Where HLL's Shakti comes from

Vinay Kamath FMCG giant Hindustan Lever has embarked on yet another ambitious venture, Project Shakti, to spur growth and penetration of its products in rural India while changing lives and boosting incomes. Catalyst presents a first hand account.

A HARSH summer sun beats down mercilessly on the drive to Nalgonda district in Andhra Pradesh. The rocky landscape is parched, scorched by successive years of drought. The destination is Peddakaparthy village, 65 kms from Hyderabad, and the seat of a brave new experiment by fast moving consumer goods major, Hindustan Lever Ltd (HLL), where, undaunted by the vagaries of nature, a group of village women are attempting to bring about a transformation in their lives. Through a combination of micro-credit and training in enterprise management, these women from self-help groups have turned direct-to-home distributors of a range of HLL products and helping the company plumb hitherto unexplored rural hinterlands. From the time HLL's new distribution model, named Project Shakti, was piloted in Nalgonda district in 2001, it has been scaled up and extended to over 5,000 villages in 52 districts in AP, Karnataka, Gujarat and Madhya Pradesh with around 1,000 women entrepreneurs in its fold. The vision is ambitious: to create by 2010 about 11,000 Shakti entrepreneurs covering one lakh villages and touching the lives of 100 million rural consumers. What's Project Shakti all about? How does it work and benefit the company? Catalyst was part of a media team that HLL invited to visit Peddakaparthy village to see Project Shakti at work. The team visits the house of Jella Sujathamma, whose spouse is a weaver who weaves the famous Pochampally sarees of AP. However, her income was not enough for her family, which includes three children. Five years ago, Sujathamma had joined a self-help group (SHG), formed by the district rural development authority. HLL has operated Project Shakti through these self-help groups; AP was chosen for the pilot project as its has the most number and better established SHGs - there are about 4.36 lakh SHGs in AP covering nearly 58.29 lakh rural women. C.S. Ramalakshmi, Commissioner, Women Empowerment & Self employment, Govt of AP, points out that AP alone has about half of the SHGs organised in the country. Says Pradeep Kashyap, Managing Director, Marketing & Research Team (MART): "This network has ensured that AP is the incubator for all

our experiments in working out new models of distribution of FMCGs and other products." MART, an organisation which works in the social sector, implements the on-ground activities for many companies wanting to work the rural sector, including HLL. The likes of Sujathamma, among the first Shakti entrepreneurs, have been chosen from these SHGs. She, HLL officials explain, is a shining example of the success of the model - Sujathamma, on an initial loan of Rs 10,000 from her SHG to start the enterprise, has a turnover of Rs 10,000-Rs 25,000 a month earns a profit of Rs 750-Rs 2,000 a month, an average return of 8 per cent. Besides, she now also sells staples, sugar, edible oil and a variety of other household items.

The objectives of Project Shakti, explains Dalip Sehgal, Executive Director, New Ventures & Marketing Services, HLL, 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". For HLL, it is "enlightened self-interest". Creating opportunities to increase rural family incomes puts more money in their hands to purchase the range of daily consumption products - from soaps to toothpastes - that HLL makes. It also enables HLL access hitherto unexplored rural hinterlands. Says Sehgal, "We looked at several models of rural distribution, even at the Grameen Bank model in Bangladesh, before we decided on the pilot in Nalgonda to figure out this model. Now the model has been refined based on our learning here and we expect to roll out quickly in other states." For HLL greater penetration in rural areas is also an imperative - presently over 50 per cent of its incomes for several of its product categories like soaps and detergents come from rural India. The challenge for HLL now is to take its products to towns with a smaller population - under 2,000 people. As Sehgal points out, HLL's conventional hub-and-spoke distribution model which it uses to great effect in both urban and semi-urban markets, wouldn't be cost-effective in penetrating the smaller villages. Now, with this new distribution model, the smaller markets are now being referred to as `Shakti markets'. How it works 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 1,0002,000 people Typically, as Sehgal points out, 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, they we layer it with whatever else is in demand like talcum powder or Vaseline during winters," elaborates Sehgal. 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. The impact is slow and HLL too is not expecting any quick returns on this project. In Andhra, so far, since the experiment began, HLL has seen 15 per cent incremental sales from rural Andhra, which contributes 50 per cent to overall sales from Andhra of HLL products. But analysts see this rural foray as something the company has got to do. As Nikhil Vora, Sr. Vice President of research group ASK Raymond James explains, if there is one company that can take on the onus of developing the rural markets, it's HLL. Says he: "HLL contributes 20 per cent of the total FMCG business in the country. So, clearly, the onus is on HLL to grow the market. Returns may not happen in the next five years, but a lot of consumer understanding and insights comes from an exercise like Project Shakti, which in turn can lead to product innovation." An analyst with a leading brokerage points out that a lot of HLL's rural initiatives in the recent past have not paid off because of poor rural incomes. But, a monsoon revival and greater rural incomes can mean payback time for projects like Shakti. "Large companies like HLL have to push greater into rural areas. Brand loyalty is declining among urban consumers; they're looking mostly for consumer promos; regional brands too are snapping at their heels. So, to attain growth, going rural has become an imperative," she says. Concurs K.N. Siva Subramanian, Sr. Vice President, Franklin Templeton India Ltd: "The (HLL) management had recognised the impending saturation of the urban markets some time back and launched aggressive plans to capture the rural markets. However, a slowdown in the agricultural sector resulted in rural incomes remaining flat and affecting sales. We believe that by targeting lower price points and further expanding the distribution network, companies can tap the potential of rural markets. Initiatives like Project Shakti will help them in establishing and consolidating their base in rural markets." Regional brands, or even larger FMCG companies, do not have the kind of distribution reach that HLL has established and in the long run, that could prove a winner for HLL, according to analysts. The future of Shakti Having perfected the model in Nalgonda, in 2003 HLL plans to extend Shakti to a 100 districts in Madhya Pradesh, Gujarat and UP. There are other plans brewing. One is to allow other companies which do not compete with HLL to get onto the Shakti network to sell their products. Talks are on with battery companies like Nippo, TVS Motor for mopeds, insurance companies for LIC policies. "We wanted to first stabilise the project before we can look at other companies. It requires somebody with scale and size to build a platform and then invite other companies

onto this platform," elaborates Sehgal. The most powerful aspect about this model, emphasises Sehgal, is that it creates a win-win partnership between HLL and its consumers, some of whom will also draw on the organisation for their livelihood, and it builds a self-sutaining 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 palm pilot, HLL is looking at sourcing appropriate low-cost hardware from Hewlett-Packard while Unilever Research out of London is developing the consumer interactivity software. As Sehgal puts it, women in the rural areas are the catalyst of change and that is why its whole programme keeps women in focus. "It's like popcorn in a machine; one bursts at first and then everything begins popping; here too, one woman as an agent of change bursts into a movement," he says. Clearly, it's the rural women who give Shakti its strength.
AP's self-help groups

THERE are about 4.36 lakh women self-help groups in Andhra Pradesh covering nearly 58.29 lakh poor women. AP alone has about half of the SHGs organised in the country. The SHGs are also popularly called DWCRA groups and this name became popular after the DWCRA programme (Development of Women and Children in rural areas) through which women's groups were assisted initially. The SHGs not only save but also take small loans out of the corpus available with the group. The group corpus consists of savings , government assistance as well as bank loans. Members use the loan out of the group corpus for their personal needs initially. However, in the long run such loans are utilised for income generation activities. Since the inception of the SHGs, an amount of Rs 1,362.98 crore has been mobilised as corpus by these groups and it is estimated to reach Rs 1,500 crore by the middle of this year. The women's savings movement, explains C.S. Ramalakshmi, Commissioner, Women Empowerment, Govt of AP, started in 1993 as an offshoot of the total literacy campaigns conducted by the government. Rural women organised themselves into `thrift and credit' groups with one rupee saving a day and this mass movement, in which 58 lakh members saved more than Rs 800 crore is rotated

internally and lent amongst members twice in a year as per the interest rates fixed by the groups. Such amounts are used for their daily consumption needs as well as for making goods to sell. It is into this strong network that HLL tapped to launch Project Shakti. While the savings was there among the SHGs, there was no channel of investment. Now, HLL has provided a window of opportunity to invest and earn.

Monday, January 19, 2009

Project Shakti Going Global

Project Shakti as a model of distribution has attracted a lot of attention both from the company as well as media. The model makes use of existing Self Help Groups working in villages and appoints them as sales persons called shakti amma to sell HUL products in villages. The idea is to be able to reach those villages which do not very good road connectivity and penetration of media is also poor. By appointing the lady as a distributor for the company is able to get a direct reach in villages where it had no presence earlier and the lady would be able to get additional source of revenue. A win-win situation if one were to describe it.

The lady- Shakti Amma would be supplied the at her door-step and she would be selling it to the nearby cluster of 3-6 villages. The initiative has three components, one being the distribution component, second being the use of lady for communicating health and hygiene messages in the villages. The third component is IT, wherein a kiosk - ishakti is set up in the village , which could be used as information kiosk in the village.

Though this is relatively an old initiative, started in 2001 in Andhra Pradesh, the news that the model is being taken global is what has brought it back to media attention. Acco

rding to the news item, "The project is being customised and adapted in other Unilever markets such as Sri Lanka, Vietnam and Bangladesh. It is being considered for other

Latin American and African markets. In Bangladesh and Sri Lanka, it is being promoted as Joyeeta and Saubaghya, respectively. There is a similar initiative in Vietnam as well." For more on the article, link.

Though there are obvious positives in the project both for the company as well as the lady who takes up the business but there are many issues which need to be looked into. One of issues is the actual amount of benefit that the lady gets by in by engaging in the business for HUL, though the company claims that it almost doubles the household incomes, but there variations in that. Similarly the Vani component of the initiatives which is one in which the company does not make any money is being expanded very slowly and the expansion of the project is not very uniform and even within a village also the project impacts only one lady. And when one interacts or sees the mileage that the company tends to derive out of the project it makes us vary of the claims and the actual benefits....

Though this models of leveraging the existing Self Help Groups in villages for distribution for products to rural areas is being seen by many as the next wave in the SHG movement..

"Our partnership with HUL offers the rural entrepreneur a profitable business model while operating i-Shakti kiosks. Also, low cost delivery and customized products will result in higher benefit through enhanced economic gains for the rural consumers." ~ Mr. Nachiket More Executive Director, Wholesale Banking Group ICICI "There's incredible potential in rural markets. That's where the growth will come from." ~ Sharat Dhall, Hindustan Lever's director of new ventures and marketing services Sankaramma, the leader of the local Kanaka Durga self-help Group (SHG) belongs to K. Thimmapuram village's Muddaner Mandal in the Kadapa district of Andhra Pradesh. The village has 350 households with a total population of 1200. Sankaramma's 5 hectares of agricultural land was not sufficient for six member family due to severe drought in the region. She started a business in April 2003 with the Hindustan Unilever Ltd. By 2005, she had a regular monthly turnover of Rs.10,000 per month. Initially she sold door to door, but thereafter the customers started visiting her home for products. She sees Project Shakti as a mean for the bright futures of her children. Project Shakti also enabled her to provide mid-day meals at the primary school in her village. Today, Sankaramma has become a key development figure in her village. Usha Sarvatai, a mother of 2, traveled 32 km everyday to work. Her husband's income was not sufficient for the two children and their old parents. But the long distance and the odd timings of the job forced Usha to quit the job. Then she got a call from the Government dept. to attend a meeting, convened by Project Shakti. Usha became a Shakti Amma and started a new venture. In a short span the good relationships she developed with the villagers helped her do good business. She says, "I am happy fulfilling my family's requirements and people give me a lot of respect today." And she is now very eager to grow her business in the years to come. The list does not end here. Hindustan Lever Ltd., a subsidiary of Unilever is counting on thousands of women like Sankaramma and Usha Sarvatai to sell its products to the rural consumers it couldn't reach before. By 2005, around 13,000 poor women were selling the company's products in 50,000 villages in India's 12 states and contributed for 15% of the company's rural sales in those states . The women typically earned between $16 and $22 per month , often doubling their household income which was used to educate their children. Overall, around 30% of Hindustan Lever's revenue came from the rural markets in India Started in the late 2000, Project Shakti had enabled Hindustan Lever to access 80,000 of India's 638,000 villages . Hindustan Lever's director of new ventures proudly expressed, "At the end of the day, we're in business. But if by doing business we can do something positive, it's a great win-win model." Hindustan Lever was not the only company recognizing the vast marketing potential in rural India. With the saturation of urban market, the companies started reengineering their businesses and products to target rural consumers who are poor but are rich in aspirations fueled by the media and other forces. Unilever in India: Business and Growth

Unilever was the world's largest Fast Moving Consumer Goods (FMCG) company with a worldwide revenue of $55 billion in 2005 . It's Indian subsidiary, the Hindustan Unilever Limited (HUL) was the country's largest FMCG company with combined volumes of about 4 million tonnes and revenues near about $2.43 billion . HUL's major brands included Lifebuoy, Lux, Surf Excel, Rin, Wheel, Fair & Lovely, Pond's, Sunsilk, Clinic, Pepsodent, Close-up, Lakme, Brooke Bond, Kissan, Knorr-Annapurna, Kwality Wall's etc. These were manufactured over 40 factories across the country . In 1931, Unilever set up its first Indian subsidiary, Hindustan Vanaspati Manufacturing Company . Thereafter the Lever Brothers India Limited and United Traders Limited were established in 1933 and 1935 respectively. In November 1956, these three companies merged and form HUL. Unilever's share in HUL was 51.55% in 2005 and the remaining of the shareholding was distributed among about 380,000 individual shareholders and financial institutions. A foray of acquisitions followed thereafter . In 1984, the Brooke Bond joined the Unilever fold. Lipton was acquired in 1972 and Ponds in 1986 . HUL was following a growth strategy of diversification always in line with Indian opinions and aspirations. The economic and political development in the 1990s had marked an inflexion in HUL's and the Group's growth curve. Economic liberalization permitted the company to explore every single product and opportunity segment, without any constraints on production capacity. On the other hand, deregulation allowed alliances, mergers and acquisitions. In 1993, HUL merged with the Tata Oil Mills Company (TOMCO) 1993 . In 1995, HUL formed a 50:50 joint venture with another Tata company, Lakme Limited . The company had also made a string of mergers, acquisitions and alliances in the Foods and Beverages sector. Some of these were the acquisition of Kothari General Foods (1992), Kissan (1993), Dollops Icecream business from Cadbury India (1993), Modern Foods (2002), Cooked Shrimp and Pasteurised Crabmeat business of the Amalgam Group of Companies (2003) . With 12.2% of the world population residing in the villages of India, the country's rural FMCG market had a huge potential . The Indian FMCG sector was the fourth largest sector in the economy with a market size of $13.1 billion . The sector was expected to grow by over 60% by 2010. In 2005-2006 the urban India accounted for 66% of total FMCG consumption, with rural India accounting for the remaining 34% . However, rural India accounted for more than 40% consumption in major FMCG categories such as personal care, fabric care, and hot beverages . The Bid FMCG companies such as HLL, Nirma and ITC joined the foray to tap the huge potential. In the 1990s, a local Indian firm, Nirma Ltd. started providing detergents to the rural poor at the lowest cost. The company had created a business system with a new product formulation, low-cost manufacturing, wide distribution channel, special packaging and value pricing. After a decade, Nirma became one of the largest branded detergent makers with a 38% market share and 121% return on its capital employed . In 2002, ITC set up a network of internet-based kiosks, e-choupals, to help the farmers in their procurement process. The initiative began with the soya growers in Madhya Pradesh and then expanded to cotton, tobacco, shrimp etc. Starting with six e-choupals in June 2000, ITC's Internet-based, rural initiative had linked 6,000 Indian villages with around 1,200 e-choupals by 2002. The setting up of each e-choupal entails an investment of Rs 1-3 lakh .The objectives behind e-choupals was to allow single place procurement and purchase point, allowing farmers to sell their products directly to ITC on the basis of updated current prices prevailing in the market. This eliminated middlemen and thus helped ITC to cut its costs.

In 2007, around 34% of the FMCG products sales came from rural areas . The number of households that used FMCG products in rural India had grown from 13.6 crore in 2004 to 14.3 crore in 2007 . This growth was achieved on an average 1.8% year-on-year growth in the number of households, which use at least one FMCG product. However, the growth in penetration level for the entire FMCG products was not same. According to one study by a market research firm IMRB, the monthly consumption of detergents and toilet soaps remained largely stagnant with a 92% penetration, but that of liquid shampoos grew from 68% in 2004 to 83% in 2007 . These figures revealed a shift towards higher-value products among the rural market, from toothpowder to toothpaste or from unbranded to branded products. According to the senior project director of IMRB International, Manoj K Menon, "One of the most significant changes, includes growing preference towards branded products. For example, in the food and beverages segment, penetration of branded atta has gone up year-on-year by 8 per cent and branded salt by 3 per cent. The penetration of unbranded atta has decreased by 1 per cent and salt by 3 per cent." The HLL Marketing Effort: Transition to Rural Market HUL's competitive advantage generated from three sources. First it's strong well established brands, second, its local manufacturing capacity and supply chain and third its vast sales and distribution system. It was soon felt that HUL's sales and distribution system which had protected it from competitors would be soon replicated by its rivals and to maintain its edge, the company had to increase its reach beyond the urban markets. So far the operations of HUL included more than 2,000 suppliers and associates. The distribution network, consisted of 4,000 stockists, covering 6.3 million retail outlets reaching the entire urban population, and about 250 million rural consumers . Typically, the goods produced in each of the HUL's 40 factories were sent to a depot with the help of a carrying and forwarding agent (CFA). The company had its depot in every state of the country. The CFA was a third party and got servicing fee for stock and delivery of the products. In each town, there was a redistribution stockist (RS) who took the goods from the CFA and sell them to retail outlets. By the late 1990s, the HUL management realized certain problems with the existing sales model. First, the model was not viable for small towns with small population and small business. HUL found it expensive to appoint one stockist exclusively for each town. Secondly, the retail revolution in the country changes the pattern the customers shop. Large retail self service shops were established. In the response of these problems, HUL redesigned its sales and distribution channel and the new system was known as 'diamond model' in the company. At the top end of the diamond, there were the self service retail stores which constituted 10% of the total FMCG market. The middle, fatter part of the diamond represented the profit-center based sales team. In the bottom of the pyramid was the rural marketing and distribution which accounted for 20% of the business . Almost three-fourth of the total 1.2 billion Indian population resided in the rural areas and majority of them had a very low per capita income (around 44% of that of urban India) . Urban market had reached the saturation point, thus changing focus on rural India. In comparison to just 5,161 towns in India there are 6,38,365 villages in India [Exhibit I]. Moreover, more than 70% of India's population lived in villages and made a big market for the FMCG industry because of increasing disposal incomes and awareness level. Exhibit I Distribution of Villages in India Source: Kash Rangan, Sehgal Dalip et. Al., "Global Poverty: Business Approaches and Solutions", http://www.hbs.edu/socialenterprise/pdf/3-Rangan&Rajan-Presentation.pdf

When HLL shifted to the rural India, it faced many problems. In contrast with a low per capita income comparative to the urban citizens, there were some areas with enough money but their awareness level and consumerism was very low. Secondly, rural FMCG demand was depended upon agricultural situation which was again depended upon monsoon. Transportation was also a major hindrance. Many of the rural areas were not connected by rail transport. The Kacha roads were unserviceable during the monsoon and interior villages get isolated. Besides transportation, there was a problem of distribution and communication facilities such as telephone, fax and internet. Moreover, the lives in rural areas were still governed by ethnicity and traditions and people did not simply get used to new practices. For example, even rich and educated class of farmers does not wear jeans or branded shoes. The buying decisions in villages were slow and delayed. They wanted to give a trial and buy only after being satisfied. And, finally the poor illiterate villagers viewed experience more important than formal education and they valued sales people who could provide practical solutions to their problems. HLL approached the rural market with two criteria - the accessibility and viability [Exhibit II]. Around 40% of the accessible rural market had high business potential. To service this segment, HLL appointed a common stockist who was responsible for all outlets and all business within his particular town. In the 25% of the accessible markets with low business potential, HLL assigned a retail stokist who was responsible to access all the villages at least once in a fortnight and send stocks to those markets. This enables HLL to influence the retailers stocks and quantities sold through credit extension and trade discounts. HLL launched this Indirect coverage (IDC) in 1960s. To cater the needs of the inaccessible market with high business potential HLL initiated a Streamline initiative in 1997. HLL appointed rural distributors and Star Sellers. The star seller purchased goods from rural distributors and distributed them to retailers in small villages using the local mean of transport. In this way around 35% of the inaccessible rural market came under the control of HLL. But a still untapped market - the inaccessible but low business potential market was left outside. The size of this untapped market was estimated to be around 500,000 villages with a population over 500 million . At this stage, Project Shakti was conceived. Exhibit II HLL's Approach to Rural Market Low Business Potential High Business Potential Accessible Markets Indirect Coverage (25%) Direct Coverage (40%) Inaccessible Markets Space for Shakti Streamline (35%) Source: V. Kasturi Rangan Rohithari Rajan, "Unilever in India: Hindustan Lever's Project Shakti--Marketing FMCG to the Rural", http://www.caseplace.org/d.asp?d=244- 27k Project Shakti HLL soon realized that although it was enjoying a greater penetration in the rural market when compared with its competitor such as Nirma and ITC, its direct reach was restricted to only 16% . The FMCG giant was desperate to increase this share. HUL saw its dream fulfillment in the vast Indian rural market. The company was already engaged in rural development with the launch of the Integrated Rural Development Programme in 1976 in the Etah district of Uttar Pradesh. This program was in tandem with HUL's dairy operations and covered 500 villages in Etah. Subsequently, the company introduced similar programs in adjacent villages. These activities mainly aimed at training farmers, animal husbandry, generating alternative income, health & hygiene and infrastructure development. The main issue in rural development was to create income-generating prospects for the poor villagers. Such initiatives, linked with the company's core business, became successful and sustainable and proved to be mutually beneficial to

both the company ant its rural customers. However, much remained to be done. Project Shakti was conceived. Following the pioneering work carried out by Grameen Bank of Bangladesh , Self Help Groups (SHGs) of rural women were formed by several institutions, NGOs and government bodies in villages across India. This group of usually 15 members contributed a small amount of money to a common pool and then offered a micro-credit to a member of the group to invest in a commonly approved economic activity. Partnering with these SHGs, HLL started its Project Shakti in Nalgonda district of Andhra Pradesh in 50 villages in the year 2000. The social side of the Project Shakti was that it was aimed 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. Most SHG women viewed Project Shakti as a powerful business proposition and are keen participants in it. There after it was extended in other states with the total strength of over 40,000 Shakti Entrepreneurs. HLL offered a wide range of products to the SHGs, which were relevant to rural customers. HUL invested significantly in resources who work with the women on the field and provide them with on-the-job training and support. HUL provided the necessary training to these groups on the basics of enterprise management, which the women need to manage their enterprises. For the SHG women, this translated into a muchneeded, sustainable income contributing towards better living and prosperity. Armed with micro-credit, women from SHGs become direct-to-home distributors in rural markets [Exhibit III]. Exhibit III Structure of HLL's Market Reach in India Source: Kash Rangan, Sehgal Dalip et. Al., "Global Poverty: Business Approaches and Solutions", http://www.hbs.edu/socialenterprise/pdf/3-Rangan&Rajan-Presentation.pdf Shakti: How it works In general, a member from a SHG was selected as a Shakti entrepreneur, commonly referred as 'Shakti Amma' received stocks from the HLL rural distributor. After trained by the company, the Shakti entrepreneur then sold those goods directly to consumers and retailers in the village. Each Shakti entrepreneur usually serviced 6-10 villages in the population strata of 1,000-2,000 people with 4-5 major brands of HLL - Lifebuoy, Wheel, Pepsodent, Annapurna salt and Clinic Plus. Apart from these, other brands included Lux, Ponds, Nihar and 3 Roses tea. The Shakti entrepreneurs were given HLL products on a `cash and carry basis.' However, the local self-help groups or banks provided them micro credit wherever required. According to Dalip Sehgal, Executive Director, New Ventures & Marketing Services, HLL Project Shakti was adding up to 15% of HLL sales in rural Andhra Pradesh. He further asserted that given the largeness of the country and backwardness of its women, Project Shakti-like endeavor would place everybody in a win-win situation. I-Shakti: Crossing the Border Encouraged by the goodwill and success of Project Shakti, in August 2003, HLL launched an Internet-based rural information service, called I-Shakti, in Andhra Pradesh, in association with the Andhra Pradesh Government's Rajiv Internet Village Programme. IShakti was an IT-based rural information service to provide vital information to the rural people in fields like agriculture, education, vocational training, health, hygiene and the like [Exhibit IV]. The objective behind the i-Shakti model was to give need based

demand driven information and services in the villages. The i-Shakti kiosk was operated by the Shakti Entrepreneur. This was expected to strengthen their relationship with their customers. HUL expected that this would improve the productivity of the rural community and unlock economic and social progress. Exhibit IV A snapshot of the 'i-Shakti' website Source: "HUL Shakti-Changing lives in rural India.", http://www.hllshakti.com/sbcms/temp1.asp?pid=46802256 - 41k I-Shakti was based on an interactive discussion technology developed & patented by the Unilever Corporate Research Team, U.K. The system enabled an in-depth understanding of each user needs and thereby improved the quality of services offered to them. The APonline , had tied up with i-Shakti to launch various services. Moreover, through ishakti, the ICICI Bank and HUL jointly provided various financial products and services such as life and general insurance, investment products (Equity, Mutual Funds, Bonds), ICICI Bank Pure Gold (gold coins), Personal Credit, Rural Savings Accounts and Remittances to the rural customer. Redefinition Rural Distribution: Changing Lives Having successful in Nalgonda, in 2003 HLL planned to broaden Shakti to a 100 districts in Madhya Pradesh, Gujarat and UP. There were other plans such as to allow other companies (except HLL's competitors) such as Nippo, TVS Motor for mopeds, insurance companies for LIC policies to get onto the Shakti network to sell their stocks. Sehgal was looking proud when he announced, "We wanted to first stabilise the project before we can look at other companies. It requires somebody with scale and size to build a platform and then invite other companies onto this platform." He further emphasized that Shakti was creating a win-win partnership between HLL and its consumers. There were about 4.36 lakh women SHGs in AP with almost 58.29 lakh poor women. AP alone had about half of the SHGs of the country. By 2005 the SHGs had mobolised Rs 1500 crore had mobilised as corpus. The rural women organised themselves into `thrift and credit' groups with a saving of Re.1 a day which created a fund of more than Rs 800 crore. While the savings was there among the SHGs, there was no channel of investment. HLL tapped this huge overlooked network to launch Project Shakti. HLL has able tp provide a window of prospect to invest and earn. The impact of HLL was not all of a sudden. HLL witnessed 15% incremental sales from the villages of AP, which accounted 50% of the total sales of HLL products in AP. Market analysts were perceiving a huge potential in the rural foray of HLL. Nikhil Vora, Sr. Vice President of research group ASK Raymond James believed that if there was one company that could take on the onus of developing the rural markets, it was HLL. He further continued, "HLL contributes 20 per cent of the total FMCG business in the country. So, clearly, the onus is on HLL to grow the market. Returns may not happen in the next five years, but a lot of consumer understanding and insights comes from an exercise like Project Shakti, which in turn can lead to product innovation." HLL acknowledged that for Project Shakti to be successful for the company's rural penetration, dealers and communicators must be well trained. It was unclear how dealers would perform in an expanded infrastructure. Although HLL's rural initiatives incurred huge costs to the company, it was expected that with the monsoon revival and greater rural incomes could decline the payback period for projects like Shakti. Moreover, the decreasing brand loyalty among urban consumers rural market had become an imperative. According to the Concurs K.N. Siva Subramanian, Sr. Vice

President, Franklin Templeton India Ltd, "The (HLL) management had recognized the impending saturation of the urban markets some time back and launched aggressive plans to capture the rural markets. However, a slowdown in the agricultural sector resulted in rural incomes remaining flat and affecting sales. We believe that by targeting lower price points and further expanding the distribution network, companies can tap the potential of rural markets. Initiatives like Project Shakti will help them in establishing and consolidating their base in rural markets." HLL would have to determine whether Project Shakti could be repeatable in other countries. The Indian family structure and village interaction provide a unique diffusion mechanism that is an effective vehicle for Shakti. Whether this model could be successfully implemented in other countries must be further explored. Moreover, it need to find out whether the Project Shakti or e-choupal like initiatives could be increased. There was no doubt that the regional brands, or even larger FMCG companies, did not have the kind of distribution reach that HLL had established and in the long run, that could prove a winner for HLL.

India: Creating rural entrepreneurs

45 000 Shakti entrepreneurs reach 100 000 villages.

Helping women, creating entrepreneurs

Rojamma is a single parent living in Kurumurthy, a small village in the Indian state of Andhra Pradesh. When her husband left her, she earned a few rupees working in her mother's field but found it difficult to support her two daughters. Then she joined a women's self-help group and found out about Project Shakti. "From that moment my life changed", recalls Rojamma. To expand its markets, the challenge for Hindustan Lever (Unilever's business in India) was how to reach millions of potential consumers in small remote villages where there is no retail distribution network, no advertising coverage, and poor roads and transport. The solution was Project Shakti, launched in 2000 in partnership with non governmental organisations, banks and government. Women in self-help groups across India are invited to become direct-to-consumer sales distributors for Hindustan Levers soaps and shampoos. The company provides training in selling, commercial knowledge and bookkeeping to help them become micro-entrepreneurs.

Increasing income
After an initial investment in stock - usually borrowing from self-help groups or micro-finance banks facilitated by Hindustan Lever - most Shakti entrepreneurs net a monthly profit of 700 - 1 000 rupees (US$15 - 22). This is a far cry from the few rupees single mothers like Rojamma had earned before, and for those with husbands who work in the fields, this typically doubles the household income. By the end of 2009, 45 000 Shakti entrepreneurs were selling products to three million consumers in 100 000 villages. Shakti has brought them self-esteem, a sense of empowerment and a place in society. As Rojamma says: "When my husband left me I had nothing except my daughters. Today everyone knows me. I am someone now". It has meant she has been able to send her daughters to school, giving them the chance in life she didn't have. Find out more from Rojamma's story on video, read the full story in the pdf in related links. Note: The Project Shakti pdf was written in 2005. By the end of 2009 there were more than 45 000 Shakti entrepreneurs covering 3 million homes in 100 000 villages in 15 states in India. We are rolling out similar initiatives in Sri Lanka and Bangladesh. For more information, please see the Supporting micro-enterprise section of our online Sustainable Development Report 2009. |

HLL Project Shakti To Cover All Rural India

Posted: Tuesday, Mar 02, 2004 at 0000 hrs IST

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Consumer products giant Hindustan Lever Ltd (HLL) is quietly working on a mammoth task of reaching out to the last rural consumer in the deepest part of Indias hinterland. The mission: to deepen its roots and cover the whole of rural India by the end of 2005. The vehicle: Project Shakti. As part of its new ventures, Project Shakti had initially started operating in rural parts of Andhra Pradesh, empowering women through self-help groups to increase awareness of HLLs products. The project has now been extended to Madhya Pradesh, Gujarat, Karnataka, Tamil Nadu, Chattissgarh, Uttar Pradesh and Orissa, which, as planned, will cover 100 million rural population. Project Shakti will be our vehicle to deepen our rural reach to the entire rural India, MS Banga, chairman, HLL, told FE. HLL has married its rural penetration programme with Project Shakti to achieve better results, as coverage through the stockist route will not be as effective as using the rural women folk as agents for marketing its products, in a manner which is similar to door-to-door selling. In 10 years from today, Project Shakti will contribute in a major way to HLLs sales, said Mr Banga. HLL currently draws a larger sales contribution from the urban market, of about 60 per cent, even as the Rs 10,138 crore maker of Lifebuoy, Surf Excel and Lux is considered to have the largest rural backbone its key strength among consumer product companies. Launch of this major mega offensive to increase rural penetration to 100 per cent would eventually lead to HLLs sales contribution coming from the rural market to go well beyond 50 per cent. Statistics show that there are over six lakh villages in India, with a population of over 650 million. The multinational had about six years back launched Project Bharat, a massive rural sampling initiative in two phases. According to Mr Banga, the current plan will be at a much more larger scale as compared to Project Bharat. The company had earlier also launched Operation Streamline to further increase its rural reach with the help of rural sub-stockists. It had appointed 6,000 such sub-stockists, with the distribution network directly covering about 50,000 villages reaching about 250 million consumers.

Since 70 per cent of the countrys population resides in rural India, penetration into this critical market is every marketers dream.

For Rojamma, Project Shakti meansbeing able to educate her daughters Rojamma is a single parent living in Kurumurthy, a small rural village 150 kilometres south west of Hyderabad in the Indian state of Andhra Pradesh. From a very poor background, she was married at seventeen to a man with whom she had two daughters but who then left her to fend for herself. At first she earned a few rupees working in her mothers field but she found it difficult to live on. A few years ago she joined a womens self-help group that was formed in the village to help women like Rojamma.It felt good to be part of a group but thats not the same as eating food, she remembers. But then a man from Hindustan Lever came to Kurumurthy and told the women about Project Shakti. From that moment my life changed. Hindustan Lever is Unilevers business in India. Its brands include such well-known names as Lifebouy, Lux, Surf, Vim, Ponds and Lipton, as well as local brands, such as Kissan, Annapurna, Lakme, Fair & Lovely and Wheel. The company generates around half its business from Indias towns and cities and half from rural areas, where its products are sold in some 100,000 villages with populations of 2,000 or more. By the end of the 1990s, however, the company realised that to increase its market share it had to expand the market. The challenge was how to reach the 500,000 villages with smaller populations in more remote parts of the country, where there are millions of potential consumers but no retail distribution network, no advertising coverage and poor roads and transport. Hindustan Levers solution, called Project Shakti (which means strength in Sanskrit), was both bold and innovative. The company decided to tap into the growing number of womens self-help groups that had been springing up around the country. These groups, about one million of which now exist across India, are usually formed to help women save money and borrow from each other to avoid the excessive demands of unscrupulous moneylenders. Hindustan Lever made presentations at rural self-help group meetings, initially in Andhra Pradesh, and invited women, including Rojamma, to become direct-to-consumer sales distributors. The company provides selfhelp group women with training in selling, commercial knowledge and bookkeeping, teaching them to become fully-fledged microentrepreneurs. The women who are trained can then choose to set up their own business or to become Project Shakti distributors or Shakti Ammas (mothers) as they have become known. Each woman who becomes a distributor invests 10,000 15,000 rupees (US$220-330) in stock at the outset usually borrowing from self-help groups or micro-finance banks facilitated by Hindustan Lever. Each aims to have around 500 customers, mainly drawn from her villages self-help groups and from nearby smaller villages. Most generate sales of 10,000-12,000 rupees a month, netting a monthly profit of 7001,000 rupees (US$15-22). For those with husbands who work in the fields, this typically doubles the household income. For single mothers like Rojamma, it is a far cry from the handful of rupees she earned working in her mothers field. Project Shakti has proved to be a great success for Hindustan Lever and for women in India. The project started in a few pilot villages in Andhra Pradesh in 2000. In 2002 it expanded to two states and by the end of 2004 had grown to over 13,000 Shakti women

entrepreneurs covering 50,000 villages in 12 states, selling to 70 million consumers. This represents a 30% increase in rural population reached. Hindustan Lever has had strong support from over 300 partners, including NGOs, banks and both state and local government departments, who recognise the potential for economic growth by encouraging women to become entrepreneurs. Andhra Pradesh typically had a 3% success rate in creating entrepreneurs among womens self-help groups prior to Project Shakti. This initiative has a 90% success rate so, not surprisingly, Andhra Pradeshs Womens Empowerment Commissioner, Ms Ramalakshmi, requests monthly updates on Project Shaktis progress. In 2003 Hindustan Lever started to pilot an information technology initiative called iShakti. This is designed to meet rural villagers information needs and provide organisations with communications access to those parts of the country not reached by TV, radio and newspapers. This involves creating village kiosks containing internetlinked computers run by entrepreneurs. i-Shakti was formally launched in partnership with the Government of Andhra Pradesh in November 2004, and aims to have 3,500 i-Shakti kiosks on stream by the end of 2005. Mostly housed in the homes of Shakti entrepreneurs, i-Shakti kiosks provide villagers with free information on a wide range of topics, including health and hygiene, agriculture and horticulture, child and adult education, finance, employment, and entertainment. Content is in the local language and has been specially developed by institutions and NGOs with experts in these fields, including the Azim Premji Foundation for childrens education, the Tata Consultancy Services Adult Literacy Programme and ICRISAT (International Crops Research Institute for the Semi-Arid Tropics) for information on agriculture. i-Shakti also includes an interactive service in which villagers can email questions to a panel of experts and receive a response within 24 hours. Sharat Dhall, Hindustan Levers Business Head for the Shakti initiative, is excited about i-Shaktis capabilities: Farmers can find a quick solution to pest problems with their crops, villagers can email their symptoms to a doctor and get a diagnosis in hours rather than days, and computer programs with voiceovers will teach people who are illiterate. Hindustan Lever and its partners are funding the initiative in the initial stages, but in future it is planned to charge content providers and brand advertisers to make the initiative self-financing and to generate incomes for i-Shakti entrepreneurs. While Hindustan Lever is intent on building its rural sales and market share, it is equally committed to improving the lives and livelihoods of people in India. Shakti Vani (Voice) takes Project Shakti a stage further. Hindustan Lever is now training rural women to give talks to villagers about basic health practices, such as good hygiene, disease prevention and pre- and post-natal care. Project Shaktis role in creating incomes for underprivileged rural women and helping to empower them economically is more important than sales alone, says Sharat Dhall. He believes Project Shakti, i-Shakti and Shakti Vani will have the potential to act as a catalyst for creating new markets and generating rural micro-economies. He recognises this is something that Hindustan Lever cannot achieve alone and is actively building links with noncompetitive partners, such as ICICI Bank, which specialises in micro-loans. At the same time, competitors and companies from other

sectors are watching Project Shakti very closely and are expected to develop similar distribution models. Project Shaktis goal is to recruit 100,000 Shakti entrepreneurs covering 400,000 villages and 400 million consumers by 2008. I believe it can become the biggest rural operation in the history of Indian business and change the way companies look at seaching consumers living in the smallest of villages, says Sharat Dhall. For the thousands of women like Rojamma who have become Shakti entrepreneurs, this initiative has already changed their lives in ways that are much more profound than the income they earn selling soaps and shampoos. It has brought them self-esteem, a sense of empowerment and a place in society. As Rojamma says: When my husband left me I had nothing except my daughters.Today everyone knows me. I am someone now. It has also meant she has been able to send her daughters to school, giving them the chance in life she didnt have, although Rojammas aspirations for them remain modest: I hope they have happy marriages and they too become Shakti Ammas Unilever believes that one of the best and most sustainable ways it can help to address global social and environmental concerns is through the very business of doing business in a socially aware and responsible manner. This is one in a series of occasional articles called Global Challenges Local Actions that looks at how Unilever companies are tackling global social and environmental concerns by working in partnership with local, national and international agencies, governments, business organisations and NGOs. Hindustan Lever works in partnership with over 300 organisations on Project Shakti and i-Shakti.