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Marketing Channel

A critical analysis of distribution


channel of HUL
Project Report
Presented to: Prof. Hamendra Dangi

2014
Presented by Group 6
Name
Aditya Kumar
Akshat Nain
Amit Kumar Minz
Apurv Jain
ChirayuSomani
Deoskar Ajay Ram
Dhirendra Kumar
Dhruvjot Singh Sehgal
EshanShankhwar
GarimaMadaan
NikhalPratap
Naveen Sagar

Roll No.
148
150
151
154
163
164
166
167
171
174
190
237

Faculty of Management Studies, Delhi

A critical analysis of distribution channel of HUL


Table of Contents
Introduction ............................................................................................................................................ 3
Background & Motivation........................................................................................................................ 3
Distribution Channel................................................................................................................................ 4
Channels employed for distribution ..................................................................................................... 4
Typical Distribution Channel Design ..................................................................................................... 5
Importance of distribution channels .................................................................................................... 5
Literature Review .................................................................................................................................... 5
Creating Distribution advantage in India .............................................................................................. 6
Hindustan Unilever: Scaling a cost-efficient distribution and sales network in remote markets ............ 7
Rural Marketing: A Case Study on Hindustan Unilever Limited ............................................................. 8
Personal Interviews of HUL Employees .................................................................................................. 10
HULs Channel Manager on Achieving Leadership in New Channel: Pharmacy India ........................ 10
Sales manager on Reconfiguration of HULs distribution setup ....................................................... 12
Questionnaire for Distributors ............................................................................................................... 12
Distributors Interview Experiences ........................................................................................................ 13
Hindustan Unilever Limited (HUL) ...................................................................................................... 13
P&G (Procter and Gamble) ................................................................................................................ 14
ITC (Indian Tobacco Company) ........................................................................................................... 14
Nestle ................................................................................................................................................ 15
Questionnaire for Retailers.................................................................................................................... 16
Retailer Interview Experience ................................................................................................................ 16
Shop Name: Campus Corner, Shop Type: Small General Trade ........................................................... 16
Shop Name: Twenty-four Seven Shop Type: Modern Trade ............................................................... 17
Shop Name: Om Sai Traders, Shop Type: Wholesaler ......................................................................... 18

Shop Name: Priya General Store, Shop Type: Small to medium General Trade ................................... 19
Research Analysis: Distribution Models of FMCG Companies ................................................................. 20
HUL:The Diamond Model................................................................................................................... 20
Comparative Matrix of Distribution Models ....................................................................................... 25
Opportunities for HUL: .......................................................................................................................... 26
Conclusion............................................................................................................................................. 27
References ............................................................................................................................................ 28
Primary Sources ................................................................................................................................. 28
Secondary Sources............................................................................................................................. 29

Introduction
Hindustan Unilever Limited (HUL) is an Indian consumer goods company based in Mumbai,
Maharashtra. It is owned by Anglo-Dutch company Unilever which owns a 67% controlling share in
HUL.HUL's products include foods, beverages, cleaning agents and personal care products.
HUL was established in 1933 as Lever Brothers and, in 1956, became known as Hindustan Lever Limited,
as a result of a merger between Lever Brothers, Hindustan Vanaspati Mfg. Co. Ltd. and United Traders
Ltd. It is headquartered in Mumbai, India and employs over 16,500 workers, whilst also indirectly
helping to facilitate the employment of over 65,000 people. The company was renamed in June 2007 as
"Hindustan Unilever Limited".
Hindustan Unilever's distribution covers over 2 million retail outlets across India directly and its products
are available in over 6.4 million outlets in the country. As per Nielsen market research data, two out of
three Indians use HUL products.
Food Brands
Annapurna
Bru coffee
Kissan
Brooke Bond
Lipton tea
Knorr
Kwality Wall's
Magnum (ice cream)
Modern Bread

Home Care
Active Wheel
Vim
Surf Excel
Sunlight
Rin
Domestos
Comfort
Cif

Personal Care
Axe
Breeze
Clear
Dove
Lakm
Fair & Lovely
Liril 2000
Vaseline
Sunsilk
Pond's
Pepsodent
Pears
Lux
Lifebuoy
Clinic Plus

Background & Motivation


Distribution is the establishment that the company sets up in order to be able to provide its customers
with products and services which go through various echelons of supply chain. The availability of a
product to the retailer and the availability of a product of a consumers choice is the sole purpose of
implementing an efficient Distribution management. It helps to optimize operations, minimize cost,

maximize sales and serve targeted consumers to gain a sustainable and competitive advantage for the
producer.
We are doing this project as part of our subject Marketing Channel in 3rd Semester MBA Programme.
Apart from this, as future marketers there is a lot of learning that we knew would be involved for us and
through this project we aim to critically analyze the various distribution arms of HUL to see their viability
in the changing market environment. We also want to benchmark its practices against its competitors to
analyze where it can improve and adopt the industrys best practices.
This project will be beneficial most specifically to the marketing managers of HUL, and also its
competitors. Anyone studying the FMCG sector marketing channels in India will also find it interesting.

Distribution Channel
It is a path or pipeline from which goods go from a vendor to a consumer and payments go in the
opposite direction. Following are the 2 types:

Direct (DSD-Direct Store Delivery): This is directly from the vendor to the customer. No
intermediaries are involved in the process.
Indirect (DC- Distribution Center): This channel ensures that the good reaches the customer via
intermediaries who may be one or more than one. Examples are agents, distributors,
wholesalers, stockists etc. these are mutually interdependent i.e. one is reliant on the other.

Channels employed for distribution

Typical Distribution Channel Design

Importance of distribution channels


Though FMCG companies, be it Indian or MNC, they face huge challenges in maintaining a strong
distribution network in a country like India. Some of the major reasons are:
Diverse Geographical locations.
o Peoples mentality of buying from kirana stores, mom and pop shops due to lack of big
retail stores.
o Intermediaries ask for huge commissions resulting in lesser margins both for the retailer
as well as the company.
The intermediaries have to be given a profit of 2-5%.
Hence, companies constantly evolve with new distribution channels so as to maximize margins
and profits.

Literature Review
The team conducted several literature reviews to get a better understanding of the current distribution
channel market scenario in India.

Creating Distribution advantage in India


Source: BCGs Opportunities for Action: Consumer
Study by: Vikram Bhalla, Arindam Bhattacharya, Abheek Singhi, Sharda Verma
Organization: Boston Consulting Group
India is seeing a rapid increase in consumer groups, with rapidly rising middle class. Also, the presence of
a young population facilitates growth. The retail market is projected to reach almost $38 bn by 2010,
but the complexity of distribution networks presents various challenges.
Drivers of Distribution Complexity:

Dispersed Population: The divide of spending power is spread throughout the country, making
strategy formulation difficult.
Retailing Density: India has one of the highest retailing densities in the world with mom and pop
stores around every corner.
Channel Intermediaries: The number of intermediaries, their scope and scale of operation,
accessibility etc. are crucial factors.
Infrastructure Complexity: The manufacturers are forced to devise ingenious logistical
strategies to manage all the bottlenecks- be it roads, storage facilities etc.
Unorganized Markets: The presence of extensive general trade makes accessibility limited and
planning difficult.

Finding the right mix:


Inorder to approach the different segments, the right distribution mix needs to be planned and
worked upon. This can be done in following ways:

Plan to have more than one distribution model for different segments or regions

Carefully determine which customers you want to serve


Be prepared for multiple channel partners

Invest in developing the channel and the sales team


Always measure performance

Hindustan Unilever: Scaling a cost-efficient distribution and sales network in


remote markets
Source: http://www.accenture.com/Microsites/emerging-markets/Documents/pdf/Accenture-UnileverCase-Study-Final.pdf
Study by: Raghav Narsalay, Ryan T. Coffey and Aarohi Sen
Organization: Accenture Strategy
Consumer goods companies face an uphill battle beyond cities to often-remote rural areas, where
distribution and sales networks capable of profitably supporting operations of necessary scale are
difficult to build. With Project Shakti, Hindustan Unilever has answered this challenge through a blend
of strong local connections and changes to its organizational structure.
The impacts of this inclusive business initiative are:

Villages often lie entirely outside the reach of mainstream media, and they cannot be reached
cost effectively through the usual marketing channels, such as retail stores or online shopping
sites.
To reach consumers in villages, HUL has recruited local female entrepreneursShakti Ammas
(Shakti power and Amma mother)across 15 states to act as salespeople and brandbuilders.
HULs products are delivered to central locations where Shakti Ammas purchase the goods and
from there to thousands of villages.
Shakti Ammas generate income under a commission-based model. They earn approximately Rs.
2000-3000 (US$41 $59) a month.
Recently, Project Shakti has expanded its operations to include men, Shaktimaans, who are all
husbands of Shakti Ammas. Their employment helps to improve the retention rates of Shakti
Ammasan increasingly critical factor for the long-term sustainability of Project Shakti.
With 45,000 Shakti Ammas and 26,000 Shaktimaans, HUL today reaches an estimated 3 million
rural households a month through this initiative.

The distribution channel followed can be illustrated as follows:

Some of the barriers to scale are:

Infrastructure deficit: Poor physical infrastructure made it difficult to use HULs urban
distribution system to support its Project Shakti operations in rural locations.
Negative incentives: Thus, retaining workers who have immediate cash flow problems became
more difficult for Project Shakti because it doesnt guarantee daily wages for rural employment
unlike government initiative.
Institutional deficits: Many of the household products HUL planned to market with Project
Shakti were already available in rural villages, such as shampoo aand soaps. So the reliance on
brand became very crucial, but the brand was essentially absent from the villages.

Some of the strategies employed for success were:

Consistently ensuring top leadership participation in the project: The key strategy was to keep
the companys chairman and board involved during the 15-month pilot stage.. Only two out of
the original six ideas made it to the market. One was for Pureit, a water purifier; the other was
Project Shakti.
Designing unique metrics and making adjustments to organizational structur: The design of
metrics for project Shakti to ensure the alignment with the companys strategic priorities. Some
of the crucial factors were: scalability, sustainability of the network created followed by
improved cost efficiency and capability development.
Using technology to design a flexible rural supply chain and sales network: Consumer data is
not reliable for low income households. GPS and density mapping technology helped in
designing rural supply chain and sales network.

Rural Marketing: A Case Study on Hindustan Unilever Limited


Source: http://www.ijars.in/iJARS%20506.pdf
Study by: Manpreet Kaur
Organization: International Journal of Applied Research and Studies (iJARS)

In the recent past, many organizations have forayed into rural areas and this has proved fruitful and
beneficial for them.
According to a white paper prepared by CII-Technopak, the rural market grew at an impressive 25% in
the year 2008 and by the year 2010-11 has grown to approximately 720-790 million customers with a
size of US$425 bn.
Rural Markets are becoming Important because:

Competition in Urban Markets


Changing Consumption Pattern in Rural Areas
Improved Lifestyle
Huge Population Base
Rapidly Growing Market

Distribution Strategies of HUL:


In rural India particularly, availability determines volumes and market share, because the consumer
usually purchases what is available at the outlet, influenced very largely by the retailer.
To meet the ever-changing needs of the consumer, HUL has set up a distribution network that ensures
availability of all its products, in all outlets, at all times. This includes:

Maintaining favourable trade relations


Providing innovative incentives to retailers
Organizing demand generation activities among a host of other things

The Evolution of HUL's Distribution Network:


First Phase:

Wholesalers placing bulk orders directly with the company


Large retailers also placed direct orders, which comprised almost 30 % of the total orders
collected
The company salesman grouped all these orders and placed an indent with the Head Office
Goods were sent to these markets, with the company salesman as the consignee
Salesman then collected and distributed the products to the respective wholesalers, against
cash payment, and the money was remitted to the company.

Second Phase: Desired Products and Quality service was the main focus

One wholesaler in each market was appointed as a "Registered Wholesaler," a stock point for
the company's products in that market.

The company salesman still covered the market, canvassing for orders from the rest of the
trade.
Salesman would then distribute stocks from the Registered Wholesaler through distribution
units maintained by the company
Registered Wholesaler system, therefore, increased the distribution reach of the company to a
larger number of customers

Third Phase: Redistribution Stockist

The RS was required to provide the distribution units to the company salesman
Financed his stocks and provided warehousing facilities to store them
Undertook demand stimulation activities on behalf of the company.
"Company Depots" system was initiated by the company.
System helped in trans-shipment, bulk breaking, and provided a stock point to minimize stockouts at the RS level.

HULs Rural Marketing Strategies:

Indirect Coverage Approach


Operation Harvest
Cinema Van Operations
Project Streamline
Project Shakti
HULs Khushiyon ki Doli
Future Initiative: Gateway to Rural: Beyond FMCG

Personal Interviews of HUL Employees


HULs Channel Manager on Achieving Leadership in New Channel: Pharmacy
India
The aim of the new channel is to attain supremacy in Pharmacy. The increase of the personal care sales
of our products from the chemist shops will be attained through:

Increasing Share of Basket


Encouraging Positive Substitution in the channel

About the Chemist Channel:


Chemist is a permanent, over the counter store, between
250-500 sqft, located in a residential / retail area and
sometimes near medical institutions. Its main role is to
handle prescriptions, provide medical bills and give
pharmacist advice. It stocks pharmacy products, PC,
nutritional and health products and some household
products. It is neat and tidy, often uses glass shelves for
display and has a refrigerator for medicines. It is
independently owned. The shopper has a good
relationship with the shopkeeper who is the key
influencer for non prescription purchases.

HULs objective through Chemist channel:


1. Increase Share of Basket : Market Shares (market shares in channel significantly lower than
nation market share)
2. Leverage the power of recommendation that the Chemist has with his shopper
3. Increase the personal care sales of our products from the chemist shops, through:
4. Increasing Share of Basket
5. Encouraging Positive Substitution in the channel

Opportunities in the channel:


As a channel, chemist can hugely positively influence the brand image, because of the way the channel
is perceived. The chemist is almost an opinion leader. Hence it offers a unique opportunity to activate
Unilever brands in this channel.
The activation opportunities for the channel are:
Information Dissemination

Retail Recommendations
Trial where it makes a difference
Advertising Problem Solution at Point of Purchase

Sales manager on Reconfiguration of HULs distribution setup


HUL launched Project Zero with the sole objective of designing the next generation distribution model
which could serve the business a few years from now. The move caters to the coexistence of modern
trade and general trade and the increasing challenges for Indian infrastructure.
Key Features:

Salesmen would carry handheld devices to book the replenishment orders from retailers. The
data is synced while interfacing with the distributors.
The clearing and forwarding agent (C&FA ) sends out the required stocks to the respective
distributors who in turn pass it on to the retailers.
As a result, from being in a position of holding a warehouse full of stocks, distributors now hold
zero inventory.
Move from a numeric to a value-weighted distribution model implies rather than focusing only
on the width of the distribution, a mapping for the retailers and products they sold

Project Advantages:

No inventory is held by few distributers in Mumbai and the number has come down for 42
major urban centers.
No stock damaged in transit from depots to Mumbai retailers, which is very surprising especially
in India for several months.
Elimination of costs and far higher efficiency for the distributers

Questionnaire for Distributors


Go-to-market model
1. Please describe the flow of goods from manufacturing to end user and the various
intermediaries involved? Can the margins also be specified at different levels?
2. What all channels do you service?
3. What is the hierarchy in companys sales teams? (Eg- ASM, TSO,etc for sales)
4. How does company distinguish between different categories in terms of margins?
5. Is there a difference in goods supplied to different channels? ( modern trade, small home
appliance)
6. What is distribution model in rural areas?

7. Which company has best distribution network and why?


Regarding Distribution
1. Name of Distributor
2. Any past distribution experience? How many years and which company?
3. What HUL products do you stock?
4. Areas covered by distributor? Is the area covered for service same? If no, please mention.
5. Monthly Turnover
6. Distribution infrastructure?
7. What incentive schemes are provided to you and based on which parameters apart from
turnover? (Coverage,
8. What is payment system to company? Mode of payment? How much Credit from company?
9. How many days credit for the retail market? Please specify if different for different channels (egmodern trade, small home appliance stores?
10. No. of days of stock kept?
11. How many godowns?
12. Total manpower involved? (Please specify the sales and service numbers)
13. What is the method of handling claims? Does company repay on time?
14. ROI from business? No. of Rotations?
15. Margins for different appliances?
16. How does distributor reclaim credit from retailers?

Distributors Interview Experiences


Hindustan Unilever Limited (HUL)

Product range distributed includes personal care products, household products, and packaged
foods. Expensive items like Lakme are handled with extreme care and stocked separately.
The Pune distributor scale of business was massive covering a range of kiosks, kirana stores, and
small retailers- around 4000 in number
Product of HUL not supplied-food items bread, ice-cream kwality walls
Online payment is issued on the next day after the product is received by the distributor
Orders are placed daily by the company through software provided by company. No credit is
handed out to RS
In a day the product comes to the dealer from the company
Time limit given to retailer to pay for order received is 2 weeks. Ideally, next order should not be
issued in case the payment is not received but depending on relationship credit is handed out.
Transportation expenses are to be born by the distributor itself.

The average ROI that a company aspires to ensure for its customers is 30%.
Margin given to retailer varies from 6% to 10%
Payment mode with HUL-electronic money transfer is made as soon as order is delivered. No
credit is allowed
Distributor places order to HUL via internet
Orders are placed by retailer to sales person, next day order is delivered
Based on profit/target achievement incentives is also given by the company on a 50-50% basis
Forecasting-CRP a SAP based application installed by HUL. This does forecasting on regular basis.
Based on last years sales and present years forecasting the software says how much to provide
HUL provides UNIFY application to forecast order placement, issue orders and for financial
transactions

P&G (Procter and Gamble)

Product range distributed includes Personal care, beauty products, soaps and detergents.
Mode of distributing goods to retailers is by tempos, four- wheeler, tempos are on agreement
basis
Distribution cost is billed and claimed from P&G
Reordering frequency is once in a week, order delivered in 2 to 3 days
Credit of one week is only entertained to the big counters
Distributor margin is approx 5% depending on the products
Stock out period is 10 days
The company has a golden distributorship strategy where company becomes totally dependent
on its distributors and get rid of all the worries related to distributor issues but on the other
hand the bargaining power of distributor becomes too high and total dependency on the
distributor can lead the company into back foot

ITC (Indian Tobacco Company)

Product range distributed includes cigarettes, personal care, packaged foods, and safety
matches
Distributor margin varies from 0.75% on cigarettes, 2.8% to 3% depending upon other products
Distribution network includes wholesaler, retailer and small shops
Out of total sales 65% to 70% is from cigarettes, 22% for packaged foods, and rest from personal
care products and safety matches

The distributor keeps 9 days of safety stock in the ware house .The recording frequency is 1
week
Mode of distributing goods to retailers is by pick up van, two wheeler van and sales person on
bikes and cycles
Forecasting is based on past 6 months turnover data, order is placed on the basis of forecasting,
advanced payment is made and delivery happens from nearest warehouseModeltownwithin a
week after payment
Distribution to the retailers is done by distributors, the cost of distribution is borne by ITC only
Retail margin is 10.5% on personal care product and packaged food, wholesaler margin is 1.5%
Cigarettes is sold on immediate payment basis other products are sold on 15 days credit basis
Goods are sold on 7 days credit and less margin is given to the sub stockiest
Feedback-customer late payment

Nestle

Product range distributed includes milk products and nutrition, beverages, packaged foods,
chocolates and confectionary.
Margin given to distributor-not told
Distribution network includes wholesaler, retailer and re-distributor
Re-distributor is in the charge of managing the availability outside the region of distributor
The distributor is supposed to maintain a stock of 3 weeks; stock is formalized by the company
Delivery happens from nearest warehouse Lawerence Road within a week after payment
Distributors have to maintain cold storage, deep freezers for the storage of the products and
have to maintain all expenses pertaining to infrastructure requirements
Distribution to the retailers is done by distributors ,the cost of distribution is borne by Nestle
only
Distributors are termed as cash distributors as the company charges the distributors before the
stock is delivered
Company connects the distributor online and transaction happens online
Distributors sell goods on credit and the period of credit ranges from 1 to 2 weeks
Distributors to push in slow moving SKUs clubs them with fast moving SKUs for the retailer
Replenishment is done with the cash and happens at the end of every six months
Company follows a policy of return when the product has past its expiry date, damaged or has a
defect
Company does not give any guarantee to the distributor
A higher quantity ordered has to be replenished from the warehouse

Questionnaire for Retailers

What is the frequency of HUL, ITC, P&G and Nestle visiting the retail store?
What is the shelf space occupied by HUL, ITC, P&G and Nestle items?
What is the frequency and average value per order?
What are the Payment and Inventory terms with the wholesalers?
Does the supplier provide any backing to display their items?
Is there any difference in the inventory levels of displayed stocj and non-displayed stock?
Do retailers request extra charges for the presentation of things or signage?
Are displayed things sold or favored over non-displayed things?
Are there any directions from suppliers regarding the way their things be shown at retail
location?
Is there any distinction in edge offered by heading suppliers than those offered by non-heading
suppliers?
Is there any incentive given based on the total sales of a retailer?

Retailer Interview Experience


Coordinated individual meetings were directed. We attempted to cover all the end-merchants who
specifically offer the items to the clients beginning from little tea shops which sold FMCG things like rolls
to the bigger advanced exchange shopping centers offering the entire umbrella of FMCG items.
Communication with retailers was extremely educational as it gave data of the sides, the client's
fulfillment level, their perspective for items and the merchants' issues and arrangement. A percentage
of the distinctive meeting encounters are:-

Shop Name: Campus Corner, Shop Type: Small General Trade


Address: Delhi University, North Campus

It is a little tea shop at the corner of the two uniting lanes. Items like Maggi (settle), scones (ITCSunfeast), chips and so on.
The retailer just kept rolls of ITC brand, as it is just ITC's wholesaler who goes to his shop to take
the other and convey the items.
He didn't incline toward results of organizations like HUL, as they must be purchased from a
wholesaler shop which was truly removed from his shop
The retailer did not keep neighborhood marked items, despite the fact that they guaranteed
colossal edges, as the client favored the marked ones
ITC gave the retailer an edge of around 15-20%

ITC had given a rack to keep the Bingo chips on showcase


The ITC merchant had no rack employing method with this shop along these lines the wholesaler
had no issues with other focused items in the rack space.
The wholesaler went by the shop, each Thursday and afterward just, the request for the
following week is put.
The businessperson said on the off chance that there is a stock-out, he calls the wholesaler, puts
in the request and the exact following day, the items are conveyed
The expense of transportation of the items is borne by the wholesaler himself
The retailer needed to pay the trade in for cold hard currency return immediately when the item
gets conveyed
The unsold products items are returned once more to the organization and it can be recovered
as far as money or different merchandise and therefore there was no misfortune to the
businessperson
The re-request level was not settled and it was finished reliant on the businessperson's tact.
The retailer said that he was fulfilled by the wholesaler of ITC

Shop Name: Twenty-four Seven Shop Type: Modern Trade


Address: Malkaganj, Near Kamlanagar, New Delhi
It is a huge present day exchange store, completely aerated and cooled and electronic charging
procedure. The store had results of practically all celebrated brands under individual consideration and
nourishment & refreshments class of FMCG merchandise. We had a balanced meeting knowledge with
the Store Manager Mr. Kushal. A portion of the key purposes of the discussion were:

The store keeps items from distinctive umbrella brands like HUL, P&g, ITC, Nestle, Dabur, J&j
and so on.
Two sorts of item dispersion happens here: DC-Direct Center and DSD-Direct Store Delivery
The immediate focus is the storage facility of the twenty-four seven and serves all the
establishments of the store in the close-by range.
Since, the charging is machine based, a predefined re-request level is situated for particular
items and when the load of an item goes down of a specific item, the request is put
consequently, which is further sent to the buy office with the request number produced.
The immediate store conveyance is received for some crisp items like bread, curd, milk and so
on. These are requested from the store itself by the store director and conveyed specifically to
the store.
The installment for DSD is through check where concerning the DC, the buy office handles the
installment which is for the most part online charge from the organization's financial balance.
Neighborhood brands offer higher edges however, there is strict no approach for the nearby
brands.
The edges over the nourishment & refreshment part, among all the huge 4 organizations like
HUL, P&g, ITC and so on is practically the same which extends from 15-20%, which in
examination is higher than that offered to the mother & pop stores

The in house brands like chomps giving nibble sustenances and so on have a higher edge which
may touch even 40-half. These sustenance things are created in the bread kitchen of the
organization itself
The buy bureau of the organization conceded to the no return approach of the suppliers and
receiving as an exchange the requested price tag from the suppliers.
Since, the items had no return approach, the expense of deserted merchandise, unsold
products, and so on were to be borne by the organization itself
As contrasted with the rack contracting process in the mother & pop kirana stores, here in the
megastore, the brands like Kitkat(nestle) paid approx. Rs. 25000 for every month to keep the
kitkat rack in the front having the most extreme perceivability.
The items continued showcase, regularly had higher deals and in this manner the stock for them
must be kept up higher
The client charging in the front end was taken care of by Genpact and at the back end was SAP
6.3
Having electronic charging and so forth, all the stock was kept up at the store machine just. The
deals money gathered toward the end of the day was gathered thus by a bank representative of
ICICI Bank , with whom twenty-four seven had cooperated with

Shop Name: Om Sai Traders, Shop Type: Wholesaler


Address: Gurgaon

It is a medium estimated mother and pop


kirana store. It kept practically all the
fundamental needs things including
nourishment and refreshments, individual
forethought, dairy items and so forth.

The shop had the items from very nearly all


the main umbrella brands of Fmcgs
including HUL, ITC, Nestle, P&g.
The items were specifically bought from the
wholesalers, as the merchants had a day
altered in a week, when they came,
conveyed the items and take request for
the following week
In the event that, there is a stock-out before the wholesaler comes, the items can be requested
via telephone, where in they got conveyed the following day
The re request level was totally physically and on retailer's watchfulness.
The mode of installment money for organizations like HUL, P&g and check for ITC, Nestle
On the off chance that the items were not sold, the organization took back the unsold items, so
there is no trouble on the businessperson
The expense of transportation of items is borne by the merchant or the organization itself
The edge over the huge four organizations was practically the same going from 7-15% shifting
from item to item

At the point when the supply is higher, the merchant tries to receive the push technique, as he
offers plans and offers (BTL movement) e.g. 1 pack of little maggi free with 24 parcels of maggi
The merchants of organizations like HUL, pepsi, P&g and so forth like greater organizations, take
the request and convey the items immediately as they convey a bullfighters/little truck of
products with them
The supply for HUL, Nestle was great; P&g offered items in little number, as they may be a lack
of supply, ITC was the most noticeably awful in the supply was the businessperson was totally
unsatisfied with it, as he said there is never on time conveyance, merchants don't get the call,
and the stockpiling framework in the stockroom is far more atrocious
As indicated by the retailer, ITC had isolated little retailers into three classes A, B and C relying
upon the aggregate deals income in a month. A-classification retailers had their deals more than
10,000 INR in a month, between 7000 to 10,000 INR was given B class and beneath 7000 INR
was recompensed the C classification. The edge was settled on this classification
Settle especially contracted a particular rack space inside the shop for its items to build the
perceivability and the retailer was paid 30,000 INR for three months
There were in some cases review reason visits from the chiefs of the organization P&g and
Nestle
The retailer gave the decision as HUL had the best store network dissemination and ITC had the
most exceedingly bad of the part.

Shop Name: Priya General Store, Shop Type: Small to medium General Trade
Address: Gurgaon

The shop had the items from few of the main umbrella
brands of Fmcgs including ITC, Nestle and so forth.
Other than Kwality Walls no other HUL item was sold in
the shop
The items were specifically bought from the merchants,
as the wholesalers had a day settled in a week, when
they came, conveyed the items and take request for the
following week
In the event that, there is a stock-out before the
wholesaler comes, the items can be requested via
telephone, where in they got conveyed the following
day
The re request level was totally physically and on
businessperson's prudence.
In the event that the items were not sold, the
organization took back the unsold items, so there is no
load on the retailer
The expense of transportation of items is borne by the wholesaler or the organization itself
The edge over the enormous four organizations was very nearly the same extending from 7-15%
fluctuating from item to item

The results of Nestle were more obvious inside the shop; the installment was carried out either
with money or with look out for a quarterly premise.
Retire and showcase rack was given by Nestle.
HUL arranged the retail shops concurring the deals income into three classes of A, B and C. This
shop fell under the C classification, so no legitimate wholesaler was dispensed to this shop. On
the off chance that the businessperson needed to offer HUL items, he needs to go to the
wholesaler/ wholesaler to buy the item. For little items, HUL keeps up a DSR or every day deals
report
Be that as it may, HUL gave the refrigerator to refrigeration of desserts, yet the power bill was to
be paid by the retailer
ITC gave the most elevated edge, and it additionally kept up the retailer classifications as per the
deals turnover
Since, gets around 70% of its incomes from cigarettes, it concentrates all the more on cigarette
shops just and gives a higher edge to them, this makes awkwardness in the business among
retailers
As per this businessperson , Nestle had the best conveyance framework

Research Analysis: Distribution Models of FMCG Companies


HUL:The Diamond Model

MT-Cash and Carry, Hypermarket, Supermarket, Self Service Formats


LAB- Leadership accessed brands- This is for the rural distribution and same RS has range of
products with customized SKU for rural markets.
Grocery Retail- This is handled by another set of RS who handle all retail outlets in city. Usually
HPC and F&B are handled by different RS.

U2 consists of all products (not brands) that are high margin. For example, this would mean that Ponds
Talcum powder is part of U1 while Ponds Face Wash is a part of U2.
The division of products is made according to the different channels that they are suitable for. Therefore
it is easier to implement customized channel programs once a dedicated sales system is in place for
each. For eg., U1 is more suitable for kirana, U22 for chemist and U21 for fancy stores.
The Grocery retail has many divisions so that there is some focus in the service provided by the
company to the retail outlets.
The Modern Trade Setup of HLL is a direct distribution setup wherein the company directly supplies to
the large-scale retail outlets. These require daily servicing, the company also aims to improve range

availability and reduce inventories. These stores can also be used as nodes for running direct
promotions and interacting with customers.
Traditional Route to market model

Rural Distribution Setup

A point of contention in the above is the role of a star seller, which acts as a central hub for many rural
retailers in lieu of the fact that these villages have low volumes, and are spread over vast geographical

distances which make it infeasible for the rural distributor to supply to them directly. HLL classifies the
retailers according to their Turnover and the volume of the business done by the retailer

Type

Details

-Vijetha

Mass retail outlets and major wholesale dealers. These outlets are serviced and
shipments of salt are directly sent to the key outlets.

Family
Groceries

These are larger groceries which are analogous to our ISS outlets and further in these
shops the range of product are very wide so the merchandising operations are very
intense.

Local Kirana shops (T.O range Rs.10,000 - Rs.5000) {Lab towns}

Small Kirana shops (T.O range Rs.5,000 - Rs.3000) {Lab towns}

Local Pan shops ( T.O range less than Rs.3000)

{Lab towns}

Channel Programs

CHANNELS

SPECIALIZED PROGRAMS

Modern Trade

MT Business Efficiencies

Family Grocer / Kirana

SuperValue store

Wholesale

VIJETHA

Chemist

Unicare (Pilot project)

Fancy Store

Kiosk (less than 50sq. ft. area) There is also a Food Leadership Outlet program for high turnover food retailers.
Market Segmentation How do they segment the market?
wrt Towns

wrt Consumers

Population

Income

Class of society

Product Usage

Project Shakti
The objectives of Project Shakti are to create income-generating capabilities for underprivileged rural
women by providing a sustainable micro-enterprise opportunity and to improve rural living standards

through health and hygiene awareness. Project Shakti works through the concept of Self Help Groups
based on the Grameen Model of microfinance. The participants in this model are women who are
termed as Shakti entrepreneurs.
Typically, a woman 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. Each Shakti
entrepreneur services 6-10 villages in the population strata of 1,000-2,000 people
Typically a Shakti entrepreneur sets off with 4-5 chief brands from the HLL portfolio - Lifebuoy,
Wheel, Pepsodent, Annapurna salt and Clinic Plus. These are the core brands, then they are layered
with whatever else is in demand like talcum
powder or Vaseline during winters. These brands apart, other brands which find favour with a rural
audience are: Lux, Ponds, Nihar and 3 Roses tea. Typically, unit packs are small. All the brands are
national and HLL is cool to the idea of creating a rural-specific brand as it will only dissipate the
advertising media effort for the brands. To get started the Shakti woman borrows from her SHG and the
company itself chooses only one person. With training and hand-holding by the company for the first
three months, she begins her door-to-door journey selling her wares.
It has already been extended to 190 districts from 11states, the Project Shakti footprint now reaches
approximately 3 lakh households across rural India.. HLL's vision is to scale it up across the country by
2010, creating about 11000 Shakti entrepreneurs, covering 100,000 villages. A typical Shakti
entrepreneur conducts business of around Rs.15,000 per month, which gives her an income in excess of
Rs.1000 per month on a sustainable basis. As most of these women are from below the poverty line, and
live in extremely small villages (less than 2000 population), this earning is very significant, and is almost
double of their past household income

Comparative Matrix of Distribution Models


Based on the collected data and interview experiences, the table below represents a comparative
analysis of HUL, ITC, P&G and Nestle.

Company
Name

P&G

Nestle

Products

Food/ beverages,
soaps/detergents,
personal care

Cigarettes,
personal care,
packaged foods,
stationary.

Food/ beverages,
soaps/detergents,
personal care.

Milk based
products and
beverages,
packaged foods,
confectionary.

SupplyDemand Match

High

Low

High

Medium

Payment and
Delivery
Policies with
Distributers

E-payment on
delivery

E-payment before
delivery

E-payment on
delivery

E-payment on
delivery

Pratap Bagh, New


Delhi

Model Town, New


Delhi

B-72, Mayapuri,
Industrial Area,
Phase -1 , New
Delhi

Industrial Area,
Lawrence Road,
New Delhi

Distributor
Margin

Margin varies from


4% to 6% varying
from product to
product

3% on personal
care and food
products
Distribution cost of
vehicles is totally
handled

Approx 5%

Retailer Margin

7% to 10% on
personal care and
packaged food

8% to 10% on
personal care and
food

5% to 10% on
personal care and
food

Nearest ware
house

HUL

ITC

5% to 6%
depending upon
products

7% to 8% based on
products

Stock out
period

7 days to 10 days

9 days

10 days

7 days

Ordering
process

Bi-weekly order on
visit by distributor

Through telephone
to the distributor

Weekly order on
visit by distributor

Weekly order on
visit by distributor

Retailers
feedback on
distribution
channel

Among the best in


the industry

Worst among the


chosen companies

Shortage of supply
at times, otherwise
good

Good

Display racks /
Shelf hiring /
Other space for
keeping SKUs

Provides
refrigerator for
Kwality Walls

Provides display
engage deos

No such offerings

Shelf hiring for


Maggi, Kitkat,
munch etc.

RetailerCategorization
based on
monthly sales

Yes, three
categories A, B and
C in the sales
group >50k, 20k50k and <20k

Yes, three
categories A, B and
C in the sales
group >10k, 7k-10k
and <7k

No

No

Opportunities for HUL:


Differential Tapping of Rural Market:

Just 3% of India's villages are open through traditional single organization run direct circulation
frameworks. UV found that rural retailers needed to visit the closest town to get 81% of the
merchandise that they were offering. These visits were regularly made twice a month leading a lot of
expense and disturbance in their operations. United Villages has set up a pilot extend in Jaipur
(Rajasthan) catering 5000 country retailers close to Jaipur. The pilot has now been reached out to Kota
and will expand to different parts of the state by the year end. Orders are taken on a mobile phone app
uniquely created for UV. These requests are sent to the central computer and serviced in 2 days.

Sales Force Automation


The appearance of hand held gadgets and enhanced communication innovation has changed the
situation in the last few years. The frontline sales person now carries a hand held gadget on which he
books retail requests (Secondary Sales). These are downloaded into the Stockist's computer toward the
end of the day and serviced the following day. Accumulation is carried out automatically and an
abundance of data is accessible for dissection including points of interest of sales personnel working,
productivity, plans and target accomplishment.

Conclusion
Hindustan Unilever's distribution covers over 2 million retail outlets across India directly and its products
are available in over 6.4 million outlets in the country.
Project Shakti is a rural distribution initiative in small villages. Hul is benefitted by this project by its
expanding rural reach and it also develops livelihood doorways for the lesser privileged rural women.
Shakti which once started with 17 women, Today, provides livelihood enhancing opportunities to over
65,000 Shakti Entrepreneurs engaged in distributing productions in more than 165,000 villages and
reaching over four million rural households.
The process of return at HUL is largely different from that of ITC, P&G and Nestle. They shy from
purchasing products in ample quantities retailer purchasing just 70 - 80% of the actual demand. This
shows that absence of good return policy affects the product availability.
FEFO or first expiry first out helps in ensuring freshness of Nestls products
Retailers operate on lower margins on all the four big brands, they also offer good unsold return policies
taking on an average 80% to 95% of unsold goods back.
Among the competitors discussed ITC provides better margin to its retailers and distributors compared
to other companies, It also offers quick replenishment of damaged goods but even here the good old
cigarette business takes the cake as total sales 65% to 70% are from cigarettes and the company targets
most of those retailers who keeps ITC cigarettes
HUL is more prompt in order delivery compared to ITC, P&G and Nestle
From the combined analysis of ratings and data collected, it can be concluded that while the distribution
management of HUL is the strongest while the ITC remains close because of its behemoth cigarettes
business which requires extensive distribution to the smallest of kiosks. P&G has always been known as
the king of execution with superior utilization of technology while Nestle, which relies mostly on the
strength of its brand, has scope for improvement.

References
Primary Sources
Distributor Details
Hindustan Unilever Limited-Shree Krishna Enterprise
Contact number-9971165855
Address-B-8/1, Ranapratabbagh,delhi 7
Pune
Chavra Enterprises
Contact: 8793804373
Nestle-SK N Enterprise
Contact no-01127107919
Address- Industrial area, Lawrence road
P&G- BHARAT DISTRIBUTOR
Address: Bharat Distributor,
B-72, Mayapuri,
Industrial Area,
Phase 1,
New Delhi.
Contact no. - 011-49333111, 49333100

ITC- Agarwal Company


Contact No.: 9871159119
Address: D-119, Mahendra Enclave, Delhi-09

Retailer Details
Some of the few retailer details are:

Campus Corner, Address: Delhi University, North Campus


Twenty-four Seven
Address: Malkaganj, Near Kamlanagar, New Delhi
Om Sai Traders, U- Block, DLF Phase III, Gurgaon
Priya General Store, 16/47, U- Block, DLF Phase III, Gurgaon

Secondary Sources

http://indianresearchjournals.com/pdf/APJMMR/2013/February/7.pdf

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wnload%2F138%2F32&ei=If9TVOz3DoK_mwXqk4LIAQ&usg=AFQjCNG6AcbxpkDJfmiwkHqT5KSJkOBLA&bvm=bv.78597519,d.dGY&cad=rja

http://www.ijars.in/iJARS%20506.pdf

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http://www.ijirset.com/upload/2014/january/45_FAST.pdf

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www.itcportal.com

http://www.hul.co.in/

www.pg.com/en_IN/

http://www.atkearney.in/

http://www.bcgindia.com/

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Azad, Priyanka(2010, November), Go Rural: Marketing Mantra for the Competitive Era
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to reach rural India wider, www.economictimes.indiatimes.com

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