Project Report on Hindustan Unilever

Limited (HUL)
An exclusive project report on Hindustan Unilever Limited (HUL). This report
will help you to learn about:- 1. Genesis of Hindustan Unilever Limited (HUL) 2.
History of HUL 3. Product Lines 4. Core Competency and Business Strategy 5.
Innovative Campaigns 6. Spread of HUL to Villages 7. Combating Recession 8.
Competitors 9. Problems Faced by HUL 10. SWOT Analysis 11. PEST Analysis 12.
Financial Positions.

Contents:

1. Project Report on the Genesis of Hindustan Unilever Limited (HUL)

2. Project Report on the History of HUL
3. Project Report on the Product Lines of HUL
4. Project Report on the Core Competency and Business Strategy of HUL
5. Project Report on the Innovative Campaigns of HUL
6. Project Report on the Spread of HUL to Villages
7. Project Report on the Combating Recession Faced by HUL
8. Project Report on the Competitors of HUL
9. Project Report on the Problems Faced by HUL
10. Project Report on the SWOT Analysis of HUL
11. Project Report on the PEST Analysis of HUL
12. Project Report on the Financial Positions of HUL

1. Project Report on the Genesis of Hindustan Unilever Limited (HUL):

Hindustan Unilever Limited (HUL) played a vital role in combating recession and inducing
private consumption-led growth in the Indian economy. The company displayed an ability to
effect price hikes and avoid impact of inflation on vegetable oils, which, combined with
improved outlook for fabric wash and strong growth in processed foods and beverages, lent a
positive outlook for the stock during 2010-13.

The consolidated profit made by HUL in financial year 2010 is Rs. 2, 063.27 crore. The net
sales has come down to Rs. 175,238 million in financial year 2010 from Rs. 202,393 million in
financial year 2009; registering negative growth of 13.4 per cent. But projected to grow up 6.8
per cent in financial year 2011 with a net sales of Rs. 187, 100 million and Rs. 203,018 million
in financial year 2012.
Powerful brands and an envious distribution network are HUL’s primary strengths. The
company operates in five segments—soaps and detergents, personal products, beverages,
foods and ice creams, exports, and other operations. While soaps and detergents contribute
45 per cent of net sales, the high-margin personal products segment contributes the most to
operating profits at 45 per cent in 2009.

Together, personal products and soaps and detergents, which constitute the home and
personal care (HPC) division, contribute 71 per cent of net sales and 82 per cent of operating
profits in 2009. In 2009, the company’s move to dispose of its non-core assets including some
properties gave it a near-term upside.

Analysts believe the price war in the detergent segment with rival P&G has ended and is likely
to add to the profitability from the segment going forward.

HUL’s portfolio of products covers a wide spectrum including soaps, detergents, skin creams,
shampoos, toothpastes, tea, coffee, and branded wheat flour (atta). In 2008, it generated net
sales of Rs. 163.50 billion and a profit of Rs. 21 billion. However the market performance of
the leader was quite disappointing. HUL posted a marginal growth of 5 per cent in net sales of
Rs. 3, 988.30 crore in March 2009.

Operating profits grew by 35 per cent y-o-y to 449.30 crore and operating margins expanded
by 3,302 basis points. Net profits grew by 4 per cent y-o-y to Rs. 394.90 crore.
Though HUL is a market leader, it has been losing market share in key categories. In order to
regain this, HUL can either opt for further price cuts, promotional offers or invest more in
brand building, but these are likely to affect profitability.

They may result in marginal growth (de-growth in a few categories like oral care) in the top-
line as well as profitability in the financial year 2010 (estimated earnings). Table 12.1 shows
the market capitalization of HUL along with other top FMCG companies in the Indian stock
market.

It seems HUL is losing its relevance in the Indian FMCG space. Let us evaluate the company’s
strategies.

2. Project Report on the History of HUL:

In 1888, Lever Brothers started exporting Sunlight laundry soap to India. Meanwhile,
Margarine Unie also exported vanaspati, or hydrogenated edible fat to the same country.
Therefore, when Margarine Unie and Lever Brothers merged in 1930, the products already
had considerable presence in India.

In 1931, Unilever established the Hindustan Vanaspati Manufacturing Company, its first
subsidiary in India, followed by two more subsidiaries—Lever Brothers India Limited and
United Traders Limited. In 1956, these three companies, which marketed soaps, vanaspati
and personal products, merged to form Hindustan Lever, in which Unilever now has a 51 per
cent stake.
The company has pursued growth through acquisitions and joint ventures. In April 1993,
Hindustan Vanaspati merged with Tata Oil Mills Company in an amalgamation that brought
in a soaps and detergents brand portfolio to compliment that of Hindustan.

In a related move, in 1995, Hindustan and yet another Tata company, Lakme, formed a 50: 50
joint venture, Lakme Lever, to market Lakme’s market-leading cosmetics and other
appropriate products of both the companies.

Subsequently, in 1998, Lakme Limited sold its brands to Hindustan and divested its 50 per
cent stake in the joint venture to the company. Growth continued in 1994 when the company
formed 50: 50 joint ventures with two US-based companies, Kimberly-Clark Corporation and
S.C. Johnson & Son, and the Netherlands-based Gist Brocades. Kimberly-Clark Lever Ltd.
markets Huggies diapers and Kotex sanitary pads.

The portfolio of Lever Johnson (Consumer Products), formed in 1995, includes the Raid range
of mosquito repellent mats, coils and cockroach killing aerosols and Glade air fresheners.
Furthermore, the company established a subsidiary in Nepal, called Nepal Lever Ltd. (NLL).
Its factory is the largest manufacturing investment in the Himalayan kingdom.

The NLL factory manufactures Hindustan products like soaps, detergents and personal
products both for the domestic market and exports to India. The 1990s also witnessed a string
of crucial mergers, acquisitions and alliances on the foods and beverages front.

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In 1992, Brooke Bond acquired Kothari General Foods, with significant interests in instant
coffee. In 1993, it acquired the Kissan business from the UB Group and the Dollops ice cream
business from Cadbury India.

As a measure of backward integration, Tea Estates and Doom Dooma, two plantation
companies of Unilever, were merged with Brooke Bond. Then in July 1993, Brooke Bond
India and Lip ton India merged to form Brooke Bond Lipton India Ltd. (BBLIL), enabling
greater focus and ensuring synergy in the traditional beverages business.
Further expansion occurred in 1994 when BBLIL launched the Wall’s range of frozen desserts.
By the end of the year, the company entered into a strategic alliance with the Kwality ice
cream group families and in 1995 the Milkfood 100 per cent ice cream marketing and
distribution rights too were acquired.

The same year, the company also bought from Pepsi Foods its tomato processing assets at
Zahura (Punjab). Finally, BBLIL merged with Hindustan in January 1996.

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Meanwhile, in 1995, Hindustan restructured its businesses, selling its fertilizer and industrial
chemicals business to the group company. Hind Lever Chemicals (erstwhile Stepan
Chemicals), and acquiring from Stepan its popular detergents business. This was done to
allow the fertilizer and industrial chemicals business to grow rapidly through fresh
investments in expansion.

The internal restructuring culminated in the merger of Pond’s India Ltd. (PIL) with
Hindustan in 1998. The two companies had significant overlaps in personal products,
specialty chemicals and exports businesses, besides a common distribution system since 1993
for personal products.

This includes 15 months as the accounting year has changed from December to March.
Sources: Company, Edelweiss Research and Emkay Research, 27 August 2010.

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In January 2000, in a historic step, the government decided to award 74 per cent equity in the
State-owned Modern Foods Industries Ltd. (MFIL) to Hindustan Lever, thereby kick-starting
the first major strategic sale of government equity in a public sector undertaking (PSU) to a
private partner.

Meanwhile, in 2001 HLL decided to focus on power brands, entered the confectioneries
category and also launched supporting services like Lakme beauty salons. The Lever Gist
Brocades, a 50 : 50 joint venture of HLL and DSM of The Netherlands, was sold to Burns
Philip India in 2002.

The year 2003 saw the company merge its key food brands Knorr and Annapurna under one
brand name, Knorr Annapurna. Let us now look at the bottom line of the company, shown in
Table 12.2, as the end result of the company’s business plan.

HUL reported a like-to-like growth of over 15 per cent in financial year 2009; however, while
the first half growth was a healthy volume and value mix, the growth in the last two quarters
of 2008 were predominantly value led price hikes in the soaps and detergents category at over
25 per cent.

However, analysts see substantial slowdown in HUL’s growth as price-led growth disappears
(in fact there are price cuts in soaps and detergents category) and volume growth subsides.

Volume growth has declined sharply from 10 per cent in the quarter ended March 2008 to 6.8
per cent in the quarter ended September 2008 to 2.3 per cent in the December 2008 quarter
to – 4 per cent in the first quarter of 2009. HUL’s volume growth is expected to remain at best
in low single digit. This could pose a risk to the company’s growth estimates of 10-11 per cent
in 2009-10.

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The financial year 2011 poses huge challenges to the company as its power brands are losing
market share to local and regional players. HUL had a tough time with fluctuating sales in
2007, and then picked up well after corporate restructuring and innovative campaigns.

A 33 per cent spurt in advertisement and promotion in the first quarter ended 30 June 2010
dragged down HUL’s net profit by 1.8 per cent to Rs. 533.21 crore, despite a 60 basis point
reduction in supply chain cost. HUL’s volume grew by 11 per cent and net sales grew 7 per
cent at Rs. 4,794 crore as compared to Rs. 4, 476 crore in June 2009. HUL’s current operating
margin of 14 per cent is lower than its peak operating margin registered in 2002.

3. Project Report on the Product Lines of HUL:

HUL’s journey began in 1933, when the company was incorporated and it celebrated its
platinum jubilee in 2008. The company claims to have by touched the lives of 700 million
Indians, looking after their nutrition, hygiene and personal care and making them feel good,
look good and get more out of life. In 2007 Hindustan Lever Limited became HUL, showing
its alignment with the parent company.

Its corporate mission was also redefined (Adding vitality to life’). Today, HUL is a pre-
eminent corporation and its brands are household names across the country. HUL is
undoubtedly the company that has virtually shaped India’s FMCG market over the decades.
The company has built some of the most successful brands in India and many of its
advertising campaigns have become part of the country’s advertising folklore.

The company operates through two major divisions:

Food and beverages (F&B) and home and personal care (HPC) products.

(i) Food and Beverages Division:

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Within the F&B division, the company markets ice creams. As the Indian branch of Unilever,
the largest ice cream manufacturer in the world, a number of its brands are available in more
than 90 countries. International brands include Carted’ Or, Cornetto, Magnum, Solero and
Vienetta.

Other brands are more regional, such as Kwality-Walls in India; Algida, Langnese, Ola and
Wall’s in Europe; and Ben & Jerry’s, Good Humor and Breyers in the US.
The division also sells tea, of which it markets under seven brands: Red Label, Taaza, Al, 3
Roses, Super Dust, Top Star and Ruby Dust. The company also markets Yellow Label and
Green Label teas and has also launched New Lipton Taaza and FX Tazgi Dust Tea. The
division’s coffee business, comprising Bru Instant Coffee and Deluxe Green Label Roast &
Ground Coffee, is the market leader in India.

Bru Expresso is an innovative coffee pre-mix that delivers creamy, frothy coffee. In order to
strengthen its share of the premium-segment roast and ground coffee market, a new product,
Brooke Bond Green Label Classic, was also launched.

The F&B division also includes the Kissan range of culinary products, which comprises jams,
squashes, tomato ketchups, pureees, and cooking pastes. The company has also launched
sachet packs for jams and squashes to target new users. The business is backed by contract
farming in Punjab and Karnataka.

Overall, beverages and ice creams continued to grow in double digits in 2008-9; the former
driven by sharp price hikes and the latter by healthy volume off take. However, processed
foods slowed down to single digits for the first time since the September 2005 quarter. The
company’s conscious strategy to exit non-core, low profit margin commodity export business
led to a 45 per cent decline in export revenues.

(ii) Home and Personal Care Division:

In the HPC Division, HUL’s hair care brands include Clinic, Sunsilk, Lux and Organics
shampoos and Clinic Plus, Clinic All Clear, Cococare and Nihar hair oils. In the oral care
sector of the division, its portfolio comprises Close- up and Pepsodent toothpastes,
toothbrushes and toothpowders. Close-up Oxy Fresh was launched in 1999.

Another sector of the division is skincare. Hindustan Lever markets Fair & Lovely skin cream
and lotion, the largest selling skincare product in India. The other major skincare franchises
are Pond’s, Vaseline, Lakme and Pears. Additional ranges in the division include colour
cosmetics, for which the company markets the Lakme, Orchids and Elle-18 ranges; and
deodorants and fragrances, including brands such as Rexona, Ivana, Shie, Elle-18 and Axe.

HUL’s brands and people have its unparalleled strengths and they delivered very good results
in 2007-8. For the year 2007, the company achieved an overall turnover growth of 13.3 per
cent; both HPC and the foods businesses grew by 12.3 and 20.2 per cent, respectively. Profit
After Tax (PAT) registered a growth of 14.9 per cent.

While analysing the company’s performance in March 2009, personal care offsets soaps and
detergents’ growth in HPC which increased by 11.5 per cent. Foods went up by 13.2 per cent
and exports were down by 45 per cent, restricting the overall revenue growth to 6 per cent.

Lower input costs aided by cost reduction measures and lower taxes improved profitability
from core operations. Exceptional items in the form of incremental provision for retirement
benefits, restructuring costs and provision for remediation of a site affected bottom line.

Overall volumes declined by 4 per cent on account of destocking at trade level in anticipation
of further price action by the company, consolidation in modern trade and lacklustre
performance by the oral care segment.

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Within the HPC segment, the almost stagnant sales of personal care products (up by 1.9 per
cent y-o-y) affected the price-led growth of 15.8 per cent in the soaps and detergents segment.
Personal care was mainly affected due to the dismal performance of oral care products
(Pepsodent in particular) and lower offtake in the modern trade outlets due to consolidation.

HUL has witnessed downtrading in its personal and fabric wash categories, losing share to the
regional and other national competitors in these price- sensitive categories. The company has
taken corrective actions in terms of reduction in MRP of soaps and increase in grammage of
detergents, along with increased advertising of the same. Going forward, market analysts
expect the competitive pricing in the mass consumption segments to improve volume offtake
and hence improve performance in this segment in the quarters to come.

HUL initiated price hike in August 2010 on soap portfolio Lifebuoy (+ 6.7 per cent), Liril (+
5.2 per cent), Dove (+ 3 per cent), Pears (+ 4 per cent) and Lux (+ 10 per cent). Price increase
initiated to mitigate rise in palm oil price (+ 20 per cent).

Typically raw material costs above 50 per cent (53 per cent in 2009 and 50.7 per cent in
2010). In September 2010, a single process change by introducing plough share mixer (psm)
technology, HUL earned 15,000 tons carbon emission reduction in an year. This is a typical
example of economic advantage of going green strategy.

(iii) Other Businesses:

However, the ‘Other’ business, mainly comprising bottled water, increased by 27.6 per cent
with Pureit becoming a billion brand (l million units) in financial year of 2009 (15 months).
Despite healthy operating profits and lower tax provision during the quarter, the net profit
increased by a meager 3.7 per cent due to exceptional items, namely incremental provision for
retirement benefits, restructuring costs and provision for remediation of a site.

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HUL has acknowledged down-trading as being one of the factors responsible for slower
volume growth and eroding market share in a few categories in first quarter of financial year
of 2009. The management, however, remained confident of being able to drive profitability
and recoup its lost market share by increasing grammage and effecting pricing cuts in mass
brands.

Advertising expenses dropped by 37 bps as a percentage of sales, growing by only 3 per cent y-
o-y HUL’s management, however, pointed out that media spends had increased by 27 per
cent, while below- the-line promotional activities were scaled down.

Media rates for the company have come down, and this will help contain any increases in ad
spends going forward. Other expenses came down by 70 bps, as the company put in place a
number of cost-cutting measures on fixed costs and overheads.

Revenue from personal products rose by only 2 per cent y-o-y Oral care declined the most,
mainly due to the sharp fall in sales of lower-priced SKUs of the Pepsodent brand. Top end
skincare and shampoo segments were negatively affected by the slowdown in organized retail.

A mild winter also hurt sales of winter-care creams. Personal products’ Earnings Before
Interest and Tax (EBIT) margin was also down despite lower raw material prices, as sales mix
turned adverse as high-margin oral care and skin and hair products had lower sales
contributions.

4. Project Report on the Core Competency and Business Strategy of HUL:

Core competence is clearly an important concept, and HUL seems to have been able to make it
work for itself in the past. But for most of its counterparts in India, it is like a mirage:
something that from a distance appears to offer hope in a hostile environment, but that turns
to sand when approached.

HUL’s strength was tested in the Indian market between 2002 and 2004. Rising to the
challenge, the company realigned its operations and strategy and regained its top slot with
more than 30 per cent growth in 2008.

There are three distinct paths to developing a competence, each with its own benefits and
drawbacks; and sustaining a core competence requires just as much rigour as developing one
in the first place. To mount a winning competence-based strategy, it is not enough to rely on
broad generalizations like ‘marketing’, ‘product development’, or ‘service’.

That means a consumer goods company like HUL with a reputation for marketing excellence
assumed during 2002-4 that it was superior in all aspects of marketing. In reality, the
company is not particularly skilled at pricing, is only average at channel management, and has
made some serious errors resulting in a string of new product failures. Its true competence is
much narrower: demand stimulation through image-based advertising.

Companies must define their core competences with precision if they are to use them to their
full advantage. Basically, a core competence is a combination of complementary skills and
knowledge bases embedded in a group or team that results in the ability to execute one or
more critical processes to world-class standard. In principle, a world-class competence must
steer the power structure in a company.

The keeper of the skill drives all the company’s major decisions, even in unrelated functions.
At Procter & Gamble, for instance, the core consumer marketing skill resides in the
advertising department (the company’s name for brand management). Brand managers exert
a dominant influence on all decisions throughout the company.

In confronting the challenges of the past ten years since 2000, HUL began by reshaping its
product portfolios through mergers and acquisitions, with the aim of becoming a global leader
in a few core categories. Then HUL focused on its core brands, where it concentrated
marketing and other resources, and eliminated weaker brands. Eventually, strengthened
brands made it more difficult for retailers to insist on price cuts.
In the coming years, success will require ever sharper capabilities in the four main areas that
sustain consumer goods companies: brand marketing, sales, innovation, and supply chain.
Average performance and best practices have improved spectacularly in each area compared
with a decade ago.

Tomorrow’s winners will be companies that not only adopt and roll out best practices quicker
than others, but also introduce new approaches, often borrowed from other industries.

Although HUL views innovation as vital, few are happy with what they have accomplished in
this respect, especially compared with pharmaceutical and consumer electronics companies.

Pharmaceutical and consumer electronics companies concentrate on the small percentage of

the population that can afford expensive, Western-style goods, leaving local competitors to
target the overwhelming majority of consumers with modest means. The locals have the edge
in supplying neighbourhood stores, which global companies find harder to reach.

The former have held off the big players by selling some products at very low prices while
nonetheless generating profits. In this respect, however, HUL scripted several success stories
in the rural market. The latest in 2010 is the going green strategy of reducing CO 2 footprint by
introducing psm technology.

In modern marketing, consumers opt for experience, not products and services, and brands
continue to rule. So the management can concentrate entirely on dealing with customers—the
main engines of growth—by outsourcing production and logistics.

Indeed, companies like HUL find that they can think more creatively about developing new
products and stretching their brands into new categories when they no longer have to worry
about keeping factories occupied. This approach would also promote a great leap in a
company’s return on capital employed.

5. Project Report on the Innovative Campaigns of HUL:

In 2005-7, the employee of HUL was undertaking a promotional exercise in the rural areas—
Madhya Pradesh, Bihar and Orissa, for its utensil- cleansing detergent bar Vim under the
campaign, ‘Vim Khar Khar Challenge’, visiting rural towns and demonstrating how vessels are
cleaned with Vim.

For the purpose, HUL is educating the rural masses on the . . . “Vim Ghar Ghar Challenge” TV
commercial by conducting live demonstrations about vessel cleaning. Company’s aim was to
tap the growth rate of the billion scouring bar market.

The HUL had, in fact, earned the distinction of becoming one of the few Indian companies to
tap the country’s vast rural population so extensively and now around 50 per cent of its
turnover came from the rural markets.

Product Launches: A Regular Affair:

The 1960s and 1970s witnessed a series of new product launches—Anik (clarified butter, in
the early 1960s), Sunsilk (shampoo, in 1964), Rin (detergent bar, in 1969), Clinic (shampoo,
in 1971), and Liril (bathing soap, in 1974). In 1975, HUL entered the oral care market with gel
toothpaste called Close-Up. In the late- 1970s, it set up 70 medium- and small-scale factories
in the rural areas for manufacturing soaps and detergents.

Amongst the over 110 brands that it owns, HUL terms the 30 best selling ones as Figure 12.1:
Lux campaign featuring Shahrukh ‘Power Brands’—a title well deserved. This is because
brands such as Fair & Lovely, Pond’s, Pepsodent, Close-Up, Sunsilk, Clinic, Lakme, Surf, Rin,
Wheel, Lifebuoy, Lux, Breeze, Vim, Kwality Brooke Bond, Lipton, Annapurna, Kissan, and
Dalda have become an integral part of almost every Indian household.

Interestingly many of these products, and especially those in categories like fabric wash,
personal wash and beverages, derive over 50 per cent of their sales from rural areas. HUL’s
efforts to build a market for its products in these areas had started way back in the days it
began operations in the country. By 2010, the rural markets had become a destination for
FMCG marketers like never before.

6. Project Report on the Spread of HUL to Villages:

(i) Project Streamline:

HUL adopted a phased approach in order to meet its 16 million village household target. It
decided to address the key issues related to availability awareness and overcoming prevalent
attitudes and habits of rural consumers. Penetrative pricing was also an important factor that
was addressed.

This project was to be carried out with the help of a rural distributor who had 15-20 rural sub-
stockists connected to him in the villages. The sub-stockists would drive distribution in the
neighbouring villages using unconventional means like bullock-carts and tractors. As part of
Project Streamline, HUL aimed at providing higher quality services to consumers in terms of
‘frequency’, ‘full-line availability’ and ‘credit’. As a result, the number of HUL brands and the
Stock Keeping Units (SKUs) stocked by village retailers increased.

(ii) Project Bharat:

HUL carried out its direct marketing operations in the high potential districts of the country
to attract first-time users. Under Project Bharat, HUL vans visited villages and sold low unit-
price packs each of its detergents, toothpastes, face creams and talcum powders for Rs. 5 and
Rs. 15. During the sale, company representatives took the help of a video show to explain to
the people how to use these products.

The villagers were also educated about the superior benefits of using the company’s products
as compared to their current habits. This was very helpful for HUL as it created awareness
about its product categories and the availability of the affordable packs.

Under this, the company provided self-employment opportunities to villagers through Self-
Help Groups (SHG). The SHGs operated like direct- to-home distributors wherein groups of
15-20 villagers who were below the poverty line (people whose monthly incomes was less than
Rs. 750 per month) could take micro-credit from banks.
Using this money, villagers could buy HUL’s products and sell them to consumers, thereby
generating income as well as employment for themselves. This activity also helped the
company increase the reach of its products.

By the end of 2009, HUL had covered 2.3 million households through Project Bharat. The
campaign was successful in increasing penetration levels, usership and the awareness about
the company’s products in the districts targeted. This also helped HUL grow at a better pace
than the industry.

In the shampoo market, while the urban growth rate was only 4-5 per cent, HUL’s rural
growth was at 15-16 per cent. Similarly, in the skincare market the urban growth was only at
7-8 per cent whereas it was 14 per cent in the rural markets.

(iii) Community Dental Health Campaign:

HUL launched a nationwide Community Dental Health Campaign in association with the
Indian Medical Association (IMA), to promote its toothpaste Pepsodent.

The Community Dental Health Campaign’s vision was ‘to make every person in urban and
rural India adopt a good oral care regime’. Company sources placed the total investment in
the programme at between Rs. 100-Rs. 200 million.

The Community Dental Health Campaign was carried out for a period of three years and
targeted 100 million people across rural India. The IMA- Pepsodent project increased the
overall dental care penetration in the country to 65 per cent from the prevailing 48 per cent in
2010.

(iv) Project Millennium:

HUL planned ways to tap the chai ki dukan (tea vendors). It provided affordable tea packets
that were suitably blended to appeal to the rural taste of kadak chai (strong tea). The company
test-marketed a specially designed product, chai ki goli (fully soluble tea balls) that was
dropped in a boiling milk-water combination. These were priced very attractively at four for a
rupee.
(v) Rural Communication Programme:

Inspired by the success of its earlier ventures, HUL went on to participate in a rural
communication programme called Grameenon ke Beech (Amidst Villagers) in August 2001. It
involved setting up company stalls, conducting product briefings and demonstrations,
organizing interactive games, lucky draws, magic shows and screening hit movies interspersed
with product commercials.

(vi) Project Shakti:

In late 2001, HUL launched a six-month project called Project Shakti in Andhra Pradesh. The
project sought to create a sustainable partnership between HUL and its low-income rural
consumers by providing them access to micro-credit; an opportunity to direct that credit into
investment opportunities as company distributors; and reward them for growth and
enterprise through shared profits.

During 2001, the rural cell’ within HUL worked closely with SHGs, NGOs and governmental
bodies in Andhra Pradesh to put in place a comprehensive experiment in training the SHGs.

(vii) Tapping the Village Market:

HUL decided to highlight concepts of health and hygiene in rural areas to support the
relaunch. The Lifebuoy soap was given a completely new look (size and shape), formulation,
fragrance, lather profile and was repositioned as a family soap rather than a male soap.

The company introduced several variations of the product including Lifebuoy Active Red,
Lifebuoy Active Orange, Lifebuoy International Plus and Lifebuoy International Gold.

7. Project Report on the Combating Recession Faced by HUL:

HUL’s volume disappoints, reporting a 4 per cent decline during the March 2009 quarter,
while profit growth is ahead of estimates on account of sharper margin expansion. While the
FMCG business has grown by 11.8 per cent to reach Rs. 37.2 billion, export revenues have
declined by 45 per cent to stand at Rs. 2.2 billion.
Within FMCG, the soaps and detergents business has grown by 15.8 per cent and the foods
business by 12.6 per cent. The personal products category has disappointed with a revenue
growth of just 1.9 per cent. Oral care in particular has seen a decline, while the skincare
category has got impacted by high base effect and mild winter.

While part of HUL’s volume decline can be attributed to 4-6 days of destocking (in soaps and
detergents in particular), part of the volume decline is also on account of HUL’s strategy of
portfolio premiumization and thereby vacating certain mass segments. This was reflected in
the improved margin profile too.

Most analysts believe that HUL’s strong and professional management will take the necessary
steps and strategize to continue its growth path. HUL has one of the highest return ratios in
the industry. The company has limited capex plans going ahead.

The sales growth for both Marico and GSK Consumer Healthcare remained robust in the
March 2009 quarter. Volume growth for Marico remained steady (8 per cent growth in the oil
brand Parachute, 5 per cent in Saffola cooking oil and 3 per cent y-o-y growth in the
December quarter). For GSK, volume growth was very high at ~ 20 per cent (out of this ~ 6
per cent came from growth in international business and pipeline inventory of new products).

Both Marico and GSK benefitted from new product launches. In the past few quarters, Marico
launched Saffola Cholesterol Management, Saffola Diabetic, Parachute Advanced (revitalizing
hot hair oil), Saffola Zest and Saffola Rice. GSK too introduced three new products in the past
few quarters (Horlicks Nutribar, Dood, Activ Grow).

These new product launches are likely to propel incremental sales growth for the company. In
fact, GCPL’s soap volumes are likely to grow faster than HUL’s, owing to downtrading in
favour of GCPL’s value-for-money (VFM) platform and the successful launch of Godrej No. 1-
Strawberry and Walnut.
8. Project Report on the Competitors of HUL:

(i) Colgate-Palmolive Limited:

Colgate is promoted by Colgate-Palmolive USA, which has a 51 per cent stake in the Indian
subsidiary The Company’s flagship product, Colgate Dental Cream, is the largest selling
toothpaste in India with an estimated market share of over 30 per cent in 2010. The company
has over 45 per cent share in the Rs21 billion oral care markets.

Colgate-Palmolive also has a presence in the personal products category with brands such as
Palmolive (soaps, shaving products) and Charmis (face cream). The company has
discontinued the production of toilet bar soaps (Palmolive) from third quarter of financial
year 2006, which it now imports through one of the subsidiaries of its parent company.

(ii) P&G Hygiene:

P&G Hygiene and Healthcare (PGHH) is a 69 per cent subsidiary of the FMCG major P&G,
USA. The company dominates both hygiene and healthcare segments backed by strong
brands, Vicks in the anti- cold segment and Whisper in the feminine care segment (40 per
cent market share). The company’s parent has two other 100 per cent subsidiaries in India
which have well known brands in the shampoos (Head & Shoulders, Pantene, Rejoice) and
detergents space (Ariel, Tide).
Earlier PGHH used to undertake contract manufacturing for its parent’s detergent portfolio in
India, which it has discontinued. P&G, USA recently acquired the shaving products major,
Gillette, and has dethroned Unilever to take the top slot in the global FMCG space.

(iii) Marico Industries:

Marico is a leading Indian group in consumer products and services in the beauty and
wellness space. It has products and services in haircare, skincare and health foods. Marico’s
brands and their extensions occupy leadership positions with significant market share in all
categories.

The company is present in the skincare services segment through Kaya skincare clinics (44
clinics) in India and the UAE, and also through the Sundari range of Ayurvedic skincare spa
products in the US and other countries. Marico’s branded products are also present in
Bangladesh, other SAARC countries and the Middle East.

Marico has been growing both organically and inorganically. It acquired Nihar, Oil of Malabar
and Manjal herbal soap brand in India. It also acquired a clutch of brands namely, Camelia,
Aromatic and Magnolia in Bangladesh.
(iv) Nirma Limited:

Nirma sells over 8, 00,000 tons of detergent products every year and commands a 35 per cent
share of the Indian detergent market, making it one of the world’s biggest detergent brands.
The brand promotion efforts are complemented by Nirma’s distribution reach and market
penetration through a country-wide network of 400 distributors and over 2 million retail
outlets, making Nirma products available from the smallest rural village to the largest metro.

The operating division of Nirma Industries Limited (NIL) owns inter alia the trademark
‘Nirma’, ‘Nima’ and others, as well as limestone mining rights and a unit to manufacture
soapstone.

(v) Gillette India:

Gillette India is the 52 per cent subsidiary of the US shaving Major Gillette USA. The company
came back into the black in 2003 after a spate of restructuring in 2001 and 2002. Gillette
hived off its battery manufacturing plant (Duracell) at Manesar and also saw cash infusion
from the parent, which helped it restructure and pay of all its debt. It is now a focused shaving
product major, which also markets the Duracell range of batteries.
(vi) ITC:

ITC is not a pure-play FMCG company, since cigarettes are its primary business. It is
diversifying into non-tobacco FMCG segments like food, personal care, paper products, hotels
and agribusiness to reduce its exposure to cigarettes.

ITC has over the last 100 years established a very close business relationship with the farming
community in India and is currently in the process of enhancing the Indian farmer’s ability to
link to global markets through the e-Choupal initiative, and produce the quality demanded by
its customers. This long-standing relationship is being leveraged in sourcing best-quality
agricultural produce for ITC’s foods business.

The foods business extends to four categories in the market ready-to-eat, staples,
confectionery and snack foods. In order to assure consumers of the highest standards of food
safety and hygiene, ITC is engaged in assisting outsourced manufacturers in implementing
world-class hygiene standards through HACCP certification.

The unwavering commitment to internationally benchmarked quality standards has enabled

ITC to rapidly gain market standing in all its six brands: Kitchens of India, Aashirvaad,
Sunfeast, Mint-o, Candyman and Bingo!
ITC launched an exclusive line of fine fragrances under the Essenza Di Wills brand in mid-
2005. In September 2007, it launched Fiama Di Wills, a premium range of personal care
products comprising shampoos, conditioners, shower gels and soaps.

Between February and June 2008, it expanded its personal care portfolio with the launch of
Vivel Di Wills and Vivel brands. Vivel Di Wills, a range of soaps, and Vivel, a range of soaps
and shampoos, cater to the specific needs of a wide range of consumers. In the popular
segment, ITC launched a range of soaps and shampoos under the brand name Superia.

(vii) Britannia Industries Limited:

Britannia Industries Limited is an Indian company based in Kolkata and famous for its
Britannia and Tiger brands of biscuits, which are highly recognized throughout the country.
Britannia is India’s largest biscuit firm, with an estimated 38 per cent market share.

The company’s principal activity is the manufacture and sale of biscuits, breads, rusks, cakes
and dairy products. Some of the popular biscuit brands include MarieGold, Treat, Maska
Chaska, Good Day, Milk Bikis, Little Hearts and Pure Magic.
Between 1998 and 2001, the company’s sales grew at a compound annual rate of 16 per cent
and operating profits reached 18 per cent. More recently, the company has been growing at 27
per cent a year, compared to the industry’s growth rate of 20 per cent. At present, 90 per cent
of Britannia’s annual revenue of Rs2, 200 crore comes from biscuits.

(viii) Nestle India:

Nestles relationship with India dates back to 1912, when it began trading as The Nestle Anglo-
Swiss Condensed Milk Company (Export) Limited, importing and selling finished products in
the Indian market.

The company continuously focuses its efforts to better understand the changing lifestyles of
Indians and anticipate consumer needs in order to provide taste, nutrition, health and
wellness through its product offerings.

The culture of innovation and renovation within the company and access to the Nestle
Group’s proprietary technology/brands expertise and the extensive centralized R&D facilities
give it a distinct advantage in these efforts. It helps the company create value that can be
sustained over the long term by offering consumers a wide variety of high-quality, safe food
products at affordable prices.

Nestle India manufactures products of international quality under internationally famous

brand names such as Nescafe, Maggi, Milkybar, Milo, KitKat, Bar One, Milkmaid and Nestea.
In recent years the company has also introduced products of daily consumption and use such
as Nestle Milk, Nestle Slim Milk, Nestle Fresh ‘n’ Natural Dahi and Nestle Jeera Raita.
(ix) Godrej Consumer Products Limited:

Godrej Consumer Products Limited (GCPL) is amongst the well known mid-cap companies in
the Indian FMCG space with a presence in the personal care, haircare and fabric care
categories and top-of-the-mind brands such as Cinthol, Fairglow, Godrej No. 1 (soaps), and
Ezee liquid detergent, to name a few. The company bought over the Snuggles brand in the
child nappy segment in 2003.

It acquired 100 per cent ownership of the UK-based Keyline Brands, which owns several
international brands and trademarks in Europe, Jordan, Australia and Canada. In July 2006,
GCPL entered into an agreement to acquire the South African hair colour business of Rapidol,
UK, as well as its subsidiary Rapidol International, which had a combined turnover of Rs 330
million in 2005.

(x) K.S. Oils Limited:

K.S. Oils (KSO), established in 1985 with a crushing capacity of 1,475 metric tons per day of
mustard seeds is one of the largest manufacturers of mustard oil in India. It enjoys a 4.5 per
cent share of the total mustard oil market with a dominant 25 per cent market share of
branded mustard oil market. The company accounts for 40 per cent market share in north-
east India.
KSO’s product portfolio also comprises refined oils, vanaspati and non- edible solvent oil.
KSO is one of the largest and regular supplier of edible oils to the Indian defence organization
and a leading exporter of soyabean/ rapeseed (mustard) meal to foreign buyers.

(xi) Dabur India Limited:

Dabur India Limited has marked its presence with some very significant achievements and
today commands market leadership. Its story of success is based on dedication to nature,
corporate and process hygiene, dynamic leadership and commitment to partners and
stakeholders.

The results of its policies and initiatives speak for themselves:

a. Leading consumer goods company in India with a turnover of Rs. 2,233.72 crore (financial
year 2007).
b. Two major strategic business units (SBU)—Consumer Care Division (CCD) and Consumer
Health Division (CHD).

c. Three subsidiary group companies—Dabur Foods, Dabur Nepal and Dabur International,
and three step-down subsidiaries of Dabur International (Asian Consumer Care in
Bangladesh, African Consumer Care in Nigeria and Dabur Egypt).

d. 13 ultra-modern manufacturing units spread around the globe.

e. Products marketed in over 50 countries.

f. Wide and deep market penetration with 47 C&F agents, more than 5,000 distributors and
over 1.5 million retail outlets all over India.

g. CCD deals with FMCG products relating to personal care and health care.

Leading brands include:

Dabur:

Healthcare brand

Vatika:

Personal care brand

Anmol:

Value-for-money brand
Hajmola:

Digestive products brand

a. Dabur Amla, Chyawanprash and Lai Dant Manjan—Rs. 100 crore turnover each.

b. Vatika hair oil and shampoo—High growth brand.

c. Strategic positioning of honey as a food product, leading to market leadership (over 40 per
cent) in the branded honey market.

d. Dabur Chyawanprash, the largest selling Ayurvedic medicine with over 65 per cent market
share.

e. Leader in herbal digestives with 90 per cent market share.

f. Hajmola tablets command over 75 per cent market share of the digestive tablets category.

g. Dabur Lai Tail tops the baby massage oil market with 35 per cent of total share.

(xii) CavinKare:

CavinKare Private Limited offers beauty products, including hair, skin and personal care
products; food products; and home essentials. The company also offers packaging solutions to
confectionery, cosmetics, detergent, soap, pharma, pest control/insecticide, food, and
beverage industries. In addition, it operates salons offering personal styling and beauty
solutions and spa treatments to men, women and children.

CavinKare offers its products in India and internationally. The company was founded in 1983
and is based in Chennai. Started as a single product company, CavinKare’s products are born
out of a keen understanding of consumer needs. They have built in India a consciousness to
use branded cosmetics made from natural herbs. Products like Nyle, Fairever and Spinz are
established brands in the Indian cosmetic market.
CavinKare popularized the concept of shampoo sachets with its Chik brand, which
restructured the packaging trend in 1983. The company had a turnover of over Rs. 5, 000
million in 2007-8. It has an employee strength of 976, an all-India network of 1,300 stockists
catering to about 25 lakh outlets. CavinKare’s astute professionalism, innovative products and
consistent quality are results of its significant corporate practices.

(xiii) Johnson & Johnson:

Johnson & Johnson Consumer Products Division is one of the leading FMCG manufacturers
in India. It is also among the most consistent and successful enterprises not just in the J&J
worldwide group of companies, but also in India. Johnson & Johnson Consumer Products
Division has been growing steadily over the last few years, and is one of the few companies in
the Indian market to grow at extremely healthy levels.

The consumer products division owes its success to the strength of its brands, and the loyalty
they enjoy from consumers, a strong sense of values driven from the credo, and an
environment which sets the toughest standards of leadership. It currently has brands Clean
and Clear, Stayfree, Carefree, Shower to Shower powder, and a range of baby products.

9. Project Report on the Problems Faced by HUL:

(i) Recession and Inflation:

The biggest problem to hit the FMCG industry was the current recession and decreasing
inflation. As per the data on 19 March 2009, inflation hit its lowest levels and the markets
started tumbling with the FMCG sector taking the lead. The BSE Sectoral Index fell by close to
1 per cent to 1,906.24.

HUL, which surged by close to 8 per cent in the previous week, plunged by close to 3 per cent
to hit Rs. 226 soon after the inflation data was released by the government. FMCG major
Marico Limited witnessed a fall of 3.39 per cent to Rs. 59.80, while ITC fell by 0.56 per cent to
Rs. 168.50 on the BSE. Dabur India too witnessed a fall of over 1 per cent to Rs. 93.20.

However, during his visit to India Paul Polman, group chief executive officer of Unilever Pic.,
commented that ‘recession could help firms such as Unilever. Consumers postpone buying
cars, televisions and that frees up a lot of money to spend on everyday needs.

HUL don’t see personal care or food markets go down substantially. Hence, in fact, beneath
the surface problem of recession lies an untapped opportunity for HUL. Everything depends
on how it taps the opportunity. This is further worsen by the escalation of input costs in 2010.

(ii) Price Wars:

One of the major problems faced by HUL is the cutting price war in the FMCG industry.
Crowded by too many players and cut-throat competition, reduction in price is being seen as
one of the aggressive and easy ways to churn the market. With global recession playing havoc
with the economy, every sector is going through a rough patch, including the once promising
retail sector.
Retailers like Big Bazaar and More started renegotiating deals with FMCG companies like
HUL and P&G to keep the cash registers ringing by selling cheaper products in an otherwise
slowing retail environment. This means that FMCG players will have to give higher margins to
retailers as compared to previous years.

Newer packaging techniques will be introduced to help retailers, which could minimize
operational cost in terms of logistics and shelf management.

HUL, ITC and P&G have already started a price war to grab a larger chunk of the consumer’s
wallet and obviously market share. HUL has undergone a strategy change by abandoning
premium positioning strategy to take up cost cutting to compete with P&G. These price cuts
are causing profit margins to shrink, making difficult to sustain the previous profit margins
without affecting product quality.

(iii) Increased Competition:

Given its bigger portfolio HUL faces challenges from all fronts. For instance, in the shampoo
market Dabur India has upped the ante by introducing new variants of Vatika with specific
benefits. The move will propel the company into the same league as other big-ticket
multinational players HUL and P&G, which already offer different variants of anti-dandruff
shampoo brands. HUL faces stiff competition in the detergents segment too from local players
like Ghadi of Kanpur Trading Corporation and CavinKare.

(iv) Changing Customer Preferences:

Over time there has been paradigm shift in consumer taste and preferences. There is dire
need for constant innovation to address changing customer needs such as health
consciousness and increased utility of products.

(v) Capacity Over-utilization:

Another problem that HUL faces is that of capacity over-utilization which plagues the
industry today. The FMCG industry is extremely competitive and consumers have high
demands on price and quality. They are increasingly disloyal to brands, quickly choosing a
different brand or product if it appears better.
The recent rise of private-label goods has led to increased competition within the FMCG
industry. A focus on bringing high volume products at low prices to the market has placed
greater demands on all actors. Producers must differentiate their products and quickly bring
them to the market.

This has spurred the rise of numerous product variants and a frequent replacement of
products in order to achieve best positioning in the current market scenario. Manufacturers
must adapt and be able to produce products in smaller batch sizes to win the battle on the
shelf It is necessary to have the freshest product.

Additionally, demand for FMCG can be very seasonal. Therefore manufacturers must be very
flexible to produce different goods. Quick installation of a production line is necessary to
achieve this.

(vi) Employee Surplus:

HUL’s employee surplus led it to cut managerial jobs. In February 2008, it cut about 50
managerial jobs and its parent company announced a reduction of 20,000 jobs worldwide
over the next four years.

(vii) Purchase-on-Impulse Products:

Impulse-purchase products like chocolates, toffees, colas, and ice creams follow the Say’s Law
which states that ‘supply creates demand’. This implies that availability is the most critical
factor for these products to be sold and consumed. Therefore transport and logistics for these
products becomes very important.

HUL has only one product in this impulse-purchase category—Kwality- Walls (ice cream). It is
next to Amul in this FMCG segment. To increase the brand’s sale and market share,
availability, visibility and consumer mindshare have to be increased and improved.

10. Project Report on the SWOT Analysis of HUL:

Strengths:
a. Strong and well-differentiated brands with leading share positions. Brand portfolio includes
both global Unilever brands and local brands of specific relevance to India.

b. Consumer understanding and systems for building consumer insight.

c. Strong R&D capability well linked with business.

d. Financial resources.

e. Integrated supply chain and well-spread manufacturing units.

f. Distribution structure with wide reach, high quality coverage and ability to leverage scale.

g. Access to Unilever global technology capability and sharing of best practices from other
Unilever companies.

h. Productive and professionally trained the manpower resources.

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

j. Consumer understanding and systems for building consumer insight.

k. Project Shakti helped HUL create brand awareness and reach extensively into rural India.

l. Well placed to take advantage of growth in rural India and lower strata of the society
through ‘shakti’.

m. It could look at introducing products (like margarine) from its parent company in order to
cater to changing consumer tastes and opportunities in the food sector.
n. It can be a leader in exports by positioning itself as a sourcing hub for Unilever companies
in various countries.

Weaknesses:

a. Increased consumer spends on education, consumer durables, entertainment, and travel

resulting in lower share of wallet for FMCG.

b. Limited success in changing eating habits of people.

c. Complex supply chain configuration, unwieldy number of SKUs with dispersed

manufacturing locations. HUL already has taken steps to minimize the same.

d. Price positioning in some categories allows for low price competition, like Amul captured
Kwality’s market.

e. High social costs (subsidised housing, foodgrains and firewood, health and other welfare
measures) in the plantation business.

f. Competitors focusing on a particular product and eating up HUL’s share like Nirma
focusing on soaps and detergents.

Opportunities:

a. Market and brand growth through increased penetration, especially in rural areas.

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

c. Potential outsourcing business in India.

d. Upgrading consumers through innovation to new levels of quality and performance.

e. Emerging modern trade can be effectively used for introduction of more upscale personal
care products.

f. Growing consumption in out-of-home categories.

g. Position HUL as a sourcing hub for Unilever companies in various countries.

h. Leveraging the latest IT technology.

i. Growing consumer base due to increasing income levels and new consumers from lower
strata of the society.

j. Untapped market in branded Ayurvedic medicines and other such consumer products.

k. Opportunity in the food sector: changing consumer tastes.

l. Expand horizon to more countries.

Threats:

a. Low priced competition now present in all categories.

b. Grey imports.

c. Spurious/counterfeit products in rural areas and small towns.

d. Changes in fiscal benefits.

e. Unfavourable raw material prices in oils, tea, and so on.

f. Unfavourable raw material prices due to inflation reducing profitability.

g. Heavy onslaught of competition in the core categories from emerging players like ITC will
result in higher advertising expenditure.

h. Reduction in real income of consumers due to high inflation.

i. FMCG dealing with overcapacity utilization.

j. Health conscious environment friendly customers.

k. Scarce water problem affecting demand for detergents and related goods.

11. Project Report on the PEST Analysis of HUL:

PEST analysis is used to identify the external forces affecting HUL. This is an analysis of
HUL’s political, economic, social and technological environment.

Political:

The first element of a PEST analysis is the study of political factors. Political factors influence
organizations in many ways. They can create advantages and opportunities, and also place
obligations and duties on businesses.

Political factors include the following types of instruments:

a. Legislation such as minimum wage laws or anti-discrimination laws

b. Voluntary codes and practices, market regulations

c. Trade agreements, tariffs or restrictions

d. Tax levies and tax breaks

e. Type of government regime, e.g. communist, democratic, dictatorship.

Non-conformance with legislative obligations can lead to sanctions such as fines, adverse
publicity and imprisonment. Ineffective voluntary codes and practices will often lead to
governments introducing legislation to regulate the activities covered by the codes and
practices.

Various political factors that have affected HUL are:

a. Stimulus package for the FMCG sector implemented in March 2009.

b. Various taxes and levies imposed on commodities that have a cascading effect on prices.

c. Very limited international trade regulations and restrictions; Indian economy deregulated
since 1991.

d. Market committee legislation in various states restricts free movement of agricultural

produce and restricts the firm from directly buying from farmers.

e. India’s food law restricts innovation and needs to be brought in line with international
Codex.

f. Fully acquired the government-owned Modern Foods in 2002.

Economic:

The second element of PEST analysis involves a study of economic factors. All businesses are
affected by national and global economic factors. National and global interest rates and fiscal
policies will determine the economic conditions. The climate of the economy dictates how
consumers, suppliers and other organizational stakeholders such as suppliers and creditors
behave within society.

An economy undergoing recession will have high unemployment, low spending power and low
stakeholder confidence. Conversely a ‘booming’ or growing economy will have low
unemployment, high spending power and high stakeholder confidence.

A successful organization will respond to economic conditions and stakeholder behaviour.

Further, organizations will need to review the impact economic conditions have on their
competitors and respond accordingly.

In this globalized world, organizations are affected by regional/national economies

throughout the world and not just in the countries in which they are based or operate from.
For example, a global credit crunch originating in the USA contributed towards the credit
crunch in the UK in 2007-8.

Cheaper labour in developing countries affects the competitiveness of products from

developed countries. An increase in visa fee draught in the USA will affect the share price of IT
stocks, or draught weather conditions in India may affect the price of tea bought in an English
cafe.

A truly global player has to be aware of the economic conditions across all borders and needs
to ensure that it employs strategies that protect and promote its business through
unfavourable economic conditions.

Taking account of the current scenario looming over the world, the various
economic factors affecting HUL are:

a. Economic slowdown might affect HUL sales.

b. Positive growth prospects in developing and emerging economies.

c. 4 per cent reduction in Cenvat tax in the recent stimulus package by Government of India.
d. Exchange rates stable; depend on the global economic condition.

e. In the present scenario, the Indian economy is on a bullish run.

f. Unfavourable raw material prices of oils, tea, commodities reducing profitability.

Social:

The third aspect of PEST focuses on forces within society such as family, friends, colleagues,
neighbours and the media. Social forces affect our attitudes, interests and opinions. They
shape who we are as people, the way we behave and ultimately what we purchase.

For example in the UK, people’s attitudes towards their diet and health are changing. As a
result the country is seeing an increase in the number of people joining fitness clubs and a
massive growth in the demand for organic food.

Products such as Wi Fit attempt to deal with society’s concern about children’s lack of
exercise. In India, there are growing awareness for sustainable development and conserve our
natural resources. HUL thus implemented ‘Go Green’ strategy in 2010 and reduced
CO2 footprint by 15,000 tons per year in the detergent manufacturing unit.

Population changes also have a direct impact on organizations. Changes in the structure of a
population will affect the supply and demand of goods and services within an economy.
Falling birth rates will result in decreased demand and greater competition as the number of
consumers fall.

Conversely an increase in the global population and world food shortage predictions are
currently leading to calls for greater investment in food production. Due to food shortages
African countries such as Uganda are now reconsidering their rejection of genetically
modified foods.

In summary, organizations must be able to offer products and services that aim to
complement and benefit people’s lifestyle and behaviour. If organizations do not respond to
changes in society they will lose market share and demand for their product or service.
Hence the social factors that affect HUL are:

a. With more than a billion consumer base, India offers good growth prospects.

b. Growing awareness in rural India and higher disposable income.

c. Good growth prospects in tier I and tier II cities for FMCG industry.

d. Growing consumption in out-of-home categories.

e. Spurious/counterfeit products in rural areas and small towns.

f. Change of eating habits of people; consumers have become more health conscious.
Increased consumer spends on education, consumer durables, entertainment, travel, resulting
in lower share of consumer’s budget for FMCG products.

g. Fashion and hypes.

Technological:

Unsurprisingly the fourth element of PEST is technology. Technological advances have greatly
changed the manner in which businesses operate. Organizations use technology in many
ways.

They have:

1. Technology infrastructure such as the internet, intranet and other information exchange
systems including telephone.

2. Technology systems incorporating a multitude of CRM and ERP software to help manage
the business.
3. Technology hardware such as mobile phones, laptops, desktops, Bluetooth devices,
photocopiers and fax machines which transmit and record information.

Technology has created a society which expects instant results. The technological revolution
has increased the rate at which information is exchanged between stakeholders. A faster
exchange of information can benefit businesses as they are able to react quickly to changes
within their operating environment.

However the ability to react quickly also creates extra pressure as businesses are expected to
deliver on their promises within ever-decreasing time scales. For example, the internet is
having a profound impact on the marketing mix strategy of organizations. Consumers can
now shop 24 hours a day from their homes, workplaces, and internet cafe’s and via 3G phones
and cards.

The pace of technological change is so fast that the average life of a computer chip is
approximately six months. Technology is utilized by all age groups. Children are exposed to
technology from birth and a new generation of technology-savvy pensioners, known as ‘silver
surfers’ has emerged. Technology will continue to evolve and impact consumer habits and
expectations organizations that ignore this fact face extinction.

The technological factors affecting HUL are:

a. Leveraging the latest IT technology; industry focus on technological effort.

b. SAP implementation started in 2006 across HUL.

c. New inventions and development; upgrading consumers through innovations to new levels
of quality and performance.

d. Rate of technology transfer.

e. Access to Unilever global technology, capability and sharing of best practices.

f. Life cycle and speed of technological obsolescence.

g. Energy use and costs: need to use renewable sources of energy to protect the environment
and natural resources.

12. Project Report on the Financial Positions of HUL:

For the year 2007, HUL achieved an overall turnover growth of 13.3 per cent; both HPC and
foods businesses grew by 12.3 per cent and 20.2 per cent, respectively. Profit after Tax
registered a growth of 14.9 per cent. Earnings per share for the year 2007 at Rs8.73 reflect a
3.8 per cent growth in net profit (after exceptional items).

The Board of Directors recommended a final dividend of Rs. 3 per share. The total dividend to
the shareholders for the year 2007 stood at per share, including an interim dividend of per
share paid in August 2007 and Rs. 3 per share paid in November 2007 as Special Platinum
Jubilee Dividend to commemorate the company’s 75 years of operations in the country.
Turnover, net of excise, in respect of continuing businesses increased by Rs 1,614 crore and
was 13.3 per cent higher than the previous year. This increase was from more volumes sold,
better mix of products, and selective price increases effected during 2008.
 Now the company is struggling to maintain its leadership and sales has recorded negative
growth in 2010.

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