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CHAPTER 6

CASE 1: HINDUSTAN UNILEVER LIMITED

In order to enlighten a non-traditional retail structure we chose the multi retailer Hindustan

Unilever Limited that within India is a legendary company. What really drew our attention to this

outsider was their unique formula for sustainable competition, coming from the ability of

keeping their costs down.

INTRODUCTION:

Hindustan Unilever Limited is India’s largest Fast Moving Consumer Goods company, touching

two out of three Indians with their large brand portfolio. HUL’s 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.

Growth of HUL in India is as follows…

• FMCG came into in existence in 1888 when Sun Light soap was firstly seen at

KOLKATA harbor. It was made by Lever brothers in England.

• After that in 1895 Lifebuoy and after that Lux, Pears and Vim bar.

• In 1918 Vanaspati was launched.

• Dalda was launched in 1937.

• In 1931 Lever brothers made 1st subsidiary in India

• In 1933 they joint with Hindustan Vanaspati manufacturing company

• In 1935 they joint with united traders limited

• All these 3 players mixed together and form HUL in 1957.

• HUL offers 10% of its equity to Indian public

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• Unilever holds 52.10% shares and rest is distributed amongst about 360675 individual

shareholders and financial institutions

• Brooke bond is present in India back to 1900 and its Red Label band was launched in

1903. In 1912 it joined with lever brothers.

• Unilever acquired LIPTON in 1972

• Ponds India ltd is working in India since 1947 and it is acquired by HUL in 1986 by an

international acquisition.

• Tata oil Mills Company merged with HUL in 1993.

• In 1996 Tata made 50-50% joint venture for LAKME with HUL and in 1998 it was

completely sold to HUL.

• HUL made 50-50% joint venture with Kimberley Clark corp. in 1994 as Kimberley clark

lever ltd which makes haggis diapers and kotex sanitary pads.

• Unilever established its subsidiary in Nepal as NEPAL UNILEVER LTD.

• In 2002 HUL launched AYUSH ayurvedic soap.

• In 2004 it came into the water purifier segment and launched PURE-it

• In 2007 it formally formed as HUL from HUL that is HINDUSTAN UNILEVER

LIMITED.

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

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advantage, HUL has aggressively extended more deeply in India, moving from large to small

towns, and from urban to semi-urban areas.

In the past, HUL’s 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 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 HUL’s sales.

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

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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

today’s 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 women’s 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

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every month. Unilever has replicated Project Shakti’s success in other markets such as Sri Lanka

and Bangladesh.

Hindustan Unilever Limited value Proposition

Hindustan Unilever Limited, Unilever's $3.9 billion subsidiary in India. Unilever is the

corporation that produces Axe deodorant, Vaseline, Surf detergent, and Lipton tea, among many

other everyday products.

India is the second largest country in the world in terms of population. India has also a large

number of villages; more than 600.000 villages with poor transport infrastructure making

shipments of goods extremely difficult. Most of these villagers don’t have access to the very

basic hygiene products like soap, toothpaste, shampoo, etc. Many of them have even never used

a tooth brush or washed their hairs with shampoo. Instead of investing in costly infrastructure,

the Indian government decided to promote entrepreneurship in these villages, targeting women

particularly. Hindustan Unilever saw an opportunity in this program and decided to develop a

business model accordingly. Within their established organization Hindustan Unilever has

created a leadership organization with total freedom for developing the business model.

Hindustan Unilever launched the so-called Shakti Entrepreneurship Program. The value

proposition was to create in each village and surrounding a chain of entrepreneurs for Hindustan

Unilever products. These entrepreneurs (who are selected women) will not only distribute but

also educate these villagers on the use of the different corporal hygiene products provided by

Hindustan Unilever.

NGO’s have supported Hindustan Unilever with selecting these underprivileged women, to

become the new Hindustan Unilever distributers and the new promoted entrepreneurs. According

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to Hindustan Unilever, at the beginning, there was a lot of hesitation, since these women were

often illiterate or had no math skills. It turns out they were very quick to learn and smart-within

48 hours they would get it. Their motivation was so high that it compensated for any lack of

ability.

Today H. Unilever employs between 60,000 and 70,000 women entrepreneurs in villages to sell

Unilever products at affordable prices to the Base of the Pyramid (BoP). For the first time,

villagers had access to soap, detergent, and toothpaste. The women entrepreneurs were also

educating their communities on hygiene issues while selling their products - for example, by

explaining how to brush children's teeth - and through community wide health awareness days.

Shakti is a good example of CSR. it created a whole new way of life for 60.000 to 70.000

women, with the opportunity to gain a good living. It had a direct effect on their social stature.

And millions of people had access to personal care and home products. In terms of distribution

and marketing, the business model is using the BoP to distribute products; so the BoP is

definitely part of the solution. And it's self-sustaining from the business it generates.

Hindustan Unilever has managed to create a sustainable business for itself and for the women

distributers, to reach untapped market and to reinforce its brand and its company internal and

external culture. All this by using the BoP in a CSR business model.

Image 1.5 Business Model Picture

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How Hindustan Unilever Limited deliver its value proposition

We assume Hindustan Unilever Limited (HUL)value proposition as follows: “Targeting any

person who is willing to pay a higher than ordinary transportation and search cost in order to buy

quality goods to the lowest price”.

HUL Products in India

Personal wash:-

• Lux.

• Lifebuoy,

• Liril ,

• Hamam,

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• Breeze,

• Moti ,

• Dove,

• Pears

• Rexona

Laundry:-

• Surf Excel,

• sun light,

• Rin

• Wheel

• Ala bleech

Beauty Products:-

• Fair & Lovely,

• Lakme,

• Ponds,

• Vaseline

• Aviance

Hair-Care:-

• Sunsilk naturals,

• Clinic ,

• Dove

Oral-Care:-

• Pepsodent

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• Close-up

Deo spray:-

• Axe

• Rexona

Foods:-

-Kissan(Jam,Ketchup,Squashes),

• Annapurna (Aata and salt),

• Knorr Soups,

• Modern Bread

Ice-cream:-

• Kwality Wall's

Bewerages:-

Tea:-

• Brooke bond,

• Lipton,

• taj mahal

Coffee:-

• Brooke bond bru

Dishwasher :-

• Vim

Disinfectants:-

• Domex

• cif

Water Purifier:-

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• Pureit

Table 4: Category wise sales growth of HUL in India:

Particulars Key Brands

Market Size (in Rs Cr.)

Market Share

Rank

Fabric wash

Surf Excel, Wheel

8988 37.50% 1

Personal Wash

Dove, Lux, Lifebuoy

6632 54.30% 1

Dish wash

57.30% 1 Skin Ponds 2792 54.50% 1 Shampoo Sunsilk,

Clinic plus 2168 47.80% 1

Talcum Powder

59.70% 1

Packet Tea Red Label 4452 22.70% 1 Coffee Bru 708 44.00% 1 Jams

67.50% 1

Toothpaste Pepsodent, Closeup

2764 29.50% 2

Ketchups

28.10% 2

COMPETITION IN THE FMCG MARKET

Five main competitive strategies are:

• Overall low cost leadership strategy

• Best cost provider's strategy

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• Broad differentiation strategy

• Focused low cost strategy

• Focused differentiation strategy

Here competitive strategy varies from sector to sector and company to company. Thus, it is not

easy to predict a single or to find a single strategy for the whole sector. When we come on to

FMCG Sector main strategies lay behind market strategies, cost, and quality strategies. Here in

this report we are going to get information about such type of strategies of FMCG giants.

Competitive Strategies and Comparison with ITC

HUL (Hindustan Unilever Ltd.)

This Company is earlier known as Hindustan Lever Ltd. This is India's largest FMCG sector

company with all type of household products available with it. It has Home & Personal Care

products, and also food and Water Purifier available with it. According to Brand Equity, HUL

has largest no of brands in most trusted brands list 16 of HUL's brands featured in AC-Nielson

Brand Equity list of 100 most trusted brands in 2008 in an annual survey. For the entire year

ending March - 2009 net turnover of company is Rs. 20'239.33 Crore which is 47.99% higher

than 31st December 2007's Rs. 13675.43 Crore driven mainly by domestic FMCG's with net

profit stood at Rs. 2'496.45 Crore.

Products of HUL are: Annapurna; Ayush; Axe; Breeze; Bru; Brooke bond; Clinic; Dove; Fair &

Lovely; Hamam; Liril; Lux; Pears; Ponds; Pepsodent; Pureit; Rexona; Rin; Sunlight; Surfexcel;

Vaseline; Wheel.

ITC Limited

This Company was earlier known as Imperial Tobacco Company of India Ltd. It is Currently

headed by Yogesh Chander Deveshwar. Company mainly operates in the industry like Tobacco,

Foods, Hotels, Stationary and Greeting Cards with the major products constitutes Cigarettes,

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packed foods, hotels, and apparels. For the entire year ending Mar-2009 the turnover of company

is at Rs. 15388 Crore which is 10.3% higher than previous year's Rs. 13947.53 Crore, driven

mainly by robust 20% growth in non cigarette FMCG business with net profit stood at Rs. 3324

Crore.

Analysis of Both Companies

HUL & ITC are major companies in FMCG market in India. When we compare both companies

on the basis of their strategies i.e. , their competitive strategies in the present market. When we

look at the present segment breakup for both of the companies then we came to know that their

different products vary too much in the market. Now let us take a comparative analysis of both

the companies under some heads:

HUL

Hindustan Unilever (HUL) is the largest pure-play FMCG Company in the country and has one

of the widest portfolio of products sold via a strong distribution channel. It owns and markets

some of the most popular brands in the country across various categories, including soaps,

detergents, shampoos, tea and face creams.

ITC

ITC is not a pure-play FMCG company, since cigarettes is its primary business. It is diversifying

into non-tobacco. FMCG segments like foods, personal care, paper products, hotels and agri-

business to reduce its exposure to cigarettes.

Performance

After stagnating between 1999 and '04, the company is back on the growth track. In the past

three years, till 2008 HUL's net sales have witnessed a CAGR of 11%, while net profit has

posted a CAGR of 17%.

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Despite diversification, ITC's reliance on cigarettes is still huge. The tobacco business

contributes 40% to its revenues, and accounts for over 80% of its profit. This cash-generating

business has enabled it to take ambitious, but expensive bets in new segments and deliver modest

profit growth.

Overall Strategy:

HUL always believes in customer friendly products with major emphasis on low cost overall

without compromising on the quality of the product. They are leveraging the capabilities and

scale of the parent company and focusing on the value of execution. The entire product portfolio

is also being tweaked to include premium offerings such as Pond's Age Miracle and dove

shampoo in skin and hair care. HUL introduced Project Shakti to penetrate the rural market.

Overall Strategy:

HUL always believes in customer friendly products with major emphasis on low cost overall

without compromising on the quality of the product. They are leveraging the capabilities and

scale of the parent company and focusing on the value of execution. The entire product portfolio

is also being tweaked to include premium offerings such as Pond's Age Miracle and dove

shampoo in skin and hair care. HUL introduced Project Shakti to penetrate the rural market.

ITC is focusing on delivering value at competitive prices. Its tremendous reach through extensive

distribution chain has been a competitive advantage. Additionally, the company's e-choupal

model for direct procurement is well known under which ITC partners with over 100,000

farmers for spices and wheat procurement and an even larger number for oilseeds. This kind of

rural pedigree is hard to beat.

Growth Drivers

HUL has been launching new products and brand extensions, with investments being made

towards brand-building and increasing its market share. HUL is also streamlining its various

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business operations, in line with the ‘One Unilever' philosophy adopted by the Unilever group

worldwide. Introduction of premium products and addition of new consumers via market

expansion will be HUL's growth drivers.

ITC's backward integration to ensure that its products pass efficiently from the farms to

consumers has helped it to cut down supply and procurement costs. ITC's non-cigarette FMCG

business leverages the large distribution network the company has developed by selling

cigarettes over the years. A rich product mix, along with ramp-up of investments in its new

sectors, will be instrumental in charting ITC's growth path.

Risk for both the companies

For HUL

Being an MNC operating in India, HUL is more conservative in its strategies than its Indian

counterparts. Moreover, given increasing competition, it faces the risk of being overtaken by

domestic players in various categories. Prolonged inflation may lead to margin contraction, in

case HUL is not able to pass on this burden to consumers. The company's large size also poses a

problem, since it does not give HUL the agility to address the competition it faces from national

and regional players.

For ITC

Increased regulatory clamps on tobacco, along with rising tax burden, pose a business risk for

ITC. So, it has started an ambitious diversification plan, which has its own set of risks. With its

foray into the conventional FMCG space, ITC has entered the high-clutter branded products

market. This will burden its resources in terms of ad spend and brand-building. Creating brand

recall and building market share in new products are ITC's key challenges. Export ban and rising

crop prices pose a threat for its agri-business, taxing its margins.

HUL AND P&G

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Procter & Gamble was founded in 1837 by William Procter, a British citizen who immigrated to

the United States. The company first sold candles. Procter & Gamble Co. (P&G, NYSE: PG) is a

Fortune 500 American multinational corporation headquartered in Downtown Cincinnati, Ohio

that manufactures a wide range of consumer goods. As of mid 2010, P&G is the 6th most

profitable corporation in the world, and the 5th largest corporation in the United States by market

capitalization, surpassed only by Apple, Exxon Mobil, Microsoft, and Wal-Mart. It is 6th in

Fortune's Most Admired Companies 2010 list.

P&G is credited with many business innovations including brand management and the soap

opera.

According to the Nielsen Company, in 2007 P&G spent more on U.S. advertising than any other

company; the $2.62 billion spent by P&G is almost twice as much as that spent by General

Motors, the next company on the Nielsen list.

P&G was named 2008 Advertiser of the Year by Cannes International Advertising Festival.

Proctor & Gamble is a leading member of the U.S. Global Leadership Coalition, a Washington

D.C.-based coalition of over 400 major companies and NGOs that advocates for a larger

International Affairs Budget, which funds American diplomatic and development efforts abroad.

Consumer Understanding

No company in the world has invested more in consumer and market research than P&G. We

interact with more than five million consumers each year in nearly 60 countries around the

world. P&G invest more than $350 million a year in consumer understanding. This results in

insights that tell us where the innovation opportunities are and how to serve and communicate

with consumers.

Innovation

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P&G is the innovation leader in this industry. Virtually all the organic sales growth delivered in

the past nine years has come from new brands and new or improved product innovation. We

continually strengthen our innovation capability and pipeline by investing two times more, on

average, than our major competitors. In addition, we multiply our internal innovation capability

with a global network of innovation partners outside P&G. More than half of all product

innovation coming from P&G today includes at least one major component from an external

partner. The IRI New Product Pacesetter Report ranks the best-selling new products in our

industry in the U.S. every year. Over the past 14 years, P&G has had 114 top 25 Pacesetters—

more than our six largest competitors combined. In the last year alone, P&G had five of the top

10 new product launches in the U.S. and 10 of the top 25.

Brand-Building

P&G is the brand-building leader of this industry. It has built the strongest portfolio of brands in

the industry with 22 billion-dollar brands and 20 half-billion-dollar brands. Eleven of the billion-

dollar brands are the #1 global market share leaders of their categories. The majority of the

balances are #2.

Go-to-Market Capabilities

It has established industry-leading go-to-market capabilities. P&G is consistently ranked by

leading retailers in industry surveys as a preferred supplier and as the industry leader in a wide

range of capabilities including clearest company strategy, brands most important to retailers,

strong business fundamentals and innovative marketing programs.

Scale

Over the decades, we have also established significant scale advantages as a total company and

in individual categories, countries and retail channels. P&G’s scale advantage is driven as much

by knowledge-sharing, common systems and processes, and best practices as it is by size and

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scope. These scale benefits enable us to deliver consistently superior consumer and shareholder

value.

P&G follows Connect + Develop strategy which enables to bring innovations to life faster, more

economically and more sustainably.

HUL AND P&G ADVERTIESMENT WAR

The new campaign started by Rin, a product of Hindustan Unilever Limited. It is a direct attack

on the Tide Naturals product by Procter & Gamble. Note that when It is said a direct attack – it

means an uncensored visual shows the competitor product and then highlights how the other

product is better then the former. The sequence of the ad is as follows

1. Two ladies are standing on a bus stop, waiting to pick their kids from the school bus.

2. Both are carrying their shopping basket/bag with them.

3. Lady 1 has Tide Naturals in her bag.

4. Lady 2 has Rin in her bag

5. Both ladies have a look at each other’s bag and Lady 1 boasts that Tide has a good

fragrance and provide better whiteness/brightness to the clothes

6. In the meantime, the school bus arrives and it’s shown that the white shirt of Lady 2’s

kid is strikingly brighter and whiter then the Lady 1’s kid.

7. Lady 1 gets astonished by the whiteness seen.

8. Lady 2’s kid reacts by asking he mother, as to why is the other lady so observant and

amazed

9. There is a disclaimer during the ad that the analysis has been done by an independent

agency

10. It’s then claimed that now there is promotional price of Rs. 25 on Rin as opposed to

the earlier Rs. 35.

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As it can be noticed, there is a direct mention of the competitor product along with the visuals.

This one seems to be an absolute direct attack. It is difficult to say if the ad will continue on TV.

Tide would definitely come out with a protest. However, I think the damage is already done. The

main point about the reduced price of Rin would definitely catch the consumer’s eye benefiting

HUL.

Strategic growth summary of HUL

HUL prioritized opportunities which build upon the existing assets and capabilities. It avoided

spreading their management thinly. For example: HUL first made its sales and distribution

channel & supply chain management in manufacturing and selling wheat flour and utilized it into

the selling breads produced by wheat flour.

• HUL is more focused on the innovations Example: In 1995 launched KISSAN

ANNAPURNA staple foods with the message “staple food including iodized salt”

• Serving Rural population: In 2000 the 32% of the sales were from rural sector but in 2010

it is more than 50%.

• It follows direct communication from the customers.

• It believes in expanding the portfolio.

• Each category has a different set of supply chain, production and consumer decision

making process issuing associated with it.

Strategies - market entry: (Kissan Annapurna iodized salt)

In 1995 HUL launched Kissan Annapurna iodized salt at that time only 10% of 6.5 million ton of

salts were branded and refined HUL identified it and launched the KISSAN ANNAPURNA

SALT.

• Firstly it launched in the few cities of the country for test marketing and then for all.

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• Shifted from “purity- a product attribute” to “Health –consumer benefit” (As a

positioning strategy)

• Tried to shift the consumers from unbranded to brand.

• Started Using IODINE as a marketing strategy as there were other salts including iodine

but no one was focused on that. HUL started it.

• Started endorsement through trusted government agencies.

• In 2002 it has made iodine patented in 80 countries.

Strategic Shifts

In the past 10 years, HUL has made four shifts in its business strategy, targeted at boosting

growth and reach

• POWER BRANDS: Strategy in 2000. Focusing on fewer brands, 30 of them, and

showering marketing attention on them.

• MASSTIGE: Strategy in 2005-06. Making premium brands (prestige) attainable for a

larger section of consumers (mass).

• ONE UNILEVER: Strategy in 2007. Building leadership position in fast-growing

markets.

• PUMP UP THE VOLUMES: Strategy in 2010. Global CEO Paul Polman is pushing the

Indian operations chasing value growth to deliver on the volumes as well.

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Table No: 5 Income Statements (Rs. Million)

INCOME STATEMENT (RS MILLION)

Y/E 7-Mar FY09 FY10 FY11E FY12E

Net Sales 136,754 202,393 173,844 190,848 213,504 Other Operating

Income 1,937 3,622 1,838 3,298 3,608 Total Revenue 138,691 206,016 175,683 194,147 17,112 Change (%) 13 48.5 -14.7 10.5 11.8 COGS 72,685 108,379 88,498 101,159 112,531

Gross Profit 66,006 97,636 87,185 92,987 104,581 Operating Exp 45,281 67,235 60,612 66,314 73,424 EBIDTA 20,724 30,402 26,573 26,673 31,157 Change (%) 13.7 46.7 -12.6 0.4 16.8 Margin (%) 14.9 14.8 15.1 13.7 14.4 Depreciation 1,384 1,953 1,814 2,006 2,132 Int. and Fin.

Charges 255 253 75 112 91 Other Income –

Recurring 2,379 2,056 1,692 1,457 1,623

Pro fit before

T axes 21,464 30,251 26,376 26,013 30,557 Change (%) 15.3 40.9 -12.8 -1.4 17.5 Margin (%) 15.7 14.9 15.2 13.6 14.3 Tax 3,643 5,244 5,644 5,463 6,417 Deferred Tax 389 0 475 468 550 Tax Rate (%) 18.8 17.3 23.2 22.8 22.8

Profit after Taxes 17,432 25,007 20,256 20,082 23,590 Change (%) 13.2 43.5 -19 -0.9 17.5 Margin (%) 12.7 12.4 11.7 10.5 11 Non-rec.

(Exp)/Income 1,824 -43 -144 0 0 Reported P AT 19,256 24,965 20,112 20,082 23,590

Brand Management at HUL

HUL has a large brand portfolio consisting of nearly 110 bands. In every product line, it has built

a number of brands over a period of time. Quite a few brands have come to its fold from the

parent company. It has also acquired several ongoing brands from the market. HUL also

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vigorously pursues brand extension strategy. And concurrently, HUL undertakes line pruning

and brand restructuring and consolidation, based on marketing compulsions. HUL is also playing

the rejuvenation and re-launch game. With great benefit the corporate-level endeavors at

business expansion and diversification are also throwing new challenges on the brand strategy

front. HUL lends itself for a proper understanding of the complexity of the brand management

task. We shall examine how HUL handles the complex demands in brand management. Such an

array of brands is the outcome of a conscious corporate strategy by HUL. As a corporate, HUL

wants to be a leader in every one of its businesses and the strategy is to fight on the strength of

the competitive advantage arising from the possession of strong brands. It is this strategy that is

getting reflected in the development of a multitude of strong brands. If we take the business of

bathing soaps, as an example, HUL has the objective of being a national player (not a niche or a

regional marketer) and the leader therein. HUL also wants about 30 per cent of the corporate

income to come from this line.

So, HUL opted for the strategy of developing quite a few strong brands in this line, and among

them they cover different market segments and price points. Dove, Lux, Liril, Rexona, Pears and

Lifebuoy are the outcome of such a well planned brand strategy implemented over time.

Lifebuoy is 100 years old and Liril 15 years old. In fact, HUL has about 10 brands of toilet soaps

each having good volume of sale to its credit . The point is that decisions on brand portfolio are a

fundamental expression of the company’s objectives and strategy governing a given business.

HUL Locates Positioning Opportunities:

HUL methodically goes about the task of developing a brand portfolio across a product category.

It first identifies the various positioning opportunities across benefits, target groups and price

points. Existing brads are mapped across these positioning opportunities, and gaps for possible

new offers are explored.The company then estimates the likely volumes for each of the possible

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opportunity and the financial viability and sustainability of the propositions in the long term. If

some of these gaps look promising, HUL goes ahead with the plans. It examines the existing set

of brands with the company, the product technologies available, the benefits that can be provided

and other considerations that have a bearing on the company’s long term interests in the

business. Finally, if the company decides to go in for the new offer, a decision has to be taken as

to whether new brands should be created or extensions if existing brands should be preferred or

ongoing brands from the market acquired.

HUL hires brands to capture new opportunities: Towards the close of the 1990s, HUL found that

the germicide segment of the soap market was growing fast, with RCI’s Dettol antiseptic soap

leading it. HUL did not have suitable offer in its stable to capture a share of this segment.

Lifebuoy was not strictly meeting the particular benefit. HUL knew that launching and

developing a new brand would take a lot of time and resources, and the company would miss the

market if it chose this route. HUL did not have the product formula either to enter this segment.

It was in this background that HUL decided to hire the Savlon brand from J&J. Savlon was a

successful antiseptic lotion, a competitor to Dettol lotion. Just as the Dettol soap owed its origin

to the success of the Dettol lotion, HUL assessed that a Savlon antiseptic soap could be

successfully extended from the Savlon lotion. It entered into an agreement with J&J for the use

of Savlon brand name and the product formula, and launched the Savlon antiseptic soap. HUL

very deftly managed successfully new brand launch and merged as a challenger to Dettol soap.

J&J secures a good royalty from HUL for lending the brand. It is a potentially win-win

arrangement for both companies. Repositioning and rebranding HUL has done the process of

repositioning the brands. Few of them as follows;

• SUNSILK: Sunsilk co-creations , collaboration with 7 pioneer global hair experts

• BREEZE: New fragrances over the world, new look more colors, packaging

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• Rexona: relaunched it with the coconut moistening

• Lifebuoy hand sanitizer: kills 99.99% germs in 15 seconds

• Fairness cream: Fair & lovely multivitamin

• Close-up: peppermint splash

• Pepsodent toothbrush: 25% flexibility.

Conclusion & Recommendations

HUL's up-and-running business model is a treat for investors seeking exposure in the FMCG

segment. The company has delivered in the past and has the potential to do better in future. In

short term. HUL’s growth story is evolving.

ITC is eyeing the pie which HUL and other FMCG players currently enjoy. Though risky, the

company's business model will pay off in the long run. ITC has proved its expertise in the

cigarettes, hotels, paper and agri-businesses. Investors who want to bank on its execution ability

in FMCG can consider the stock with a long-term horizon.

According to us the companies should continue with their CSR and also continue with their

strategies. The thing that needs to be changed is that, ITC should go for more diversification in

Non cigarette segment (FMCG) while HUL should come up with the new strategies that could

take the new product forward to create a new segment. A recommendation For HUL is that it

should focus on rural area more.

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CASE 2: DABUR INDIA

Introduction: Dabur India Limited has marked its presence with significant achievements and today commands

a market leadership status. Dabur story of success is based on dedication to nature, corporate and

process hygiene, dynamic leadership and commitment to their partners and stakeholders. The

results of our policies and initiatives speak for themselves.

• Leading consumer goods company in India with a turnover of Rs. 5,283 Crore (FY12)

• 2 Major strategic business units (SBU) - Consumer Care Business and International

Business Division (IBD)

• 2 Subsidiary Group companies - Dabur International and NewU and several step down

subsidiaries: Dabur Nepal Pvt Ltd (Nepal), Dabur Egypt Ltd (Egypt), Asian Consumer

Care (Bangladesh), Asian Consumer Care (Pakistan), African Consumer Care (Nigeria),

Naturelle LLC (Ras Al Khaimah-UAE), Weikfield International (UAE) and Jaquline Inc.

(USA)

• 17 ultra-modern manufacturing units spread around the globe

• Products marketed in over 60 countries

• Wide and deep market penetration with 50 C&F agents, more than 5000 distributors and

over 3.4 million retail outlets all over India

Milestones

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Dabur India Ltd. made its beginnings with a small pharmacy, but has continued to learn and

grow to a commanding status in the industry. The Company has come a long way in popularising

and making easily available a whole range of products based on the traditional science of

Ayurveda. And Dabur has set very high standards in developing products and processes that

meet stringent quality norms. As it grows even further, Dabur will continue to mark up on major

milestones along the way, setting the road for others to follow...

Milestones To Success

• 1884 - Established by Dr. S K Burman at Kolkata

• 1896 - First production unit established at Garhia

• 1919 - First R&D unit established

• Early 1900s - Production of Ayurvedic medicines

Dabur identifies nature-based Ayurvedic medicines as its area of specialisation. It is the first

Company to provide health care through scientifically tested and automated production of

formulations based on our traditional science.

• 1930 - Automation and upgradation of Ayurvedic products manufacturing initiated

• 1936 - Dabur (Dr. S K Burman) Pvt. Ltd. Incorporated

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• 1940 - Personal care through Ayurveda

Dabur introduces Indian consumers to personal care through Ayurveda, with the launch of Dabur

Amla Hair Oil. So popular is the product that it becomes the largest selling hair oil brand in

India.

• 1949 - Launched Dabur Chyawanprash in tin pack

Widening the popularity and usage of traditional Ayurvedic products continues. The ancient

restorative Chyawanprash is launched in packaged form, and becomes the first branded

Chyawanprash in India.

• 1957 - Computerisation of operations initiated

• 1970 - Entered Oral Care & Digestives segment

Addressing rural markets where homemade oral care is more popular than multinational brands,

Dabur introduces Lal Dant Manjan. With this a conveniently packaged herbal toothpowder is

made available at affordable costs to the masses.

• 1972 - Shifts base to Delhi from Calcutta

• 1978 - Launches Hajmola tablet

Dabur continues to make innovative products based on traditional formulations that can provide

holistic care in our daily life. An Ayurvedic medicine used as a digestive aid is branded and

launched as the popular Hajmola tablet.

• 1979 - Dabur Research Foundation set up

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• 1979 - Commercial production starts at Sahibabad, the most modern herbal medicines

plant at that time

• 1984 - Dabur completes 100 years

• 1988 - Launches pharmaceutical medicines

• 1989 - Care with fun

The Ayurvedic digestive formulation is converted into a children's fun product with the launch of

Hajmola Candy. In an innovative move, a curative product is converted to a confectionary item

for wider usage.

• 1994 - Comes out with first public issue

• 1994 - Enters oncology segment

• 1994 - Leadership in health care

Dabur establishes its leadership in health care as one of only two companies worldwide to launch

the anti-cancer drug Intaxel (Paclitaxel). Dabur Research Foundation develops an eco-friendly

process to extract the drug from its plant source

• 1996 - Enters foods business with the launch of Real Fruit Juice

• 1996 - Real blitzkrieg

Dabur captures the imagination of young Indian consumers with the launch of Real Fruit Juices -

a new concept in the Indian foods market. The first local brand of 100% pure natural fruit juices

made to international standards, Real becomes the fastest growing and largest selling brand in

the country.

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• 1998 - Burman family hands over management of the company to professionals

• 2000 - The 1,000 crore mark

Dabur establishes its market leadership status by staging a turnover of Rs.1,000 crores. Across a

span of over a 100 years, Dabur has grown from a small beginning based on traditional health

care. To a commanding position amongst an august league of large corporate businesses.

• 2001 - Super specialty drugs

With the setting up of Dabur Oncology's sterile cytotoxic facility, the Company gains entry into

the highly specialised area of cancer therapy. The state-of-the-art plant and laboratory in the UK

have approval from the MCA of UK. They follow FDA guidelines for production of drugs

specifically for European and American markets.

• 2002 - Dabur record sales of Rs 1163.19 crore on a net profit of Rs 64.4 crore

• 2003 - Dabur demerges Pharmaceuticals business

Dabur India approved the demerger of its pharmaceuticals business from the FMCG business

into a separate company as part of plans to provider greater focus to both the businesses. With

this, Dabur India now largely comprises of the FMCG business that include personal care

products, healthcare products and Ayurvedic Specialities, while the Pharmaceuticals business

would include Allopathic, Oncology formulations and Bulk Drugs. Dabur Oncology Plc, a

subsidiary of Dabur India, would also be part of the Pharmaceutical business.

• Maintaining global standards

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As a reflection of its constant efforts at achieving superior quality standards, Dabur became the

first Ayurvedic products company to get ISO 9002 certification.

• Science for nature

Reinforcing its commitment to nature and its conservation, Dabur Nepal, a subsidiary of Dabur

India, has set up fully automated greenhouses in Nepal. This scientific landmark helps to produce

saplings of rare medicinal plants that are under threat of extinction due to ecological degradation.

• 2005 - Dabur aquires Balsara

As part of its inorganic growth strategy, Dabur India acquires Balsara's Hygiene and Home

products businesses, a leading provider of Oral Care and Household Care products in the Indian

market, in a Rs 143-crore all-cash deal.

• 2005 - Dabur announces bonus after 12 years

Dabur India announced issue of 1:1 Bonus share to the shareholders of the company, i.e. one

share for every one share held. The Board also proposed an increase in the authorized share

capital of the company from existing Rs 50 crore to Rs 125 crore.

• 2006 - Dabur crosses $2 bln market cap, adopts US GAAP.

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Dabur India crosses the $2-billion mark in market capitalisation. The company also adopted US

GAAP in line with its commitment to follow global best practices and adopt highest standards of

transparency and governance.

• 2006 - Approves FCCB/GDR/ADR up to $200 million

Moving forward on the inorganic growth path, Dabur India decides to raise up to $200 million

from the international market through Bonds, FCCBs, GDR, ADR, QIPs or any other

securities.The capital raised will be used to fund Dabur's aggressive growth ambitions and

acquisition plans in India and abroad.

• 2007 - Celebrating 10 years of Real

Dabur Foods unveiled the new packaging and design for Real at the completion of 10 years of

the brand. The new refined modern look depicts the natural goodness of the juice from freshly

plucked fruits.

• 2007 - Foray into organised retail

Dabur India announced its foray into the organised retail business through a wholly-owned

subsidiary, H&B Stores Ltd. Dabur will invest Rs 140 crores by 2010 to establish its presence in

the retail market in India with a chain of stores on the Health & Beauty format.

• 2007 - Dabur Foods merged with Dabur India

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Dabur India decides to merge its wholly-owned subsidiary Dabur Foods Limited with itself to

extract synergies and unlock operational efficiencies. The integration will also help Dabur

sharpen focus on the high growth business of foods and beverages, and enter newer product

categories in this space.

• 2008 - Acquires Fem Care Pharma

Dabur India acquires Fem Care Pharma, a leading player in the women's skin care market.

Besides an entry into the high-growth skin care market with an established brand name FEM,

this transaction also offers Dabur a strong platform to enter newer product categories and

markets.

• 2009 - Dabur Red Toothpaste joins 'Billion Rupee Brands' club

Dabur Red Toothpaste becomes the Dabur's ninth Billion Rupee brand. Dabur Red Toothpaste

crosses the billion rupee turnover mark within five years of its launch.

• 2010 - Dabur makes its first overseas acquisition

Dabur makes its first overseas acquisition, buying Hobi Kozmetik Kozmetik Group, a leading

personal care products company in Turkey, for $69 million.

• 2010 - Dabur acquired 100% equity in Namaste Lab

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Dabur acquired 100% equity in Namasté Laboratories LLC of the US for $100 million. This

marks Dabur’s entry into the fast-growing ethnic hair care products market in U.S., Europe and

Africa.

• 2010 - Dabur Chyawanprash Launched Orange & Mango Flavours

Dabur launches India’s first fruit-flavoured Chyawanprash. Dabur Chyawanprash was launched

in Orange and Mango flavoured variants.

• 2010 - Dabur Amla Hair Oils enters Limca Book of Records

Dabur Amla Hair Oils enters Limca Book of Records for achieving a record feat of hosting the

longest ever non-stop head massage marathon.

• 2011 - Dabur enters professional skin care market

Dabur enters professional skin care market with the launch of OxyLife Professional Facial Kit,

created exclusively for professional use.

• 2011 - Dabur launches its first-ever online shopping portal

Dabur India Ltd. launches its first-ever online shopping portal www.daburuveda.com With this,

Dabur is the first Indian FMCG company to launch a dedicated online shopping portal for its

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beauty products range. The portal will be the online gateway for consumers to know, understand,

buy and gift the exclusive Dabur Uveda range of skincare products.

• 2011 - Dabur India acquires 30-Plus from Ajanta Pharma

Dabur India Ltd acquired Ajanta Pharma’s over-the-counter energizer brand ’30-Plus’.

• 2011 - Dabur to enter Sri Lanka

Dabur India Ltdsets up new subsidiary in Sri Lanka – Dabur Lanka (Pvt.) Ltd. The company will

establish a new export-oriented manufacturing facility for producing a range of fruit-based

beverages in Gampaha, north of Colombo.

• 2011 - Dabur enters Almond Hair Oil market

Dabur India Ltd launches Dabur Almond Hair Oil, a one-of-its-kind product that offers superior

nourishment for 100% damage-free hair.

• 2012 - Dabur crosses Billion-Dollar turnover mark

Dabur India Ltd surpassed the Billion-Dollar Turnover mark during the 2011-12 fiscal to end the

year with Net Sales of Rs 5,283.17 Crore.

Dabur Sustainability

At Dabur, environment and nature is the lifeline of our business. With a portfolio of Ayurveda

and nature-based products, conservation of nature & natural resources is deep rooted in our

organizational DNA, and in every aspect of our ever-growing business.

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We, at Dabur, have not merely incorporated the concept of sustainability into the core of our

business but have, in fact, expanded it to encompass our aspirations and responsibilities to the

society and to the environment. It is this concept that inspires us to optimize our business

performance to tackle the new and growing challenges of environment and technology.

It is a concept on which we aspire to build an organization that will continue to increase value for

all our stakeholders for generations to come, through intensive focus on Conservation of Energy

and Technology Absorption, along with Health, Safety and Environment Protection.

Conservation of Energy

Dabur has been undertaking a host of energy conservation measures. Successful implementation

of various energy conservation projects have resulted in a 13.8% reduction in the Company’s

energy bill in the 2008-09 fiscal alone. What was noteworthy was the fact that this reduction has

come despite an 8-9% volume increase in manufacturing, and an average 11.7% increase in cost

of key input fuels.

The host of measures – key among them being use of bio-fuels in boilers, generation of biogas

and installation of energy efficient equipment – helped lower the cost of production, besides

reduce effluent and improve hygiene conditions & productivity

Technology Absorption

Dabur has also made continuous efforts towards technology absorption and innovation, which

have contributed towards preserving natural resources. These efforts include:

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•Minimum use of water in process by pre-concentration of herbal extract and reduction in

concentration time

•Uniform heating in VTDs by hot water as against steam earlier, resulting in 30% reduction in

bulk wastage by using non-stick coating and formulation change.

•Improvement in water treatment plant through introduction of RO (Reverse Osmosis) system

for DM water, reutilization of waste water from pump seal cooling and RO reject waste-water

management.

•Introduction of water efficient CIP system with recycling of water in fruit juice manufacturing.

•Development of in-house technology to convert fruit waste into organic manure by using the

culture Lactobacilus burchi

The Company has achieved a host of significant benefits in terms of product improvement, cost

reduction, product development, import substitution, cleaner environment and waste disposal,

amongst others.

Health Safety & Environmental Review

Renewing the commitment to Health Safety and Environment, Dabur has formulated a policy

focusing on People, Technology and Facilities. A dedicated “Safety Management Team” has also

been put in place to work towards the prevention of untoward incidents at the corporate and unit

level, besides educate & motivate employees on various aspects of Health, Safety and

Environment.

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The Company is also continuously monitoring its waste in adherence with the pollution control

norms. In pursuance of its commitment towards the society, efforts have also been initiated to

conserve and maintain the ground water level. The efforts include implementation of rainwater

harvesting, which has delivered encouraging results and has put the company on the path to

becoming a Water-Positive Corporation.

Dabur also initiated a Carbon Foot Print Study at the unit level with an aim to become a carbon

positive Company in years to come.

At Dabur, we are committed to sustainable development throughout our diverse operations. And,

we will strive to translate the good intentions into concrete and lasting results, contributing to the

ultimate good of the society.