recent rural project

8/8/2019 Recent Rural Project

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AProject Report

On

Rural Market

Session 2010-2012

Submitted To Submitted By


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Dr. Amit Nagpal Sabyasachi RoyExecutive Summary

A debate continued for a long time amongst the Indian marketers, bothpractitioners & academicians, on the justification for the existence ofthe distinct discipline of rural marketing. Consequently, two schools ofthought emerged. The first school believed that the products/services,marketing tools & strategies that are successful in urban areas, couldbe transplanted with little or no more modifications in rural areas.However, the second school saw a clear distinction between urban &rural India, & suggested a different approach, skills, tools & strategiesto be successful in rural markets. what differentiates the two marketsis not mere income, but a host of other infrastructural &socio-culturalfactors. Thus, the rural market cannot be tapped successfully with anurban marketing mindset & would definitely require its thorough

understanding. In other words, the approach toward rural marketsneeds to be distinct from the one adopted for the urban markets. Thus,in a large rural economy like Indias, rural marketing has emerged asan important &distinct internal sub-division within the marketingdiscipline. This sub-division clearly highlights the differences betweenrural marketing & mainstream marketing.


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Table of ContentsChapter.1 Profile of Rural Marketing

1.1 Introduction to Rural Marketing

1.2 Definition of Rural Marketing

1.3 Statistical Approach to Rural Marketing

1.4 Evolution of Rural Marketing

1.5 The Reasons to Prefer the Rural Areas

1.6 Characteristics of Rural Marketing

1.7 Classification of Rural Marketing

Chapter.2 Consumer Behavior in Rural Areas

2.1 Characteristics of Rural Consumer

2.2 Rural Consumer Class

2.3 Factors Influencing Rural Consumer Behavior

2.4 Model of Rural Consumer Behavior

2.5 Rural Marketing Strategy

Chapter.3 Rural Distribution Network

3.1 Introduction

3.2 Functions of Rural distribution

3.3 Strategies of Rural Distribution

3.4 Statement of the Problem of Rural Marketing

Chapter.4 A Brief Profile of Hindustan Lever Limited

4.1 Introduction

4.2 Present Scenario

4.3 HLLs Initiative in Corporate Social Responsibility

4.4 Introduction to SHAKTI

4.5 Expectations of Shakti in Future

Chapter.5 A Case Study on HLLs Project Shakti

5.1 Introduction to Shakti

5.2 The Objectives of Shakti

5.3 The Idea of Shakti to Achieve

5.4 The Motto of the Shakti Sandesh5.5 Business Activity of Shakti

5.6 Achievement Model of Project Shakti

5.7 The Reasons for Shakti to Start

5.8 Shakti The Present Scenario

5.9 The Ways of Development: I-Shakti

5.10 The Expectations of Market towards Project Shakti

5.11 Channel of distribution used by HLL


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Chapter.1 Profile of Rural Marketing

1.1 Introduction to Rural Marketing:

The rise in rural marketing provided volume growth to all leading companies in the beginning of 90s.

Rural markets are facing many challenges to target rural markets.Higher rural incomes driven by agricultural growth have increased the purchasing power to consume

branded and value-added products in rural areas. Marketers and manufacturers are increasingly aware of

the purchasing power, size and demand base of the Indian hinterland. Efforts are been made by them to

understand the attitude of rural consumers.

Marketers want to follow the principle of WALK THEIR WALK and TALK THEIR TALK.

Marketing mix is framed according to rural tastes and lifestyles.

For example: MIRC ELECTRONICS, which owns the Onida television brand, launched IGO, which was

positioned as a value-for-money brand targeted at rural markets, especially customers who were upgradingtheir black-and-white TVs, which constitutes 65%of the total colour television buyers. The ad campaign

screamed loudly in rural lexicon: kasam se, kya TV hai!

1.2 Definition of Rural Marketing:

According to Prof. Ramkishen Y, Rural marketing is the process of developing, pricing, promoting,

distributing rural-specific goods and services, leading to exchanges between urban and rural markets, which

satisfies consumer demand and also achieves organizational objectives.

Let us understand this definition and its implications: -

Rural marketing involves a two way marketing process.


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Every want is backed by an ability and willingness to buy. These are known as demands.

Marketers are now trying to satisfy the rural demands by customizing the products and

manufacturing the products as per the demand.

1.3 Statistical Approach to Rural Marketing:

Government agencies like IRDA (Insurance Regulatory and Development Authority) and NCAER(National Council for Applied Economic Research) define rural as villages with a population of less

than 5,000, with 75% of the male population engaged in agriculture, etc.

Two-thirds of the countrys consumers live in rural areas, which are around 700 million people, and

almost 26% of the National income is generated there.

10 consecutive monsoons have led to 26% of GDP as returns from agriculture. This has increased their

purchasing power.

India is divided into 597 districts, and has 6,38,667 villages, of which 32% can be reached as they areconnected by pucca roads.

However, 68% of the rural market lies untapped due to various reasons ranging from inaccessibility to

lack of awareness.

In all there are more than 3.8 million retail outlets in rural India, averaging 5.8 shops per village.

The rural market has been growing at 3-4% per annum, adding more than 1 million new consumers

every year. It now accounts for close to 50% of the volume of consumption of fast-moving consumer goods

(FMCG) in India.

As a result Rural India is becoming an important part of the market development strategies

of all FMCG and consumer durables companies as well as service companies.

1.4 Evolution of Rural Marketing:

The Glorious Past (1940-1990):In 1949, Asian Paints was the first company to enter rural markets. In 1960 HLL saw rural

markets as an opportunity and entered with lifebuoy soap. Today HLL dominates rural markets and have its

presence in more than 1 lakh villages. Major players like Colgate and Dabur followed in. in 80s companieslike Nirma, Cavinkare, and Marico enteredrural markets. MNCs like P&G (Proctor & Gamble) also found

potential in rural markets.

The Pulse of the Present (1990-2000):

Around 70% of the population lives in rural India, which is almost 700 million in

number. A 1% increase in their purchasing power can lead to an increase of Rs.10,000 crores in the

government revenues. Cos. Are launching a range of products to cater to the changing lifestyles in ruralIndia. MNCs like LG, Samsung, Revlon and insurance biggies like Birla Sun life, Max New York Life and

Prulife are entering rural markets in a big way. But till today these have altogether tapped only 1-lakh

villages out of the 6-lakh odd villages.

1.5 The Reasons to Prefer Rural Areas:

Presently, companies operating in India are left with only two options, i.e. either to go Global

or to go Rural. The cost of going global is very high and also its tough to penetrate markets in othercountries. Rural India is emerging as a large market for a number of goods and services. So, its better to

target the rural market. Marketers find a similarity between the criticality of rural as well as urban markets.

Some reasons for the same are listed below: -


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a) Saturation of urban markets: There is cutthroat competition in urban markets. Due to the widevariety of choices of products, it becomes difficult for existing companies to maintain their market

share. Compared to urban markets, the rural markets provide better opportunities.

b) A huge untapped market: With a rural population of more than 700 million, it has a huge potential

and market areas as only around 1-lakh villages are tapped out of the 6-lakh odd villages.

c) Rising disposable incomes: Good monsoons during the past 10 years have raised farmers

incomes. Non-farm sectors now account for almost 50% of the total rural incomes. It is a marketthat corporatists cannot afford to ignore. Another reason for the rising disposable incomes of thevillages is that Agricultural income is non-taxable.

d) Remittances from abroad: Many households in rural India have one of their family members

abroad, mostly in Gulf countries. People working there send their savings to their families in

India, which is an additional source of income.

e) Impact of the media: The growing reach of the electronic media has created a huge change in thelifestyles of rural consumers because of TV programmes likesoaps and other serials. Rural people

are spending more on lifestyle products these days. Modi, Revlon, for instance sells more lipsticks

in the rural market than in urban areas. Last year rural sales were Rs.25 crores; only Rs.12 crores

came from the urbanmarket.

1.6 Characteristics of Rural Marketing:

India is a big country and its rural markets have varied characteristics that change

from people to people, region to region. Some of the main features of Indias rural markets are: -

1) Diverse Nature: There are 6,38,667 Indian villages in all. Out of these 50% share a very small population of less than 500 and a limited

purchasing power. Many of these villages dont even have a single shop.

In the second category there are 2,50,000 villages with a population between 500-2000. There are at least 5 shops per village.

Lastly there are 60,000 villages with a population of more than 2000.

Companies should try and focus on the last two categories more as they have high

potential. Regional disparities heavily influence economic development, social

interaction patterns, mobility patterns and awareness levels. This in turn influences purchasing power.

2) Urban Market Saturation:

There is a cutthroat competition in urban markets, which have reached a stage of

saturation.

As a result, marketers are shifting focus to greener pastures in rural markets, as there

is equal number of households in rural areas as in urban areas.

3) Rising Disposable Income of Rural Customers:

New tax structures, good monsoons, the green revolution and the Administered

Pricing Mechanism (APM) have raised disposable incomes in rural areas. It is ironic that rural people spend so lavishly on weddings, ceremonies and festivals

amidst deficiency.

Today the rural consumer shop for value.

It is this income that the companies are going to tap in the near future.

4) Rising Literacy Levels:

Nearly 45% of rural Indians are literate out of which 59% are men and 31% are

women.


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Around 12 crore people invillages are literate as compared to 12.5 crore in urbanIndia.

Every year produces 60 lakh literate people.

Farmers are remarkably well informed about the changing world around them.

The increased enrolment in schools has also generated a wave of rural demand for

lifestyles and aspiration products. Hence, one cannot make generalizations about

Indian Rural Markets.

5) Spread of Cable Television:

The growth of satellite TV channels has had a major impact on villagers.

It has led to a change in lifestyle and consumption patterns.

Television has high capacity to raise interest levels as it has greater accessibility

compared to other media.

Rural consumers now aspire to buy brands rather than to just purchase commodities.

1.7 Classification of Rural Marketing:

URBAN RURAL

RURAL URBAN

RURAL RURAL

Urban to Rural (U2R): A major part of rural marketing falls in this category. It is the transactionwhere urban products are sold in the rural areas. The urban products, which are generally sold in rural

areas, are pesticides, fertilizers, seeds, FMCG, tractors, bicycles, consumer durables, etc.

Rural to Urban (R2U):It is basically where agricultural products are marketed in urban areas.

Usually a farmer seeks to sell his produce in an urban market. An agent or middlemen plays a crucial role

in this marketing process. These are basically cooperatives like AMUL, MAPRO, etc. Products sold under

R2U category include seeds, fruits, vegetables, milk and milk products, forest produce like beeswax,honey, spices, cotton for textile mills etc.

Rural-to-Rural (R2R):This includes activities that take place between two villages in close

proximity to each other. The transactions involve areas of expertise a particular village has. Items in this

category include agricultural tools, handicrafts, bullock carts, dress materials etc.


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Chapter.2 Consumer Behavior in Rural Areas

2.1 Characteristics of Rural Consumer:

Literacy level:

Consumers Literacy level in %

Urban India 52%

Rural India 45%

The literacy rates are much lower in the villages of underdeveloped states like Bihar, Andhra Pradesh, etc. Income level:

Consumers Income level

Urban India High

Rural India Low


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Low purchasing power, standard of living, per capita income, economic and social positions are the traits

of rural consumers.

Location Pattern of Rural Consumer:

India

Urban Rural

3,200 cities & Towns 6, 38,667 villages

6,300 villages 3,00,00 1.5 lakh

Villages villages

5,000 persons 500 people 200 people

Or less or less

Reference Groups: Typically, in a rural area the reference groups are primary health workers, doctors,teachers and panchayat members, the village trader or the grocer, commonly called Baniya or

Mahajan are an important influence in the decision making of rural customer. A marketer needs to be

aware of these influences that can effect changes in the rural customers consumption patterns.

Occupation: Consumption patterns differ according to income levels. Typically, in a rural area theprincipal occupation is farming, trading, crafts, plumbing, electric works, primary health workers and

teachers.

Media Habits: Rural people are fond of music and folklore. In rural areas a popular form ofentertainment is the Tamasha and Nautanki. And then there are television, radio and video films.

Other Variables: Culture, language, religion, caste and social customs are some other important

variables for profiling a rural customer. Rural consumers have a lot of inhibitions and tend to be rigid

in their behavior. A company has to take intense care while targeting them.

2.2 Rural Consumer Class:

Groups Population Examples

1. Affluent Group 150 million people Cash rich wheat farmers in

Punjab, Chilly merchants in

Andhra Pradesh (Guntur).

2. The Middle Class 300 million people Sugarcane farmers in Uttar

Pradesh, Jute farmers in West


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Bengal.

3. The Poor Size is very large The poorest farmers growing

Jowar, Bajra, etc. of Bihar,

Orissa.

2.3 Factors Influencing Rural Consumer Behavior:

Stimuli

Perception

a. Exposure

b. Interpretation

Attitudes

a. Changing Effect

b. Changing Beliefs

c. Changing Behavior Needs and Motives

Demographics

Culture

Believes and Value

Social Class

Influence Groups

a. Reference Groups

b. Opinion Leaders

c. Innovations

2.4 Model of Rural Consumer Behavior:

Need recognition: A rural customer first recognizes his needs and accordingly thinks of purchasing theproducts. This is the first step in the Simple Decision Making Model. EX: Ramlal, Sarpanch of Sonawani

District, wants to purchase a color TV.

Pre-purchase Search: Once there is need recognition, the next step is to do a pre-purchase search. EX:

consider the earlier example, Ramlal may go to a nearby city and visit a showroom that has multiple

products.

Need

Recognition

Pre-Purchase

Research

Post-Purchase

Behavior

Evaluation of

Alternatives

Purchase

Decision


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Evolution of alternatives: the third step is to basically to pick up the best alternative from the available

options. EX: Ramlal may look for the products of Videocon, Onida, and LG that are available with the

dealer and may finally select one of them.

Purchase decision: This is the action that result in the purchase of the product from among availablealternatives. The customer may plan to purchase a specific product that suits his needs and is within his

budget. EX: Ramlal may plan to go for LGs Sampoorna colour TV, as it has a vernacular on-screendisplay, better sound and superior picture quality. Besides, it is priced at only Rs. 8,500.

Post-purchase behavior: This is the final step in the Simple Model of Consumer Behavior. The buyers

relationship with the seller does not come to an end with the purchase, especially in the case of

commodities like consumer durables. This is not an important factor for FMCG. EX: Ramlal may see

whether LG has a service centre nearby, in the event of the product needing servicing.

2.5 Rural Marketing Strategy:

Introduction:

The stagnation in the urban markets, cutthroat competition and shrinking product life cycles are

forcing marketers to go rural. Pioneer marketers used an insensitive approach to their advantage. They took

the urban brand, tweaked the product a wee-bit, extended the brand to low-unit packs, modified thepackaging marginally, took the urban advertisement and dubbed it in the vernacular. That was the way rural

marketing was done.A more sensitive approach has to be adopted to succeed in the rural markets. The conservative

approach resulted in huge losses and erasing of brands completely from the rural landscape e.g. LUX

shampoo and POLAR fans. New rules have to be framed to succeed in the rural markets. Its a bit like

handling a honeycomb; you want to take out the honey, but you dont want to be stung by the bees!

Let us see how a company can adopt a rural marketing strategy that achieves the desired results. A

company entering the rural markets will do it as:

A new entrant:A company starts its life in markets and then ventures in the urbanareas. For example, CavinCare and Asian Paints

A mid-entrant: An organization will enter the rural markets after tasting success in

urban markets. These companies seek to earn around fifty percent of their revenuefrom the rural markets. For example, HLL and LG.

The late entrant: Companies in this category will enter the rural markets with a lot

of skepticism. After being successful in the urban markets for a long tine, they

finally decide to enter rural markets. For example Cadbury and Nestle.

A company has to decide when it wants to enter the rural market. Basically a company will enter the rural

market for the following reasons: To look for new markets.

To expand existing markets.

To increase potential customers.

To sustain profitability and increase market share.

The rural marketing strategy involves three stages:

i. The Planning Stage

ii. The Execution and Implementation Stage

iii.The Feed Back Stage

Rural Marketing Strategy:

Planning Stage


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Execution and Implementation Stage

Feedback Stage

Profile of Rural

Market

Segmentation,

Targeting &

Positioning

Study Consumer

Behavior

Profile of Rural

Consumer

Rural Product

Rural Pricing

Rural

Distribution

Rural Sales

Force

Management

Rural

Communication

Monitor the Rural

Strategy

Feedback

&Control


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Chapter.3 Rural Distribution Network

3.1 Introduction:

Rural distribution is considered as a nightmare because of the 6-lakh odd villages spread across the

country.

To make it easier, one needs to ask from where rural consumers buy. In the case of durables, 90% is

purchased from towns with a population of 20,000 plus.

The situation with FMCG is more complex but not insurmountable.

Direct supply to the 20,000 plus population feeder towns should be quite sufficient, as each distributor

would, in turn, have supply networks of 100-plus outlets in 50-odd locations, which can cover all

villages up to the 2000-plus population category.

3.2 Function of Rural Distribution:

Rural Distribution Network can be divided into two categories:

RURAL DISTRIBUTION

PHYSICAL

DISTRIBUTION

CHANNELS OF

DISTRIBUTION


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Multiple tiers

Non-availability of dealers

Poor viability of retailOutlets

Inadequate Bank Facilities

Inadequate Credit Facilities

1) Physical distribution: Physical distribution is the process of delivering products to the marketing

channels and consumers. It encompasses the various activities involved in the physical flow of the

product, from the manufacturer to the consumer. The following diagram illustrates the various

processes of physical distribution:

Transportation :-

The transportation infrastructure remains underdeveloped in rural India. Although Indiahas the fourth largest railway network in the world, many parts of rural India remain outside its reach. As

regards road transport,nearly 50% ofthe 6 lakh-odd villages do not have all-weather roads. Waterways are

an easy transport option in state like Kerala, Jammu and Kashmir. Many cos. use animal carts to carry their

goods. There are around 2 lakh mobile cycles traders in rural India that are penetrating rural markets and

the mobile traders are of immense help.

Communication :-

Communication plays a pivotal role in distribution for rural markets. Lack of proper facilities

like telephones, postal devices, Internet etc. in rural areas poses lots of problems to marketers in servicing

their retailers. Companies are using Internet as a communication tool and are harnessing the power ofInternet in rural areas. It provides e-mail services in vernacular languages.

Warehousing:-Companies find it difficult to suitable go downs in many parts of rural India. There are no public

warehousing facilities in the interiors of rural India.

CWS/

SWCs Three-tier rural

Transportation

CommunicationWarehousing


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Warehousing

Set-up

CO-OPERATIVES

RURAL GODOWNS

At the apex level, Central warehousing corporation (CWC) and State warehousing corporations (SWCs)

do not provide their services beyond the district level. They reach only up to the nodal points or majormarkets centers. In the middle tiers are the co-operatives at the mandi level. Then there are rural godowns,

which are owned by panchayat heads. All these provide warehousing facilities only to their own members.

As a result it is a big problem for a company to store its goods in rural areas. Companies like HLL and ITC

have feet of delivery vans for rural distribution. It is better for companies to have their own mobile

warehouses rather than to depend on central go downs. Thereby they can save the cost of constructing

warehouses of their own.

2) Channels of distribution: Channels play a pivotal role in marketing by performing a number of vitaldistribution functions. Firms rely on marketing channels to generate customer satisfaction and to

achieve differentiation over the competition. Channels are thus a vital source of competitiveadvantage for the firm. The following are some problems of rural channels of distribution:

(a) Multiple Tiers, Higher Costs and Administrative problems: In the first place, the ruraldistribution chain requires a larger number of tiers, compared to the urban one. The long distancesto be covered from the product points and the scattered locations of the consuming households

cause this situation. At the minimum, the rural distribution chain needs the village-level

shopkeeper, the mandi-level distributor and the wholesaler/ stockist in the town. And on top of

them are the manufacturers own warehouses/branch office operations at selected centers in the

marketing territory. Such multiple tiers and scattered outfits push up costs and make channel

management a major problem. It becomes expensive as well as unmanageable.

(b) Non-Availability of Dealers: Another problem is the availability of dealers. Many firmsfind that there are a limited number of suitable dealers. Even if the firm is willing to start from

scratch and try out rank new comers, the choice of candidates is really limited.

(c) Poor Viability of retail outlets: Retail sales outlets in the rural markets suffer from poorviability. A familiar paradox in rural distribution is that the manufacturer incurs additional

expenses on distribution; still the retail outlets find that the business is unremunerative. The

scattered nature of the market and the multiplicity of the tiers in the chain use up the additional

funds. Moreover, the business volume is not enough to sustain the profitability of all the groups

and the retail outlet suffers the most.

(d) Inadequate Bank Facilities: Distribution in rural markets is also handicapped due to lackof adequate banking and credit facilities. Rural outlets need banking support for three important

purposes:

To facilitate remittances to principals and to get fast replenishment of stocks.

To receive supplies through bank (retiring documents with the bank)

To facilitate credit from banks.

As banking facilities are inadequate in rural areas, rural dealers are handicapped in all these

aspects. It is estimated that there is only one bank branch for every fifth village.

(e) Inadequate credit facilities: Inadequacy of institutional/ Bank credit is another constraint. Rural

outlets are unable to carry adequate stocks due to lack of credit facilities. Thus there is a vicious

circle of lack of credit facilities leading to adequate stocking and loss of business, finally resulting

in poor viability of outlets. In order to tackle the problem of channels of distribution effectively, a

marketer needs to implement the following strategies: -


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Relying on private village shops- For a large variety of consumer products, private shops

are the main channels in the rural markets. They are also the cheapest and the most convenient channel to

align with. Considering the many constraints that the village shopkeeper in India has to operate under. He is

forced to deal in a large number of products in order to make his operations viable.

Satellite distribution- The concept of satellite distribution is strongly recommended to

penetrate the rural market. Stockists are appointed in major towns and feeder towns. They, by and large,

discharge the following functions: financing, warehousing, sub- distribution. Depending on the size of thestockists and the product line, these functions are performed with varying degrees of competence. Theyfunction as authorized retailers or franchised dealers of the company and are recognized officially as

forming part of the companys marketing network, operating through the stockists. The manufacturer

supplies goods to the stockists either on a consignment or on cash or a credit purchase basis. The stockists

take care of distribution on the terms and conditions determined by the manufacturer or agreed upon by the

parties. The volume of business done by the retailers vary, partly because of their location and partly

because of their own capacity for doing business.

HUBS AND SPOKES MODEL:

A1-A4 semi-wholesale S1-S4 satellite markets

This process continues as long as the market and consumption level keep expending and the

supply also catches up. At any point of time, a certain number of retail points always hover round

particular stockists. Hence the system is known as the satellite distribution system. The advantage of

Wholesaler

town

A2

A3

S1

S

4

S

3

S

2

A4

S

4S

3

S2

S

1

A1 S

1

S

4

S

1

S3

S

2

S

4

S2 S

3


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this system is that market penetration takes place in the interiors of rural markets without the

manufacturer having to expand his direct stock point network.

Syndicated distribution- channels of distribution are a major problem for anew company

targeting the rural market for the first time. The biggest problem a new company faces is that there to many

levels in the channels (multiple-tier), and setting up a distribution channel for rural markets is a costly

proposition. Coca-cola India purchased by the Parle brands (thumbs up, Limca,etc.) for Rs.550 crores in

1993 mainly to use Parles existing distribution network. But small companies cannot afford to buy anothercompany for distribution. The solution for small companies is to tie up with a leading company the already

has a presence in the rural market to distribute products through its distribution network. The golden rule isthe small companies should not deal in the sameproduct that the leading company sells. A successful

model of syndicated distribution is P&G using the rural distribution network of Marico to sell Ariel, Tide,

etc. in the initial stages, Cavincare uses distribution network of Amrutanjan Pain Balm for its Chik

Shampoo.

3.3 Strategies of Rural Distribution:

3.4 Statement of the Problem of Rural Marketing:

Although the rural market offer a vast potential but we cannot forget to recognize the fact that

it is not easy to operate there. Rural marketing is a time consuming affair and requires considerable

investments in terms of evolving appropriate strategies. The major problems faced by companies targetingrural markets are:

1) Deprived People and Deprived Markets:

Rural people are tradition-bound and fatalistic.

They strongly believe in old customs, traditions, habits, taboos and practices.

They also face significant deprivation of basic human needs.

2) Lack of Proper Physical Communication Facilities:

Communication with these villages is difficult and highly expensive.

Moreover 300,000 villages in the country have no access to telephones.

Even today, most villages are inaccessible during the monsoons.

3) Transport:

Many rural areas are not connected by rail transport.

At least 50% of the roads are poorly surfaced, some are totally destroyed and many are severelydamaged due to monsoons and lack of servicing duringyears.

This lead to isolation of the interior villages. And the use of bullock carts looks inevitable for many

years into the future.

Strategies of Rural

Distribution

Integrated

Marketing

Outlets

Combining

IN & OUT

operations

Rural

Supermarkets

National &

Regional Chain

Stores


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4) Many Languages and Dialects:

The number of languages and dialects vary widely from state to state, region to region, and probablyfrom district todistrict.

It is difficult for marketers to design promotional strategies in different languages and local dialects.

These rural areas also lack telecommunication facilities adding to the problems faced by the marketers

in the distribution of goods and services.

5) Dispersed Markets:

Rural populations are scattered over a large land area and it is almost impossible to ensure the

availability of a brand all over the country.

Rural buyers arent concentrated unlike urban buyers.

Advertising in such a highly heterogeneous market, which is widely spread, is very expensive.

6) Low Per Capita Income:

Even though 26% of GDP is generated in rural areas, it is shared by 76% of the population.

So, per capita incomes are low. Moreover demand for goods in rural markets depends upon theagricultural situation, which depends upon the monsoon to a large extent.

Therefore demand is not stable or regular.

7) Low Levels of Literacy:

Literacy rates are low in rural areas compared to urban areas.

This lead to the problem of communication.

The print medium is ineffective in rural areas since its reach is poor.

8) Prevalence of Spurious Brands and Seasonal Demand:

For any branded product there are a multitude of local variants, which are cheaper and therefore more

desirable for villagers.

Rural people are cautious about there buying decisions.

They like to give a product a trial, and buy it again only after getting personal satisfaction.

9) Different Way of Thinking:

There is a vast difference in the lifestyles of rural and urban people.

An urban customer is given many more choices than his rural counterpart.

A rural customer has two to three brands to choose from, whereas an urban counterpart has more

choices. Its only a difference in the way of thinking.

The rural customer lives fairly simply as compared to his urban counterpart.

Life in rural areas is still governed by customs and traditions and people do not easily adopt new

practices.

10) Distribution Problem:

Effective distribution requires a village-level shopkeeper, mandi/ taluka-level wholesaler or preferreddealer, a distributor or stockist at the district level and a company owned depot or consignment

distribution at the state level.

So many tiers increase the cost of distribution.

There are more macro-level concerns about purchasing power parity, per capita household expenditure

and regional and cultural variances.

These all problems taken together make up the great hurdle that one can ill-afford to either ignore or

take for granted.

Infrastructure also poses a major problem when a marketer thinks of targeting rural markets.


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11) Narrow Consumption Basket:

According to NCAERs India Market Demographics Report, 1998, almost 55% of the FMCG

produced in the country were consumed by the villagers between 1992-1993 and 1997-1998, withannual average growth rate of 14%.

These figures are estimated on a narrow consumption basket of about 20 most expendable goods and

do not signify either the potential size of the market nor the dynamics of the product preferences andlife cycles.

Chapter.4 A Brief Profile of Hindustan Lever Limited

A Brief Profile of Hindustan Lever Limited (HLL)

4.1 Introduction:

Hindustan Lever Limited (HLL) is India's largest fast moving consumer goods company, with

leadership in Home & Personal Care Products and Foods & Beverages. HLL's brands spread across 20

distinct consumer categories, touch the lives of two out of three Indians. They endow the company with ascale of combined volumes of about 4 million tonnes and sales of Rs.10,000 crores.

The mission that inspires HLL's 36,000 employees, including about 1,350 managers, is to "add

vitality to life".

With 35 Power Brands, HLL meets every day needs for nutrition, hygiene, and personal care

with brands that help people feel good, look good and get more out of life. HLLs parent company,

Unilever, holds 51.55% of the equity. A Fortune 500 transnational, Unilever sells Foods and Home and

Personal Care brands in about 100 countries worldwide. The rest of the share holding is distributed among

3,80,000 individual shareholders and financial institutions.

HLL is India's largest marketer of Soaps, Detergents and Home Care products. It has the

countrys largest Personal Products business, leading in Shampoos, Skin Care Products, Colour Cosmeticsand Deodorants. HLL is also the market leader in Tea, Processed Coffee, branded Wheat Flour, Tomato

Products, and Ice cream, Soups, Jams and Squashes. HLL is also one of the country's biggest exporters and

has been recognized as a Golden Super Star Trading House by the Government of India; it is a net foreign

exchange earner.HLL is India's largest exporter of branded fast moving consumer goods. HLL is also

driving exports in chosen areas where India has a competitive advantage Marine Products, Basmati Rice,

Castor Oil and its Derivatives.It is India's largest exporter of Marine products, and one of the largest global

players in castor.


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4.2 Present Scenario:

Largest FMCG Company: Hindustan Lever Limited (HLL) is India's largest Fast Moving ConsumerGoods Company, touching the lives of two out of three Indians with over 20 distinct categories in

Home & Personal Care Products and Foods & Beverages. They endow the company with a scale of

combined volumes of about 4 million tonnes and sales of Rs.10,000 crores. HLL is also one of the

country's largest exporters. The Government of India has recognized it as a Golden Super Star TradingHouse.

HLL's brands: HLLs major brands like Lifebuoy, Lux, Surf Excel, Rin, Wheel, Fair & Lovely, Pond's,Sunsilk, Clinic, Pepsodent, Close-up, Lakme, Brooke Bond, Kissan, Knorr-Annapurna, and Kwality

Wall's are household names across the country. They span many categories - soaps, detergents,

personal products, tea, coffee, branded staples, ice cream and culinary products.

Factories: They are manufactured in close to 80 factories. The operations involve over 2,000 suppliersand associates.

HLL's distribution network: It comprises of about 7,000 redistribution stockists, and it directly coversthe entire urban population, and about 250 million rural consumers. HLLs distribution network is

recognized as one of its key strengths which helps reach out its products across the length and breadth

of this vast country. The need for a strong distribution network is imperative, since HLLs corporate

purpose is to meet the everyday needs of people everywhere. Technologies: HLL has traditionally been a company, which incorporates latest technology in all its

operations. The Hindustan Lever Research Center (HLRC) was set up in 1958, and now has facilities

in Mumbai and Bangalore. HLRC and the Global Technology Centers in India have over 200 highlyqualified scientists and technologists, many with post-doctoral experience acquired in the US and

Europe.

Social Services: HLL believes that an organizations worth is also in the service it renders to thecommunity. HLL is focusing on health & hygiene education, women empowerment, and watermanagement. It is also involved in education and rehabilitation of special or underprivileged children,

care for the destitute and HIV-positive, and rural development. HLL has also responded in case of

national calamities /adversities and contributes through various welfare measures, most recent being

the village built by HLL in earthquake affected Gujarat, and relief & rehabilitation after the Tsunami

caused devastation in South India.

Over the last three years the company has embarked on an ambitious programme, Shakti.

Through Shakti, HLL is creating micro-enterprise opportunities for rural women, thereby improvingtheir livelihood and the standard of living in rural communities.

Shakti also includes health and hygiene education through the Shakti Vani Programme, and creatingaccess to relevant information through the I-Shakti community portal.

The programme now covers about 50,000 villages in 12 states. HLL's vision is to take this programmeto 100,000 villages impacting the lives of over a 100 million rural Indians.

HLL is also running a rural health programme Lifebuoy Swasthya Chetana. The programmeendeavors to induce adoption of hygienic practices among rural Indians.

It has already touched 70 million people in approximately 15000 villages of 8 states. The vision is tomake a billion Indians feel safe and secure.

If Hindustan Lever straddles the Indian corporate world, it is because of being single-minded inidentifying itself with Indian aspirations and needs in every walk of life.

And they prove it by the latest redesign done for the HLL brands LUX and Wheel:

HLLs brands redesign:

Indias two most popular FMCG brands got a makeover recently. HLL roped in ELEPHANT

DESIGN, a Pune based design house for the redesign strategy.

One of them is Rs. 7500 crores-toilet soap LUX, which was redesigned for market abroad.


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And the second one being Rs. 1000 crores detergent brand WHEEL for which all aspects of redesign

its logo, new packaging and promotional material was done by Elephant Design for the Indian market.

The brief for both the brands was to make them look fresh and contemporary while maintaining their

emotional connect with the user.

The design revamp is expected to provide a fresh impact of the FMCG giant in the face of rigid

competition in foreign and domestic markets.

The challenge for WHEEL was to make the brand look fresher, slicker and yet reflect its image as avalue for money soap.

The objective of redesign was to convey that an improved product was available at the old price.

In Wheels white powder now added was the Lemon-fresh power boosters.

Redesigning of logo was done to make it look more meaningful and with the use of more colours in the

logo, Elephant tried to make it look more dynamic, fresh and premium.

The smarter green wheel on the pac k creates play of dimensions; illustration on the backside of thepack has been made in a fresh style.

The images and expressions on the pack communicate the feeling of a good wash, enhanced fragrance

and a premium look. This all adds to the overall effect of the revamped WHEEL.

Product Mix:

HLL

Home & Personal car Food & Beverages

Personal wash: oral care: Foods:Lux Pepsodent Kwality walls

Lifebuoy Close-up

Liril

Hamam

Breeze Beverages:Dove Tea/Coffee:

Peers Brook bond/ Bru

Rexona Lipton3 Roses tea

Hair care: Colour cosmetics: A1 tea

Sunsilk naturals Lakme

Clinic plus

Nihar

Skin care: Ayurvedic personal &Fair & lovely health care:Ponds Ayush


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Laundry:

Surf excel

Rin

Wheel

4.3 HLLs initiative in Corporate Social Responsibility:

Corporate Social Responsibility (CSR) in Hindustan Lever Limited (HLL) is rooted in its CorporatePurpose - the belief that "to succeed requires the highest standards of corporate behavior towards our

employees, consumers and the societies and world in which we live".

HLL's CSR philosophy is embedded in its commitment to all stakeholders - consumers, employees, the

environment and the society that the organization operates in.

HLL believes that it is this commitment, which will deliver sustainable, profitable growth.

HLL's key CSR initiatives are undertaken with a long-term view. Initiatives that are sustainable have

long-term benefits and an ongoing business purpose.

As early as in the 1950s, HLL focused on import substitution when balance of payments was an issue.

Since the 1980s, most of HLL's investments have been in designated backward areas and zero-industrydistricts, spreading industrialization.

HLL has revived sick industries and has developed local entrepreneurship.

HLL is also involved in a number of community support activities, like education and rehabilitation of

special or underprivileged children, care for the destitute and HIV-positive, and rural development.

In recognition of these initiatives, HLL received the prestigious TERI-CSR Special Award for the year

2002-03 from The Energy and Resources Institute (TERI), which was established in 1974.

TERI is world famous for its commitment to and initiatives in every aspect of sustainable

development.

HLL is also a socially responsible company in running programmes for the sake of the society, namely:

Greening barrens Shakti

Lifebuoy swasthya chetana

Fair & lovely foundation

Happy homes

Yashodadham

4.4 Introduction to Shakti:

Hindustan Lever Limiteds (HLLs) rural self-help group initiative to push the penetration of its

products deeper has paid off.

In terms of contribution to HLLs rural sales, 10% -- 15% comes from this initiative, which was

launched two years back. The rural market constitutes over 40% of HLLs total sales of about

Rs.10,000 crores.

In terms of incremental gains, the company now reaches out to around 10,000 villages. In general,

rural women in India were underprivileged and required a sustainable source of income.

NGOs (Non-Government Organization), governmental bodies and other institutions have been

working to improve the status of rural women.

SHAKTI is a pioneering effort in creating livelihoods for rural women, organized in Self-Help

Groups (SHGs), and improving living standards in rural India.


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Shakti provides critically needed additional income to these women and their families, by equipping

and training them to become an extended arm of the company's operation.

Started in 2001, Shakti has already been extended to about 50,000 villages in 12 states - Andhra

Pradesh, Karnataka, Gujarat, Madhya Pradesh, Tamil Nadu, Chattisgarh, Uttar Pradesh, Orissa,

Punjab, Rajasthan, Maharashtra and West Bengal.

The respective state governments and several NGOs are actively involved in supporting the rural

initiative of HLL. Shakti already has about 13,000 women entrepreneurs in its fold.

A typical Shakti entrepreneur earns a sustainable income of about Rs.700 -Rs.1,000 per month, which

is double their average household income.

Shakti is thus creating opportunities for rural women to live in improved conditions and with dignity.

In addition, it involves health and hygiene programmes, which help to improve the standard of living

of the rural community.

Shakti's ambit already covers about 15 million rural population. Plans are also being drawn up to bring

in partners involved in agriculture, health, insurance and education to catalyze overall rural

development.

Shakti Vani is a social communication programme where women are trained in health and hygiene

issues; village communities are addressed through meetings at schools, village baithaks, SHG meetings

and other social fora.

In 2004, Shakti Vani has covered 10,000 villages in Madhya Pradesh, Chattisgarh and Karnataka.

HLL has formulated a strategy for rural markets known as Operation Bharat.

OPERATION BHARAT HLLs Rural Product strategy:

HLL launched Operation Bharat in the year 1997to create brand awareness for its rural brands.

The strategy also involved promoting the sales of its special packs for rural areas.

HLL provided hampers at discounted prices of Rs. 5, Rs. 10, Rs. 15 and Rs. 20, each of which had a

clinic shampoo bottle, a tube each of Pepsodent and Fair & Lovely, and Ponds Dream flower Talc, in

different sizes and combinations.

The idea behind this is to have a product each for hair care, dental care, skin care and body care.

Consumers were also made aware of the benefits of using HLL products, and the affordability of the

pack sizes on offer.

The project thus successfully addressed issues of awareness, attitudes and habits.

Hopefully, as consumers in rural areas get exposed to such value-added, value-for-money, alternatives,

they will continue to buy the different categories of products.

Operation Bharat is now targeting 65,000 villages and the strategy has proved to be successful for

HLL.

Its long-term strategy is to target 1.5 lakhs villages by the year 2005.

4.5 Expectation of Shakti in Future:

An organization, which successfully stands the test of time, is one that transforms itself in line with

changes in the environment.

Hindustan Levers continued success in India over the past 75 years is marked by conscious

transformations, building on the past and reshaping for the future.

In Foods, they see enormous growth potentially in leading the evolution of consumers to branded and

processed foods.

Over the last few years they have focused on putting in place the building blocks of a strong Foods

business.


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They recognized that changing food habits would require considerable investment, which the current

business simply could not afford. Therefore they divested the non-value added parts like Vanaspati.

They have consolidated their portfolio and improved the gross margins by over 13% through product

mix and cost reduction.

They have also cleared the supply chain of all old stock and geared up for fresh availability on shelf.

The foods business will now invest for growth through relevant innovation.

Over the next 10 years, per capita income in India is likely to touch Chinas current levels. At thoselevels, the FMCG market will be over Rs. 1,00,000 crores from a current value of Rs. 40,000 crores.

This is an opportunity that they well poised to seize.

They choose to focus on 35 power brands covering all consumer appeal and price segments. They are

already seeing the benefits; six brands Brooke bond, Lifebuoy, Lux, Fair & Lovely, Rin and Wheel

have emerged as mega brands in the last five years, each with sales of more than Rs. 500 crores.

Perhaps the most significant change has been to move their brands beyond merely making functionalclaims to playing a bigger and deeper role in the lives of consumers.

Today lifebuoy, their oldest brand, has grown at over 15% for the last three years.

They have strengthened this and reinvented the way they manage their distribution channels and

customers.

The sales structure has been transformed to leverage scale and build expertise in servicing Modern

Trade and Rural Markets.

They have also delayered their sales force to improve their response times and service levels. It has been extended to 60,000 villages in 12 states, already touching 75 million people. By the end of

the year, Shakti will cover 100 million people.

To ensure that HLL remains competitive in the long-term, they have made significant investments inproduct quality, pricing and marketing.

As mentioned earlier, the investment in product quality alone has been in excess of Rs. 4000 crores, or

5% of their sales.

In addition there is a cost of defending their market position.

They have made this trade-off necessary that market share is the best means of sustaining future

profits.

Over time their stronger market positions will surely lead to greater long-term profit.

Despite these significant investments to strength the long-term competitiveness and the costs of

defending there strong market position, they still remain one of the most profitable companies in the

country.

HLL's vision for Shakti is to scale it up across the country, covering 100,000 villages and touching the

lives of 100 million rural consumers.

Given the success of the initiative, the company is now planning to expand Project Shakti in 400

districts by 2006.

HLL will cover 100 districts through Project Shakti by the end of this calendar year.

I-Shakti, the Internet-based rural information service, has been launched in Andhra Pradesh, in

association with the Andhra Pradesh Government's Rajiv Internet Village Programme.

The service is now available in Nalgonda, Vishakapatnam, West Godavari and East Godavari districts.

I-Shakti has been developed to provide information and services to meet rural needs in medical health

and hygiene, agriculture, animal husbandry, education, vocational training and employment and

women's empowerment.

The vision is to have 3,500 kiosks across the state. HLL want to spread the use of Internet through I-Shakti not only in Andhra Pradesh but also throughout India.


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Chapter.5 A Case Study on HLLs Project Shakti

5.1 Introduction to Shakti:

Hindustan Lever Limited (HLL) and its constituent companies have been in India since 1931.

Over these decades, while HLL has benefited from the developments in the country, it has contributed

equally to these developments.

HLL has consciously woven India's imperatives with the company's strategies and operations.

The companys main contributions include developing and using relevant technologies, stimulating

industrialization, boosting exports, adding value to agriculture and generating productive employmentand income opportunities.

HLL has been proactively engaged in rural development since 1976 with the initiation of the IntegratedRural Development Programme in the Etah district of Uttar Pradesh, in tandem with the companys

dairy operations.

This Programme now covers 500 villages in the district. Subsequently, the factories that HLLcontinued establishing in less-developed regions of the country have been engaged in similar

programmes in adjacent villages.

These factory- centered activities mainly focus on training farmers, animal husbandry, generatingalternative income, health, hygiene and infrastructure development.

The company has acquired a wealth of experience and learning from these activities.


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The principal issue in rural development is to create income-generating opportunities for the ruralpopulation.

Such initiatives are successful and sustainable when linked with the companys core business and ismutually beneficial to both the population for whom the programme is intended and for the company.

Based on these insights, HLL launched Project Shakti in the Year 2001, in keeping with the purpose ofintegrating business interests with National interests.

5.2 The Objectives of Shakti:

To create income- generating capabilities among underprivileged rural women by providing a

sustainable micro- enterprise opportunity for them.

To improve rural living standards through health and hygiene education.

5.3 The Idea of Shakti to Achieve:

Avail micro- credit from government/ banks/ loans for self help groups, and a stable income-

generating activity offered by HLL will stimulate wealth creation in the village.

Women from self- help groups to operate like rural direct-to-home sales distributors for HLL

products.


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GOALS: 50,000 villages25,000 Entrepreneurs by 2005

5.4 The Motto of Shakti Sandesh:

THINK BIG. START SMALL. MOVE FAST.

5.5 Business Activity of Shakti:

Year 2000 found Peddakaparthy village, in the Nalgonda district of Andhra Pradesh, in the throes of anew revolution.

A revolution propelled by a vision to better the lives of rural women and support them in their movetowards economic independence. It was the inception of Project Shakti.

Today, with over 5000 entrepreneurs, Project Shakti has traversed 130 districts in eight states.

A journey only made possible by our spirited entrepreneurs and the steadfast support received fromnumerous individuals and organizations including NGOs and SHGs.

Project Shakti remains indebted to them and is hopeful of their continued patronage and support.

They aspire to have 25,000 Shakti Entrepreneurs in their midst, covering 100,000 villages and reaching100 million rural people, by year 2005.

As they set forth, they earnestly hope that they have made several poignant struggles easier towards alife of dignity.

Typically, women from a SHG selected as a Shakti entrepreneur receives stocks at her doorstep from

the HLL rural distributor and sells direct to consumers as well as to retailers in the village.

To get started the Shakti women borrows from her SHG and the company itself chooses only one

person from SHG.

Each Shakti entrepreneur services 6-10 villages in the population strata of 1000-2000 people.

Some Shakti entrepreneur selling upwards of Rs.15000 a month worth of products can make a gross

profit of over Rs.1000 a month.


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Their attempt has been to educate rural consumers on the value they can derive from an HLL product.

5.6 Achievement Model of Project Shakti:

A Win-Win Model:

5.7 The Reasons for Shakti to Start:

The objective of Project Shakti is to create income-generating capabilities for underprivileged ruralwomen, by providing a sustainable micro enterprise opportunity.

It also aims to improve rural living standards through health and hygiene awareness.

Following the pioneering work carried out by Grameen Bank of Bangladesh, and several otherinstitutions, NGOs and government bodies have been working closely, for nearly five years, toestablish Self Help Groups (SHGs) of rural women in villages across India.

Their experiments clearly indicate that micro-credit, when carefully targeted and well administered canalleviate poverty significantly.

A crucial lesson learnt was that rural upliftment depended not on successful infusion of credit, but onits guided usage for better investment opportunities.

This is where HLL's Project Shakti is playing a role in creating such profitable micro enterpriseopportunities for rural women.

Catalyzing prosperity in Indian villages:

Faster turnaround of money

Better repayment rates

Social Responsibility

Income/InvestmentOpportunity

Education/

Awareness

Access to urban

Markets and

Information

Corporate Social ResponsibilityBetter product reach

Income

Generating

Activities

Efficiency and

Productivity

Bank

SE*

Govt.

HLL


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Under the project, HLL offers a range of mass-market productsto the SHGs, which are relevant torural customers.

HLL is investing significantly in resourcesthat work with the women on the field and provide themwith on-the-job training and support.This is a key factor in ensuring the stabilization of their fledgling

businesses.

HLL imparts the necessary training to these groups on the basics of enterprise management, which thewomen need to manage their enterprises.

For the SHG women, this translates into a much-needed, sustainable income contributing towardsbetter living and prosperity.

Armed with micro-credit, women from SHGs become direct-to-home distributors in rural markets.

Risk-free micro enterprise that yields high returns:

A typical Shakti entrepreneur conducts a steady business, which gives her an income in excess ofRs.1,000 per month on a sustainable basis.

As most of these women live below the poverty line, and hail from extremely small villages (withpopulations of less than 2000), this earning is very significant, and almost twice the amount of their

previous household income. For most of these families, Project Shakti is enabling families to live with dignity, with real freedom

from want.

In addition to money, there is a marked change in the woman's statuswithin the household, with amuch greater say in decision-making.

This results in better health and hygiene, educationof the children, especially the girl child, and anoverall betterment in living standards.

The most powerful aspect about this model is that it creates a win-win partnership between HLL andthe consumers, some of whom will depend on the organization for their livelihood, and builds a self-

sustaining cycle of growth for all.

5.8 Shakti The Present Scenario:


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The model was piloted in Nalgonda district ofAndhra Pradeshin 50 villages in the year 2000.

The Government of Andhra Pradesh took the pioneering step of supporting the initiative by enablinglinkages with the network ofDWACRA Groupsof rural women set up for their development and self-

employment.

Most SHG women view Project Shakti as a powerful business proposition and are keen participants init.

It has since been extended to in Andhra Pradesh, Karnataka, Gujarat, Madhya Pradesh, Uttar Pradesh,Tamil Nadu, Chattisgarh and Orissa.

As part of their training programme, all HLL Management Trainees spend about 4 weeksonProjectShakti in rural areas with NGOs or SHGs.

Assignments include business process consulting for nascent enterprises engaged in the manufacture ofproducts such as spices and hosiery items.

HLL envisions the creation of 25,000 Shakti Entrepreneurs covering 100,000 villages, and touchingthe lives of 100 million rural people by the year 2005.

In order to achieve this goal, Project Shakti plans to extend to the states of West Bengal, Punjab andRajasthan in addition to expanding operations in the eight existing states.


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Product Mix:

HLL

Home & Personal care Food & Beverages

Personal wash: oral care: Foods:

Lux Pepsodent Kwality walls

Lifebuoy (Rs.1 candy)

Hamam

Breeze Beverages:

Tea:

3 Roses

A1 tea

Hair care: Colour cosmetics: Green label

Sunsilk naturals Elle 18

Clinic plus

Nihar

Skin care: Ayurvedic personal &

Fair & lovely health care:

Ayush

(New entry)

Laundry:

Surf excel

Rin

Green Wheel

5.9 The Ways of Development: I-Shakti:

Hindustan Lever Ltd, which had launched an Internet-based rural information service I-Shakti inAndhra Pradesh, expects to set up over 1,000 such kiosks by the end of the year in the state.

The company opened its 250th kiosk at Puttapaka village of Nalgonda district, extending its services to

Nalgonda, Visakhapatnam, West Godavari and East Godavari districts.

I-Shakti is an IT-based rural information service network that has been developed to provide

information and services to meet villagers' needs in medical, health and hygiene, animal husbandry,

agriculture, education and women's empowerment among others.


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The programme is being rolled out in association with Andhra Pradesh's Rajiv Internet Village

Programme and it is an extension of HLL's Project Shakti.

Meanwhile, the company was also planning to extend its reach of Project Shakti to over 1,00,000

villages by 2005 from the present 20,000 villages in 196 districts of Andhra Pradesh, Karnataka,

Madhya Pradesh and Tamil Nadu among others.

The scaling up will result in creating over 25,000 entrepreneurs and helping over 10 crores rural

consumers. Project Shakti is aimed at creating incomes for under-privileged rural women by providing a

sustainable micro enterprise opportunity.

A key factor that has inhibited the development of rural India has been lack of access to criticalinformation and services.

Given Indias large geography and weak infrastructure, it is often difficult to reach out to the ruralareas.

In order to impact both livelihood opportunities and living standards of rural communities.

I-Shakti- an IT-based rural information service has been developed to provide information andservices to meet rural needs in agriculture, education, vocational training, health and hygiene.

The premise of the I-Shakti model is to provide need based demand driven information and servicesacross a large variety of sectors that impact the daily livelihood opportunities and living standards ofthe village community.

The I-Shakti kiosk will be operated by the Shakti Entrepreneur, which further strengthens therelationship we have already cultivated and builds new capacity.

HLL expects that the information provided would improve the productivity of the rural community andunlock economic and social progress.

To catalyze overall rural development, HLL hopes to collaborate with mainstream institutions (bothcorporate and not-for-profit organizations) that are experts in agriculture, health, insurance, financial

services and education.

I-Shakti kiosks have been set up in 8 villages in Andhra Pradesh, and have been functional sinceAugust 2003.

The kiosks have received an overwhelming response from the local populace. During the launch of these kiosks, important village members like the Sarpanch, schoolteacher and

doctor are invited to help reinforce relationships with the villagers.

The kiosks remain open from 9 a.m. to 7 p.m., six days of the week. To enable access to the services,users have to register themselves first and obtain the unique registration number. An id card with the

registrationnumber is provided for use every time they visit the kiosk.

The information provided in the above areas is culled from the best available resources, takingadditional care to ensure that information, especially in areas like agriculture, is locally relevant and

includes inputs from home-grown experts.


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These experts are also available on request, to help provide solutions to problems raised by usersthrough a query mailing system.

A System running on Interactive dialogue:

HLL uses a system running on interactive dialogue. Every area expert provides content online to everysatellite village. This is how Shakti entrepreneurs operate an I-shakti kiosk.

A farmer from the village can obtain a quick solution to a pest problem with his crops.

People can also send queries on health and hygiene to a local doctor for a speedy response.

Villagers can avail of discount coupons from the kiosk for medical treatment from doctors operating inlocal areas.

This can be explained diagrammatically as::

'I-shakti has also tied up with Azim Premji Foundation to deliver innovative educational modules tostudents of classes VIII-XII through the kiosk. Local schoolteachers have also been involved in the

process.


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A similar partnership is in place with Tata Adult Literacy for adult education.

Involving the locals, augments institutional knowledge with local expertise, that greatly benefits thevillage community and provides them with a customized web space on subjects of immediaterelevance.

Information is updated on a regular basis and new sections are added.

Feedback is sought from the users on the quality of content based on which, improvisations have beenmade to satisfy user requirements.

The system is based on an interactive dialogue technology developed & patented by the UnileverCorporate Research Team, U.K.

The system enables a deeper understanding of individual user needs and thereby improves the qualityof services rendered to them.

Ogilvy Outreach and Interactive worked with HLL to develop the content for the system, whileTessella provided key software development and support services.

APonline, a joint venture between TCS and the Government of Andhra Pradesh, which has themandate to enable e-governance, services to both urban and rural community, has tied up with I-Shakti

to launch these services in rural Andhra Pradesh.

This is one of the first rural service delivery projects of APonline.

The services include application forms for caste, nativity, income certificates, agricultural grievances,and utility bill collection to name a few. Over fifty new services will be added in the next six months.

Through I-Shakti kiosks, ICICI Bank and HLL will work together to provide a new delivery channelfor rural India, which offers a multitude of products and services to the rural customer.

In the first phase, Life and General Insurance will be offered through this channel.

Other financial services including Investment products (Equity, Mutual Funds, Bonds) ICICI BankPure Gold (gold coins), Personal Credit, Rural Savings Accounts and Remittances will be introduced

subsequently.

5.10 The Expectations of Market towards Project Shakti:

There are other plans brewing, one is to allow companies, which do not compete with HLL to get ontothe Shakti network to sell their products.

Talks are on with a variety of companies selling batteries, mopeds and insurance companies for LIC

policies.
http://www.tessella.com/http://www.tessella.com/


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They wanted to first stabilize the project before they can look at other companies.

It requires somebody with scale and size to build a platform and then invite other companies onto this

platform.

The most powerful aspect about this model is that it emphasizes in creating a win- win partnershipbetween HLL and its consumers, some of whom will also draw on the organizational for their

livelihood, and it builds a self sustaining virtuous cycle of growth for all.

The next stage of project Shakti is even more ambitious. HLL is now in the process of piloting I-SHAKTI, an IT- based rural information service that will provide solutions to key rural needs in the

areas of agriculture, education, vocational training, health and hygiene.

The project will be piloted in Nalgonda district again.

Based on a hand held digital device, HLL is looking at sourcing appropriate low cost hardware from

Hewlett-packer while Unilever corporate research out of London is developing the consumer

interactivity software.

Women in the rural areas are the catalyst of change and that is why its whole programme keeps womenin focus.

Its like popcorn in a machine; one burst at first and then everything begins popping. Here too, one

woman as an agent of change bursts into a movement and it is strengthen.

5.11 Channel of Distribution used by HLL:

Generally most of the textbooks talk about the 4 level channel of distribution, namely:

Zero level

One level

Two level

Three level

Zero level involves no middlemen, which can help companies to save upon cost. The three level

COD involves the following steps:3 level COD:

Manufacturer

Wholesaler


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Level 1

Level 2

Level 3

The urban market uses this distribution channel. But in case of rural markets, companies use a different

COD, which is up to 4 levels, 6 levels or maximum, an 8 level channel. For this, we first need to

understand the distance in the rural market.

Project Harvest

Project Streamline

Project Shakti

Stockist

Retailer

Consumer

City

Village

District

Satellite Village


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For example consider a city with a population of 20 million. To transport the goods from city to the

district, we have rail routes.

So, we can put a warehouse at the district level. Now consider a district with a population of around 10

lakhs EX: Ahmednagar.

Suppose in Ahmednagar there are around 110 villages, which are accessible through road transport.So, a warehouse can be put at a village also.

Now take into account any village (ex: Saphale with a population of around 10,000).

Villages are linked to satellite villages through kutcha roads. Ex: Nevasa with a population of 2000.

So, companies should either use bullock carts or bicycles for transport.

Between satellite villages and tribal areas, there are only fields and the population of tribal areas is

around 200 only. Since there are no proper transportation facilities here, companies cannot put a warehouse.

Now, the only option left to reach satellite villages or tribal areas is on foot.

So, what companies like HLL do is that they hire SHGs to sell their products.

Women in the SHGs personally collect the products from the distributors in the villages and sell it in

their areas.

Self Help Groups (SHGs) is a group of 18-20 women coming together to market and sell HLLs

FMCG brands. These women are known as Shakti Entrepreneurs.

HLL have not created these SHGs model. They only use it. Actually, these SHGs are MICRO

CREDIT INSTITUTIONS employed by SAHARA group of companies. This is the core business of

Sahara industries.

What HLL does is that from every SHG they select one woman as Shakti Entrepreneur to be arepresentative of HLL in rural areas to sell HLLs brands in and around villages.

MART (Marketing and Research Team) a private MR agency from Delhi provides training to theseSHGs in marketing and selling products in rural areas.

Channel of Distribution adopted by HLL in Rural Markets (Project Shakti):

Forest

Tribal Areas

HLLs clearing and

forwarding agent

RDS (Re-Distribution

Stockist)

MART (Marketing and

Research Team)

MACTS (Mutually Aided

Co-operative Thrift Society

Star sellers

Retailers

Consumers


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Now lets see the link between the distribution system applied by HLL and the distance in the rural

markets:

It is actually the logistics management but it is known as Channels of Distribution. The reason behindthis can be explained diagrammatically: -

Communication

Flow

Inventory Management

Logistics is divided into 3 parts: -

Transportation

Warehousing

Supply Chain

But in case of rural markets, due to improper means of transportation there are no warehousingfacilities available in the satellite villages. That is why distribution in rural areas is known as channels of

distribution.

Link between COD and the distance in the rural markets:

The clearing and forwarding (C&F) agent is at the CITY level. There are around 3000 C&F

agents in the city. Then comes the RDS, which is at District level. Further the goods are either distributed

through star sellers i.e. the distributors or the MACTS, which is a co-operative society and both are at the

village level. An MR agency MART assists and trains the distributors in order to sell and market thegoods. Lastly, is the distribution in the satellite villages, which is either done by MACTS directly i.e.MACTS supply the goods at satellite villages with the help of SHGs and retailers.

SHGs (Self Help

Groups)

Logistics

Warehousing Supply Chain

Transportation

recent rural project

Documents