Distribution Strategies Of
Presented By
Prashant Singh Anjan Roy Nazim Malik Wasim Feroze
Introduction
Hindustan Unilever Limited (HUL), formerly Hindustan Lever Limited (it was renamed in late June 2007 as HUL), is Indias largest FMCG company, touching the lives of two out of three Indians with over 20 distinct categories in Home & Personal Care Products and Food & Beverages. HUL is also one of the countrys largest exporters, it has been recognized as a Golden Super Star Trading House by the Govt. of India.
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The mission that inspires HULs over 15,000 employees, including over 1300 managers, is to add vitality to life. HUL meets everyday needs for nutrition, hygiene and personal care with brands that help people feel good, look good and get more out of life. HUL shares its mission with parent company UNILEVER which holds 52.10% of the equity. The rest of the shareholding is distributed among 360,675 individual shareholders and financial institutions. HUL manufacture their products over 40 factories across India. The operation involve over 2000 suppliers and associates. HULs distribution network comprises about 4000 redistribution stockiest, covering 6.3 million retail outlets reaching the entire urban population and about 250 million rural consumers.
Products
Tea Coffee Processed Food Ice Creams Water
Analysis of Distribution Network
The first phase of the HUL distribution management had wholesalers placing bulk orders directly with the company. Large retailers also place direct order which comprise almost 30% of the total orders collected. The focus of the second phase, which spanned the decades of the 40s, was to provide desired products and quality service to the companys customers. In order to achieve this one wholesaler in each market was appointed as a Registered Wholesaler and therefore it increased the distribution reach of the company to a larger number of customer.
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The highlight of the third phase was the concept of Redistribution Stockiest (RS) who replaced the Registered Wholesaler (RWs). The RS was required to provide the distribution units to the company salesman. In this phase Company Depots system established. This system helped in transshipment, bulk breaking and as a stock point to minimize stock-outs at the RS level.
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In the recent past, a significant change has been the replacement of the Company Depot by a system of third party Carrying and Forward Agents (C&FA). The C&FA system has also resulted in cost savings in terms of direct transportation and reduced time lag in delivery. The most important benefit has been improved customer service to the RS.
Strength
Innovative distribution strategy Largest market share Largest exporter of the country New division called HL NETWORK Growth more than the FMCG sector
Weakness
HUL is steadily losing its market share in segments including soaps, hair, oral, and skin care economic growth slows and competition increases Huge Cost- Setting up of extensive distribution system with 7500 distributors and about million retail points requires huge cost, thus resulting in a hit on their bottom lines. Time Involved-Setting up of extensive distribution network with million retail points involves great amount of time. Extensive Hiring- large number of distributors. Centralization Vs Decentralization
Opportunity
Expansion of horizon outside Asia Diversify its brand ( it can switch to new brands in segments like confectionary, medicines etc.) Large Domestic market over a billion Population Untapped rural market.
Threats
Loosing market share due to New Entrants ITC Ltd. one of the biggest threats Mimic of Brands Removal of import restrictions resulting in replacing of domestic brands. Reliance Fresh Outlets Local Brands
Huls strategy to strengthen distribution
Super Value stores Project Shakti Lakme Beauty Solution Ayush Therapy Treatment Solution Beverage Vending Machine Hindustan Liver Network Program Vijeta
Super Value stores
Through this strategy HUL dominated unorganized retailers after observing that organized retailers as a threat and have captured 2% market share in food & grocery segments. HUL observed that unorganized retailers commands the major share hence the unorganized stores need to differentiates themselves both by offering better services at low price and maintaining a good quality image. This is where HUL steps in by coming forward to certify them as SVS. This gives an edge to the small grocery shopkeepers. This leads to a huge nation-wide branding and helped to survive against organized retailers. HUL benefited by better display for its products and exclusive promotional offer for its customers and most robust distribution channel by building a synergetic relationship with the channel members
Project Shakti
It works for empowerment of rural woman with the help of self-help Groups, which support them with microcredit facilities In rural the women are selected and given certain mass market products of HUL. These women stock and sell them to rural consumer Since its inception in 2001,Project Shakti has been successful in its operations in more than 50,000 villages in 12 states. Involvement of NGOs make it more successful Company plans to reach out to 600 million rural consumers in around 5,00,000 villages by recruiting 1,00,000 Shakti Entrepreneur s
Lakme Beauty Solution
Its a new setup by HUL The professionals in these salons are trained by the Lakme academy Its offering regular beauty and personal care related services. These salon provide the customers with a unique and differentiated experience of the brand Lakme, and thereby enhancing its image and indirectly promoting the sale of Lakme products These salons are set up in 71 locations in 28 Indian cities, these means HUL has an exclusive distribution network in allover India
Ayush Therapy Treatment Solution
HUL collaborated with Arya Vaidya Pharmacy, a leading name in ayurveda, to set up Arya Therapy Treatment Centers. Since its launch in 2002 more than 40 lakhs households are reported to have tried it and more than 50% of them are said to have become repeat customer These centers provide personalized health advice and therapy and some other service They even offer promotional schemes on Womens Day, such as 50% discount on all treatment and services
Beverage Vending Machine
It was one more option for distribution of certain products of HUL through vending machine It introduced more than 15000 Tea and Coffee vending machine And thus HUL become the largest player in the Indian hot beverages segment This business is being further expanded in the education, entertainment, leisure and travel segment
Hindustan Liver Network
This is another attempt by HUL to reach out to its consumers through an independent, companyowned distribution channel. Started in 2003, HLN is HULs direct selling arm It works on the concept of multi-level marketing. An individual can be a part in two ways 1. As a Privileged Consumer, or 2. As a HLN Consultant Currently HLN is operating in 1500 towns with 3.5 lakhs consultants.
Program Vijeta
HUL launched Program Vijeta in around 2002, this program is aimed at the strong network of wholesalers that HUL has built The Co. has tied up with Direm Marketing services Pvt. Ltd., Indias leading direct and relationship marketing agency Under this program, the wholesalers are given some points in exchange of the business that they bring to HUL. This points can be redeemed for gifts and awards and other benefit. This program is also used as a platform to interact closely with its channel partners and build long lasting relationships by the company.
Conclusion
A few companies have extended the importance that is Place or distribution also known as the forth P of marketing mix. HUL observe its importance and made it an effective weapon to achieve a strong competitive edge in the market place.
