F a c u l t y o f M a n a g e m e n t S t u d i e s , D e l h i

Presented by Group 6

Name Roll No.

Aditya Kumar 148

Akshat Nain 150

Amit Kumar Minz 151

Apurv Jain 154

ChirayuSomani 163

Deoskar Ajay Ram 164

Dhirendra Kumar 166

Dhruvjot Singh Sehgal 167

EshanShankhwar 171 GarimaMadaan 174

NikhalPratap 190

Naveen Sagar 237

2014

A critical analysis of distribution

channel of HUL

Project Report

Presented to: Prof. Hamendra Dangi

Marketing Channel

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

HUL’s Channel Manager on “Achieving Leadership in New Channel: Pharmacy India” ........................ 10

Sales manager on “Reconfiguration of HUL’s 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 Home Care Personal Care

Annapurna Active Wheel Axe

Bru coffee Vim Breeze

Kissan Surf Excel Clear

Brooke Bond Sunlight Dove

Lipton tea Rin Lakmé

Knorr Domestos Fair & Lovely

Kwality Wall's Comfort Liril 2000

Magnum (ice cream) Cif Vaseline

Modern Bread 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 consumer’s 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 industry’s 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 People’s 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: BCG’s 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-Unilever-

Case-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 entrepreneurs—Shakti Ammas

(“Shakti” – power and “Amma” – mother)—across 15 states to act as salespeople and brand-

builders.

HUL’s 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

Ammas—an 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 HUL’s 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 doesn’t 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 company’s 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 company’s 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 stock-

outs at the RS level.

HUL’s Rural Marketing Strategies:

Indirect Coverage Approach

Operation Harvest

Cinema Van Operations

Project Streamline

Project Shakti

HUL’s Khushiyon ki Doli

Future Initiative: Gateway to Rural: Beyond FMCG

Personal Interviews of HUL Employees

HUL’s 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.

HUL’s 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 HUL’s 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 company’s 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 (eg-

modern 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 year’s sales and present year’s 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 SKU’s clubs them with fast moving SKU’s 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 (ITC-Sunfeast), 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 These are larger groceries which are analogous to our ISS outlets and further in these

Groceries shops the range of product are very wide so the merchandising operations are very

intense.

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

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

D 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 HUL ITC 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.

Supply-

Demand 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

Nearest ware

house

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%

5% to 6%

depending upon

products

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

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

Retailer’s

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.

Retailer-

Categorization

based on

monthly sales

Yes, three

categories A, B and

C in the sales

group >50k, 20k-

50k 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 Nestlé’s 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

https://www.google.co.in/url?sa=t&rct=j&q=&esrc=s&source=web&cd=4&ved=0CDEQFjAD&url

=https%3A%2F%2Fwww.sciencetarget.com%2FJournal%2Findex.php%2FIJBRD%2Farticle%2Fdo

wnload%2F138%2F32&ei=If9TVOz3DoK_mwXqk4LIAQ&usg=AFQjCNG6AcbxpkDJf-

miwkHqT5KSJkOBLA&bvm=bv.78597519,d.dGY&cad=rja

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

http://www.accenture.com/Microsites/emerging-markets/Documents/pdf/Accenture-Unilever-

Case-Study-Final.pdf

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

www.nestle.in

www.itcportal.com

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

www.pg.com/en_IN/

http://www.atkearney.in/

http://www.bcgindia.com/

The Hindu- Business line

Official website of Rural marketing Association in India

Rural Marketing in India-Strategies and Challenges by Ruchika Ramakrishna

Business world Marketing White book 2005

Azad, Priyanka(2010, November), “Go Rural: Marketing Mantra for the Competitive Era”

Marketing Mastermind, pp.20-23.

Baijoor, Harish. (2009, June18). Knowledge@wharton.

Krishnamacharyulu, C.S.G. and Ramakrishna, Lalitha (2002). Rural Marketing.

Paul,Nidhi(2010 May),HUL’s “Khushiyon Ki Doli” – A new Campaign Strategy.

www.technospot.in

Ramkishen,Y. (2004, 2nd Edition). Rural & Agricultural Marketing.

Sestiamohan, V.V. Narayana, M.S & Babu, Ramesh(2008, December), “Rural Marketing:

Understanding Rural Markets: A competitive edge in tapping the potential in Rural India”,

Marketing Mastermind, pp.37-42.

Srivastava, Samar. (2010, September). Hindustan Unilever’s Bharat Darshan,Forbes India.

Srivastava, Arpita. (2008, November), “Effective Product Positioning Strategies for the Rural

Markets – A Winning Proposition”, Marketing Mastermind, pp.42-47.

Subramanian, Samanth. (2009 March), “ Mother of all rural marketing schemes”.

www.livemint.com

Vijayraghavan, Kala. Malviya,Sagar. (2011 May), “Hindustan Unilever taps banks, telecom firms

to reach rural India wider”, www.economictimes.indiatimes.com

HUL Corporate website. www.hul.co.in