TOPIC: A study on the effects of upscaled advertising & promotional efforts

in HUL

Winter Project Report

Submitted in partial fulfillment of the requirement for the award of the
degree of
MASTER OF BUSINESS ADMINISTRATION

By:
SHITAL VERMA

(MBA 4560/08)
Department of Management

Birla Institute Of Technology

Noida Campus

BIRLA INSTITUTE OF TECHNOLOGY

(Deemed University U/S 3 of UGC Act 1956)

Mesra, Ranchi, Jharkhand

DECLARATION CERTIFICATE

Birla Institute of Technology, Mesra (Noida ext.) Page 1

This is to certify that the work presented in the project entitled “A study on the

effects of upscaled advertising & promotional efforts in HUL” is in partial

fulfilment of the requirement for the award of degree of ‘Master of Business

Administration’ Birla Institute of Technology, Mesra, Ranchi, is an authentic

work carried out under my supervision and guidance.

To the best of my knowledge, the content of this project does not form a basis for
the award of any previous degree to anyone else.

Date: (Mrs. Rachna Prateek)

Department of Management

Birla institute of
Technology

CERTIFICATE OF APPROVAL

Birla Institute of Technology, Mesra (Noida ext.) Page 2

The foregoing thesis entitled “A study on the effects of upscaled advertising & promotional

efforts in HUL”, is hereby approved as a creditable study and has been presented in

satisfactory manner to warrant its acceptance as prerequisite to the degree for which it has been

submitted.

It is understood that by its approval, the undersigned do not necessarily endorse any conclusion
drawn or opinion expressed therein, but approve the project for the purpose for which it is
submitted.

(Ms. Vandana Sharma) (Dr. S.

L Gupta)

Co-ordinator- MBA Academic

Coordinator

Director

BIT- Noida

Birla Institute of Technology, Mesra (Noida ext.) Page 3

 Acknowledgement

It is my privilege to work on the project “A study on the effects of

upscaled advertising & promotional efforts in HUL”.

I express my sincere sentiments of gratitude to Mrs. RACHAN PRATEEK

who guided me throughout this project. I would also like to thank for her
continuous assistance without which this project would not have been a
success.

I am indebted to my mentor Mrs. Rachana Prateek for extending her

untiring guidance to me, by constantly discussing the project matter and
helping me in clarifying my thinking in several pertinent issues and
providing a meaning full insight into the subject.

I am also grateful to Mr. Mudit lawania for reposing confidence in my

abilities and giving me the freedom to work on my project.

I owe my deep sense of gratitude and sincere thanks to all of them

Thank you.
SHITAL VERMA
MBA4560/08

Birla Institute of Technology, Mesra (Noida ext.) Page 4

 TABLE OF CONTESTS

Chapters Page No.

Chapter 1

Executive summary 1

Chapter 2

Introduction to the Topic 2

Chapter 3

Company Profile 3-13

Chapter 4

Literature Review 14-16

Chapter 5

Research Methodology 17

Chapter 6

Data Analysis and Findings 18-43

Chapter 7

Conclusions 44

Chapter 8

Limitation of the study 45

Chapter 9

Recommendations 46

Questionnaire

Bibliography EXECUTIVE
SUMMARY

Fast Moving Consumer Goods popularly known FMCG is as the name

suggests is the most demanded products in the market. It includes

Birla Institute of Technology, Mesra (Noida ext.) Page 5
everything from food items like flour, biscuits, ice creams, etc to body

products soaps, face creams to cigarettes to beverages, etc. consumers

need these things in their everyday life so they invests a good portion of

their income in these things. There are so many companies which are

dealing in FMCG products like HUL, Dabur, Calvin Care, AMUL dealing in

dairy products, etc. By the very nature of the product the companies are

seeing this as a great source of income.

As large numbers of companies are looking this sector as a profitable

venture, so for sustaining their position and gain new market they have to

bring something unique in their products or services to gain position in the

market or to sustain there.

INTRODUCTION

Birla Institute of Technology, Mesra (Noida ext.) Page 6

Advertising is bringing a product (or service) to the attention of potential and current
customers. Thus, an advertising plan for one product might be very different than that for
another product. Advertising is typically done with signs, brochures, commercials, direct
mailings or e-mail messages, personal contact, etc.
Promotion keeps the product in the minds of the customer and helps stimulate demand for the
product. Promotion involves ongoing advertising and publicity (mention in the press). The
ongoing activities of advertising, sales and public relations are often considered aspects of
promotions.
Hindustan Unilever Limited is one of India’s oldest and most efficiently run companies. The
company is managed natively and employs over 40,000 throughout the sub-continent.
Moreover, their brands are the strongest in their respective categories with over 2/3 of the
Indian population using HLL products every day.
HUL has increased spending on advertisements and promotions by 38 per cent as it introduced
new versions of its soaps and spent more on personal-care products to garner a higher share of
the market as competition intensified. The company boosted advertising spending to Rs 571
crore, or about 14 per cent of sales, compared with 10 per cent of sales a year earlier.
While the company has taken price cuts and is promoting some of the brands, winning back
market share from the competition will be difficult and expensive. The strategy to create
brands at the high end, in areas such as skin care, is working well and should continue to pay
off.
“We would expect the FMCG sector to continue to grow but we have yet to ascertain what
impact the poor monsoons will have and the rise in consumer prices,” R. Sridhar, chief
financial officer, said.
Analysts believe that the increase in ad spends could be a reason for the muted margins. HUL
has been spending aggressively, as is clear from the fact that ad spends are up 41 per cent, 8
times the revenues growth. Of course, the spending has paid off in categories such as personal
products, where margins are up a sharp.

Birla Institute of Technology, Mesra (Noida ext.) Page 7

Birla Institute of Technology, Mesra (Noida ext.) Page 8
 COMPANY PROFILE
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 tones and sales of Rs.10, 000 crores.
HUL is also one of the country's largest exporters; the Government of India has recognized it as a
Golden Super Star Trading House.
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 Center (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
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

Birla Institute of Technology, Mesra (Noida ext.) Page 9

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 a rural health programme – 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.

Birla Institute of Technology, Mesra (Noida ext.) Page 10

 VISION

Birla Institute of Technology, Mesra (Noida ext.) Page 11

Birla Institute of Technology, Mesra (Noida ext.) Page 12
 MISSION

Unilever's mission is to add Vitality to life. We meet everyday needs for nutrition, hygiene
personal care with brands that help people feel good, look good and get more out of life.
Our deep roots in local cultures and markets around the world give us our strong relationship
with consumers and are the foundation for our future growth. We will bring our wealth of
knowledge and international expertise to the service of local consumers - a truly multi-local
multinational.
Our long-term success requires a total commitment to exceptional standards of performance
and productivity, to working together effectively, and to a willingness to embrace new ideas
and learn continuously.
To succeed also requires, we believe, the highest standards of corporate behavior towards
everyone we work with, the communities we touch, and the environment on which we have an
impact.
This is our road to sustainable, profitable growth, creating long-term value for our
shareholders, our people, and our business partners

PROMOTERS OF HUL

Birla Institute of Technology, Mesra (Noida ext.) Page 13

 Organizational Structure

Birla Institute of Technology, Mesra (Noida ext.) Page 14

 Chairman

Mr. Harish Manwani

Vice Chairman & CFO

CEO & MD Executive Director

Mr. Nitin Paranjpe Mr. Gopal Vittal

Mr. D. Sundaram

Non Executive Directors

Mr. D. S. Parekh

Mr. Dhaval Buch

Mr. C. K. Prahlad

Mr. A. Narayanan

Mr. S. Ramadorai

Mr. R. S. Mashelkar

PRODUCT LINE OF HUL

 FOODS

TEA- Brooke Bond, Lipton

Birla Institute of Technology, Mesra (Noida ext.) Page 15
 COFFEE- Brooke Bond Bru

FOODS- Kissan, Annapurna, Knorr

ICECREAM- Kwality wall’s

 HOME&PERSONAL CARE

PERSONAL WASH- Lux, Liril, Hamam, Dove, Pears, Breeze,

Rexona, Lifebuoy

LAUNDRY- Surf excel, Rin, Wheel, Sunlight

SKIN CARE- Pond’s, Vaseline, Aviance, Fair&Lovely

ORAL CARE- Pepsodent, Closeup

HAIR CARE- Sunsilk Naturals, Clinic

DEODRANTS- Axe, Rexona

COLOUR COSMETICS- Lakme

 AYURVEDIC PERSONAL&HEALTH CARE

Ayush

Ayush was launched in 2002. With Ayush HLL brings to you a range of Ayurvedic Health Care &
Personal Care Products with a superior sensory experience, scientifically tested and proven

Birla Institute of Technology, Mesra (Noida ext.) Page 16

functionality and international standards of quality and safety, for a uniquely pleasurable and
holistic Ayurvedic experience.
For the first time, the eternal truths of Ayurveda and the rigours of modern science have been
combined. The Ayurvedic purity of Ayush's formulation is endorsed by Arya Vaidya Pharmacy,
Coimbatore.
The Ayush range comprises shampoos, hair oil, skin cream, soap and nutritional supplements.
The Ayush Therapy Centres provide personalised service and advice in positive health and stress relief,
aches and pain relief, skin and hair care and weight loss consultation
CLOSE UP

Close up is the original youth brand of India.

The first brand targeting youth in the oral care market, with an edgy and youthful image, which
stays relevant till date. Ever since its launch in 1975, Close up has broken every rule in the
book on how toothpastes should behave!
Closeup was the first gel toothpaste to be launched in India and has led the gel toothpaste
segment ever since.
In 2004, Closeup was re-launched with a bang. And this time it was packed with the power of
Vitamin Fluoride System – a powerful mix of Vitamins, Fluoride, Mouthwash and Micro
whiteners, the perfect combination of ingredients for fresher breath and stronger, whiter teeth.
Closeup became the first Gel toothpaste with Fluoride in the Indian Market!
The brand umbrella also includes Closeup Lemon Mint, gel toothpaste with the whitening
benefits of lemon.

AXE
Axe, the deodorant that is considered cool, fashionable and stylish by young men was launched
in India in 1999. Available in more than 60 countries around the world, it is a world leader in
male toiletries.

Birla Institute of Technology, Mesra (Noida ext.) Page 17

Axe has a mix that is completely harmonized globally – from its proposition and
communication to the product, as available on the shelf.
Axe is available in five fragrances: Java, Pulse, Dimension, Voodoo and Phoenix. Axe has
become the leading male deodorant brand in India within just one year of its launch.
Consumers associate a lifestyle of cool clubs, cool music and cool fashion with Axe. The youth
view it as an icon, which introduces many 'firsts' to their world of music and dance – like the
first "World's Longest Dance Party" and the first ever 'Axe Voodoo Island Party'

BROOKE BOND
In a nation of tea drinkers, the one brand that signifies tea in India is Brooke Bond – ever since
the launch of Brooke Bond Red Label in 1903. It is India's single largest tea brand. It has
touched millions of consumers with a range of tea offerings appealing to the diversity of their
tastes. It has the strongest foothold amongst any of the tea brands in India and touches the
homes of over 500 million consumers.

To de-commodities the tea category, Brooke Bond is focusing its efforts on building four
powerful sub-brands, namely, Brooke Bond Taj Mahal, Brooke Bond Red Label, Brooke Bond
Taaza & Brooke Bond 3 Roses. The range offers a full variety of propositions as well as price
points to appeal to various sections.

FAIR AND LOVELY

A woman's passion for beauty is universal and catering to this strong need is Fair & Lovely.
Based on a revolutionary breakthrough in skin lightening technology, Fair & Lovely was
launched in 1978.
The Hindustan Lever Research Centre (it is among the largest research establishments in
India's private sector, including pharmaceutical companies, with facilities in Mumbai and

Birla Institute of Technology, Mesra (Noida ext.) Page 18

Bangalore) deployed technology, based on pioneering research in the science of skin lightening
to develop Fair & Lovely. The formulation is patented. Its formulation acts safely and gently
with the natural renewal process of the skin, making complexion fairer over a period of six
weeks.

KISSAN
Acquired by Hindustan Lever Limited in 1994, the Kissan category consists of 'deliciously wholesome
products for kids to grow up.'

The Kissan range consists of ketchup and other sauces, jams, squashes and ready-to-drink products. For
mothers and children, Kissan is today one of the most trusted brands in the country.
Kissan continues to be a pioneer in the categories that it operates in.

SURF EXCEL
A pioneer in the Indian detergent powder market, Surf Excel has constantly upgraded itself over the
years, to answer the constantly changing washing needs of the Indian homemaker. Today Surf Excel
offers outstanding stain removal ability on a wide range of stains. This means that mothers now have
the freedom to let their kids experience life without worrying about stains.
Surf Excel quick wash is powered with a path-breaking technology- it reduces water consumption and
time taken for rinsing by 50%. It is a significant benefit, given the acute water scarcity in most of India.
Surf Excel is available in 3 variants: Surf Excel Blue, Surf Excel Quick Wash and Surf Excel
Automatic. So whatever be the need, Surf Excel hai na

KWALITY WALL’S
Kwality Wall's, launched in 1995, is the company's master brand for ice cream. Kwality Wall's has
combined state-of-the art technical know-how of Unilever - the global leader in ice cream - with a deep
insight of the Indian market, to deliver a range of superior quality products under its international
brands.

Birla Institute of Technology, Mesra (Noida ext.) Page 19

Key launches include Cornetto, Feast, Viennetta, and a range of Sundaes, and also exciting eats for
children specifically, like Li-me Punch or Sunshine Zing Cone. Kwality Wall’s ensures that while each
of its offerings is unique in taste and flavor, they are also accessible to more consumers through
breakthrough cost reengineering and value delivery

CLINIC PLUS
Clinic Plus Health shampoo was launched in India in the year 1987. It is India’s largest selling
shampoo, offering the five most important hair health benefits: strengthens weak hair, prevents
hair breakage, softens rough dry hair, shine for thick and healthy hair, and contains anti-
dandruff ingredient.

Literature review

Title:
Winning Share from a Dominant Competitor in a Slow-growth Consumer Market: A THEORY-
GUIDED EMPIRICAL CASE INVESTIGATION
Author(s):
D.K. (Skip) Smith, William Weber
Journal: Journal of Product & Brand Management
Year: 1993; Volume: 2; Issue: 4; Page: 20 - 32

Abstract:
Winning market share in a major market from a deeply-entrenched dominant competitor is a tough
challenge. Uses Nielsen data on channel-specific market shares for Brand A and its leading competitor

Birla Institute of Technology, Mesra (Noida ext.) Page 20

in a major US market to suggest one strategy a marketing manager might use to accomplish that
objective. The dependent variable is relatively market share. The independent variables, based on the
reference price and advertising share of voice literatures, relate current levels of price and promotional
activity for Brand A and the dominant competitor to historical levels of price and promotional activity
for the two competitors. A multiple regression analysis of the data indicates that the independent
variables are significantly related to the relative market share dependent variable. Provides examples of
the effect as well as heuristics flowing from the analysis.

Title:
Explaining variations in the advertising and promotional costs/sales ratio: a reanalysis
Author(s):
Balasubramanian S K, Kumar V
Journal: Journal of Marketing (USA); Year: Jan 97 (61/1); Volume: 61; Issue: 1

Abstract:
Defends a model developed by the authors in 1990, which showed that market growth, market
share and the interaction between the two were accurate predictors of the ratio of advertising
and promotional costs to sales, against criticisms by Ailawadi, Farris and Parry (AFP), who
attempted to replicate the model in 1994 using three data sources ™ COMPUTSTAT, PIMS
(profit impact of market strategy) and brand-level data ™ and concluded that these were not
good predictors. Analyses the AFP model and uncovers several weaknesses in their study, such
as erroneous model estimates, unacceptable data pooling criteria, data preparation errors,
incorrect operational definitions of market growth and market share and inappropriate brand-
level analyses. Claims that these flaws invalidate the conclusions drawn by AFP and confirm
the findings of the original 1990 model.

ARTICLES FROM WEBSITES:

Hindustan Lever Ltd's (HLL) expenses have grown faster than sales this quarter. Higher
increase in expenses was due to the jump in advertising and promotion expenses and increasing
raw material/packaging cost. Advertising and promotion form a very important aspect of the
FMCG industry.
According to industry analysts, the company has not benefited in terms of its sales growth
when compared to the increase in advertising costs.HLL is facing stiff competition from
regional players who are eating into its marketshare in small towns.

Birla Institute of Technology, Mesra (Noida ext.) Page 21

HUL lost market shares in soaps, detergents, toothpaste and skincare with marginal gains in
shampoos and coffee. Tea and ketchups were the only categories that did well. This indicates
that the process of revival is slow. “Adding to the disappointment could be the continued
weakness in topline. “We expect volume growth to improve in the September quarter but it
may still remain weak at mid single-digit levels,’’ the DSP Merrill Lynch report said.
In an attempt to regain lost market share, FMCG major Hindustan Unilever (HUL) is said to
have gone in for an advertising blitz in the September quarter. This, according to industry
analysts, is expected to hurt its profitability.

The company is projected to have upped its A&P spend to around Rs 570 crore during the just
ended quarter, while the same was Rs 404 crore during the September quarter of 2008.
Analysts expect this spurt in ad spend to translate into a 250-basis-point hit on margins.

The company is now taking corrective action. In one of its sharpest ad campaigns ever, HUL
has started aggressively advertising its products across all media, launched a micromarketing
strategy to take on regional competitors and is now drawing up a district-wise pricing and
distribution strategy. It has upped advertising spends by 15-20%.

In an exclusive interview with ET, Nitin Paranjpe, CEO of HUL, declined to comment on any
Unilever directives and moves. “Within HUL, there is a clear communication that says we will
not tolerate any uncompetitiveness in any part of the market and any part of our portfolio. If
anyone notices uncompetitiveness for whatever reasons, it is incumbent on them to escalate it
and find a way to speedily resolve it,” he had said. In certain categories, the differences across
regions are significant in terms of the nature of competition. “We will have different brands
playing different roles in different parts of the country,” Mr Paranjpe said.

The country’s largest advertiser has never been so ruthless about advertising as it is now. The
message is clear — minimising costs and maximising returns. It has taken several initiatives
such as value-based compensation for advertising and media agencies, block buying of time on
TV networks, slashing agency commissions and a global review of its media buying agencies.

Last month, HUL bought advertising space for an entire day across Star India channels — Star
Plus, Star One, Star Gold, Star Utsav, Star Movies, Star World, Channel [V], Star Jolsha, Star
Pravah and Star Vijay. This was followed on September 24 by a similar buying on Zee
Network across its 25 channels.

Birla Institute of Technology, Mesra (Noida ext.) Page 22

 “HUL’s volumes have been under pressure over the past 3-4 quarters. So, in the mass segment,
the company can only grow by improving per unit consumption. The way smaller players are
attacking HUL’s share — whether it’s Godrej in soaps or Tata Tea in tea — HUL has no choice,
but to go all out on these parameters,” said Aashish Upganlawar, FMCG analyst at broking
firm Sharekhan. The October-December 2009 and Jan-March 2010 quarters will be tough if
delayed rains impact offtake, he said.
The company is closely tracking prices in the market place. “We have, for every brand, a
defined strategic price and a different relative price in the market. Now, we have systems to
check the pricing of a brand with respect to market, and with respect to key competitors,” Mr
Paranjpe said.

Drastic measures by HUL are in the works, said an executive who asked not to be named.
According to rough estimates, HUL’s ad spends are close to Rs 1,300 crore annually. Analysts
say HUL’s strategies are ‘reactionary’. “As one of the largest FMCG companies, HUL should
set the agenda to drive growth, it should have a five-year growth plan in place,” said Mr Vora.

RESEARCH PROBLEM AND ITS RELEVANCE

RESEARCH PROBLEM

OBJECTIVES:

 To assess how effective is the HUL’s new promotional strategy.

 To compare the advertisement cost as compared to the revenue earned by HUL.

RESEARCH METHODOLOGY

Research type- Exploratory research

Birla Institute of Technology, Mesra (Noida ext.) Page 23

 Sampling Technique
For my survey I used Cluster Sampling technique. I selected a sample of 50 shopkeepers
around the area and interviewed them according to the questionnaire. In the survey I tried to
find out their opinion relating to the HUL product and effect of its advertisements, and what are
the factors which influences their customers while purchasing the product.
SCOPE OF THE RESEARCH

The scope of the research has been limited to JAMSHEDPUR city in Jharkhand

Keeping in mind the objective stated, questionnaire was designed for the shopkeepers.

Subsequently a research was conducted.

DATA COLLECTION:

For this research study, primary data as well as secondary data was collected.

Primary data- questionnaire

Secondary data: newspapers, internet

Data analysis:

For the analysis of data collected through survey work, a series of steps were followed
 Each question of the questionnaire was assigned codes (coding)
 Each questionnaire was punched into ms-excel sheet thus forming a data base
 Further the data was analyzed by using diagrams, graphs, charts etc.
 The graphic rating scale and percentage method was used to measure the response of the
shopkeeper.

DATA ANALYSIS
COMPETITORS ANALYSIS

Birla Institute of Technology, Mesra (Noida ext.) Page 24

 Graph 1

Table 1

Birla Institute of Technology, Mesra (Noida ext.) Page 25

 TAXATION ASPECTS

Table 2

Graph 2

Birla Institute of Technology, Mesra (Noida ext.) Page 26

COMPETITION

Sales turnover Net profit Total assets

HUL 20,601.56 2,496.45 2,483.46
Dabur India 2,417.91 373.56 877.17
Colgate 1,770.82 290.22 220.98
Godrej Consumer 1,088.01 161.55 599.8
P and G 772.81 178.85 440.02
Marico 1,921.85 142.12 676.21
Godrej Ind 880.97 19.33 1,628.10
Gillette India 661.51 113.13 490.89
Emami 722.35 87.52 736.1
Jyothy Labs 350.85 40.88 352.51

Birla Institute of Technology, Mesra (Noida ext.) Page 27

Birla Institute of Technology, Mesra (Noida ext.) Page 28
 MARKET LEADER IN FMCG SECTOR

(Out of 50 respondents )

HUL ITC DABUR NESTLE

30 8 7 5

ANALYSIS:
Out of 50 respondents 30 were of the opinion that HUL is the market leader in FMCG sector
then is the ITC followed by DABUR and NESTLE.
According to the respondents (all 50) HUL is the unbeatable market leader in the FMCG
sector

Birla Institute of Technology, Mesra (Noida ext.) Page 29

 Awareness about the Brand HUL

BRAND AWARENESS
yes no
15 35

ANALYSIS:

Out of the 50 respondent 70% of them believe that the consumer does not have
any awareness about the brand name while purchasing

Birla Institute of Technology, Mesra (Noida ext.) Page 30

MARKET SHARE
(Calculated in percentage)

MARKET SHARE
HUL ITC DABUR NESTLE

60 16 14 10

ANALYSIS:
From the above pie chart its clear that HUL enjoys the maximum share in the market whereas
ITC is the second followed by DABUR and NESTLE.

FACTORS INFLUENCING CONSUMER’S PURCHASE

Birla Institute of Technology, Mesra (Noida ext.) Page 31

(In percentage)

PRICE QUALITY PACKAGING ADVERTISEMENT INFLUENCE BY OTHERS

100 99.9 40 80 5

ANALYSIS:
From the above representation, it is clear that PRICE & QUALITY is the main factor which
influences the consumer’s purchasing decision along with packaging, advertisement etc.

Top five largest selling product of HUL

1. Surf excel

Birla Institute of Technology, Mesra (Noida ext.) Page 32

 2. Lux
3. Fair & lovely
4. Life bouy
5. Rin

Birla Institute of Technology, Mesra (Noida ext.) Page 33

 Overall scenario of FMCG sector
The Crisis of Declining Markets
Through the nineties, the FMCG markets grew at almost 15% per annum in value. Suddenly, in
2000, FMCG market growth stalled and then declined for the next four years. It is important to
understand why this happened. The rapid opening up of the economy resulted in many new
avenues of expenditure for the consumer’s growing income. A sharp drop in interest rates from
18% to 8% led to explosive demand for consumer durables like white goods, two-wheelers and
automobiles. After all, one could drive out of a car showroom in a Maruti 800 with a down
payment of only Rs. 2000. The home ownership market grew exponentially as the average age
of a home loan borrower dropped from 50 in 1999 to 30 in 2004.
Mobile phone ownership and usage exploded due to its amazing lifestyle and convenience
benefits as well as lower prices. Entertainment, Leisure and Travel sectors also boomed. The
lure of new avenues of expenditure in products and services led to consumers restricting their
expanse on FMCG. It is not that they bathed less often or brushed their teeth less often or
indeed washed their clothes less often. But they did downtrade to lower priced substitutes from
higher quality brands. For example, a consumer buying six tablets of Lux in a month went to
buying three of Lux and three cheaper brands. Or a consumer buying Surf Excel for her clothes
mixed it with a cheaper powder. As a result of this shift in spending patterns, the FMCG market
declined in value in the last four years creating a major challenge for growth.

The new Hindustan Lever: Focused on FMCG

In 2000, 75% of our sales came from FMCG businesses. The rest came from several non-
FMCG businesses which were not profitable, and did not offer prospects for long-term
leadership. Besides, they were a drain on the core FMCG business, both in terms of resource
and focus. Hindustan Unilever Limited is a part of the €40 billion Unilever Group. The Group
has more than 400 brands spanning 14 categories of home, personal care and food products. It
has presence in over 100 countries and employs more than 174,000 people Worldwide. Over
700 million consumers Covers over 6.3 million retail outlets including direct reach to over 1
million, over 2000 suppliers and associates. They decided to disengage from all non-FMCG or
commodity businesses. In all, we have divested and discontinued 15 businesses including
Animal Feeds, Specialty Chemicals, Nickel Catalyst, Adhesives, Thermometers, Seeds,
Mushrooms etc. with sales of Rs.1,750 crores as in 1999.

Birla Institute of Technology, Mesra (Noida ext.) Page 34

Today they are a focused on FMCG company with our branded business accounting for over
90% of sales, consisting of 35 brands across 20 categories. These will be their main engines of
growth, with higher levels of resource concentration, be it technology, people talent or media
spend.

Building blocks of a strong Foods business

In Foods, there is enormous growth potential in leading the evolution of consumers to branded
and processed foods. Over the last few years they have focused on putting in place the building
blocks of a strong Foods business. Historically their Foods business was fragmented and
lacked scale. It was often commoditized with low margins. They recognized that changing food
habits would require considerable investment, which the current business simply could not
afford. Therefore they divested the non-value added parts like Vanaspati.
They have consolidated their portfolio and improved the gross margins by over 13% through
product mix and cost reduction. They have also cleared the supply chain of all old stock and
geared up for fresh availability on shelf. Today, their Foods business has a healthy gross 37
margin and a supply chain driven by freshness. The Foods business will now invest for growth
through relevant innovation.

FMCG still offers enormous potential

As the largest FMCG player it was up to them to reverse the downtrading to realize its true
growth potential. They could achieve this by raising the bar and becoming world class in what
their brands offered and how they worked. Nothing less would do. Penetration levels in several
of the categories and consumption levels in all of the categories is low by any comparison.
Across the world, they are seeing a strong correlation between income levels and the size of
FMCG markets. Over the next 10 years, per capita income in India is likely to touch China’s
current levels. At those levels, the FMCG market will be over Rs.100,000 crores from a current
value of Rs.40,000 crores. This is an opportunity that they have to seize.
Portfolio of Strong Brands
Their main challenge was to reverse the downtrading in the categories and re-establish the
relevance of their brands in the mind of the consumer. In 2000, they had 110 brands,many
undifferentiated and lacking scale. They chose to focus on 35 power brands coveringall
consumer appeal and price segments. They are already seeing the benefits. Six brands –Brooke

Birla Institute of Technology, Mesra (Noida ext.) Page 35

Bond, Lifebuoy, Lux, Fair & Lovely, Rin and Wheel –have emerged as mega brands in the last
five years, each with sales of more than Rs.500 crores.

Better Value
The first step was to ensure that they offer world class quality and real differentiation backed
by technology to give them the advantage over low priced competition. They have invested 37
over Rs.400 crores, or 5% of sales, in the last three years to upgrade the brands. In several
cases they reduced prices to make the brands more affordable. Better quality and more
affordable prices have increased the value to the consumer. They have also launched several
low unit size and price packs for single use to make the brands more accessible to all income
groups. For example, they are the first to introduce branded toothpaste in a tube at Rs.5 and a
branded quality shampoo in a bottle at Rs.5.

Bigger Role in Consumers’ Lives

Perhaps the most significant change has been to move the brands beyond merely making
functional claims to playing a bigger and deeper role in the lives of consumers. They had to
move from selling soap or a detergent to something far more important and central to the
consumer’s life. How often have we heard someone say, “Soap is soap is soap!” Or indeed,
“All detergents clean clothes as well”.
In the case of Lifebuoy, it was only when they associated it with the promise of health and
protection against disease that it claimed a larger space in the consumer’s mind. It moved from
being a mere soap to a health essential. Today Lifebuoy, their oldest brand, has grown at over
15% for the last three years.
Similarly, in the laundry market, Surf Excel went well beyond the benefit of ‘great clean’ by
saving two buckets of water with every wash. Imagine the importance of that benefit to
consumers in cities, who often get running water for only a couple of hours a day. Surf Excel is
one of their fastest growing brands today.
Both Lifebuoy and Surf Excel have succeeded because they are relevant to two key concerns of
the Indian housewife: family health and the scarcity of water.
In addition to the growing consciousness of health, consumers today are looking for ways to
look good and feel good so that they can get much more out of life. In short, consumers are 37
seeking Vitality in their lives. Their portfolio of 35 power brands is uniquely positioned to offer
nutrition, hygiene and personal care benefits and thereby deliver Vitality.

Birla Institute of Technology, Mesra (Noida ext.) Page 36

Technology, the Key Differentiator
Their brands and sound understanding of the local consumer are supported by a world class
Research and Development capability. They have over 200 of the brightest scientists and
technologists based in India.
Their recent reorganization leverages the talent pool from across 16 global technology centers,
of which four are in India. In all, they have over 4,000 high quality minds across Unilever
working relentlessly to provide new benefits that make a real difference to the consumers.

Winning with Customers

Hindustan Lever has historically had a strong bond with its customers. They have strengthened
this and reinvented the way they manage their distribution channels and their customers. The
sales structure has been transformed to leverage scale and build expertise in servicing Modern
Trade and Rural Markets. They have also de-layered their sales force to improve the response
times and service levels.
Their 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
stockiest. 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.

HUL’s strategy 'must win'

Birla Institute of Technology, Mesra (Noida ext.) Page 37
Hindustan Unilever (HUL) may have grown by a healthy 5 per cent last quarter, entirely driven
by volume growth. But for its parent company Unilever, the performance was still
disappointing. Now, to please Unilever and mop up more volume growth, HUL has introduced
a distribution initiative called ‘Must Win 2010’.
Last year in March, Unilever's global CEO Paul Polman was in India and made it very clear to
HUL's management to improve market share.
Falling volumes is one of the key reasons for HUL to introduce a new strategy internally called
—Must Win 2010—where India's largest consumer product Company is targeting at least 10-
12 per cent volume share this year.
In this initiative, the company will increase retail coverage and appoint more distributors
especially in rural areas. After reducing prices in few laundry brands; they are also looking to
slash MRP's on soap, shampoo and oral care brands.
HUL will also step up its advertising spends and in-store promotions.
The company, which test launched its ‘Go to Market’ initiative in 2008 in select cities, will
take it nationally through heavy investment in IT systems.
R Sridhar, CFO of Hindustan Unilever, said, “From the distribution cost point of view, we have
been driving our cost down, leveraging a lot on the investment we have made
behind technology in IT space, in the planning space and we have actually seen good savings
coming from distribution stand point.”
But the new initiative of aggressively seeking volumes through price cuts will have its own
fallout, as margins are expected to take a back seat.
Sonam Udasi, consumer head of Brics Securities, said, “In a way, they believe they can
manage some of the cost and in the short run, they are willing to give away some margins for
volume share gain. So that seems to be the driving thing. Overall historically, Levers has
always performed well when it has market share gain or volumes.”
HUL already has the largest distribution network in the country and is the biggest advertiser,
too. So growing from such a large base would be an issue and rivals from P&G to Godrej to
Wipro are also planning similar pricing strategy.
So, despite having a must win strategy, the race to win more market share is still wide open.

Birla Institute of Technology, Mesra (Noida ext.) Page 38

 EFFECT OF UPSCALED
ADVERTISING AND
PROMOTIONAL EFFORTS

Birla Institute of Technology, Mesra (Noida ext.) Page 39

 Galloping ad spend trims HUL's profit growth
 Sky-rocketing spends
 Ad spend thrice employee costs
 Input savings, fight for turf drive adspend
 Profit growth sacrificed for brand-building
Hindustan Unilever's (HUL) advertising expenses simply galloped in the December quarter, even as
both its sales and net profits grew at a modest pace. To put it in context, the sum of Rs 633 crores
that HUL set aside towards advertising and promoting its brands was three times what it spent on its
employees (Rs 212 crores) and nearly equal to the operating profit (Rs 692 crores) it generated for
this quarter.
The reasons why the FMCG giant's adspend sky-rocketed could be two-fold. One, sluggish volume
growth and market share losses to smaller rivals in some categories seem to have prompted the
company to splurge on brand-building efforts lately. Two, savings on raw material costs due to the
decline in commodity prices (from the highs of last year) have also freed up cash which HUL has
chosen to deploy on advertising and promotions.
HUL's advertising and promotional spends for the latest December quarters were up 66 per cent
compared to the same period last year. While the exact break-up of these spends between
advertisements and below-the-line activities are not known, HUL went into an overdrive to rev up
volume growth this quarter through initiatives such as price cuts on its detergent brands, the launch of
a new Close-Up variant, the re-launch of Lux soap and advertisements for its premium Pond's and
Dove skin and hair care ranges.
Upward bound
HUL often cautions investors not to read too much into its quarterly adspend numbers as they can be
quite lumpy, varying with the level of new launch and promotional activity in each period. However,
it is clear that HUL's advertising spends have been upward bound for some time now.
It goes without saying that HUL's absolute spends on advertising and promotions are the largest
within the FMCG space. Over the past year, for instance, the company single-handedly spent more on
advertising than the next five listed FMCG companies (ranked by sales) put together. However, what
is worth noting is that HUL has also been carving out a larger portion of its sizeable sales towards
adspend in recent years. For the nine months ended December 2009 for instance, HUL expended
about 13.3 per cent of its net sales on advertising and promotions. That is a much higher proportion
than the 10-10.5 per cent that was set aside in the three years to 2008.

Birla Institute of Technology, Mesra (Noida ext.) Page 40

That HUL has made a conscious decision to put greater firepower behind its brands through
advertising, is clear from the fact that it sacrificed profit growth to expand its ad budget. With its sales
growth at a sedate 4.5 per cent for the quarter, curbing ad-spend would have been one way to deliver
reasonable profit growth this quarter. Had the company maintained its proportion of adspend to sales
at the levels of last year, for instance, its operating profits may have jumped nearly 35 per cent (other
expenses remaining the same) for the latest quarter, instead of the 2 per cent reported.

Birla Institute of Technology, Mesra (Noida ext.) Page 41

 HUL Loses Ground
Market dynamics can change rapidly in the fast-moving consumer goods (FMCG) business.
In early 2008, consumer non-durable companies were grappling with a sharp increase in raw
material prices like oil and packaging material. Modern retailers were tightening their product
portfolios and downsizing existing inventory—some even closed shop, squeezing sales
volumes of FMCG companies.
Towards the end of 2008, raw material and packaging
material prices started sliding as oil prices dipped.
Consumer non-durable companies soon passed the
benefits on to consumers by paring product prices.
Now, overall volume sales growth has perked up to
around 30 percent in March 2009 as compared to a
sluggish 20 percent last year. FMCG’s roller-coaster
ride seems to have come to an end.
Such a rapid cycle made it tougher for FMCG
behemoth Hindustan Unilever Limited (HUL) to
navigate the market conditions. HUL volumes dipped
4 percent in the quarter ended March 2008-09. Says Harish Manwani, Non-Executive
Chairman, HUL: “We have never seen a situation where price inflation and deflation
happened so rapidly. As our marketing pipeline is huge, the impact of changing prices may
differ from those companies that operate only at one end of the market.” However, lower raw
material costs helped boost margins by two percentage points.
HUL is losing some ground to small and mid-sized
companies and lost market share in March 2009 in some
key product categories. For instance, in soaps, market
share in value is down to 47.5 per cent in March 2009 from
53.4 per cent in the same period last year, according to data
from AC Nielsen. In shampoos, HUL’s market share
dipped to 45.9 per cent from 47.3 per cent. In toothpaste
and detergents, too, HUL has slipped. In tea, however,
HUL managed to buck the trend and increased its share
from 22.6 per cent to 23 per cent. Price hikes and the
down stocking in big retail had an impact on HUL’s sales.

Birla Institute of Technology, Mesra (Noida ext.) Page 42

HUL has corrected its product pricing now and is working to regain market share in the
coming months. Says Manwani: “There has been pressure at the bottom-end of the market.
We changed the prices in the March quarter, a lot of which has not reached our consumers
yet.”
On the other hand, small players are pushing sales aggressively. Many absorbed the higher-
input costs, taking margin hits and made gains in their market shares. For instance, Godrej
Consumer’s market share, in value terms, in soaps, increased from 9.2 per cent in March
2008 to 10 per cent. Others, like Marico, chose not to hike prices aggressively and the
strategy seems to have paid off. Says Saugata Gupta, CEO, consumer products, Marico: “We
had higher costs, but we believed in retaining consumers. So we didn’t pass on the entire
cost.”
Urban markets proved tougher to negotiate for consumer companies. A sharp decline in sales
and a lower stocking of goods at modern retailers hurt volume growth. With almost 9 per
cent of its revenue derived from big retail, HUL took a significant volume hit. A three-day
down stocking in a quarter can have a 3-4 per cent impact on HUL’s volumes. Besides,
consumers are also changing their buying patterns—a fallout of the economic downturn.
High-value FMCG brands that are heavily dependent on big retailers for sale, are seeing a
slump in volumes at the top-end of the market.
This is, in part, due to a dip in impulse buying, which translates into lower-volume growth for
companies. At the bottom-end of the category, consumers are buying on a need based basis
rather than making bulk purchases. In the impulse category, there could be potential for lower
consumption. Consumers don’t tend to migrate to high-value brands in a recession.
The rural market, though, is expanding. For many companies, particularly the smaller ones,
the rural market is still unexplored and as they spread in India’s interiors their volumes tend
to get a significant boost. Rural market is a faster-growing segment and is still under-
penetrated. With consumer-spending power on the upswing in the rural areas, this is a good
time for mid-sized companies to gun for growth. FMCG giant HUL already has a fairly
sizeable presence in the rural market.
Profits of mid-sized companies grew at a faster clip than big competitors due to their rural
focus. Their volume growth has been robust in 2008-09. Overall, Dabur recorded volumes in
excess of 10 per cent for its hair oil and oral-care segments and nearly 15 per cent for its
foods business. Marico clocked a 20 per cent volume growth in consumer products while
Godrej Consumer’s soaps business grew 20 per cent.

Birla Institute of Technology, Mesra (Noida ext.) Page 43

 Still, the business environment remains challenging for FMCG companies as the economy is
not out of the woods. Says Gupta: “It’s a difficult market, so we are looking at retaining
volume growth this year.”
Companies are devising ways of retaining their existing consumers by fine-tuning their
pricing and packaging of their products. One key strategy has been to introduce sachets with
the right pricing in rural markets. For instance, the Rs 10 strategic price point has found favor
with the price sensitive rural consumers.
Meanwhile, cost control is again the buzzword in FMCG circles. And, the priority is
managing marketing networks. As consumers taste changes rapidly, companies with larger
distribution get hit harder. They have a disadvantage in the short-term as they have to unwind
stock positions.
HUL has been working on reducing its execution cycles so as to better respond to marketing
changes. It’s streamlining its distributor network—sticking to a fewer big distributors—and
through the use of technology, seeks to reduce inventory levels. As a result, it will lead to
quicker response to fickle consumers. Mid-sized companies, with smaller distribution
networks, respond quickly to changes in the market, which gives a fillip to business volumes.
HUL now is gearing up to take on competition with new price points and a streamlined
distribution.

FMCG battle: P&G turns up the heat, launches 2 products

Global giant Procter and Gamble (P&G) has stirred the FMCG (Fast Moving Consumer
Goods) market in India by launching two products in the mass and mid segment. What could be the

Birla Institute of Technology, Mesra (Noida ext.) Page 44

impact of this move and can we expect another round of price war between Hindustan Unilever (HUL)
and P&G.
P&G has gone into an aggressive mode. It has launched two new variants, one in the detergent
segment, which is called 'Tide Naturals' and also another one in skin care segment under the 'Olay'
brand.
Idea behind the move
'Tide Naturals' will be priced at 20% discount to the core 'Tide' brand. The main idea seems to be
to arrest the loss in market share in the detergent segment, which P&G had been witnessing; it lost
about 1% of market share in the last one year.
Impact on HUL
Though a price war is not really expected in a big way, the way we saw in the late 1990’s but there
could be some sort of lowering in prices to about 10%. It could impact the profitability of the mid
segment brand such as 'Tide' for P&G and 'Rin' for HUL. It could also impact HUL’s lower segment
brand 'Wheel'. There might be some sort of up trading happening to 'Tide Natural' and also down
trading from the upper segment. It could impact sales for HUL for these two brands.
But primarily detergents just contribute about 12% to HUL's sales so even if there is an impact analyst
says that it will be a marginal impact about 2% on the earnings. It may also end up cannibalizing the
core Tide brand sales itself. Also P&G has launched 'Olay Natural Whiteness', which is in the
fairness cream segment but it is still at a lot more premium than the other existing players such as
Garnier, Ponds and Fair and Lovely, so not much of an impact is expected in this segment at least.
Brokerages will continue to be bullish on HUL, they say the stock has been underperforming for quite
a while and a positive surprise is well expected. Overall, analysts are saying about 10% decrease in
mid segment primarily for 'Rin' is expected to come in.

Birla Institute of Technology, Mesra (Noida ext.) Page 45

HUL says only mass-end business needs fixing
Monday, November 2, 2009 3:19 IST

Mumbai: For consumer goods giant Hindustan Unilever Ltd (HUL), gaining volume numbers
back is going to remain a big thrust.
Three-fourth of company's business is on track, showing double digit growth and market share
improvement, while the remaining -- primarily in the mass-end -- needs fixing, Harish Manwani,
chairman said during the Q2FY10 results announcement on Saturday.
HUL has taken several steps in the past two quarters such as improving product quality, pricing, and
stepping up investment behind brands; and now expects these actions to bear fruit.
"Brands in the premium and mid-segment have shown double-digit growth with strong volume
growth. It is only the mass-end segment where there is an issue and we have taken already actions,"
said Nitin Paranjpe, managing director, HUL.
For the quarter ended September 30, the consumer goods maker reported net sales growth of 5% at
Rs 4,228 crore as compared with Rs 4,028 crore in the same quarter last fiscal. However, the 21.6%
decline in net profit has been a real disappointment.
HUL's Q2 net profit went down from Rs 546 crore last fiscal to Rs 428.53 crore this year.During the
quarter, the company's advertising and promotion spend rose 38%, driven by re-launches across
brands including Lux, Pepsodent, Liril and Breeze. The company's domestic sales, including the
Pureit water business, grew 8%.
Fast moving consumer goods (FMCG) sales grew 7%, with 5.7% growth in home and personal care
and 13.1% growth in the foods business.
Sales volumes, however, grew just 1%. During the April-June quarter and March 2009 quarter, HUL
had reported volume growth of 2% and negative 4%, respectively.
Profit after tax before exceptional items grew 9.5%; while before the mark-to-market charge, it grew
14.4%.Operating margin improved by 140bps due to carry-forward impact of pricing, improved
product mix, and a step-up towards cost saving. PBIT grew 16.5% with operating margin improving
to 14.3%, after absorbing 320 bps increases in brand investments.
Soaps and detergents have performed meekly for the company. It has experienced down-trading from
consumers, who moved to cheaper brands of national and regional competitors. The company is
rejuvenating soap and detergent brands in the mass-end and expects market share stabilization and
positive results in the coming two quarters. This is likely to happen as the re-launched stocks move
up the distribution pipeline and reach the consumer.

Birla Institute of Technology, Mesra (Noida ext.) Page 46

"In soaps and detergents, we are actively strengthening our full portfolio and improving our
competitiveness in the mass segment. We remain determined to profitably grow volumes and further
strengthen our market leadership across categories," Manwani said.
The home and personal care business grew 6%, driven by volume-led growth in personal products.
Soaps and detergents grew only by 1%, impacted by low growth in the mass segment.
The personal products category grew 13%. Dove, in soaps as well as shampoo, is the company's
fastest growing brand and is having a positive impact on the market share.
During the quarter, HUL re-launched Clear and Clinic Plus. In skin care, the company re-launched
Pond's White Beauty, and is rolling out a winter fairness cream under Fair & Lovely.
In the oral care category, HUL witnessed some erosion in the segment, even as it re-launched
Pepsodent. The month-on-month value share in oral care has declined from 27.1% in August 2009 to
26.8% in September 2009.
The foods business grew 13%, driven by tea, coffee and ice-cream. Beverages grew 18%, fuelled by
the launch of Lipton Green Tea, re-launch of tea bags and growth in low unit packs of instant coffee.
The company also re-launched Knorr soups in processed foods division during the quarter.
In instant coffee, the company's value share increased from 44.3% in August to 46.4% in September,
while in tea, it increased from 22.3% in August to 22.6% in September.
In washing powders and liquids, the company's value share has gone up from 36.2% in August to
37.3% in September while in detergents; it has lowered from 36.3% to 36.1% during the same period.
In soaps, the value growth remained flat at 44.5%, while in skin care, it increased to 46.9% from
46.4%.
HUL has 35 brands across 12 categories. "The breadth in our business is our advantage," Manwani
said referring to brands that cater to premium, middle and mass-end of consumer segments.
Manwani said the focus will be on market development as much as on market share gain. The
company is also giving major thrust on cost saving from distribution and efficiencies within the
organisation.
Going forward, HUL's strategy will be to focus and cater to consumers across all segments through
its existing brands. It plans to take on to the many regional players that have been eating into its
market share for over a year now.

Birla Institute of Technology, Mesra (Noida ext.) Page 47

 Present status
Domestic Consumer and FMCG business grows 5%
 driven entirely by acceleration in volume growth
· Underlying Operating Margin improved by 10 bps,
 Step up in brand investments by 530 bps.
Net Profit grows 5.4%
Hindustan Unilever Limited (HUL) announced its results for December Quarter 2009. Domestic
consumer and FMCG sales grew 5%, driven by strong growth in Personal Products, Foods and Water.
Underlying volume growth accelerated to 5% in the quarter. Actions to restore competitiveness in
Soaps & Mass Laundry yielded positive results, with the Soaps & Detergents segment returning to
volume growth during the quarter.
HPC business grew 4% with volume growth in Soaps, Detergents and Personal Products partly offset
by price reductions in Laundry. Wheel delivered strong volume growth in Laundry. In Personal wash,
relaunched Lux led volume growth and the premium soaps segment (Dove, Pears and Liril) continues
to grow strongly.
Personal Products momentum was sustained with 16% growth led by strong volume growth in Hair
Care and Skin Care. In the Hair category, Dove grew rapidly across shampoo and conditioners,
becoming the No.1 Hair Care brand in Modern Trade. In Skin Care, recently launched Pond’s White
Beauty, received very good consumer response and FAL ‘winter fairness’ variant performed well;
Pond’s Talc and Vaseline grew strongly in the Hand & Body segment. In Oral, both Close Up and
Pepsodent delivered volume growth aided by launch of Close Up “Peppermint Splash” and a new
“Germicheck” advertising campaign on Pepsodent.
Foods business grew at 9% driven by all three segments – Beverages, Processed Foods and Ice
Cream. Beverages was up 8% with all brands growing well. Coffee growth was largely driven by
small packs. In Processed Foods, all brands - Kissan, Knorr and Annapurna grew well. Ice-Cream
continued its volume led growth and 10 new Swirls parlours were started during the quarter.
Pure-It is making excellent progress and expanding its national franchise through innovation and
channel expansion. A value added offering, Pure-It Autofill, was launched during the quarter.
Increased cost savings and buying efficiencies improved Gross Margins and significantly reduced
cost of goods sold by 480 bps which were reinvested behind brands. A&P expenditure grew by 66%
to support innovations and further strengthen market competitiveness. Underlying operating profit
grew 5% and Operating margin excluding mark to market (MTM) accounting impact on forex
exposures, improved 10 bps to 16.8%, despite the 530 bps increase in brand investments. Excluding

Birla Institute of Technology, Mesra (Noida ext.) Page 48

mark to market (MTM), PAT (bei) was flat. Net Profit improved 5% due to exceptional gains from
property disposal in the current quarter.
Harish Manwani, Chairman commented: “We are seeing good results from the actions that we have
taken to drive growth. Volume growth accelerated in the quarter, backed by quality innovations,
increased brand support and continued focus on market execution. We are committed to strengthening
our market leadership and will invest appropriately in an increasingly competitive environment.”

(Rs. Crores)

financial highlights 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Segment-wise Sales (%)
Soaps, Detergents & Household Care 41 40 40 45 44 45 45 47 47 49
Personal Products 17 17 21 22 24 26 28 29 29 29
Foods 34 37 33 30 29 27 25 22 22 20
Chemicals, Agri, Fertilisers & animal
feeds 6 4 3 2 2 1 1 1 1 1
others 2 2 3 1 1 1 1 1 1 1
EBIT as % of Sales 10.7 `2.3 14 17.6 18.4 13.4 12.3 13.1 13.1 13.1

Balance Sheet of Hindustan Unilever

Dec '04 Dec '05 Dec '06 Dec '07 Mar '09

Birla Institute of Technology, Mesra (Noida ext.) Page 49

 12 mths 12 mths 12 mths 12 mths 15 mths

Sources Of Funds
Total Share Capital 220.12 220.12 220.68 217.75 217.99
Equity Share Capital 220.12 220.12 220.68 217.75 217.99
Reserves 1,871.92 2,084.84 2,502.14 1,220.82 1,842.85
Revaluation Reserves 0.67 0.67 0.67 0.67 0.67
Networth 2,092.71 2,305.63 2,723.49 1,439.24 2,061.51
Secured Loans 1,453.06 24.5 37.13 25.52 144.65
Unsecured Loans 18.06 32.44 35.47 63.01 277.3
Total Debt 1,471.12 56.94 72.6 88.53 421.95
Total Liabilities 3,563.83 2,362.57 2,796.09 1,527.77 2,483.46
Dec '04 Dec '05 Dec '06 Dec '07 Mar '09

12 mths 12 mths 12 mths 12 mths 15 mths

Application Of Funds
Gross Block 2,314.22 2,375.11 2,462.69 2,669.08 2,881.73
Less: Accum. Depreciation 891.08 989.61 1,061.94 1,146.57 1,274.95
Net Block 1,423.14 1,385.50 1,400.75 1,522.51 1,606.78
Capital Work in Progress 94.42 98.03 110.26 185.64 472.07
Investments 2,229.56 2,148.72 2,522.22 1,440.81 332.62
Inventories 1,470.44 1,321.77 1,547.71 1,953.60 2,528.86
Sundry Debtors 489.27 522.83 440.37 443.37 536.89
Cash and Bank Balance 102.98 103.77 170.8 200.11 190.59
Total Current Assets 2,062.69 1,948.37 2,158.88 2,597.08 3,256.34
Loans and Advances 1,013.04 902.04 1,150.06 1,083.28 1,196.95
Fixed Deposits 595.07 251.26 246.15 0.75 1,586.76

Total CA, Loans & Advances 3,670.80 3,101.67 3,555.09 3,681.11 6,040.05
Current Liabilities 2,730.64 3,077.97 3,362.52 4,028.41 4,440.08
Provisions 1,123.46 1,293.39 1,429.71 1,273.90 1,527.98
Total CL & Provisions 3,854.10 4,371.36 4,792.23 5,302.31 5,968.06
Net Current Assets -183.3 -1,269.69 -1,237.14 -1,621.20 71.99
Total Assets 3,563.82 2,362.56 2,796.09 1,527.76 2,483.46

Contingent Liabilities 476.41 468.33 476.4 494.46 417.26

Book Value (Rs) 9.5 10.47 12.34 6.61 9.45

Major Findings:
 The company increased spending on advertisements and promotions (A&P) by 38 per cent to
Rs. 571 crore.

Birla Institute of Technology, Mesra (Noida ext.) Page 50

 the operating margin improved by 1.4 per cent to 14.3 per cent through a combination of carry
forward impact of pricing, improved product mix, step-up in cost saving programmes and
better operating leverage.
 Hindustan Unilever’s (HUL) mainstay soaps and detergents business continued to struggle
during the three months to December 2009, but the homecare and personal products maker said
signs of improvement are visible as it reported a slight increase in sales and profits for the third
quarter of the 2009-10 fiscal
 Sales of soaps and detergents fell by 2.42% to Rs 2,072 crore, but HUL insisted that the glass
was half full, pointing out in a statement that “actions to restore competitiveness in soaps and
mass laundry yielded positive results, with the segment returning to volume growth during the
quarter”
 Net profit rose by 5% to Rs 649.1 crore, aided by exceptional gains from the sale of property
during the quarter. Net sales grew 4.56% from a year ago to Rs 4,504.2 crore.
 HUL has been losing market share and shedding volumes in key segments such as soaps, tea
and toothpaste in the past few quarters to aggressive smaller rivals. The company has
responded with price cuts, relaunched brands and stepped up spending on advertising and
promotions.
 Volume growth accelerated in the quarter backed by quality innovations, increased brand
support and continued focus on market execution
 Price cuts in soaps and laundry products such as Lux and Wheel helped restore volume
growth during the quarter.
 Underlying operating profit grew 5% and operating margin excluding mark-to-market
accounting impact on forex exposure improved 10 basis points to 16.8%. Excluding mark-to-
market, profit after tax was flat.
 Analysts believe that the increase in adspends could be a reason for the muted margins. HUL
has been spending aggressively, as is clear from the fact that adspends are up 41 per cent, 8
times the revenues growth. Of course, the spending has paid off in categories such as personal
products, where margins are up a sharp 200 basis points.

CONCLUSION

In recent years, the FMCG sector declined due to downtrading. Also because of presence of large

number of companies trying to resize this opportunity, this force the old HLL for the change and

Birla Institute of Technology, Mesra (Noida ext.) Page 51

thus, their transformation has resulted in a new HLL, which has successfully faced this challenge

and reversed this trend. It has done so by substantially strengthening their brands and building

capabilities. This has already begun to yield benefits and they are returning to growth. Volume

growth is being followed by value growth, which in turn is bringing profit growth.

India is one of the most exciting markets offering great potential. Over the next 10 years, the per

capita income in India is likely to double. In FMCG, there is an opportunity to catalyze penetration,

increase usage, and upgrade consumers. As a result, the FMCG market is expected to grow to over

Rs.100000 crores from its current base of Rs.40000 crores.

The new Hindustan Lever sees an exciting opportunity for growth. They have 35 powerful brands

covering all segments, with leading market positions in most. Today, these are stronger and more

relevant to the consumer than ever. The people are energized by the scale of the opportunity and

determined to seize it. The scale of the business and operations gives them the resources needed.

They are delivering good services and the changes they brought in the products are well taken by

the customers, by this they are generating sustainable profitable growth.

LIMITATIONS OF STUDY
 The sample size may not adequately represent the national market.
 This study has not been conducted over an extended period of time, it do not consider any
hangs due to changes in the sudden needs of the customer because of some seasonal
change or any kind of festivals.

Birla Institute of Technology, Mesra (Noida ext.) Page 52

  The duration of the project work was short enough to allow the full exposure.
 The process of lead identification to the final completion of the documentation requires
more than just two months of time.
 Thus the project was limited to either negotiation of the deals or carrying on with an
existing lead.

RECOMMENDATIONS

The suggestions are pretty straight forward, and will not be remarkable in their originality.
Companies have to work at the same old rules of marketing:
1. Customer Convenience

Birla Institute of Technology, Mesra (Noida ext.) Page 53

2. Customer Satisfaction
3. Enhanced Awareness
4. Feedback Service
5. After sale service / Guidance
6. Grievance handling etc.

Birla Institute of Technology, Mesra (Noida ext.) Page 54

 QUESTIONNAIRE

(To be filled in by one applicant only)

I, student of BIT Mesra (Noida Ext.) conducting a research as a part of our curriculum and would

highly appreciate if you could spare a few minutes to answer the questionnaire. Your contributions

would be extremely valuable.

Thank You.

From Retailers

1. Who do you think is the market leader in FMCG sector?

---------------------------------------
2. Do you deal in HUL products?

a. Yes b. No

3. Name 5 largest selling products of HUL?

a. ______________________ b. ______________________ c. ______________________
d. ______________________ e. ______________________
4. What is the market share of HUL?
______________________________________________________________________________
5. Are the customers aware of HUL products?

a. Yes b. No

6. How much is the consumption of HUL’s product with respect to the product of other company?

_________________________________________________________________

0% 50% 100%

7. During purchase which factors of the following influence the consumer’s purchase?
(Please select multiple).

a. Price

b. Quality

c. Packaging

d. Experiment

Birla Institute of Technology, Mesra (Noida ext.) Page 55

 e. Influence by others

f. Advertisement

8. Which FMCG company in your opinion expends the maximum, on promotion, advertising etc.?
__________________________________
9. Are the promotional strategies proving effective for HUL?
Or,
Do you think promotional strategies adopted by HUL are effective?

a. Yes b. No

10. What would you like to recommend to HUL?

______________________________________________________________________________

______________________________________________________________________________

Shop name: _______________________________

Location: ________________________________

Birla Institute of Technology, Mesra (Noida ext.) Page 56

 BIBLIOGRAPHY
BOOKS

 Tripathi P.C. (2007), Research Methodology(6th ed), Page 7.1-7.17

 Malhotra, Naresh.K (2008), Marketing Research(5th ed), Page 7-11,78-83
.

WEBSITES

 http://www.hul.co.in/
 http://en.wikipedia.org/wiki/Fast_moving_consumer_goods

 http://oneclick.indiatimes.com/article/00SA34J8STdFP?q=Unilever+PLC

 http://www.24dunia.com/english-news/shownews/0/HUL-loses-ground/5130154.html

 www.indianmba.com

 www.scribd.com

 www.en.wikipedia.com

 www.economicstimes.com

 www.timesofindia.com

 www.moneycontrol.com

 www.financialexpress.com

Birla Institute of Technology, Mesra (Noida ext.) Page 57