FAST MOVING CONSUMER GOODS (F IN RURAL INDIA

A descriptive case study is a puzzle that has been solved. It provides the reader an opportunity to know how exa sector removed the hurdles they were facing. The descriptive case study has enough information in it that reade information could answer the questions like what the problem was and what thinking and analyzing process wa with the said solution? BENEFITS OF STUDYING DESCRIPTIVE CASE STUDY 1. 2. 3. 4. 5. Good source of ideas about behavior Good opportunity for innovation Good method to study rare phenomena Good method to challenge theoretical assumptions Good alternative or complement to the group focus of psychology

FAST MOVING CONSUMER GOODS (FMCG) IN RURAL INDIA What Rural Means?

Marketers today define rural as people living a different lifestyle as opposed to that of those who have settled in basically, a mindset. Those who possess it are rural and those who do not, are urban.

FMCG recognize rural India by certain characteristics. These are: low population numbers, low median income electricity, communications], and agrarian rather than industrial activity. Such rural areas are within the sphere metros. This influence determines their aspiration levels and their viability as markets for many FMCG compan What are FMCG Goods?

We regularly talk about things like butter, potato chips, toothpastes, razors, household care products, packaged know under which category these things come? They are called FMCGs. FMCG is an acronym for Fast Moving things that we buy from local supermarkets on daily basis, the things that have high turnover and are relatively

Fast Moving Consumer Goods (FMCG) goods are popularly named as consumer packaged goods. Items in this (other than groceries/pulses) people buy at regular intervals. The most common in the list are toilet soaps, deter products, shoe polish, packaged foodstuff, and household accessories and extends to certain electronic goods. T frequent consumption and have a high return.

The sector is divided into two distinct segments - the premium segment catering mostly to the urban upper mid with prices as low as 40% of the premium segment, catering to mass segments in urban and rural markets. The sensitive and more brand conscious.

The industry is volume driven and is characterized by low margins. The products are branded and backed by m packaging and strong distribution networks. Also, raw material prices play an important role in determining the

FMCGs growth story started following the deregulation of Indian economy in early 1990s which saw dismantl spurt in new companies and entry of a number of foreign brands. With relatively lesser capital and technologica brands emerged domestically as well while the relaxed FDI conditions led to induction of many global players resulted in leading to rapid development of the FMCG market in India. Riding on a rapidly growing economy, rising trend of urbanization, the FMCG market in India is expected to further expand to Rs 1,80,000 crore by 20

Despite the strong presence of MNC players, the unorganized sector has a significant presence in this industry. cheaper labor costs and presence across the entire value chain has provided Indian companies with a key compe century. In most categories, the unorganized sector is almost as big if not bigger as the organized sector. Unorg stockiest in order to gain market share.

The Indian FMCG sector with a market size of USD 14.8 billion is the fourth largest sector in the economy. Th USD 14.7 billion in 2008-09 to USD 30 billion in 2012. FMCG sector will witness more than 60% growth in ru Indian consumer goods market is expected to reach USD 400 billion by 2010.

At present, urban India accounts for 66% of total FMCG consumption, with rural India accounting for the rema accounts for more than 40% consumption in major FMCG categories such as personal care, fabric care and hot personal care category, including skin care, household care and feminine hygiene will keep growing at relativel

Within the foods segment, it is estimated that processed foods, bakery, and dairy are long-term growth categori growing incline of rural and semi-urban folks for FMCG products will be mainly responsible for the growth in have to deepen their concentration for higher sales volumes.

Major Players in this sector include HUL (Hindustan Unilever Ltd.), ITC (Indian Tobacco Company), Nestl In Asian Paints (India), Cadbury India, Britannia Industries, Procter & Gamble (P&G) Hygiene and Health Care, M Pepsi and others.

As per the analysis by ASSOCHAM, Companies like Hindustan Unilever Ltd and Dabur India originates half o Colgate Palmolive India and Marico constitutes nearly 37% respectively, however Nestle India Ltd and GSK C from rural India.

With factors like rapid urbanization, increase in demands, presence of large number of young population, etc., a available in the FMCG sector. Indian Competitiveness and Comparison with the World Markets The following factors make India a competitive player in FMCG sector:

Availability of raw materials Because of the diverse agro-climatic conditions in India, there is a large raw material base suitable for food pro producer of livestock, milk, sugarcane, coconut, spices and cashew and is the second largest producer of rice, w also produces caustic soda and soda ash, which are required for the production of soaps and detergents. The ava India the location advantage.

Labor cost comparison Low cost labor gives India a competitive advantage. India's labor cost is amongst the lowest in the world, after give the advantage of low cost of production. Many MNC's have established their plants in India to outsource f

Presence across value chain Indian companies have their presence across the value chain of FMCG sector, right from the supply of raw mat processing sector. This brings India a more cost competitive advantage. For example, Amul supplies milk as we butter, etc. Growth Prospects of FMCG in Rural India

With the presence of 12.2% of the world population in the villages of India, the Indian rural FMCG market is s Increased focus on farm sector will boost rural incomes, hence providing better growth prospects to the FMCG facilities will improve their supply chain. FMCG sector is also likely to benefit from growing demand in the ma consumption for almost all the products in the country, FMCG companies have immense possibilities for growt change the mindset of the consumers, i.e. if they are able to take the consumers to branded products and offer n be able to generate higher growth in the near future.

It is expected that the rural income will rise in future, boosting purchasing power in the countryside. However, the key growth driver over the long term. Also, increase in the urban population, along with increase in income categories, would help the urban areas maintain their position in terms of consumption. At present, urban India consumption, with rural India accounting for the remaining 34%. However, rural India accounts for more than 4 categories such as personal care, fabric care, and hot beverages. In urban areas, home and personal care categor and feminine hygiene, will keep growing at relatively attractive rates. Within the foods segment, it is estimated dairy are long-term growth categories in both rural and urban areas. FMCG RURAL DEMAND TO SHOW 50% GROWTH IN 2012 ASSOCHAM

In a Press Release on January 3rd 2010, The Associated Chambers of Commerce and Industry in India (ASSOC robust growth in the FMCG sector. The Press Release is detailed below: Fast Moving Consumer Goods (FMCG of growth in its Rural and Semi-Urban Segments by 2012 which in totality is projected to grow at an CAGR of to over Rs.1,06,300 crore from present level of Rs. 87,900 crore, according to an analysis carried out by the As Industry of India (ASSOCHAM). The growing penchant and insatiable appetite of rural and semi-urban folks for FMCG products will mainly be their manufacturers will have to deepen their concentration for higher sales volumes in such niche areas.

Also, the urban population will develop a larger craze for organic products in the FMCG sector from health poi large number of products of organic nature in the FMCG sector, this industry will have to look for larger marke areas, says the Chambers analysis.

In the rural and semi-urban areas, FMCG market penetration is currently about 2% in general as against its tota rural market with its vast size and demand base offered a huge opportunity that FMCG companies cannot afford households, the rural population is nearly three times the urban.

ASSOCHAM also analyzed that the FMCG products, which will attract the eyes of rural and semi-urban folks, detergents, cold drinks, consumer durables, toothpastes, batteries, biscuits, namkeens, mosquito repellants, refin areas which will include townships of larger sizes, the Chamber estimates, a good number of malls will have be will sell large volumes of FMCG products and thereby increase their demand phenomenally.

Though the rural and semi-urban demand of FMCG products will grow larger and higher, it will put a severe pr manufacturers of FMCG products because of cut-throat competition, says the Chamber analysis. The branded c will make killings will include a known number like Nirma, HLL, Dabur, ITC, Godrej, Britannia, Coca-Cola, P

The rising rural and semi-urban income levels coupled with massive advertisement of FMCG products in the el awakening in the rural and semi-urban folks towards fast moving consumer goods products so much that these them.

ASSOCHAM has therefore suggested that to tap the rural and semi-urban market, better infrastructure facilities connectivity to rural persons, proper sanitation and healthcare facilities should be created. Advantages to the Sector

Governmental Policy Indian Government has enacted policies aimed at attaining international competitiveness through lifting of the q excise duties, automatic foreign investment and food laws resulting in an environment that fosters growth. 100% by government approval and use of foreign brand names is now freely permitted.

Central & State Initiatives Recently Government has announced a cut of 4% in excise duty to fight with the slowdown of the Economy. T impact on the industry. But the benefit from the 4% reduction in excise duty is not likely to be uniform across F changes in excise duty do not impact cigarettes (ITC, Godfrey Phillips), biscuits (Britannia Industries, ITC) or r are either subject to specific duty or are exempt from excise. Even players with manufacturing facilities located see material excise duty savings. Only large FMCG-makers may be the key ones to bet and gain on excise cut.

Foreign Direct Investment (FDI) Automatic investment approval (including foreign technology agreements wit foreign equity or 100% for NRI and Overseas Corporate Bodies (OCBs) investment, is allowed for most of the food, alcoholic beverages and those reserved for small scale industries (SSI). There is a continuous growth in n about 150% in Net Inflow for Vegetable Oils & Vanaspati. Market Opportunities

Vast Rural Market Rural India accounts for more than 700 Million consumers or 70% of the Indian population and accounts for 50 working rural population is approximately 400 Millions. And an average citizen in rural India has less than half to his urban counterpart. Still there is an untapped market and most of the FMCG Companies are taking differe The market for FMCG products in rural India is estimated about 52%t and is projected to touch about 60% with the industry and has the widest market coverage.

Export - Leveraging the Cost Advantage Cheap labor and quality product & services have helped India to represent as a cost advantage over other Coun offered zero import duty on capital goods and raw material for 100% export oriented units. Multi National Com requirements from its Indian company to have a cost advantage. It adds a cost advantage as well as easily availa Sectoral Opportunities Major Key Sectoral opportunities for Indian FMCG Sector are mentioned below:

Dairy Based Products India is the largest milk producer in the world, yet only around 15 per cent of the liquid milk business is in its infancy and also has large long-term growth potential. Even investment opp products like desserts, puddings etc. Packaged Food Only about 10-12 per cent of output is processed and consumed in packaged form, thus expansion of this industry. Oral Care The oral care industry, especially toothpastes, remains under penetrated in India with penetra per capita incomes and awareness of oral hygiene, the growth potential is huge. Lower price and smalle potential up trading. Beverages Indian tea market is dominated by unorganized players. More than 50% of the market share i highlighting high potential for organized players.

RURAL MARKETING BY FMCG SECTOR

With the urban market saturated, FMCG companies are now targeting the rural markets. In spite of the income India, rural holds great potential since 70% of India's population lives there. Due to the recent government mea rural employment guarantee scheme and increasing minimum support price, disposable income in rural India ha rural markets present their own sets of problems. These include poor infrastructure, dispersed settlements, lack existent medium for communication. Furthermore, retailers cannot be present in all the centers as many of them economically unfeasible. Hindustan Unilever Limited (HUL) - Shakti

Hindustan Unilever Limited (HUL) to tap this market conceived of Project Shakti. This project was started in 2 company's rural distribution reach as well as providing rural women with income-generating opportunities. Thi

helping achieve business goals.

The recruitment of a Shakti Entrepreneur or Shakti Amma (SA) begins with the executives of HUL identifying representative of the company meets the panchayat and the village head and identify the woman who they belie training she is asked to put up Rs 20,000 as investment which is used to buy products for selling. The products petty shops at home. On an average a Shakti Amma makes a 10% margin on the products she sells.

An initiative which helps support Project Shakti is the Shakti Vani program. Under this program, trained comm congregations to drive messages on sanitation, good hygiene practices and women empowerment. This serves a helps the SA in their sales.

The main advantage of the Shakti program for HUL is having more feet on the ground. Shakti Ammas are able economically unviable for the company to tap on its own, besides being a brand ambassador for the company. M consumers in the SAs who become users of the products besides selling them.

Although the company has been successful in the initiative and has been scaling up, it faces problems from tim innovative solutions. For example, a problem faced by HUL was that the SAs were more inclined to stay at hom door to door since there is a stigma attached to direct selling. Moreover, men were not liable to go to a woman's company countered this problem by hosting Shakti Days. Here an artificial market place was created with musi able to sell their products in a few hours without encountering any stigma or bias.

This model has been the growth driver for HUL and presently about half of HUL's FMCG sales come from rura end of 2008 was 45,000 Ammas covering 100,000+ villages across 15 states reaching 3 m homes. The long term 100,000 Ammas covering 500,000 villages and reaching 600 m people. We feel that with this initiative, HUL h distribution reach advantage over its competitors. This program will help provide HUL with a growing custome company for years to come. ITC - e-Choupal

The e-Choupal model has been specifically designed to tackle the challenges posed by the unique features of In fragmented farms, weak infrastructure and the involvement of numerous intermediaries, among others.

Appreciating the imperative of intermediaries in the Indian context, 'e-Choupal' leverages Information Technolo chain participants, delivering the same benefits as vertical integration does in mature agricultural economies lik

'e-Choupal' makes use of the physical transmission capabilities of current intermediaries - aggregation, logistics financing, while dis-intermediating them from the chain of information flow and market signals.

With a judicious blend of click & mortar capabilities, village internet kiosks managed by farmers - called sanch agricultural community access ready information in their local language on the weather & market prices, dissem practices & risk management, facilitate the sale of farm inputs (now with embedded knowledge) and purchase f doorsteps (decision making is now information-based).

Real-time information and customized knowledge provided by 'e-Choupal' enhance the ability of farmers to tak

output with market demand and secure quality & productivity. The aggregation of the demand for farm inputs f access to high quality inputs from established and reputed manufacturers at fair prices. As a direct marketing ch system for price discovery, 'e-Choupal' eliminates wasteful intermediation and multiple handling. Thereby it sig

'e-Choupal' ensures world-class quality in delivering all these goods & services through several product / servic leaders in the respective fields, in addition to ITC's own expertise.

While the farmers benefit through enhanced farm productivity and higher farm gate prices, ITC benefits from th (despite offering better prices to the farmer) having eliminated costs in the supply chain that do not add value.

Launched in June 2000, 'e-Choupal', has already become the largest initiative among all Internet-based interven Company, ITC has taken care to involve farmers in the designing and management of the entire 'e-Choupal' init farmers in this rural initiative has created a sense of ownership in the project among the farmers. They see the 'e for all practical purposes.

Another path-breaking initiative - the 'Choupal Pradarshan Khet', brings the benefits of agricultural best practic Backed by intensive research and knowledge, this initiative provides agri-extension services which are qualitati handholding of farmers to ensure productivity gains. The services are customized to meet local conditions, ensu including credit, and provide a cluster of farmer schools for capturing indigenous knowledge. This initiative, w hectares, has a multiplier impact and reaches out to over 1.6 million farmers.

Companies leverage the deep-rooted FMCG firms network in rural Ind

In process of understanding and reaching the scattered rural markets of India, FMCG majors HUL and ITC hav network over the years. These networks reach out to the billion dollar consumer market which companies from Hence, companies across sectors such as telecom, pharmaceuticals, banking and even cosmetics are queuing up leverage the entrenched network.

Pharmaceutical giants Ranbaxy and Pfizer recently tied up with the FMCG Company, ITC in order to distribute products across 6,500 e-Choupal centers spread across 40,000 villages. The e-Choupal initiative by ITC is by fa initiatives in empowering the rural farmers thus building a healthy rural network across 40,000 villages in 9 sta 4 million farmers while the number is growing fast. The alliance will open windows for the less equipped consu with better medical and healthcare products currently available only in urban cities and towns.

As corporate partnerships to push rural growth are on an upswing, the recent Reserve Bank of India (RBI) decis to be business correspondents of banks has encouraged such tie-ups.

For instance, in a step to promote financial inclusion, SBI bank has tied up with HUL. HULs Shakti Ammas distribute the companys products in remote villages with a population of 2,000 and less, will now be opening S alliance will ensure that the rural folks not only get access to capital, but also generate savings. While multiple business correspondent, more than one bank cannot be in the same village. Hence, the wide spread network of c most effective way to gain access to scattered rural market of India.

The Hindustan Unilever (HUL) board also recently announced its strategic alliance with Tata Teleservices for d

products by leveraging companys distribution network in rural markets in India.

Creating a distribution network from scratch is a costly affair and hence arrangements with FMCG players are a costs are shared. However, companies leveraging the FMCGs network will be successful only if they come up mechanism, keeping in mind the sensitivity of the market. Nonetheless, such tie-ups will induce further consumer brand engagements giving further exposure to the rural various products and services available in the market. Conclusion

Rising per capita income, increased literacy and rapid urbanization have caused rapid growth and chang demand for basic goods, convenience and luxury goods are growing at a fast pace too. The urban popul years is expected to increase from 107 m in 2001 to 138 m in 2011, an increase of 30% per annum. In fa average age in India will be 29 years. This would unleash a latent demand with more money and a new both the rural and the urban level, the market potential is expected to expand further.

While the homegrown companies are looking to expand beyond the Indian shores, the MNC subsidiarie leverage of their respective parent's strength. Since India is a big potential market, none of the big MNC long. The decade ahead is likely to see more MNCs looking to enter India, as organized retailing picks u

Due to the large size of the market, penetration level in most product categories like jams, skin care, too This is more visible when a comparison is done between the rural and the urban areas. Existence of uns opportunity for the industry players in the form of a vastly untapped market as the income rises. Anothe current government's focus making India the hub of agri-processing.

FMCG products are witnessing a retailing revolution in recent times. While some retail chains have larg volumes, some are focused on affordability which has resulted in margins getting squeezed. The Indian m small 'mom and pop' retail outlets. However only 4% is in the organized sector, thereby reducing the allowed, the share from the retail formats is expected to increase.

Hope you would have got sufficient information on FMCG in Rural India. You may mail your response at edito For any further query, you may mail at [email protected]

Stay tuned to www.mbarendezvous.com Indias only content lead MBA Portal.

TC eChoupal Case Study .. Rural Transformation

Agriculture is vital to India. It produces 23% of GDP, feeds a billion people, and employs 66% of the workforce. Because of the Green Revolution, Indias agricultural productivity has improved to the point that it is both self-sufficient and a net exporter of a variety of food grains. Yet most Indian farmers have remained quite poor. The causes include remnants of scarcity-era regulation and an agricultural system based on small, inefficient landholdings. The agricultural system has traditionally been unfair to primary producers. Soybeans, for example, are an important oilseed crop that has been exempted from Indias Small Scale Industries Act to allow for processing in large, modern facilities. Yet 90% of the soybean crop is sold by farmers with small holdings to traders, who act as purchasing agents for buyers at a local, government-mandated marketplace, called a mandi. Farmers have only an approximate idea of price trends and have to accept the price offered them at auctions on the day that they bring their grain to the mandi. As a result, traders are well positioned to exploit both farmers and buyers through practices that sustain system-wide inefficiencies. ITC is one of Indias leading private companies, with annual revenues of US$2 billion. Its International Business Division was created in 1990 as an agricultural trading company; it now generates US$150 million in revenues annually. The company has initiated an eChoupal effort that places computers with Internet access in rural farming villages; the eChoupals serve as both a social gathering place for exchange of information (choupal means gathering place in Hindi) and an e-commerce hub. What began as an effort to reengineer the procurement process for soy, tobacco, wheat, shrimp, and other cropping systems in rural India has also created a highly profitable distribution and product design channel for the companyan e-commerce platform that is also a low-cost fulfillment system focused on the needs of rural India. The e-Choupal system has also catalyzed rural transformation that is helping to alleviate rural isolation, create more transparency for farmers, and improve their productivity and incomes. This case analyzes the e-Choupal initiative for soy; efforts in other cropping systems (coffee, wheat, and shrimp aquaculture), while different in detail, reflect the same general approach. BUSINESS MODEL A pure trading model does not require much capital investment. The e-Choupal model, in contrast, has required that ITC make significant investments to create and maintain its own IT network in rural India and to identify and train a local farmer to manage each e-Choupal. The computer, typically housed in the farmers house, is linked to the Internet via phone lines or, increasingly, by a VSAT connection, and serves an average of 600 farmers in 10 surrounding villages within about a five kilometer radius. Each e-Choupal costs between US$3,000 and US$6,000 to set up and about US$100 per year to maintain. Using the system costs farmers nothing, but the host farmer, called a sanchalak, incurs some

operating costs and is obligated by a public oath to serve the entire community; the sanchalak benefits from increased prestige and a commission paid him for all e-Choupal transactions. The farmers can use the computer to access daily closing prices on local mandis, as well as to track global price trends or find information about new farming techniqueseither directly or, because many farmers are illiterate, via the sanchalak. They also use the e-Choupal to order seed, fertilizer, and other products such as consumer goods from ITC or its partners, at prices lower than those available from village traders; the sanchalak typically aggregates the village demand for these products and transmits the order to an ITC representative. At harvest time, ITC offers to buy the crop directly from any farmer at the previous days closing price; the farmer then transports his crop to an ITC processing center, where the crop is weighed electronically and assessed for quality. The farmer is then paid for the crop and a transport fee. Bonus points, which are exchangeable for products that ITC sells, are given for crops with quality above the norm. In this way, the e-Choupal system bypasses the government-mandated trading mandis. Farmers benefit from more accurate weighing, faster processing time, and prompt payment, and from access to a wide range of information, including accurate market price knowledge, and market trends, which help them decide when, where, and at what price to sell. Farmers selling directly to ITC through an e-Choupal typically receive a higher price for their crops than they would receive through the mandi system, on average about 2.5% higher (about US$6 per ton). The total benefit to farmers includes lower prices for inputs and other goods, higher yields, and a sense of empowerment. The e-Choupal system has had a measurable impact on what farmers chose to do: in areas covered by e-Choupals, the percentage of farmers planting soy has increased dramatically, from 50 to 90% in some regions, while the volume of soy marketed through mandis has dropped as much as half. At the same time, ITC benefits from net procurement costs that are about 2.5% lower (it saves the commission fee and part of the transport costs it would otherwise pay to traders who serve as its buying agents at the mandi) and it has more direct control over the quality of what it buys. The system also provides direct access to the farmer and to information about conditions on the ground, improving planning and building relationships that increase its security of supply. The company reports that it recovers its equipment costs from an eChoupal in the first year of operation and that the venture as a whole is profitable. In mid2003, e-Choupal services reached more than 1 million farmers in nearly 11,000 villages, and the system is expanding rapidly. ITC gains additional benefits from using this network as a distribution channel for its products (and those of its partners) and a source of innovation for new products. For example, farmers can buy seeds, fertilizer, and some consumer goods at the ITC processing center, when they bring in their grain. Sanchalaks often aggregate village demand for some products and place a single order, lowering ITCs logistic costs. The system is also a channel for soil testing services and for educational efforts to help farmers improve crop quality. ITC is also exploring partnering with banks to offer farmers access to credit, insurance, and other services that are not currently offered or are prohibitively expensive. Moreover, farmers are beginning to suggestand in some cases, demandthat ITC supply new products or services or expand into additional crops, such as onions and potatoes. Thus farmers are becoming a source of product innovation for ITC. DEVELOPMENT BENEFIT

The e-Choupal system gives farmers more control over their choices, a higher profit margin on their crops, and access to information that improves their productivity. By providing a more transparent process and empowering local people as key nodes in the system, ITC increases trust and fairness. The increased efficiencies and potential for improving crop quality contribute to making Indian agriculture more competitive. Despite difficulties from undependable phone and electric power infrastructure that sometimes limit hours of use, the system also links farmers and their families to the world. Some sanchalaks track futures prices on the Chicago Board of Trade as well as local mandi prices, and village children have used the computers for schoolwork, games, and to obtain and print out their academic test results. The result is a significant step toward rural development. KEY LESSONS The e-Choupal model demonstrates that a large corporation can play a major role in recognizing markets and increasing the efficiency of an agricultural system, while doing so in ways that benefit farmers and rural communities as well as shareholders. The case also shows the key role of information technologyin this case provided and maintained by a corporation, but used by local farmersin helping bring about transparency, increased access to information, and rural transformation. Critical factors in the apparent success of the venture are ITCs extensive knowledge of agriculture, the effort ITC has made to retain many aspects of the existing production system, including maintenance of local partners, the companys commitment to transparency, and the respect and fairness with which both farmers and local partners are treated. For more details visit: http://www.digitaldividend.org/pdf/echoupal_case.pdf Hindustan Unilever Limited (HUL) is Indias largest Fast Moving Consumer Goods company, touching two out of three Indians with their large brand portfolio. HULs products are household names across the country and span a host of categories such as soaps, detergents, personal products, tea, coffee, ice cream, and culinary products. Today, there are over 7.7 million retail outlets in India with an average of 6.8 stores per thousand people the highest store density in the world. To maintain their market leadership, HUL pursues innovative distribution mechanisms to reach the millions of potential consumers in both urban areas and small remote villages where there is no retail distribution network, no advertising coverage, and poor roads and transport. HUL realized from the onset that its sales and distribution network gave it an edge over the competition, but that rivals would try to match it over time. To maintain their competitive advantage, HUL has aggressively extended more deeply in India, moving from large to small towns, and from urban to semi-urban areas. The unorganized and scattered character of markets in India means sales and distribution requires a different tactic from that of more developed economies. Like Coca-Cola, HUL knew it needed to tailor its approach for the different markets.

Modern Trade

Photo Credit: Hindustan Unilever Modern trade, or retail chains, is characterized by standardized store formats, airconditioned ambiance, and a variety of goods and typically lower pricing. Global retail chains such as Walmart and Carrefour fall under this category. In India, modern trade comprises roughly 10% of all commercial transactions and is growing rapidly. In the past, HULs sales forces were separated by geographies and product categories. However, this organizational structure was ill equipped to manage modern trade, as one regional team negotiating the terms of trade with an individual franchisee of a national retail chain could never be as effective as HUL entering a long-term comprehensive contract spanning all product categories and outlets of the retail chain. Today, HUL has specific account managers dedicated to large modern trade customers.

General trade

Photo Credit: CGAP General trade consists of the thousands of independent retail and wholesale outlets across the country. Often called mom and pop shops, each of these stores is considered a distinct customer and has to be addressed individually. HUL services these outlets through a network of 2,900 stockists. Goods are sent to a local warehouse or carrying and

forwarding agent (CFA), and are then stocked and dispatched to specific retailers upon orders from the HUL stockists. The stockists are responsible for servicing all the small retail outlets in a specific geographic area. General trade makes up the majority of HULs sales.

Rural Markets
While general trade encompasses both urban and rural markets, serving customers in more remote areas of India poses unique challenges. Rural markets are scattered over large areas with low per capita consumption rates. While the aggregate potential of rural markets is large, the potential of each of the 600+ dispersed markets is very low. As well, rural markets are not connected to urban centers by air or rail, with road connectivity poor at best. Accessing these markets, even when feasible, means additional logistics costs to HUL. Despite the roadblocks, conquering the rural markets is a must for HUL. One out of every eight people on this planet lives in an Indian village. In comparison to the urban market, which consists of roughly 250 million people, the rural market is 775 million people across 638,000 villages. Within ten years, per household consumption in rural India is forecasted to equal todays urban levels. To penetrate the rural markets, HUL launched a unique four tier distribution system. Markets were segmented based on their accessibility and business potential.

1. Direct Coverage: HUL appointed a common stockist to service all outlets within a town and sell a limited selection of the brand portfolio. Towns consisted of populations of under 50,000 people. 2. Indirect Coverage: HUL targeted retailers in accessible villages close to larger urban markets. Retail stockists were assigned a permanent route to ensure that all accessible villages in the vicinity were served at least once a fortnight. 3. Streamline: Streamline leveraged the rural wholesale channel to reach markets inaccessible by road. Star Sellers were appointed among wholesalers in a particular village. Star Sellers would purchase stock from a local distributor and then distribute stock to retailers in smaller villages using local means of transport (e.g. motorcycles, rickshaws).

4. Project Shakti: Project Shakti targeted the very small villages (<2,000) and tapped into pre-existing womens self help groups (SHG). Underprivileged rural women were invited to become direct-to-consumer sales distributors for HUL products. Termed Shakti Ammas (literally strength mothers), these women represent HUL and sell its home-care, health, and hygiene products in their villages. By the end of 2009, Project Shakti network comprised of 45,000 Shakti Ammas covering 100,000 villages across 15 states in the country, cumulatively reaching over 3 million households every month. Unilever has replicated Project Shaktis success in other markets such as Sri Lanka and Bangladesh.

End Notes