Unilever in India – Project Shakti

- By Akash Sehra, PGP21/193

Q1. How is HLL placed in the consumer market?

HLL occupied a very special recognition among the Indian masses as it was not only identified by
its products in the market but also its CSR as well as social initiatives. Uniliver is the largest FMCG
Company in the world with global turnover of roughly US $55 billion in 2004. The Indian subsidiary
had revenues of approximately 110 billion rupees that year, or $ 2.43 billion with the gross profit
of around 46% and net income of 11.4%. The year of 2003 was even more productive with gross
around 50% and net income about 17%. The company has a varied product range varying from
detergents, personal products, beverages and foods with nearly thousand SKUs across about
twenty categories. With an estimated population of around 1.02 billion it was a huge market for
Unilever and also a huge challenge. Challenge in the sense that there was a large concentration of
majority population concentration in the rural India i.e. around 742 million of the 1.02 billion.
In the diverse Indian market HLL sought for market leadership offering a wide range of products
at various price points in each category. It had established in both the high priced as well as the
low priced market with numerous products. In the low priced market it had major competition
with the unorganized and local players whereas in the high priced market its competition was with
more established companies in the market. HLL as a brand not only guaranteed the best of
qualities but also it understood the masses it catered to. It had a well-established supply chain
model and distribution network which helped it in meeting the demand of the retailers across
India. Its market war with its competitors not only prompted it to make penetration into the
market but also improve its brand visibility in even the remotest corner of the nation. It started
programs as Shakti to improve its brand presence in the inaccessible markets as it had around
visibility in around 25% of the rural market. HLL made mark among the consumer for not only its
high brand presence through its very popular brands but also its very innovative social initiatives
across nation. Such initiatives increased the market of HLL in an additional population of 220
million spread across 1000000 villages.

2.What was the motivation for the Shakti initiative? Was it a CSR initiative?
The motivation was twofold, one to increase the wealth and well-being of India’s rural population
and in turn increase the wealth of HLL. HLL believes that if and when the wealth of the rural Indian
increases if they have a part in that increase in wealth they can benefit as a company.

The project was not a CSR initiative, but as “a business initiative with social benefits.”
Initially, the project was created as a response to Unilever’s desire to tap into new markets within
India. Unable to reach most small villages due to poor transport and supply chain infrastructure,
along with challenges of selling products to a population with little or no disposable income,
Unilever saw the need to innovate. Connecting with existing women’s self-help groups, Project
Shakti allows women to start generating an annual income of US$150 after receiving training and
a loan to get off the ground.

The motivation behind Shakti was twofold, one is to grow with people especially the rural masses
which constitute 72% of the 1.5 billion Indian population and that offers a great opportunity in
retailing and the kind of products that HLL produces. The second is why not help the community
to improve on livelihood and have sustenance in living standard if that come as a byproduct of the
business objectives. So it was not a social project but like another business venture with added
benefit of social upliftment.
Business Objective:
> To extend HLL’s reach into untapped markets and to develop its brand through local influences.
> To reach 100 million consumers by 2006.
Social Objective:
> To provide sustainable livelihood opportunities for underprivileged rural women.
> To scale up the number of Shakti entrepreneurs from 12000(2004) to 25000(2006).

3. How will Project Shakti influence distribution in rural markets?

Project Shakti aims to penetrate the rural markets to the maximum possible extent because rural
markets provide them with the opportunity to create new, markets with minimal competitor’s
presence. What makes Shakti scalable and sustainable is the fact that it contributes not only to
the business, but also to the community it is a part of the distribution approach in rural areas based
on accessibility and Business potential was mapped as follows:

Low Business potential High Business potential

Accessible markets Indirect Coverage – 25% Direct Coverage – 40%

Inaccessible markets Shakti Streamline – 35%

The Shakti project appointed Shakti entrepreneurs in villages who purchased HLL products and
sold those products to their villagers either directly or through local outlets. The entrepreneurs
had the incentive of earning higher profits by directly selling to consumers. The Shakti Project
made various efforts in overcoming the difficulties in the project. They offered credit to the
entrepreneurs to increase sales of their products. RSP or Rural Sales Promoter was hired to coach
Shakti entrepreneurs in understanding the economic aspect and create business.
In order to increase local government support, Shakti hired marketing and research team(MART)
to study and explore the potential and viability of a village for project shakti.
Sachets and LUPs - The introduction of sachets revolutionized the FMCG industry and made their
products affordable in rural areas. Using sachets and LUPs they were able to target a large mass
of consumers who had been unable to use products of this category. The benefits offered to
consumers were personalized service, doorstep delivery and assurance of quality.
Vision: The Shakti Project aims to reach 100 million consumers by 2006 with a network of 25000
entrepreneurs. In the past 4 years (Dec 2000 to Dec 2004), 50,405 villages have been covered in
project Shakti.
Shakti Vaani - It was a social communication program that target the rural community and in turn
increased the awareness about the HLL products in those areas. The local woman called Vani,
communicated the best health and hygiene practices to the people and in turn helped popularize
the HLL products. It planned to recruit and train over 500 vaani, covering 20,000 villagers by Feb
2005.
iShakti : The Portal – This project sought to extend the benefits of information technology to rural
India. HLL planned to establish 500 kiosks by the end of 2005.

4. If Shakti cannot become profitable, should HUL continue the program? Why?
Reasons to continue the project:
▪ In 2004, Shakti had grown to over 15% of HLL’s rural turnover.
▪ Project Shakti broke even in less than four years, in 2004.
▪ The Shakti entrepreneur offers personalised service and doorstep delivery that helps in
creating a better connect with the customers
▪ Shakti created a vast team of local, credible, one-to-one endorsers in rural regions where
the reach of media is comparatively low
▪ It is a social empowerment initiative that makes a difference to the rural societies. If they
withdraw now, it may create a negative image for the company.
▪ It incorporates business sense into the people which creates awareness
▪ Project Shakti has achieved a turnover of about $2.2 billion per year (as per a statement
made by Mr. Dalip Sehgal, Project Shakti achieved 1% to 3% of company’s revenues in 1 -
3 years) for the initial 3 years in the rural districts where it is operating

Constraints:
 ▪ More competition as more companies are emulating their rural distribution strategies
▪ Scaling up results in escalation of employee costs which was originally 10-15% of Shakti’s
revenues and in Vani and iShakti programmes
▪ In many of the villages, self-help groups are non-existent.

Conclusion: Although the costs will increase due to scaling up, HLL should continue with Project
Shakti for the benefit of goodwill and higher market share.