND ‘PROCTER & GAMBLE’ IN RURAL
MARKET

A Dissertation submitted in partial fulfillment of the requirements of

Masters in Business Administration – International Business

Submitted to: Submitted by:

Ms. Poorva Ranjan Pranita Singh
Lecturer, AIBS MBA (IB & Marketing)
Section – C
A1802009448

Amity International Business School

Amity University, Noida

April, 2011

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 CERTIFICATE

This is to certify that Ms. PRANITA SINGH, a student of Post Graduate Degree in
MBA International Business (2009-2011), Amity International Business School,
Noida has carried out this Dissertation Project TITLED – “COMPARATIVE
STUDY OF DISTRIBUTION CHANNEL OF ‘HUL’ AND ‘PROCTER &

GAMBLE’ IN RURAL MARKET”, under the able guidance and supervision of

MS. POORVA RANJAN, Faculty at AMITY INTERNTIONAL BUSINESS
SCHOOL.

This Dissertation report has the requisite standard for the partial fulfillment the Post
Graduate Degree in International Business. To the best of our knowledge no part of
this report has been reproduced from any other report and the contents are based on
original research.

Ms. POORVA RANJAN PRANITA SINGH

(Faculty Guide) (Student)

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 ACKNOWLEDGEMENT
Every endeavor in itself is an impression of the efforts of not only those who pursue it but
of those as well who provide guidance and motivation towards its successful completion.
Likewise, this project bears an imprint of all those who helped me at various stages and it
would be unfair on my part not to thank them.

I would like to express my gratitude to PROF. DR. GURINDER SINGH, DIRECTOR

GENERAL, AIBS for providing me with an opportunity to undergo this dissertation
project at AIBS.

The successful completion of this project could not have been possible without the co-
operation and encouragement of MS. POORVA RANJAN, my project guide, who
provided me with her unending support from the very beginning of the project, which
helped in timely completion of the project.

I would also like to thank all the my Marketing faculty members at AIBS, MS. KOKIL
JAIN, MS. NIDHI BHATIA & MR. NITIN GARG for enlightening my way whenever
any kind of support was required in completion of the project.

I’d also express my gratitude towards my father, MR. C.P.SINGH who continued to have
an impact on my thinking which helped me to complete this project.

THANKS & REGARDS,

PRANITA SINGH

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 TABLE OF CONTENTS

CHAPTER 1
EXECUTIVE SUMMARY………………………………
COMPANY PROFILE (HUL)…………………………..
DISTRIBUTION NETWORK OF HUL ………………..
SWOT ANALYSIS OF HUL……………………………
COMPANY PROFILE (P&G)…………………………..
DISTRIBUTION NETWORK OF P&G ………………..
CHAPTER 2
CRITICAL REVIEW OF LITERATURE…………………………

CHAPTER 3
RESEARCH MATHODOLOGY………………………………….

CHAPTER 4
DATA ANALYSIS, FINDINGS …………………………………..

CHAPTER 5
RECOMMENDATION

CHAPTER 6
ANNEXURES……………………………………………………..

CHAPTER 7
REFERNCES………………………………………………………

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CHAPTER 1 EXECUTIVE SUMMARY

Hindustan Unilever Limited

Hindustan Unilever Limited (HUL) is India’s largest Fast Moving Consumer Goods Company,
touching the lives of two out of three Indians with over 20 distinct categories in Home & Personal
Care Products and Foods & Beverages. They endow the company with a scale of combined
volumes of about 4 million units and sales of Rs.10000 crores. HUL is also one of the country’s
largest exporters; it has been recognized as a Golden Super Star Trading House by the
Government of India. Hence, research aims is that to study the existing marketing practices,
emerging marketing plans and understanding companies business strategy with its profile. The
main recommendations have been made on the addressing of the advertising message to the
customers. An attempt has been made to formulate the communication in a way to build it on a
platform of the basic need for buying HUL products. In another recommendation the suggestions
towards better dealer interest in HUL products has been given a chance.

The research is based primarily on secondary data. Data has been collected through administered
questionnaires by using online survey method.

Procter & Gamble

The Procter & Gamble Company, incorporated in 1905, is focused on providing branded
consumer goods. The Company’s products are sold in over 180 countries around the world
primarily through mass merchandisers, grocery stores, membership club stores, drug stores and in
high-frequency stores, the neighborhood stores, which serve consumers in developing markets.
During the fiscal year ended June 30, 2009 (fiscal 2009), one product category accounted for 10%
or more of consolidated net sales. The laundry category constituted approximately 16% of net
sales during fiscal 2009. In fiscal 2009, the Company was organized into three Global Business
Units: Beauty; Health and Well-Being, and Household Care.

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The Company had six business segments under United States Generally Accepted Accounting
Principles (GAAP): Beauty; Grooming; Health Care; Snacks, Coffee and Pet Care; Fabric Care
and Home Care, and Baby Care and Family Care.

HINDUSTAN UNILEVER
Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer Goods Company,
touching the lives of two out of three Indians with over 20 distinct categories in Home & Personal
Care Products and Foods & Beverages. They endow the company with a scale of combined
volumes of about 4 million tonnes and sales of Rs.10,000 crores.
HUL is also one of the country's largest exporters, it has been recognized as a Golden Super Star
Trading House by the Government of India.

The mission that inspires HUL's over 15,000 employees, including over 1,300 managers, is to
"add vitality to life." HUL meets everyday needs for nutrition, hygiene, and personal care with
brands that help people feel good, look good and get more out of life. It is a mission HUL shares
with its parent company, Unilever, which holds 51.55% of the equity. The rest of the
shareholding is distributed among 380,000 individual shareholders and financial institutions.

HUL's brands - like Lifebuoy, Lux, Surf Excel, Rin, Wheel, Fair & Lovely, Pond's, Sunsilk,
Clinic, Pepsodent, Close-up, Lakme, Brooke Bond, Kissan, Knorr-Annapurna, Kwality Wall's –
are household names across the country and span many categories - soaps, detergents, personal
products, tea, coffee, branded staples, ice cream and culinary products. They are manufactured
over 40 factories across India. The operations involve over 2,000 suppliers and associates. HUL's
distribution network comprising about 4,000 redistribution stockists, covering 6.3 million retail
outlets reaching the entire urban population, and about 250 million rural consumers.

HUL has traditionally been a company, which incorporates latest technology in all its operations.
The Hindustan Unilever Research Centre (HLRC) was set up in 1958, and now has facilities in
Mumbai and Bangalore. HLRC and the Global Technology Centers in India have over 200 highly
qualified scientists and technologists, many with post-doctoral experience acquired in the US and
Europe.

HUL believes that an organization’s worth is also in the service it renders to the community. HUL
is focusing on health & hygiene education, women empowerment, and water management. It is
also involved in education and rehabilitation of special or underprivileged children, care for the
destitute and HIV-positive, and rural development. HUL has also responded in case of national
calamities / adversities and contributes through various welfare measures, most recent being the

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village built by HUL in earthquake affected Gujarat, and relief & rehabilitation after the Tsunami
caused devastation in South India.

In 2001, the company embarked on an ambitious programme, Shakti. Through Shakti, HUL is
creating micro-enterprise opportunities for rural women, thereby improving their livelihood and
the standard of living in rural communities. Shakti also includes health and hygiene education
through the Shakti Vani Programme, and creating access to relevant information through the
iShakti community portal. The program now covers 15 states in India and has over 31,000 women
entrepreneurs in its fold, reaching out to 100,000 villages and directly reaching to 150 million
rural consumers. By the end of 2010, Shakti aims to have 100,000 Shakti entrepreneurs covering
500,000 villages, touching the lives of over 600 million people.

HUL is also running rural health programmers – Lifebuoy Swasthya Chetana. The programme
endeavors to induce adoption of hygienic practices among rural Indians and aims to bring down
the incidence of diarrhea. It has already touched 70 million people in approximately 15000
villages of 8 states. The vision is to make a billion Indians feel safe and secure.
If Hindustan Unilever straddles the Indian corporate world, it is because of being single-minded
in identifying itself with Indian aspirations and needs in every walk of life.

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BRANDS

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Organizational Structure:-

1. Chair Man Mr. Harish Manwani

2. CEO & Managing Director Mr. Nitin Paranjpe

3. Finance & IT Director Mr. R. Sridhar

4. Executive Director Mr. Gopal Vittal

5. Directors

I. Mr. Sanjiv Kakkar

II. Mr. A. Narayan

III. Mr. V. Narayanan

IV. Mr. D. S. Parekh

V. Mr. C. K. Prahalad

VI. Mr. S. Ramadorai

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HINDUSTAN UNILEVER LIMITED INDIA’S LARGEST FMCG
COMPANY

FINANCIAL OVERVIEW

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11
Purpose & principles
Our corporate purpose states that to succeed requires "the highest standards of corporate
behaviour towards everyone we work with, the communities we touch, and the environment on
which we have an impact."

Always working with integrity

Conducting our operations with integrity and with respect for the many people, organisations and
environments our business touches has always been at the heart of our corporate responsibility.

Positive impact

We aim to make a positive impact in many ways: through our brands, our commercial operations
and relationships, through voluntary contributions, and through the various other ways in which
we engage with society.

Continuous commitment

We're also committed to continuously improving the way we manage our environmental impacts
and are working towards our longer-term goal of developing a sustainable business.

Setting out our aspirations

Our corporate purpose sets out our aspirations in running our business. It's underpinned by our
code of business Principles which describes the operational standards that everyone at Unilever
follows, wherever they are in the world. The code also supports our approach to governance and
corporate responsibility.

Working with others

We want to work with suppliers who have values similar to our own and work to the same
standards we do. Our Business partner code, aligned to our own Code of business principles,
comprises ten principles covering business integrity and responsibilities relating to employees,
consumers and the environment.

Corporate Social Responsibility

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HUL’s corporate responsibility strategy seeks to address HUL's most significant sustainability

impacts of hygiene, nutrition, enhancement of livelihoods, reduction of greenhouse gases and

water footprint by integrating these objectives into our brands, our people and our processes.

 Provided income-generating opportunities to 45,000 Shakti entrepreneurs in rural

areas across 15 states in 100,000 villages through Project Shakti
 Lifebuoy Swasthya Chetna has touched 12crore people in more than 50676 villages
across India since 2002
 Pureit is available in more than 1500 towns nationally and already covers over 3
million households across India.
 Exceeded the target of reducing CO2 emissions from manufacturing operations by
25% on a base of 2004
 Twenty Eight of our manufacturing sites are zero water discharge sites.

HUL’s Export:

It was 1962. The reality of India then was very different from what it is today. India's economy
then suffered from foreign exchange shortage. Hindustan Unilever voluntarily decided to
take up Exports to support the country's economy.

Today, HUL is India's largest exporter of branded Fast Moving Consumer Goods. It has been
recognized by the Government of India as a Golden Super Star Trading House. Over time,
HUL has developed appropriate capabilities to be globally competitive in cost and quality for
a viable Exports business.

Focus areas:

HUL's Exports focuses on two broad areas. It is a sourcing base for Unilever brands in Home &
Personal Care (HPC) and Tea for supplies to other Unilever companies. It also focuses on
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becoming a preferred supplier to both non-Unilever and Unilever clients in three categories in
which India, as a country, has competitive advantage - Marine Products, Castor and its
Derivatives and Rice. HUL enjoys international recognition within Unilever and outside for its
quality, reliability and speed of customer service. HUL's Exports geography comprises, at
present, countries in Asia, Australia, Africa, North America and Europe.

HUL’s Export Portfolio:

HPC:

The categories are soaps, skin care products and oral care products. The brands are Lux,
Lifebuoy, Pears, Fair & Lovely, Dove, Vaseline, Close-Up, Pepsodent, Signal. HUL is the only
source of Pears soap across the world.

TEA:

The categories are branded packet tea, and instant tea for Unilever's ready-to-drink tea business.
The branded teas are Brooke Bond, Brooke Bond Red label, Brooke Bond Taj Mahal, Lipton,
Lipton Yellow Label, Lipton Green Label, Lipton Brisk, Lipton 3-in-1 premix, Chinese
Rickshaw.

Marine products:

HUL offers a comprehensive portfolio, ranging from Surimi, Crabsticks to Shrimps and several
value-added products. Among its customers is Icelandic, the world's third largest seafood
company. In addition, HUL has also become a part of Unilever's supply chain in sea foods for
Europe too. HLL's Marine Products brands are Ocean Diamond, Ocean Excellence, Shogun,
Hima, Gold Seal, Tara and Prima.

Rice:

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The categories are Basmati Rice and Basmati Rice-based ready-to-eat rice meals. The brands are
Gold Seal Indus Valley, Rozana and Annapurna.

Casto :

The categories are Castor Oil, Castor-oil based products, like hydrogenated castor oil, 12 -
Hydroxyl Stearic Acid, Ricinoleic Acid (used in grease and lubricant industry, paints and surface
coatings, cosmetics, emulsifiers), and Specialty Castor Oils (USP grade, BP grade, DAB 10) etc
used in pharmaceutical preparations. HUL's Castor brand is Topsoil.

Today, Exports is a substantial business in HUL, accounting for about 12% of the company's
turnover. HUL believes that its competitive advantages of cost competitiveness, process
competitiveness and economies of scale both at the company and country level, hold it in good
stead. They position the company to become one of the hubs for sourcing by Unilever companies
in HPC and Tea, and also simultaneously become a preferred partner to global customers in
Marine Products.

Direct Selling:

Product Range

• Lever home range

• Male grooming

• Oral Care

• Ayurveda

• Personal Wash

• Foods

Reach - 1400 towns (Largest in India) Consultant base - 330,000

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DISTRIBUTION NETWORK OF HUL
We have analyzed the distribution network of HUL from the following aspects:
1. Evolution of HUL’s distribution network
2. Transportation & Logistics
3. Channel Design
4. Initiatives taken for channel member management.
5. Field force management
1. Evolution over Time
The HUL’s distribution network has evolved with time. The first phase of the HUL distribution
network had wholesalers placing bulk orders directly with the company. Large retailers also
placed direct orders, which comprised almost 30 per cent of the total orders collected. The
company salesman grouped all these orders and placed an indent with the Head Office. Goods
were sent to these markets, with the company salesman as the consignee. The salesman then
collected and distributed the products to the respective wholesalers, against cash payment, and the
money was remitted to the company.
The focus of the second phase, which spanned the decades of the 40s, was to provide desired
products and quality service to the company's customers. In order to achieve this, one wholesaler
in each market was appointed as a "Registered Wholesaler," a stock point for the company's
products in that market. The company salesman still covered the market, canvassing for orders
from the rest of the trade. He then distributed stocks from the Registered Wholesaler through
distribution units maintained by the company. The Registered Wholesaler system, therefore,
increased the distribution reach of the company to a larger number of customers.
The highlight of the third phase was the concept of "Redistribution Stockist" (RS) who replaced
the RWs. The RS was required to provide the distribution units to the company salesman. The
second characteristic of this period was the establishment of the "Company Depots" system. This
system helped in transshipment, bulk breaking, and as a stockpoint to minimise stock‐outs at the
RS level. In the recent past, a significant change has been the replacement of the Company Depot
by a system of third party Carrying and Forwarding Agents (C&FAs). The C&FAs act as buffer
stock‐points to ensure that stock‐outs did not take place. The C&FA system has also resulted in

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cost savings in terms of direct transportation and reduced time lag in delivery. The most
important benefit has been improved customer service to the RS.
The role performed by the Redistribution Stockists includes: Financing stocks, providing
warehousing facilities, providing manpower, providing service to retailers, implementing
promotional activities, extending indirect coverage, reporting sales and stock data, demand
simulation and screening for transit damages.

2. Detailed overview:
The distribution network of HUL is one of the key strengths that help it to supply most products
to almost any place in the country from Srinagar to Kanyakumari. This includes, maintaining
favorable trade relations, providing innovative incentives to retailers and organizing demand
generation activities among a host of other things. Each business of HUL portfolio has
customized the network to meet its objectives. The most obvious function of providing the
logistics support is to get the company’s product to the end customer.

Distribution System of HUL:

HUL's products are distributed through a network of 4,000 redistribution stockists, covering 6.3
million retail outlets reaching the entire urban population, and about 250 million rural consumers.
There are 35 C&FAs in the country who feed these redistribution stockists regularly. The general
trade comprises grocery stores, chemists, wholesale, kiosks and general stores. Hindustan
Unilever provides tailor made services to each of its channel partners. It has developed customer
management and supply chain capabilities for partnering emerging self‐service stores and
supermarkets. Around 2,000 suppliers and associates serve HUL’s 40 manufacturing plants which
are decentralized across 2 million square miles of territory.

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(Schematic of HUL’s Distribution Network)

Distribution at the Villages:

The company has brought all markets with populations of below 50,000 under one rural sales
organisation.The team comprises an exclusive sales force and exclusive redistribution
stockists.The team focuses on building superior availability of products. In rural India, the
network directly covers about 50,000 villages, reaching 250 million consumers, through 6000
sub‐stockists.

HUL approached the rural market with two criteria ‐ the accessibility and viability. To service
this segment, HUL appointed a Redistribution stockist who was responsible for all outlets and all
business within his particular town. In the 25% of the accessible markets with low business
potential, HUL assigned a sub stockist who was responsible to access all the villages at least once
in a fortnight and send stocks to those markets. This sub‐stockist distributes the company's
products to outlets in adjacent smaller villages using transportation suitable to interconnecting

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roads, like cycles, scooters or the age‐old bullock cart. Thus, Hindustan Unilever is trying to
circumvent the barrier of motorable roads.

(Rural Distribution Model of HUL)

The company simultaneously uses the wholesale channel, suitably incentivising them to distribute
company products. The most common form of trading remains the grassroots buy and sell mode.
This enables HUL to influence the retailers stocks and quantities sold through credit extension
and trade discounts. HUL launched this Indirect Coverage (IDC) in 1960s.Under the Indirect
Coverage (IDC) method, company vans were replaced by vans belonging to Redistribution
Stockists, which serviced a select group of neighbouring markets.

Distribution at the Urban centres:

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Distribution of goods from the manufacturing site to C & F agents take place through either the
trucks or rail roads depending on the time factor for delivery and cost of transportation. Generally
the manufacturing site is located such that it covers a bigger geographical segment of India. From
the C & F agents, the goods are transported to RS’s by means of trucks and the products finally
make the ‘last mile’ based on the local popular and cheap mode of transport.

New distribution channels

Project Shakti

This model creates a symbiotic partnership between HUL and its consumers. Started in the late
2000, Project Shakti had enabled Hindustan Lever to access 80,000 of India's 638,000 villages
.HUL's partnership with Self Help Groups(SHGs) of rural women, is becoming an extended arm
of the company's operation in rural hinterlands. Project Shakti has already been extended to about
12 states ‐ Andhra Pradesh, Karnataka, Gujarat, Madhya Pradesh, Tamil Nadu, Chattisgarh, Uttar
Pradesh, Orissa, Punjab, Rajasthan, Maharashtra and West Bengal. The respective state
governments and several NGOs are actively involved in the initiative. The SHGs have chosen to
partner with HUL as a business venture, armed with training from HUL and support from
government agencies concerned and NGOs. Armed with micro‐credit, women from SHGs
become direct‐to‐home distributors in rural markets.

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 our products, which they will then directly
sell to consumers. In general, a member from a SHG selected as a Shakti entrepreneur, commonly
referred as 'Shakti Amma' receives stocks from the HUL rural distributor. After being trained by
the company, the Shakti entrepreneur then sells those goods directly to consumers and retailers in
the village. Each Shakti entrepreneur usually service 6‐10 villages in the population strata of
1,000‐2,000. The Shakti entrepreneurs are given HUL products on a `cash and carry basis.

The following two diagrams show the Project Shakti model as initiated by HUL.

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21
Project Streamline

To cater to the needs of the inaccessible market with high business potential HUL initiated a
Streamline initiative in 1997. Project Streamline is an innovative and effective distribution
network for rural areas that focuses on extending distribution to villages with less than 2000
people with the help of rural sub‐stockists/Star Sellers who are based in these very villages. As a
result, the distribution network directly covers as of now about 40 per cent of the rural population.

Under Project Streamline, the goods are distributed from C & F Agents to Rural Distributors
(RD), who has 15‐20 rural sub‐stockists attached to him. Each of these sub‐stockists / star sellers
is located in a rural market. The sub‐stockists then perform the role of driving distribution in
neighboring villages using unconventional means of transport such as tractor and bullock carts.
Project Streamline being a cross functional initiative, the Star Seller sells everything from
detergents to personal products.

Higher quality servicing, in terms of frequency, credit and full‐line availability, is to be provided
to rural trade as part of the new distribution strategy.

The diagram in the next page shows the model of Project Streamline.

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Hindustan Lever Network (HLN)

It is the company's arm in the Direct Selling channel, one of the fastest growing in India today. It
already has about several lakh consultants ‐ all independent entrepreneurs, trained and guided by
HLN's expert managers. HLN has already spread to over 1500 towns and cities, covering 80% of
the urban population, backed by 42 offices and 240 service centres across the country. It presents
a range of customised offerings in Home & Personal Care and Foods.

The New Compensation plan for HLN partners provides new exciting ways of earning substantial
income in addition to offering rewards like revenue sharing through the innovative concept of
“pools”

Mother Depot and Just in Time System

In order to rationalise the logistics and planning task, an innovative step has been the formation of
the Mother Depot and Just in Time System (MD‐JIT). Certain C&FAs were selected across the
country to act as mother depots. Each of them has a minimum number of JIT depots attached for
stock requirements. All brands and packs required for the set of markets which the MD and JITs
service in a given area are sent to the mother depot by all manufacturing units. The JITs draw
their requirements from the MD on a weekly or bi‐weekly basis.

Leveraging Information technology

HUL customers are serviced on continuous replenishment. This is possible because of IT

connectivity across the extended supply chain of about 2,000 suppliers, 80 factories and 7,000
stockists. This sophisticated network with its voice and data communication facilities has linked
more than 200 locations all over the country, including the head office, branch offices, factories,
depots and the key redistribution stockists. They have also combined backend processes into a
common Shared Service infrastructure, which supports the units across the country. All these
initiatives together have enhanced operational efficiencies, improved the service to the customers
and have brought us closer to the marketplace.

RS Net Initiative:

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The RS Net initiative, launched in 2001, aims at connecting Redistribution Stockists (RSs)
through an internet based system. It now covers stockists of the Home & Personal Care business
and Foods & Beverages in close to 1200 towns and cities. Together they account for about 80%
of the company's turnover. RS Net is one of the largest B2B e‐commerce initiatives ever
undertaken in India. It provides linkages with the RSs’ own transaction systems, enables
monitoring of stocks and secondary sales and optimises RS’s orders and inventories on a daily
basis through online interaction on orders, despatches, information sharing and monitoring. The
IT‐powered system has been implemented to supply stocks to redistribution stockists on a
continuous replenishment basis. Today, the sales system gets to know every day what HUL
stockists have sold to almost a million outlets across the country. Information on secondary sales
is now available on RS Net every day.

RS Net is part of Project Leap. Project Leap begins with the supplier runs through the factories
and depots and reaches up to the RSs. This ensures HUL’s growth by ensuring that the right
product is available at the right place in the right quantities and at the right time in the most cost‐
effective manner. Leap also aims at reducing inventories and improving efficiencies right through
the extended supply chain.

RS Net has come as a force multiplier for HUL Way, the company's action‐plan to not only
maximise the number of outlets reached but also to achieve leadership in every outlet. RS Net has
enabled stockists to place orders on a Continuous Replenishment System. This in turn has
unshackled the field force to solely focus on secondary sales from the stockists to retailers and
market activation. It has also enabled RSs to provide improved service to retail outlets.
Simultaneously, HUL is servicing the rural market, key urban outlets, and the modern trade as a
single concern.

Adexa iCollaboration suite

In 2000, HUL identified improved supply chain management as a critical business priority and
launched a comprehensive initiative, “Project Leap,” tasked with increasing supplier/distributor
responsiveness, reducing inventory buffers, and optimizing planning and scheduling. HUL chose
the Adexa iCollaboration suite for facilitating centralized monitoring of the SCM, live
customer /supplier collaboration, and integrating demand and distribution planning with
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production scheduling. With the aggregated view of data provided by the iCollaboration suite,
HUL was able to combine sales and distribution efforts on the diverse product lines, which
resulted in significant savings on the cost side for inventories and distribution. HUL updates
inventory positions, shipments and customer orders on a daily basis with these software packages
and can get a pulse on the market real time.

3. Channel Design
Hindustan Lever Limited (HUL) has two types of channel selling ‐
i. Regular (traditional) retail channel,
ii. Direct Selling Channel in the name of Hindustan Lever Network (HLN).
HUL has a well entrenched high distribution model which comprises of C&FAs, Redistribution
Stockists, wholesalers and retailers (as shown earlier). Hindustan Unilever's distribution network
is recognized as one of its key strengths. Its focuses on Product availability, Brand
communication, and higher levels of brand experience

25
.

4. Initiatives taken to Improve the Distribution Network

HUL has taken the following initiatives to improve its distribution network:
• Setting up of a full‐scale sales organisation comprising key account management and
activation to impact, fully engage and service modern retailers as they emerge.
• Servicing Channel partners and customers with continuous daily replenishment.
• Leveraging scale and building expertise to service Modern Trade and Rural Markets.
• Delayering of sales force to improve response times and service levels.
• Revamping of its sales organisation in the rural markets to fully meet the emerging needs
and increased purchasing power of the rural population. HUL’s distribution network in rural
India already directly covers about 50,000 villages, reaching about 250 million consumers
through about 6,000 sub stockists.
• Implementation of supply chain system that connects stockists across the country, and also
includes a back‐end system connecting suppliers, all company sites and stretching right up
to stockists. IT tools have been deployed for connectivity across the extended supply chains.
Backend processes have been combined into a common Shared Service infrastructure.
• Launching of Project Shakti through which the company is able to extend its operations in
villages. HUL has also included several NGOs and state governments as the initiative helps
rural women to improve their financial position.

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 • Launching of HUL Network to leverage the channel of direct selling by presenting
customised offerings in 11 home and personal care and food categories. Started in 2003, it
already has a base of 300,000 consultants across the country.
• Starting of franchised Lakme Beauty Salons and Ayush Therapy centres to offer
standardised services, in line with the strategy to leverage the equity of its brands through
relevant services.
• Finding out Innovative ways to reach out to its consumers, particularly in rural areas by
leveraging non‐conventional media like wall paintings, cinema vans, weekly markets
(haats), fairs and festivals.
• Initiating the concept of Super Value Stores (SVS) in urban areas to partner traditional
stores to provide a range of services ranging from managing their inventory to setting up
POS (point of sale) banners. In addition to this, to boost up traditional retail in the face
increasing in‐roads made by large, modern retailing chains like Spencer’s, Reliance Fresh
etc (where HUL is squeezed harder for discounts), HUL started restructuring some of the
selected SVSs into the form of self‐service retail shops a la modern retails. This is to protect
& maintain the competitive advantage that HUL has over its biggest competitors in the other
markets (e.g., P&G), with its very deep distribution reach through traditional retail.
• Launching the Unicare scheme with upmarket pharmacies and retailers to sale its premium
brands.
• Undertaking several initiatives for traditional channels in order to improve its capabilities at
the front‐end by developing skills for stockists' sales force. Under 'Project Dronacharya', the
FMCG major continuously imparted training to over 10,000 stockist salesmen.
• Launching of several promotional schemes for existing wholesalers and distributors. For
instance, it has started the ‘Vijeta ‐ Rishta Jeet Ka’ scheme last year to provide a platform
for the wholesaler and HUL to grow the business by earning points and redeeming them.

5. Field Force Management

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The working cycle of a typical HUL field force member is from 21st of every month to the 20th
of the next month. During this period he is given various targets that helps to achieve company
objectives and gives him a chance to prove his performance relative to other.

To start with the field force member is given a particular area and his responsibility is to cater to
all the retailers in that area. While deciding the area for each member of the field force, the
company makes sure that the operating area of each field member doesn't overlap with his other
colleagues. There are various methods used by the company to incentivize the field force ‐
Monetary and Non Monetary.

In HUL, the field force is evaluated using QOC (Quality of Contribution). It consists of 4
components ‐

1. Secondary Sale (Max points = 2.5)

2. Eco (Max points = 0.5)

3. Focus (Max points = 0.5)

4. FCS (Max Points = 0.5)

28
Secondary Sale ‐ Based on the operating area, each member is given a specific target in terms of
value (e.g., Rs. 15 lacs) for the operating month (21st – 20th of next month). If he achieves 100% of
the target he gets 2.5 points, if he achieves 95% target he gets 1.5 points. These points are used to
add to the total QOC score as well as linked to monetary incentive.

ECO / Width pack Target – This is used for the penetration/reach of certain products in the
existing market. The following is a typical ECO target assigned to a field force agent:
• Lux International – 105 outlets x 1 SKU
• Pears Soap ‐ 135 outlets x 1 SKU
• Rin ‐ 104 outlets x 1SKU
• Breeze Soap ‐ 100 outlets x 1 SKU
The outlets mentioned are within the operating area of the person and 1 SKU = Rs. 27/‐. Based on
this the Field person calculates number of packs he should sell to the retailers. The concerned
agent receives this target around 25th of each month and has to complete this target within the 5 th
day of next month. Upon completion he gets additional 0.5 points added to his QOC score along
with monetary incentive associated with it. However if this is not met within 5th, he looses the
opportunity.
Focus / Depth Pack target – This is mainly used to increase the sales volume of certain products.
A typical ‘Focus’ target is given below:
• Lux International – Rs 20,640 /‐ @ Rs 6/‐ per unit
• Life Buoy ‐ Rs 70,220 /‐ @ Rs 10/‐ per unit
• Wheel ‐ Rs 99,000 /‐ @ Rs 10/‐ per unit
• Breeze Soap ‐ Rs 27,000 /‐ @ Rs 10 /‐ per unit
This target needs to be achieved within 20th of next month. Upon achieving the target the field
person is awarded 0.5 points which is then added to his overall QOC score.
Field Capability Score (FCS) ‐ In this component, the field force persons are required to ensure
that the scheduled visit/outlet billing is such that at least 15 items are demanded per order. If this
is achieved the retailer gets a discount of 1% on the billed amount and on the other hand the field
person gets an additional score of 0.5 which is added to his QOC score. Each scheduled visit per
outlet is one per week. For example if there are 100 outlets within the operating area of a field

29
person then the number of visit per week is 100 and total number of visit per month = 100x4 =
400.
The sales person is required to achieve 90% success rate to get 0.5 points for his QOC score and
at least 65% for a satisfactory performance.

Non Monetary Methods

The other purpose of the QOC scores is to highlight the performance of the field person among
his peers. Based on the QOC various awards are distributed to the field persons at the end of
every month. These awards are also known as ‘MOC Star’ awards. MOC stands for Monthly
operating Cycle.
• If QOC score > 4.5 – The person is eligible for 7 star award
• If QOC score > 4 – The person is eligible for 5 star award
• If QOC score > 3.5 – The person is eligible for 3 star award

In the event of exceptional performance, management representatives from the regional office
come to the zonal office to distribute the awards. The photograph of the award winners is
displayed in the office as a source of inspiration for other sales person.
Target Setting Mechanism and monitoring
The regional office monitors the performance of various zones. A thorough analysis is done at the
end of each month and based on that the weak products are identified or those for which the
demand has weakened. This is the basis of setting ECO and FOCUS targets for the field persons.
Each field person is given a palmtop wherein he can feed the entries on the spot where the
transaction is done. This solves basically the two purposes ‐
a) The field person is freed from the tedious task of maintaining cumbersome records and can
then concentrate on the job (thus IT is replacing some of the field force or other channel
members),
b) The sold item is immediately updated in the company information system.

30
 SWOT ANALYSIS OF HUL
Strengths:

•Distinctly placed products providing reach to every segment of society.

•Integrated supply chain and well spread manufacturing units
•Distribution structure with wide reach, high quality coverage – The launch of project
“Shakti” has helped HUL to create brand awareness and extensive reach in rural India.
•Access to Unilever global technology, capability and sharing of best practices from other
Unilever companies.
•Well placed to take advantage of growth in rural India and lower strata of the society
through “Shakti”.
•It can be a leader in exports by positioning itself as a sourcing hub for Unilever companies
in various countries.

Weaknesses:

•Price positioning in some categories allows for low price competition like Amul captured
Kwality’s market.
•Limited success in changing eating habits of people.
•Competitors focusing on a particular product and eating up HUL’s share, like Nirma
focusing on soaps and detergents.

Opportunities:

• Growing consumer base due to increasing income levels and new consumers from lower
strata of the society
• Untapped market in branded Ayurvedic medicines and other such consumer products.
• Opportunity in Food sector: changing consumer tastes
• Expansion of horizons towards more and more countries

Threats:

• Unfavourable raw material prices due to inflation, reducing profitability.

• Heavy onslaught of competition in the core categories from emerging players like ITC will
result in higher advertising expenditure
• Spurious/counterfeit products in rural areas and small towns.

31
 PROCTER & GAMBLE
The Procter & Gamble Company (P&G) boasts boatloads of brands. The world's #1 maker of
household products courts market share and billion-dollar names. It's divided into three global
units: health and well being, beauty, and household care. The company also makes pet food and
water filters and produces soap operas. Some 25 of P&G's brands are billion-dollar sellers,
including Fusion, Always/Whisper, Braun, Bounty, Charmin, Crest, Downy/Lenor, Gillette, Iams,
Olay, Pampers, Pantene, Pringles, Tide, and Wella, among others. P&G shed its coffee brands in
late 2008. Being the acquisitive type, with Clairol and Wella as notable conquests, P&G's biggest
buy in company history was Gillette in late 2005.

BRAND

32
 P&G at a glance:
GBU Reportable Key Products Billion-Dollar Net Sales
Segment Brands by GBU
(in
billions)
(1)
BEAUTY Beauty Cosmetics, Deodorants, Hair Head & Shoulders, $26.3
Care, Personal Olay,
Cleansing, Prestige Pantene, Wella
Fragrances, Skin Care
Grooming Blades and Razors, Electric Braun, Fusion,
Hair Removal Devices, Gillette, Mach3
Face and Shave Products,
Home Appliances
HEALTH AND Health Care Feminine Care, Oral Care, Actonel, Always, $16.7
WELL-BEING Personal Health Care, Crest, Oral-B
Pharmaceuticals
Snacks and Pet Pet Food, Snacks Iams, Pringles
Care
HOUSEHOLD Fabric Care and Air Care, Batteries, Dish Ariel, Dawn, $37.3
CARE Home Care Care, Fabric Care, Downy, Duracell,
Surface Care Gain, Tide
Baby Care and Baby Wipes, Bath Tissue, Bounty, Charmin,
Family Care Diapers, Pampers
Facial Tissue, Paper Towels

P&G Purpose:

We will provide branded products and services of superior quality and value that improve the
lives of the world's consumers. As a result, consumers will reward us with leadership sales, profit,
and value creation, allowing our people, our shareholders, and the communities in which we live
and work to prosper.

P&G Values:

P&G is its people and the values by which we live.We attract and recruit the finest people in the
world. We build our organization from within, promoting and rewarding people without regard to
any difference unrelated to performance. We act on the conviction that the men and women of
Procter & Gamble will always be our most important asset.
33
Leadership:

• We are all leaders in our area of responsibility, with a deep commitment to deliver
leadership results.
• We have a clear vision of where we are going.
• We focus our resources to achieve leadership objectives and strategies.
• We develop the capability to deliver our strategies and eliminate organizational barriers.

Ownership:

• We accept personal accountability to meet our business needs, improve our systems, and
help others improve their effectiveness.
• We all act like owners, treating the Company's assets as our own and behaving with the
Company's long-term success in mind.

Integrity:

• We always try to do the right thing.

• We are honest and straightforward with each other.
• We operate within the letter and spirit of the law.
• We uphold the values and principles of P&G in every action and decision.
• We are data-based and intellectually honest in advocating proposals, including
recognizing risks.

Passion for winning:

• We are determined to be the best at doing what matters most.

• We have a healthy dissatisfaction with the status quo.
• We have a compelling desire to improve and to win in the marketplace.

Trust:

• We respect our P&G colleagues, customers, and consumers, and treat them as we want to
be treated.
34
 • We have confidence in each other's capabilities and intentions.
• We believe that people work best when there is a foundation of trust.

Business Growth

Folgers Sale
On June 4, 2008, P&G sold its Folgers coffee unit to J.M. Smucker Co for $2.95 billion. As part
of the deal, P&G shareholders will receive a 53.5 percent stake in Smuckers and the company
will assume $350 million of Folger's debt..

Gillette Acquisition

Procter & Gamble acquired Gillette in 2005 for over $50 billion in its largest acquisition to date.
In 2004, the last full year before the acquisition, Gillette generated over $10 billion in sales, about
$6 billion of which came from razors and Duracell and Braun products and the remainder sourced
from the Oral-B brand, which was moved into the Health & Well-Being segment. A key piece of
the acquisition beyond Gillette's product lines was its distribution network and supply chain.
Gillette's distribution network and supply chain in emerging markets had been extremely
successful for Gillette and, once acquired, has worked to complement P&G's own distribution
network.

Trends and Forces

Different product price points provide some insulation against recession

Household staples are somewhat protected from the US recession and global economic downturn.
However, in a recession consumers often turn to cheaper private label or store brands instead of
"brand name" products from P&G. To combat private label encroachment, P&G offers at least
two product forms in many product categories. For example, the company has seen increases
sales in Luvs from Pampers diapers and an increase in Gain detergent sales from Tide. In
addition, P&G offers "Basic" versions of its Charmin toilet paper and Bounty paper towels. The

35
company's broad offerings, combined with the necessity of household items, provide a degree of
insulation against recession.

Retail Consolidation

The rise of a handful of powerful low-priced retailers has negatively impacted consumer products
companies. A handful of big retailers have captured a large share of the market. For example,
from 1999 to 2004, the top 10 food retailers in the US increased their share of food retail sales
from 53.4% to 58.9%. These large retailers have shifted the balance of power within the supply
chain. For example, the company's largest customer, Wal-Mart, accounted for 15% of net sales in
2006, 2007, and 2008. Wal-Mart has exerted its power over other suppliers to their detriment in
the past, such as forcing record companies to produce clean-label CDs and pulling adult
magazines. A decision by Wal-Mart not to sell a particular P&G consumer product would prevent
P&G from reaching its entire target market. In addition, many retailers have pushed their own
higher margin private label brands in competition with P&G.

Rise of Private Labels

In the past decade, P&G has faced stiff competition from private label brands or "store brands" of
large retailers such as Wal-Mart, Target, and supermarket chains. Private label products often sell
at lower price points and earn higher margins because the retailers can control the cost of their
production. For example, Wal-Mart offers 5,500 products through its "Great Value" brand, which
has increasingly sold as consumers feel the recession squeeze on their disposable income. From
2003 to 2008, sales of Target's private label products rose an average of 15% annually.

Large retailers are close to the consumers, have the point of sale data on consumer behavior and
are in better position to understand consumer behavior. These strengths contribute to better
private label product development, which directly compete with P&G products. Retailers also
promote their own brands as they earn higher margins on them. P&G has addressed this issue by
continuously investing in Research & Development and introducing new products as well as
offering different versions of its own products at different price points.

Social Responsibility:

36
At P&G, Social Responsibility stems from our Corporate PVP (Purpose, Values, Principles).
Social Projects are in keeping with P&G’s credo of ‘Business With a Purpose’. P&G has always
demonstrated its commitment to the community not just through the quality of its products and
services, but also through socially responsible initiatives for the community. We believe in
building the community in which we live and operate by supporting its ongoing development.

PROJECT SHIKSHA:

P&G with CRY & Sony launches “Shiksha” to help educate Underprivileged Children

Each time you buy a P&G product, you help support one day’s education of one child

Did you know that India not only has the world’s largest number of children but also the world’s
largest number of children who are unable to access education? With a mission to make a
difference to this alarming situation, Procter & Gamble (P&G) has joined hands with India’s
premier child rights organisation Child Relief and You (CRY) and Sony Entertainment Television
to launch ‘Shiksha’, a program to help educate underprivileged children across India. Under
Shiksha, P&G and Sony will appeal to their consumers and viewers to support the cause and
make it easy for them to do so - all an individual has to do is purchase a large pack of either Tide,
Ariel, Pantene, Head & Shoulders, Rejoice, Vicks VapoRub or Pampers during April, May
and June 2005, and he/she will help support one day’s education of one child per pack
purchased.

Irrespective of the sale of its brands from Shiksha, P&G has committed a minimum of Rs. 1 crore
to CRY, which will be allocated by CRY to projects with a focus on education, spread across
India; Delhi, Barrackpore (West Bengal), Ongole and Chilkaluripet (Andhra Pradesh), Bellary
(Karnataka), Salem (Tamil Nadu), Bolangir (Orissa), and Osmanabad, Wardha, Navi Mumbai,
Borivali (Maharashtra).

GUJARAT EARTHQUAKE RELIEF:

37
P&G in partnership with Swayam Shikshan Prayog (SSP) opened four Community Resource
Centers for the earthquake victims in the Chakasari, Paggivand, Hanjiya and Jodhpar vands
(hamlets) of Rapar Taluka, Kutch District, Gujarat. The Community Centers provide basic
education for children; training on building earthquake-resistant shelters and has supported the
formation of 22 Women's Savings Groups which contribute towards an income-generating fund,
for future entrepreneurial activity. The P&G-SSP project positively impacts 25 villages, 3750
families and 22,500 people and helped mobilize women’s groups and communities in Gujarat for
their long-term sustainable development. Credit fund will be provided as a revolving fund to self-
help groups.

The operational cost for each Centre is Rs, 25,000 met by P&G. The centers have been built from
a Gujarat Earthquake Relief Fund created after the earthquake of 26th January 2001 by
employees of P&G India, Brussels, Japan, Canada, among others and the Company contribution.
P&G employees also made contributions directly to the Red Cross Society for other rehabilitation
work in Gujarat.

In addition, P&G is currently working on forming women’s micro-credit groups to ensure the
sustainability of these community centers and to further empower these women and increasing the
number of community centers from four to seven.

PROJECT POSHAN:

P&G and UNICEF launched Project Poshan to combat malnutrition in India. India has 40% of the
world’s malnourished children. POSHAN targeted three key projects: an Adolescent Girls’
Initiative to educate girls in Mumbai slums on health problems and improve their lives with
Anemia prevention through IFA tablets; a Women’s Parenting Network in Chennai to provide
information on care during pregnancy; and Day care projects in Jaipur, which focused on
increased food intake and micro-nutrients. Once again, P&G raised Rs. 50 lakhs by contributing
Re. 1/- from sales of large size packs of Ariel, Whisper, Head & Shoulders and Pantene sold in
the months of May, June and July 2000.

38
PROJECT PEACE:

P&G launched PEACE – a unique Environmental Education Program for children in schools
across Bombay and Thane representing a cross-section of economic backgrounds. Children were
exposed to a fascinating account of the Indian environmental scenario. The Multiplicity of Eco-
Systems in India, Air Around Us, Water, Solid Waste and Adopting Conservation in our
Lifestyles were the topics dealt with using interesting media like music, games, project-work,
slides, video films, group discussions, etc.

39
DISTRIBUTION CHANNEL OF P&G
Procter & Gamble, a world leader in consumer packaged goods, sells nearly 300 brands in more
than 160 countries. It has sales of $40 billion a year and 130 manufacturing sites around the
world.

P&G measures consumer satisfaction at two levels, which it calls the two “moments of truth.”
The first moment of truth occurs when the consumer reaches the shelf and finds that the desired
product is, or is not, available. This is a critical moment, because if the product is not immediately
available, the consumer usually moves on to buy a rival product. The second moment of truth
depends on the buyer’s satisfaction when consuming the product.

Detailed consumer surveys in July 2000 told P&G that in 55% of cases (75% for promotional
items), consumers were not satisfied when they looked on the shelf for the products they wanted.
The exact product variant, in the size and packaging the shopper sought, was available less than
half the time.

Something had to be done. Responsibility for having the product on the shelf every time a
shopper wants it used to be seen as purely a matter for the retailer. If retailers got their forecasts
wrong and ordered the wrong volumes, the manufacturer was not aware of the problem, or at least
not concerned about it. But, at the end of the day, both the manufacturer and the retailer were
losing. P&G was ahead of the pack in realizing the significance of this, though other
manufacturers are now also focusing on the end consumer, which is one reason why the industry
is seeing so many new CPFR (collaborative planning, forecasting and replenishment) and VMI
(vendor-managed inventory) programs.

Top managers in P&G began to realize that the company’s supply network needed to be re-
engineered so that it was genuinely responsive to consumer demand. This was especially
important for promotional items, because of the cost of merchandising and promotional activities,
and the long-term negative impact of stock-outs on consumers. After customers have been unable
to buy the desired product and have switched to alternatives, it becomes hard to persuade them to
return to buying the initial product when they go shopping again. P&G decided that sophisticated
demand chain management, establishing direct connections between sales and supply chain

40
business processes, could be the key to maintaining its leading position in the consumer packaged
goods industry. As a result, a multi-level initiative was launched, which P&G calls its “consumer-
driven supply network” (CDSN) program.

Problems for P&G and Suppliers:

For the major consumer packaged goods manufacturers, the strategies that are currently being
pursued by the world’s most competitive retail chains are changing the game in two important
ways.

• As consumers come to expect a greater assortment of product options, retailers are

responding with greater product differentiation, driving up service level expectations.
• Cash requirements are creating pressure for shorter order-to-delivery cycles and a move
towards flow-through distribution networks. These trends are already beginning to
eliminate the safety stocks that used to be held in reserve in the retail supply network.
This situation creates several new problems that P&G and other manufacturers need to come to
terms with.

• Reaction times across the supply network have been compressed.

• Current processes cannot move fast enough to deliver what retailers need.
• Supply decisions require timely, detailed information that is not usually
available today.
Optimizing supply chain performance demands a radical new look at the way the partners in the
supply network collaborate, involving retailers, manufacturers and service providers. P&G’s aim
has been to create adaptive, responsive supply networks that will link together sales and supply
processes, inside and outside the organization, to improve product availability. This will allow it
to develop demand chain management capabilities, especially for promotions. Promotional items
are the highest priority, because of the large amounts of money involved in marketing programs.
If manufacturers cannot deliver the product, they lose all the growth that should be generated by
their marketing promotions, however much demand is stoked up.

New thinking, new techniques, and new technology

41
P&G’s vision of a consumer-driven supply network has two essential elements.

o Building collaborative supply chains at several levels (local market and global
markets, for example).
o Ensuring that manufacturing sites serving both local and global supply networks
are highly responsive to changes in demand, based on real-time data from the stores.

Main requirements for successful network collaboration:

P&G has identified the main requirements for successful network collaboration under four
headings:

• The potential to move large volumes of data fast: Data should be handled
automatically, without needing to be transformed or translated on arrival.
• An adaptive, dynamic approach that uses new business applications to monitor,
alert, evaluate and, where appropriate, trigger action.
• The ability to establish connections quickly on demand, if necessary within hours.
• Enhanced back-up and recovery strategies for all the systems involved: The technical
challenges cannot be ignored, because batch processing windows soon narrow right down.
This is especially critical if these harmonized business applications are going to be
deployed on a global scale.
P&G is working with its IT suppliers to develop additional functionality and to resolve the
scalability problems inherent in most new applications. But it has also learned the value of
assembling and making a firm commitment to a small group of technology partners for such an
ambitious global project.

42
Basic distribution channel of P&G:

Operations & suppliers:

P&G’s Sustainability work goes beyond the core of our manufacturing operations, extending to
a holistic end-to-end view of opportunities. We deliver strong results across the supply chain,
ranging from manufacturing to finished product logistics, and we engage our suppliers
throughout the process.

a) Manufacturing:
Between the procurement of raw materials and the creation of a product, we strive to reduce
waste, water, energy, and CO2 through systemic conservation efforts. We apply smart eco-
design through innovative construction process improvements. And, we re-use where feasible,
giving new life to what was once waste.

b) Finished Product Logistics:

In the logistics stage, we reduce waste in customization by applying more sustainable designs.
We optimize transportation efficiency through a comprehensive multi-mode approach, and
43
 now go further by leveraging common “intermodal” containers across different modes of
transportation.

c) Supplier Engagement:
We collaborate closely with suppliers across the entire supply chain. Our new Supplier
Sustainability Board includes members from over 20 leading global suppliers and is charged
with guiding the development of supplier-related Sustainability activities and goals.

Transportation:

For decades, P&G has transported product in a “multi-modal” fashion, that is, using multiple
forms of transport. But today, we’re shifting toward “intermodal” transportation, which uses
shipping containers that transfer smoothly from one mode to another.

An intermodal approach optimizes the transportation process. And by shifting away from trucks
and planes to boats and trains, it saves fuel and reduces CO2 emissions.

Examples:

Western Europe: More Trains, More Gains

An intermodal program in Western Europe increases the use of trains in its distribution
network. Before the effort, more than 90% of Western Europe’s finished product traveled on
trucks, covering over 2 million kilometers of roads.
The intermodal program aims to increase rail transportation from 10% to 30% by 2015,
reducing CO2 emissions without any trade-offs in customer service or cost. Pilot programs in
Belgium and France have been operating since July 2008, and each has removed up to 5,000
trucks per year from the roads. The pilots have reduced CO 2 emissions by more than 4,000
metric tons per year—an amount equal to the CO2 produced by lighting more than 15,000
homes annually.

North America: Trucks and Trains Save Diesel

A transport program in North America, P&G’s first to incorporate an intermodal component
combining trucks and trains, has reduced transportation costs and improved Sustainability

44
across the region. Use of intermodal transport has increased by 30% saving 11 million liters
of diesel fuel. Overall miles in North America have reduced by 12% since the 2007/2008
fiscal year, while the same volume of product has been delivered.

45
 SWOT ANALYSIS OF P&G
Strength
 Leading Market Position
 Diversified and innovative
product Portfolio
 Strong Finances in past years
Opportunity
 Developing Markets
 Demographic trends across the
world
Weakness
 Quality control Problem
 Decreased Revenues in their
Northeast Asian Market
Threats
 Competitors
 Rising cost of energy prices
 Economic slowdown in the US and
Eurozone
 New Regulations
46
CHAPTER 2 CRITICAL REVIEW OF LITERATURE
ShareGyan.com NewsDesk, January 9, 2009

HUL ready to streamline distribution network

Hindustan Unilever Ltd (HUL), the country’s largest household and personal care products maker
by sales is increasing its so-called go to market (GTM) initiative, introduced in Mumbai last year,
in an attempt to refurbish its national distribution network and streamline its supply chain. HUL’s
GTM initiative in Mumbai was aimed at rationalizing its distribution network, make it more
proficient, deliver stocks to retailers faster and reduce inventory on their product shelves. It
farmed out the task of stock deliveries to logistics provider Mahindra Logistics as part of the
Mumbai project.

Sai Prasanna Ragu, Muthu Kumar R, IBS Case Development Centre, 2008

P&G’s Logistics Revolution: Co-creating Value

Proliferation of products, brands, companies and even distribution channels and media, have
necessitated consumer goods industry giants to shift their attention from brand marketing and
positioning towards a cross-functional focus. While manufacturers vied for significant shelf
space, retailers competed for winning customer attention and loyalty. However, their inability in
rightly assessing consumer demand created market imbalance in the form of either excessive
stocks or stock outs. The need to produce and deliver goods based on real demand made both
manufacturers and retailers rethink/review their business relationships and co-create value for
each other. This involved integration of their operations across the supply chain and delivery of
the rights goods to the right place at the right time with the right operational costs.

John Kerr, Contributing Editor -- Logistics Management, 2/1/2008

Procter & gamble takes inventory up a notch

Procter & Gamble is very much on top of its supply chain game, it still sees opportunity in
reducing its worldwide inventory levels. That explains why the company is putting so much
emphasis on emerging “multi-echelon” inventory management technology to keep
inventory levels down and customer service high. P&G focuses on inventory optimization,
Option as software partner, framework for selecting MEI tools.

47
Prahlad Krishnamurthi, ITC Ltd., October 4, 2007

Supply Chain Management Solution for Hindustan Unilever.

The Adexa implementation has improved HLL’s proactive planning capability and manufacturing
and distribution efficiency, which have helped ensure a more responsive supply chain. The
solution has also helped the company gain visibility across its supply chain, reduce distribution
lead-time, and minimize the total supply-chain cost.

Stock availability, measured in terms of Stock Service Index, has significantly increased, moving
from 65% to 90%. The company has also realized a more equitable distribution of stocks with
overall mal-distribution reducing from 19% to 6% of total volume transported. Manual
intervention has come down from 40% to sub-zero levels. Direct dispatches from the factories to
the wholesaler network have increased. Finally, in terms of volume, indirect dispatches from
finished goods warehouses have come down from a range between 70-80% to between 30-40%

Harrison, Keith, Supply Chain Management Review, October 1, 2006

P&G's global supply chain starts with the consumer

This study says that Procter & Gamble is dedicated to accelerating growth in developing markets
but this strategy presents new challenges for the supply chain. Since the beginning of this decade,
The Procter & Gamble Company (P&G) has followed three primary growth strategies: 1) focus
on P&G's biggest brands, countries, and retail customers; 2) develop faster-growing, higher-
margin businesses such as beauty, health, and home; and 3) serve more of the world's consumers
by accelerating growth in developing markets. Each of these strategies has contributed to P&G's
ability to deliver top-line growth at or above the company's targets for the past five consecutive
years.

V. Rishi Kumar, Hyderabad , Dec. 2, 2006, The Hindu Business Line

Logistics, supply chain in rural areas could be next big opportunity'

This study says that As the Indian retail, manufacturing and infrastructure sectors are poised for
rapid growth, they are faced with new challenges when it comes to logistics and supply chain
issues — particularly in the untapped rural areas for farm produce and delivery of goods and
services.

With over 70 per cent of the economy centred around the rural parts of the country, logistics
players are now seeking ways to address this issue as about $100 billion worth potential is latent
48
in the rural parts of the country, according to Professor Viswanadham, Executive Director of the
Centre for Global Logistics and Manufacturing Strategies (GLAMS), at the Indian School of
Business.

Tom Steinert-Threlkeld, 2004-07

Procter & Gamble: Delivering Goods

This study says Procter & Gamble has streamlined its supply chain to put more of its products on
store shelves when customers are ready to buy. Jake Barr is in charge of "supply chain
innovation" at The Procter & Gamble Co. He is supposed to figure out how to get the consumer
products giant's detergents, soaps and personal care products into the hands of 5 billion customers
in 170 countries more efficiently.

49
CHAPTER 3 RESEARCH METHODOLOGY
Research methodology deals with the various methods of research. The purpose of the research
methodology is to describe the research procedure used in the research. Research methodology
overall includes the research design, data collection method etc. Research Methodology helps in
carrying out the project report by analyzing the various research findings collected through the
data collection methods.

Research design

Research design is an important and the vital part of the research. Research design provides an
excellent framework for the research plan of action. The function of the Research design is to
ensure that the required data is in accordance; research design is a blue print for the research
study, which guides research in collecting and analysis the data.

For this research project exploratory method is used which often relies on secondary
research such as reviewing available literature and/or data, or qualitative approaches such as
informal discussions with consumers, employees, management or competitors, and more formal
approaches through in-depth interviews, focus groups, projective methods, case studies or pilot
studies. The Internet allows for research methods that are more interactive in nature

Data collection method:

The data collected for the research is Secondary data i.e. from internet, books, magazine etc. The
questionnaire is been filled manually and sent to the different consumers and retailers , and
responses are awaited.

Research instrument

The instrument use for data collection is structured questionnaire. Question is open and close
ended depending upon the information that needed to be elicited. I am also using the scaling
technique to assess the attitude of the customer.
50
Sampling plan

Keeping all the constraints in mind, I took a sample size of approx. 30 consumers and 15
retailers .The sampling procedure is systematic sampling. Systematic sampling relies on arranging
the target population according to some ordering scheme and then selecting elements at regular
intervals through that ordered list. Systematic sampling involves a random start and then proceeds
with the selection of every kth element from then onwards. In this case, k is (population
size/sample size).

Scope

The Indian FMCG market currently appears to be at a crossroads, and HUL are attempting to
change customer perceptions of their brands and where specific buying motivations appear to be
replacing generalities.

This meanwhile is quite unlike the west where buyers consider aesthetics, comfort and safety, not
necessarily in that order, before finalizing a purchase. “It’s smarter to think about emotions and
attitudes, if marketers are to do a better job of marrying what a HUL offers to the consumer’s
image of the offerings. Another important outcome of the research is the believability of the
claims. Most of the claims are realistic and easy to understand. Most of the people don’t
understand the quality claims by HUL.

The mindset of the Indian consumer is such that he is delighted if he buys a pen a little cheaper
than his neighbour. Things are, however, slowly changing and customers at the upper end of the
market are now ready to pay more for more. I hope that this approach will soon enter the new era,
maybe not with the same intensity.

Success will largely be determined to the extent a company can differentiate itself in terms of
intangibles that go with a Product”. Thus, success could well hinge on the best of bundle of
services that HUL provides. HUL grew from zero to the 2,268 Million $, mark and the number
One FMCG company in India this year. Looking at the present scenario it can be said that though
there is lot of competition in the market but HUL is picking up well. The landmark achievement
comes in 74 years in India after clinching its first overseas sale.
51
Limitations

Everything in this world has its own advantages and disadvantages which shows ‘nothing is
perfect’. Some of the limitations are as follows:

1. Low participation: Obviously many respondents have not participated in this and have also
created some problems which simply shows that they were not interested.
2. Biasness: Sometimes interested customers were also biased so the collected figures involve
both positive and negative figures.
3. It does not cover all the aspects of the company.
4. Subjective: This project only tells you what it is all about.

52
CHAPTER 4 FINDINGS, DATA ANALYSIS AND
CONCLUSIONS

On the basis of research, we found that there is a nominal difference in the efficiency of
Hindustan Unilever limited Vis-à-vis Procter and Gamble Ltd. I have reached to this conclusion
on the basis of following findings. They are as follows.

PRODUCT LINE

As From the study, I concluded that Hindustan Unilever limited has more brands in its basket
then Procter and gamble so it is more close to common man and touching his or her daily life in a
more comprehensive manner.

PRODUCT SATISFACTION

Most of the people (90%) are using the product of HUL and are very satisfied while only 10%
consumers are not satisfied.

Areyou usingHUL'sproduct and also

satisfied

No
Are you using HUL's product
and also satisfied
Yes

0% 50% 100%

Hul Brand Awareness

53
HUL spends largest spender of money on advertisement in the India. Last year, HUL spent Rs.
650 crore on advertisements.

Procter & Gamble

It does not have strong distribution channel in India. In India, 76% population is residing in rural
areas and their distribution channel is very week in rural India and consumers are not aware about
the products of P&G.

DEALERS

Both the companies use this type of selection criteria to select the dealers in any particular area.

54
Conclusion: Dealers of HUL are satisfied by the companies support in there sales because the
company provides them with various schemes and discounts, whereas satisfaction of P&G dealers
lies in good promotional activities, advertisement and the flexibility that the company provides
them. According to the senior officials of P&G it was found that it’s a volume based company,
hence all the above stated parameters helps the dealer to attract more and more customers.

MODE OF TRANSPORTATION

Hindustan Unilever limited: HUL uses modified trucks and rails to deliver the products from
various production sites to the dealers. They are using new state of the art technology so that they
can even track every single bottle of shampoo. Transportation cost is shared by HUL and the
dealer.

Procter and Gamble: P&G is also using road and railway transportation system to deliver
product from various production sites to the dealers. They are also using latest Information
Technology to track there consignment whose backend is managed by infosys. Each dealer has to
keep the Good Receipt Note (GRN) number and report of the whole items of delivered products.
Transportation cost is paid by P&G.

55
Conclusion: Both P&G and HUL uses advanced tracking technology to track the goods and both
companies use railways and roadways for transporting their products. In HUL transportation cost
is shared by HUL and the dealer, where as at P&G, transportation cost is paid by P&G.

FLEXIBILITY

Hindustan Unilever limited: As far as flexibility is concerned; our group found that HUL
provides more flexibility in terms of delivery of produce. HUL has there own warehouses in
every state and if the dealer orders more, he is supplied with the products in time.

Procter and Gamble: As far as flexibility is concerned; our group found that P&G does not
provides more flexibility in terms of delivery of produce and in taking order from dealers.

56
Conclusion: our group has found that Dealers of HUL are more satisfied than the dealers of P&G
and therefore HUL is a step ahead in terms of flexibility of placing orders and accepting orders
from the dealers.

DISTRIBUTION CHANNEL STRUCTURE

Hindustan Unilever limited: Hindustan Unilever limited channel structures consist of whole
seller, mass retailers, rural and modern trade. Their new approach to distribution is holistic and
seeks a three way convergence of product availability brand communication and brand
experience. They are reinventing distribution—creating new channels and redefining the way
current channels are serviced. They are building new capabilities in training the large number of
people involved in these initiatives.

Procter and gamble: Procter and gamble’s channel structure also have whole sellers, mass
retailers. They are revamping the company’s distribution system using efficient consumer
response {E C R} principles. The new distribution system has given the company considerable

57
cost and process efficiencies while significantly availability and visibility of the company’s
product in the stores.

Conclusion: HUL has more effective and efficient distribution network as compared to P & G,
which increases the availability and presence of HUL product. HUL is also given emphasis on
penetrating the rural market as well.

DEALING WITH UNSOLD AND DAMAGED MERCHANDISE

Hindustan Unilever Limited: It depends on the condition and type of the product. If company
feels that it is not the fault of the dealer then company would return it, unsold products are mostly
taken back by HUL.

Procter & Gamble: P & G replaces the damaged product with the new one, it means that the
damaged product are replaced by new product.

58
Conclusion: I found that both the companies take back the unsold product however P & G is
more flexible in returning the damaged product as compared to the HUL. Hence P & G is more
flexible here.

PERFORMANCE APPRAISAL SYSTEM

Hindustan Unilever Limited: The performance appraisal system in Hindustan Unilever Limited
is done under the supervisory of the Appraisal supervisor. The supervisor keeps track of the
performance of the employees and based on their performance he choose the right method of
performance appraisal. the main method of performance appraisal that have been adopted by
Hindustan Unilever limited are 360 degree appraisal and supervisory appraisal methods. it is done
as an early exercise and performance appraisal parameter is the past performance of the
employees.

Procter And Gamble: the performance appraisal system in Procter and gamble is also done
under the supervisory officer and almost same method are used as in the HindustanUnilever
limited.

Conclusion: There is hardly any differences is the performance appraisal methods in both the
companies .both the companies are taking almost the same measures and same parameters for
performance appraisal , however both the company were not willing to disclosed any changes

59
brought in performance appraisal system during the past five years .both of the companies said
that there have been change in some areas and which has shown positive results, but not willing
to give any reasons and what changes have been brought.

TARGETS:

Hindustan Unilever Limited: HUL has different channel members with specified targets and
they are intended to increase sales, HUL has also made changes in channel members during 2003-
2008 to increase sales of the company. Every channel member has to fulfill there given targets,
channel members expect the company of ROI. Every channel member gets credit period of two
weeks. There was also change in performance appraisal system during 2003-2008 to improve
sales. HUL has also made changes in commercial terms intended to increase the sales in different
channels and also to increase profit margins to company.

Procter & Gamble: P&G also has different channel members with specified targets and they are
intended to increase sales .P&G also made changes in channel members during 2003-2008 to
increase sales of the company. The channel members expect ROI depending on there knowledge
and on there performance to. Channel members get credit period of 30 days. Payment terms of
P&G are also flexible to the channel members and P&G also has flexible payment terms P&G

60
also offers many discounts to these channel members. P&G has made many changes to there
commercial terms during 2003-2008 to increase sales.

P&G'sSalesTargets

30% Flexibilitymore
35%
Credit limit more
Dealer'sMargin more

35%

Conclusion: Both HUL and P&G are flexible to channel members, but HUL runs some
monopoly over the market by offering a credit period of only two weeks where as P&G offers
credit period of 30 days. HUL also sets targets to there channel members and provides very less
margins to dealers compared to P&G.

SALES FUNCTIONING:

Hindustan Unilever Limited: HUL is emphasizing on rural areas through project Shakti these
days and sales also have been increased and HUL does not have any sales outlets HUL assigns
sales territory to there sales persons according to there skill and experience and assigns targets to
them. Performance appraisal of sales force is done by appraisal supervisor and it is done through
360 degree appraisal method, parameter used is performance of the sales personnel. HUL adopts
on the job and off the job training system to there sales force it is emphasized on improving skill
and experience of the sales personnel. Sales personnel are motivated through incentives and
promotions.

Procter and Gamble: P&G has increased the number of outlets in the country and the population
in the area also increased and there is no effect on sales. P&G sets targets to there sales force on

61
the basis of increase or decrease in demand and also according to the previous sales , sales
territories are assigned according to the capabilities of the sales personnel, responsibility of the
sales personnel is to clarify the doubts of the customer and make sales of the product.
Performance appraisal of sales force is done by the manager by doing meeting with them
parameters of appraisal is increase or decrease in sales it is done on monthly basis. P&G trains
their sales force by on the job training and training process is emphasized on skill and experience,
P&G has also brought many changes in the training system that has affected its sales too. P&G
motivates their sales force by providing them with targets and incentives.

Conclusion: Both P&G and HUL trains their sales force and has a good performance appraisal
system, P&G does appraisal on a monthly basis depending on increase and decrease of sales
where as HUL does it once in a year.

62
CHAPTER 5 RECOMMENDATIONS

Both the companies having good market share in India and it keep on increasing. Both the co. i.e.
HUL and P&G should open exclusive shop. HUL is already having exclusive shop in Mumbai
called SANGAM STORE. But it is only in India so it should be increased. The employee should
be given uniforms in which the name of the company should be printed, by doing this the sales
people get motivated. These shops should be opened for 24 hours. They should offer 24 hours
free home delivery system. The delivery vehicle should be attractive the name of the company
should be printed in that so that it becomes the sources of advertisement.

The companies should emphasis on its advertisement; there should be BRAND FIT in that. For
example when lux launch its advertisement in which Sharukh Khan was with girl;. It was heavily
criticized because it was not fit with the brand. It adversely affects the opinion of the customer
and it results in decrease in sales.

Both companies should emphasis their business in areas. They should penetrate their business in
the rural areas. 73% of the Indian population lives in rural areas. There is huge market there and
very less market has been penetrated. Both these companies should concentrate on rural areas.
P&G has been hardly been seen in the rural areas. So they should increase their presence.

They should increase their CSR activities in northern India. At present they are currently doing
their CSR in southern India. So they should increase their activities in north India also.

Recommendations to Improve the Distribution Network of HUL:

• Servicing Channel partners and customers with continuous daily replenishment.

• Leveraging scale and building expertise to service Modern Trade and Rural Markets.
• Delivering of sales force to improve response times and service levels.
• Undertaking several initiatives for traditional channels in order to improve its capabilities
at the front end by developing skills for stockists' sales force.

63
• Launching of several promotional schemes for existing wholesalers and distributors. For
instance, it has started the ‘Vijeta- Rishta Jeet Ka’ scheme last year to provide a platform
for the wholesaler and HUL to grow the business by earning points and redeeming them.

64
CHAPTER6 ANNEXURE
COMPARATIVE STUDY OF DISTRIBUTION CHANNEL OF ‘HUL’ AND

‘PROCTER & GAMBLE’ IN RURAL MARKET

Customer Survey Questionnaire

Disclaimer: The data collected by the following questionnaire is purely for academic purpose; and not
for any further commercial or personal use.

Name Age 15 - 20 years ___

21- 25 years ___
26 - 30 years ___
31 - 35 years ___
36 - 40 years ___
41- 50 years ___

Place Proffesion Salary

Contact

Q1. How many members are there in your family?

Q2. Have you ever heard of HUL (Hindustan Unilever Limited)?

YES ___ NO ___
Have you ever heard of P&G ( Proctor & Gamble)?
YES ___ NO ___
If Yes, from where?
Newspaper Magazines
Television Others _______

Q3. Are you using any of following products?

____ ____

____ ____

65
 ____ ____

____ ____

____ ____

____ ____

____ ____

____ ____

Q4. If yes, then are you satisfied?

YES NO CAN’T SAY

Q5. If No, then reason being

Poor quality High prices

No services Others

66
 Q6. Which brand do you use in the following categories

Personal Wash

BRAND PACKAGING

15gms 25 gms 50gms 85gms 100gms

LUX

DOVE

BREEZE

LIRL

BREEZE

LIFEBOUY

Laundry

BRAND PACKAGING

50gms 150gms 250gms 500gms 1 Kgs 5Kgs

SURF EXCEL

WHEEL

TIDE

NIRMA

ARIEL

DAWN

Skin Care

67
 BRAND PACKAGING

50gms 75gms 125gms 250gms

Fair n Lovely
cream

Pond’s cream

Olay cream

Lakme moisturizer

Oral Care

BRAND PACKAGING

50gms 75gms 125gms 250gms

Pepsodent

Close Up

Crest

Deodorants

BRAND

AXE

REXONA

LAKME

Color Cosmetics

BRAND

LAKME

OTHERS

Q7. What Recommendations or suggestions would you like to give for

Improvement of our products?

68
69
 COMPARATIVE STUDY OF DISTRIBUTION CHANNEL OF ‘HUL’ AND

‘PROCTER & GAMBLE’ IN RURAL MARKET

Retailer Survey Questionnaire

Disclaimer: The data collected by the following questionnaire is purely for academic purpose; and not
for any further commercial or personal use.

NAME: ___________________ NAME OF THE SHOP____________________

VILLAGE_____________ TEHSIL_________________ DISTRICT_____________

CONTACT DETAILS ___________________

1. Do you keep products of HUL and P&G in your shop? ( please tick mark on the
appropriate answer)

a).Yes ……. b). No ……….

(If the answer is yes then go to question number: 3 )

2. Why don’t you keep the products of HUL and P&G in your shop or why did you stop
keeping its products?
Yes No

a). erratic supply

b). lack of demand

c). low margin

d). no supplier

e). don’t know about the company

3. From whom do you purchase your product?

1). Distributor 
2). Dealer 
3). Agency 
4). Wholesaler 

70
 4. How do you rate the delivery process by the dealer?

1. Excellent 
2. Above Average 
3. Average 
4. Below Average 
5. Extremely Poor 

5. How many dealers are there in the district?

a).One 
b) Two. 
c) Three. 
d) More than three. 

6. Which vehicle do they mainly use for delivery?

1). Two wheeler 
a). scooters__ , b) motorbike__.
2) Three wheeler 
3) Four wheeler 
a) Van__, b) truck__, c) others__.

7. What are the other schemes and incentives offered by them?

___________________________________________________

___________________________________________________.

8. Which of the following products do you keep?

Personal Wash
BRANDS PACKAGING PRICE SALES ( per week)
Lux 50gms Rs. 15/-
85gms Rs. 25/-
100gms Rs.35/-
Hamaam 50gms Rs. 7/-
85gms Rs. 15/-
100gms Rs.20/-
Dove 50gms Rs. 30/-
85gms Rs. 45/-
100gms Rs.60/-
Lirl 50gms Rs. 15/-
85gms Rs. 25/-
100gms Rs.35/-
Breeze 50gms Rs. 10/-
85gms Rs. 20/-
100gms Rs.30/-

Laundry

71
BRANDS PACKAGING PRICE SALES ( per week)
Surf excel 250gms Rs. 45/-
500gms Rs. 75/-
1 kgs Rs.150/-
Wheel 250gms Rs. 10/-
500gms Rs. 25/-
1 kgs Rs. 50/-
Tide 250gms Rs. 15/-
500gms Rs. 25/-
1 kgs Rs.50/-
Dawn 250gms Rs. 35/-
500gms Rs. 75/-
1 kgs Rs.150/-
Rin powder 250gms Rs. 10/-
500gms Rs. 22/-
1 kgs Rs.40/-

Skin Care

BRANDS PACKAGING PRICE SALES ( per week)

Fair n lovely cream 125 ml Rs. 45/-
250 ml Rs. 75/-
500 ml Rs.150/-
Pond’s white cream 125 ml Rs. 120/-
250 ml Rs. 245/-
500 ml Rs. 450/-
Lakme fruit 125 ml Rs. 150/-
moisturizer 250 ml Rs. 250/-
500 ml Rs.500/-

Oral Care

BRANDS PACKAGING PRICE SALES ( per week)

Pepsodent 50gms Rs. 35/-
75gms Rs. 45/-
100gms Rs.70/-
Close up 50gms Rs. 30/-
75gms Rs. 40/-
100gms Rs.70/-
Crest toothpaste 50gms Rs. 50/-
75gms Rs. 75/-
100gms Rs. 90/-

Deodorants

Axe ________ Lakme ________

72
 Rexona ________

Colour Cosmetics

Lakme ________ Others ________

10. What improvements would you like to have in the distribution process?

___________________________________________________

___________________________________________________.

73
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 Norman Gaither, Greg Frazier, Operations Management, Indian Edition, 9th Edition,
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International Journal of Logistics Management, 7(1), pp 73-82.

74
CHAPTER 7.1 REFERENCES
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