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Hindustan Lever at the Base of the Pyramid: Growth for the 21st Century
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In fact, since 1999 revenues at HLL had remained nearly constant, an outcome stockholders had not welcomed. With this lack of growth, increasing attention was directed to the companys Millennium Plan an ambitious blueprint outlining the companys growth strategies for the 21st century. The Millennium Plan was a part of the companys renewed emphasis on business focus and operational efficiencies. Additionally, a core aspect of the Plan was to identify and nurture businesses of the future. Over 150 new businesses were proposed before the list was narrowed down to nine. These included a foray into drinking water, a plan for network-based marketing (along the lines of Amway) and an entry into retailing herbal therapy products and services through a chain of therapy centers. Perhaps the most interesting, though, was an initiative called Shakti, which aimed to extend the reach of HLLs products to the 742 million rural consumers in 637,000 villages at the base of the economic pyramid, a market not well-served by HLL at the time.
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On August 30, 2004, Hindustan Lever Limiteds (HLL) share price on the Bombay Stock Exchange touched Rs.100.5 (US$ 2.28) - a new low for one of the largest Indian companies by market value (see Exhibit 1). In its Q2 2004 results, HLLs bottom line had fallen by 43% due to price pressures in its mainstay detergents business. Procter & Gamble, its long-time nemesis, had unveiled a series of price cuts on its leading detergent brands, Ariel and Tide, forcing HLL to respond. As a consequence, operating profit margins, which had peaked in 2002 at 19.6%, declined to 14%.2 Furthermore, although the mergers, restructuring, and operating changes that HLL underwent in the 1990s had helped profits grow through 2003, the companys top-line growth had remained more or less stagnant over the past few years, causing some analysts to re-align their portfolios.
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Rural demand for, and consumption of, consumer products is set to explode. The challenge for most companies is to be able to offer appropriate products in an affordable way in relatively remote locations. It is our view that India will soon see an inflexion point in rural consumption.1 Mr. K.B. Dadiseth, Hindustan Lever Limited Chairman
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as a 100% subsidiary of Unilever in India. It primarily sold soaps, detergents, and other household products to a select group of affluent consumers, such as British government employees and the Indian elite. In November 1956, the company merged the groups companies Lever Brothers India Limited and United Traders Limited to form Hindustan Lever Limited. HLL offered 10% of its equity to the Indian public, and was the first the first international company in India to do so. Unilever, which gradually divested its stake in HLL, now holds 51.55% equity in the company. The rest of the shares are distributed among about 380,0003 individual shareholders and financial institutions. Until the 1960s, the company remained a medium-sized player, choosing to market high-end brands to a select class of Indian consumers. However, it gradually began to relinquish control to local managers, and in 1961, P.L. Tandon took over as its first Indian Chairman. In the years that followed, HLL continued to launch new brands in the FMCG (fast-moving consumer goods) segment, including the highly successful Lifebuoy and Liril bath soaps, Surf detergent powder, Fair and Lovely Fairness cream, and Close-Up toothpaste. The company also began a backward integration plan, setting up a subsidiary for chemicals (Hind Lever Chemicals), and acquiring Ponds India, Lipton India, and Brooke Bond India. In 1993, HLL completed the acquisition of Tata Oil Mills Company (TOMCO), its long-time rival. On January 1, 1996, the groups companies merged to create Indias single largest foods and beverages company and one of the biggest publicly traded companies in India. Today, the company is a $2.5 billion juggernaut in the Indian market, with a commanding presence across several product segments. HLL is comprised of two operating divisions: Home and Personal Products (HPC), consisting of its detergents, soaps, and personal care lines of products; and Foods, consisting of staple foods, bakery, confectionary, beverages, and frozen foods. In past years, leading national and international publications like The Economic Times, Business World, Far Eastern Economic Review, and Business Today have frequently rated HLL as one of Indias best-managed and most admired companies, and commended its achievements at enhancing shareholder value. HLL currently employs 42,000 employees, including about 1,425 managers,4 with a corporate objective to meet everyday needs of people everywhere - to anticipate the aspirations of our consumers and customers, and to respond creatively and competitively with branded products and services which raise the quality of life.5
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HLL also built a strong national distribution system, which became a source of competitive advantage for the company. As its rivals tried to play catch-up, HLL continued to invest heavily in maintaining its advantage, expanding first from urban to semi-urban markets, then gradually to rural markets, in a bid to stay ahead. By focusing on efficiencies, reach, and visibility, HLL was able to carve out a vast network of retail outlets that were connected seamlessly by the countrys most sophisticated distribution chain. By 2000, the company had the largest national distribution network of its kind in the country, with 7,000 stockists helping directly cover 1 million outlets. The total coverage was far higher, servicing 1.5 million outlets in 3,700 towns and cities through the urban network, and 3.6 million outlets through the rural network. These retailers were loyal because a large portion of their revenues were typically comprised of Unilever products. Using this distribution chain, HLL could efficiently provide its products to consumers in a convenient fashion, providing the company with an advantage that was the envy of its competitors. Yet, even HLLs large network was insufficient to cater to a majority of Indian people who lived in remote villages, where supplying and selling every-day products could not be done using the companys existing distribution methods. Indeed, HLLs vaunted distribution network failed to serve more than 500,000 rural villages, meaning the company was ignoring over 500 million potential customers (nearly half of the countrys population) located at the base of the economic pyramid.6
Nirma also maintained a low-cost distribution structure, unlike Hindustan Lever Limited, which had created a vast network of intermediaries. Initially, Karsan-bhai himself supplied the product to the doorstep of his customers, making sales visits on his bicycle. Gradually, he expanded his reach using wholesale distributors who ensured his products reached the farthest corners of the country without requiring him to invest in a sales organization. So successful was his product that wholesale traders could be seen standing outside his factory waiting patiently to purchase their supply of Nirma from Karsan-bhai.
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Nirma was created around a simple premise: that of putting a convenient and affordable product within reach of millions of households that could not afford expensive detergents. To be able to do this profitably, Karsan-bhai made a series of innovative business decisions that maintained a low cost structure. For example, he leveraged the home-grown nature of his business to gain tax and duty concessions from the government of India, which was actively promoting the small-scale industrial sector at that time. This led to a significant cost advantage in manufacturing for Nirma, including exemption from the minimum wage laws that were applicable to other companies operating in India. Also, the relatively simple and labor-intensive production process did not require electricity, and packaging was done by hand, further minimizing operating costs.
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In 1969, a Gujarati entrepreneur, Karsan-bhai7 Patel, set up his first detergent-making unit in the back yard of his home in Ahmedabad. Being a chemist, he devised a way to synthesize washing powder in a plastic bucket without electricity, using soda ash as the chief ingredient. He would prepare the dry mix detergent powder, pack it by hand in polythene bags, and set off on his bicycle to sell the packets door-to-door. He named the product Nirma, after his daughter Nirupama (whose image was to become the brands visual identity of the dancing girl). Every packet of Nirma that Karsan-bhai Patel sold to his consumers came with a money-back guarantee. Nirma was priced at Rs.3 per kilogram, when competing products like Surf sold for as much as Rs.15. As sales grew, so did Nirmas scale of operations. Even with its fast growth, the firm was able to maintain its business model based on broad, cost-effective distribution and low operating costs.
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Furthermore, Nirmas advertising adopted the value-for-money philosophy. While HLL spent around 10% of its sales on advertising and promotions, Nirmas rarely exceeded 2% of sales. Its advertising jingle stressed the product attributes and also saluted the savvy and budget-conscious Indian housewife. The company was also highly creative in maximizing the impact of its advertising. For instance, according to Karsan-bhai: In the early 1980s, when television began to make inroads into rural and urban India, Nirma would be one of the advertisers for the Sunday evening Hindi feature film (the most widely watched TV program). But the positioning of the TV commercial was such that a majority of the populace thought the film was being presented by Nirma! Since the modest beginnings from Karshan-bhais home in 1969, Nirma has grown rapidly. The flagship company Nirma Consumer Care achieved a turnover of Rs.25,830 million ($587 million) and a profit of Rs.2,470 million8 ($56 million) in FY2004, and it reaches across the Indian subcontinent, serving 300 million consumers through a channel of one million retail outlets and 400 distributors.
Hindustan Lever Limited appeared to have the most to lose with the success of Nirma. HLL had almost single-handedly created the category known as Non-Soapy Detergents (NSDs) with the launch of Surf in 1959. Traditionally, Indian households used soap bars to wash clothes (or fabric-wash), making it a time-consuming and physically strenuous chore. At a time when washing machines were non-existent in India, newly introduced detergent powders provided convenience and high-quality fabric care, and were, consequently, premium products - with pricing to match.
To HLLs surprise, by 1982 Nirma had steered itself into a dominating position in the Western India detergent market, and by 1985 it was the highest-selling detergent in India, with a whopping 58% of the market. By this time, Nirmas growth had begun to have an impact on HLLs market share. From its commanding market position in the early 1970s, HLL was left with a depleted market share of only 8.4%. Nirmas erosive impact on sales and market share was now quite obvious.
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Through the early 1970s, Nirmas success did not affect HLL. By 1977, however, Nirma had grown to be the number 2 brand with 12% market share, compared to Surfs 33%. HLL conducted consumer studies to understand the emerging competition from Nirma and other small-scale sector9 brands, and the view was that these products were not as effective in washing clothes as NSDs. Besides, due to their soda-based formulation (and thus high alkalinity) they were harmful to the skin. The study seemed to reassure HLL that its superior quality product would prevail in the long run.
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Surf used product demonstrations with a bucket to induce housewives to replace soap-scrubbing Nirma with a convenient detergent powder. Also, Surf used petrochemical-based raw materials (essential to qualify as NSD) in fabric-wash products instead of soda ash, which had been the traditional ingredient. While Surf soon became popular, the price tag meant that its appeal was largely restricted to the urban, middle- to upper-middle class households.
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In 1986, Hindustan Lever Limited started a company-wide initiative to understand and strategically counter Nirma.10 The initiative was a result of a growing realization of the need to adopt a more comprehensive approach to the problem. Rather than modifying an existing product, the companys scientists began working to develop new ways to create detergents by using locally available raw materials and low-cost manufacturing technologies. This development effort was combined with a large-scale marketing campaign to win back Indian detergent consumers. HLL senior managers had identified three strategic priorities for the initiative, in order to protect Surf in the premium-end of the market and to challenge Nirma in the lower income segment:
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To emphasize Surfs superior quality: This was accomplished through a new advertising campaign using Lalita-ji, a housewife who reminded consumers that buying Surf makes better sense due to its better cleaning quality and price-value equation. The campaign was an instant success, and Lalita-ji became a household name.
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To create dissonance toward Nirma by highlighting its skin-damaging effects: A comparative advertising campaign was created to raise awareness of the harm caused to hands after the use of low-quality detergents as a result of the extensive use of soda-ash. To directly attack Nirma in the bottom-end segment with a new product: This led to the creation of Wheel detergent powder. At last, HLL believed that it had created a suitable product with which it could potentially beat Nirma. Wheel offered superior cleaning and attractive pricing of Rs.9 per kg compared to Nirmas Rs.7. The product was priced to induce Nirma and other small-scale sector brand users to try it. By 1987, Wheel was available nationally, and HLL backed it with a large advertising and trade budget.
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What made Wheel a truly unique story at HLL was that for the first time, manufacturing was outsourced to a low-cost subsidiary that benefited from small-scale sector concessions. Wheel also followed a lower distribution cost structure. For Wheel, HLL eliminated the Carrying and Forwarding (C&F) agents from the distribution chain by shipping directly to major distributors, thereby reducing costs. Wheel also broke another long-held tradition at HLL by using wholesalers who purchased Wheel in large quantities from the company, much like what Nirma did. Furthermore, Wheel marked the first time that HLL reduced its profit margins per unit in its battle with Nirma. However, while margins were lower, return on capital employed was very impressive, suggesting a different metric for evaluation for base-of-the-pyramid ventures (see Table 1). The Wheel brand team was also unique in that it was lean and staffed with general managers rather than functional specialists. Together, this helped keep overhead expenses low and improve bottom-line results.
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Table 1
Sales ($m) 150 100 180 Gross Margin % 18 18 25 6
Wheel denoted a significant shift in mindset for the management team at HLL, which had relied on premium-brand image and high margins to market within India. The Indian business press hailed HLLs long-overdue acknowledgement of a new market segment that it had largely missed for so long. A further factor aiding HLL was that Nirma had grown too large to enjoy the tax benefits of being a small-scale sector company. Persistent lobbying with the government of India by the Indian Soaps and Toiletries Association resulted in the removal of some tax benefits and ensured a more level playing field.
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HLL Premium Wash
Source: The Fortune at the Bottom of the Pyramid. Prahalad & Hart, 2002; Hindustan Lever Re-invents the Wheel. Ellison, Moller & Rodriguez, IESEUniversity of Navarra, 2003.
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Wheel offered consumers the convenience of a bucket wash without causing harm to skin or to clothes, and it was available at an affordable price, which met the low unit-price requirement of the target market segment. The advertising was done in an over-the-top, Bollywood-style melodramatic tone, with a housewife saving the day for her husband by washing his clothes sparkling clean and thus earning his admiration.
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HLL had finally successfully responded to Nirma in this long war for market share, with Wheel eventually emerging in 2003 as the largest fabric wash brand in India, with a 16% market share of the total laundrywash category.11
A New Ventures team, under Executive Director Dalip Sehgal, was handed the task of selecting and implementing growth opportunities for HLL in the new millennium. Among those that were selected was an idea for reaching rural India, a market that HLL had only touched with the introduction of Wheel. The centerpiece of this initiative was a fundamentally different rural distribution system based on Self-Help Groups (SHGs).15 A cross-functional team consisting of managers from finance, technology, and marketing, and headed by a business manager was set up to get the idea off the ground. In the first year, much of the focus was on conceptualizing the entry strategy and testing it out in the market. If the plan met the action standards, it would be scaled up. Thus, with a seed capital of Rs.100 million ($2.3 million)16 and a new management structure, Shakti was born.17
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On April 25, 2000, at the annual shareholders meeting, then-Chairman K.B. Dadiseth (who has since retired) unveiled the much-talked-about Millennium Plan - a strategic blueprint for the company that had been prepared in collaboration with external consultants. Ideas for growth were extensively debated, and the team of consultants and company managers identified 142 ideas of which nine were short-listed, based on Hindustan Lever Limiteds existing capabilities or its ability to build them over time.14
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Due to the sheer size of the population, rural India is potentially a lucrative market for any consumer products company. In fact, its consumption has also been growing steadily since the 1980s and is now bigger than the urban market for both FMCGs (53% share of the total market) and consumer durables (consumer products such as electronics, automobiles, etc. that are purchased infrequently, 59%). More than half of Hindustan Lever Limiteds products were bought by rural consumers. Yet when HLL considered that its products were available in less than 15% of the villages, the company recognized the vast untapped potential of rural India.
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Shakti Entrepreneur Program The longest running Shakti initiative is the Entrepreneurship Program, which began in 2001 with a pilot project in the south-central Indian state of Andhra Pradesh. The Shakti Entrepreneur Program seeks to expand HLL reach by involving the village communities, specifically rural women, into its business venture. By focusing on women, Shakti can play a role in shaping the gender equation within the community and increasing awareness of key social and development issues (see The Gender Issue in India on previous page). Leveraging the participants of existing self-help groups, HLL invites one woman (or sometimes more, depending on the size of the area to be served) from a target village to become a Shakti entrepreneur or Shakti-ammas22 to promote and distribute HLL products within of a group of 4-6 neighboring communities. Initially, Shakti entrepreneurs are expected to invest around Rs.10,000 ($227, which is approximately equal to the annual per capita income in rural India) to buy inventory of HLL products. These funds are usually made available via micro-credit through self-help groups, since prospective entrepreneurs may not have access to traditional means of credit. Sometimes, though, bank loans may be obtained against collateral such as cattle and livestock. HLL products such as bath soap, laundry detergent, oral and skin care products, hair oil and shampoos, flour, tea, and salt are provided in affordable daily-use sizes (e.g. sachets), each costing between Rs.2 to Rs.18 ($0.04 to $0.38). The entrepreneur is supported by an HLL team member, the Rural Sales Promoter (RSP), who trains and guides the Shakti-amma in the skills required to be a distributor. The training is mostly on-the-job and covers selling skills, order-taking, book-keeping, knowledge of HLL brands, and customer segmentation. Shakti entrepreneurs are encouraged to sell to the village community as well as to small local retailers. They sell to consumers at the retail prices and to retailers at the trade prices, earning 11-13% on consumer sales and 3% on trade sales. Monthly turnover is expected to average around Rs.10,000 ($227) although in the case of mature entrepreneurs it is known to reach over Rs.25,000 ($568). This leaves the entrepreneur with a net profit (after deducting expenses and loan repayments) of Rs.700-1,200 ($16-27), which is equal to or exceeds the average monthly income in rural India. Moreover, for most Shakti entrepreneurs these business activities are designed to be supplemental in nature, leaving sufficient time for existing local livelihood activities. The entrepreneur is expected to follow a fixed route, making stops at homes and shops along the way. The mornings are usually spent taking orders. The Shakti entrepreneur is then expected to diligently record these sales in a register provided by HLL. Some of the women are literate, while others rely on children and family members to help with the order-booking tasks. Entrepreneurs are known to apply ingenuity in overcoming the infrastructural and promotional challenges faced in rural India. For example, an entrepreneur in the Nalgonda district was able to expand her market reach by contracting the back-hauling services of an auto-rickshaw that plied between neighboring villages. Others are known to hire the help of relatives and friends in surrounding villages to act as salespersons. The RSP also assist the entrepreneur in creating sales promotions and special events. In the past, Shakti-ammas have organized an Arogya (health) day,23 which brings in a doctor to disseminate information about health and hygiene, and a Shakti day, which creates a village fair atmosphere with games, songs, and product giveaways. The goal of these promotional efforts is to create broader local awareness of the health benefits of specific practices, such as hand-washing and tooth-brushing.
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Shakti Vani Program The second initiative in HLLs Shakti is a communicationled program, called Shakti Vani (Sanskrit for speech). This is a socially-led communication effort which involves a Vani (speaker), selected to spread information and awareness on important issues such as health, hygiene, sanitation, and personal care. The objective of this program is to be an advertising medium for both health challenges and company solutions within the rural markets. Hence, Shakti Vani helps create awareness of not only the problems but also how HLLs products offer ways to overcome them.
I-Shakti Kiosk
The kiosk can also be used as a computer-based classroom, as it has modules to cover education from grades one to seven. Another important feature is the ability to communicate with local experts such as doctors and agriculture technologists and to ask specific questions. For villages with poor road connections, I-Shakti provides a substantial benefit compared to having to travel to a town to obtain information on local weather forecasts, appropriate use of fertilizers, price of agriculture outputs, and medical issues. While the I-Shakti program was designed primarily as a resource for the local community, the company can also use it as a medium to convey its brand messages. Although the advice provided is brand-neutral, the program has in-built button options through which users can find out more about HLL products. In an area which was not conducive to traditional advertising methods, these community-based portals provide a useful marketing tool. By building brand messages into the software package, HLLs I-Shakti portal helps the company market to areas with limited media coverage and low literacy. To scale up the program to other regions, the cost was estimated to be approximately Rs.29,000 (US$648) per portal.
Shakti Today
Since its inception in 2001, Shakti has expanded its network to cover 80,000 villages in 12 of Indias 28 states through 25,000 Shakti entrepreneurs. What makes the project especially intriguing is that it offers a model for generating economic benefits for the company while also producing social benefits for rural communities (see The Social Impact of Shakti on the following page).
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Shakti Community Portal A recent addition to Shakti is the I-Shakti community-based portal, an interactive computer-basd module with inputs on health, beauty, agriculture, animal husbandry, etc. I-Shakti provides internet connectivity, relevant information, and education services to rural areas. Currently, the project has been rolled-out in Andhra Pradesh in cooperation with the local government, which has set up computer kiosks across the state. The portal has modules covering important information such as health, sanitation, agriculture, and animal husbandry, and is linked to the internet via a once-a-day dial up connection.
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The Vani is appointed from the self-help group and, after a training program, travels from village to village spreading the companys message at gatherings such as village events, local schools assemblies, and SHG meetings. Games and interactive quizzes are used to generate audience interest in the issues, and they end up showcasing HLL products such as soap and toothpaste. The Vani earns a fixed salary per day, based on the route and villages covered. The program does not generate any revenues for HLL. Rather, it is designed to be a cost-effective approach to generating behavioral change and promoting the companys existing brands. The program had covered 10,000 villages in 2004 and targeted 50,000 more in 2005. It was expected to cost Rs.9,000-11,000 ($200 - $244) per village per year.
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The Social Impact of Shakti In Peddakaparthy, a small village in the Indian state of Andhra Pradesh, agriculture is the chief occupation. The state has been facing droughts in many districts, and it has the dubious distinction of having one of the highest farmer suicide rates in the country. In 2004, over 300 farmers* took their lives as a result of poor agricultural output, drought, and indebtedness. Bharatamma is 55 years old and lives in Peddakaparthy. For decades, her family members worked in the fields for their livelihood. The erratic nature of monsoon rains over the years had forced them to the brink of an impoverished existence. Given these challenges, when Bharatamma heard about Project Shakti, she decided to become a Shakti Entrepreneur. In September 2003 she started her business with a small loan, and her efforts paid off very quickly. Now, her husband and her son have joined her in selling products door-to-door and to retailers in their village and in surrounding areas. Their monthly income now exceeds Rs.1500 ($34), and Bharatamma claims that our lives have finally changed for the better. The Shakti story has drawn media attention both in India and overseas, including The Wall Street Journal, which featured it on its front page on May 25, 2005. Beside the income-generation aspect, the project has made a great impact on the confidence of its participants. As Ratna, a Shakti entrepreneur from Tamil Nadu puts it: It is more important than money. When they see me, they crowd around me and call me Shaktiamma. I am someone today.
*P. Sainath, When Farmers die, Indiatogether.org
While not disclosing specific revenue targets, Vijay Sharma, Business Head of Shakti, states that the project has clear profit-making objectives, just like any other HLL project. We look at profit-making objectives. The parameters have to be the same. If they are relaxed, it becomes a subsidy. If that happens, Im not sure if we would be as accountable. You could call it a social initiative that is accountable to business or a business initiative that is accountable to society, but we [HLL] have certain action standards that have to be respected at all times. Sharma explained further: Right now, Shakti is a self-sustaining model that is generating a lot of returns, and we are currently investing all of that into the Shakti business. So, it is certainly going to impact the brands in terms of the reach and sales they get, but beyond that, Shakti is looking at plowing it back into Shakti or I-Shakti or Vani, and looking at how they can be advanced. But the reason it is scalable and sustainable is that it conforms to rules of business. Otherwise, there are a lot of companies that can do CSR [corporate social responsibility] initiatives. We dont talk about that when we talk about BoP [Base of the Pyramid] business initiatives because, quite simply, those [CSR efforts] are activities geared towards philanthropy and this is a [BoP] initiative that is scalable and sustainable. For HLL, Shakti offers a more comprehensive and entrepreneurial approach to addressing the issues faced in serving rural India. First, it leads to greater reach without having to augment an expensive distribution chain built around large volumes (see Exhibit 5). Second, it creates good will and awareness for the company by using local talent that act as spokespersons in areas where traditional advertising media cannot reach. In this environment, word-of-mouth is an effective source of influence and persuasion. Finally, it creates a stake in the community within which Shakti operates, creating first-mover advantage over rival FMCG companies and countering the future growth of possible imitation products.
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While it has been the most successful Millennium Plan initiative to date, HLL managers are reluctant to label Shakti a success. What is clear is that if it is sustainable and scalable, Shakti will provide a radically new channel for the company through which it can serve the needs of 742 million rural consumers and lift its flagging revenue and stock numbers. Shakti, however, is not without its own unique challenges.
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The company has put together its ambitious Millennium Plan to move it into the next stage of growth. Since 2000, the Shakti has taken off and is now poised to reach 100,000 villages and 30,000 entrepreneurs. As a result, the Shakti model has been extensively studied by other Unilever subsidiaries, journalists, and students, as well as competitors. Currently, Shakti-inspired models are being implemented in Unilever Bangladesh and Unilever Sri Lanka under different identities. Yet, crucial questions remain: Will Shakti and the BoP markets it targets deliver to HLL much-needed long term growth and become a key source of a future sustainable competitive advantage? HLLs BoP strategy had evolved from the development of a low-cost detergent named Wheel to Shakti, a business strategy specifically targeting the BoP segment. But is this evolution sufficient, or are further developments required in HLLs business model to serve the rural poor? Finally, how effective is HLL in achieving its stated goal of making a positive social impact in the communities in which it operates?
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Exhibits
Exhibit 1
Exhibit 2
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Nirma powder launched
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1980
Nirma becomes 2nd largest brand in India Nirma becomes the largest detergent brand in India
2000
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Surf launched
1970
1990
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Exhibit 3
Note: In December 1995, the exchange rate was US$1 = 35.2 Indian Rupees; in May 2005, it was US$1 = 44 Indian Rupees
Source: National Council for Applied Economic Research. The NCAER study is based on the population data provided by the Census of India, which is conducted every 10 years. In 2001 (most recent data), the ratio of rural-to-urban population in India was 742 million to 285 million. The same ratio was 628 million to 217 million in 1991.
Exhibit 4
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Population # of villages 92,541 Less than 200 200-500 127,054 501-1000 144,817 1001-2000 129,662 80,313 18,758 593,154* 2001-5000
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5001-10000
Total # of villages
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100.0 100.0
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Exhibit 5
HLL Factory
C&F Agent
Redistributor Stockist
Large Retailer
Urban Consumer
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Shakti Dealer
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Rural Distributor Sub-stockist Outlet
Redistributor Stockist
Outlet
Rural Consumer
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Exhibit 6
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5,786.3 5,991.1 5,917.1 18,618.5 18,367.4 19,126.7 0.00 0.00 0.00 21,061.5 20,244.0 17,860.9 667.6 91.8 77.4 1,247.8 1,341.0 1,446.6 0.00 0.00 0.00 22,053.8 21,485.0 19,152.3 4,883.0 4,798.5 16,686.5 25,297.1 7.58 16.62 4,024.2 15,128.1 20,832.9 6.87 13.82 17,170.8 29,699.5 7.80 9.71
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17,130.8 0.00
Note: Rupees in Millions 1 US$ = Rs. 44 (based on prevailing exchange rate in May 2005) Source: Hindustan Lever Limited
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11,559.1 20,159,5 5.25 9.50
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Endnotes
Dadiseth, K.B.. Annual shareholders meeting address, where Hindustan Lever Limited Chairman Mr. K.B. Dadiseth unveiled the companys strategic vision, entitled Millennium Plan. 25 Apr. 2000. Equitymaster.com. 6 Nov. 2006. < www.equitymaster.com>. HLL Corporate Profile. 2004. Ibid. Ibid. Rangan, V. Kasturi, and Rohithari Rajan. Unilever in India: Hindustan Levers Project Shakti--Marketing FMCG to the Rural Consumer. Harvard Business School Case 505-056. -bhai: an Indian term of respect, literally meaning brother. Company P&L Statement. 31 Mar. 2004. Small-scale sector: a part of industry with small capital needs and high labor-intensity. Personal Conversation with Ajit Andhare, HLL. ORG-GfK Retail audit. A Premium Future for HLL. Economic Times. 4 Sept. 2004.
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Rangan, V. Kasturi, and Rohithari Rajan. Unilever in India: Hindustan Levers Project Shakti--Marketing FMCG to the Rural Consumer. Harvard Business School Case 505-056. Grameen Bank, a micro-credit organization started in 1976 in Bangladesh by economics professor Mohammad Yunus, was a pioneer in using local groups as a key component in an enterprises business model. The Bank defied conventional banking rules by lending to the poor with no collateral and relied on self-help groups as a means to ensure accountability of borrowers. As of 2005, Grameen Bank had made cumulative loans of US$5,025 million and maintained a repayment rate of 96%, higher than that of traditional commercial banks. Widely admired by the development community, Grameens model of relying on the power of self-help groups has been replicated in a number of other emerging economies. Remaking Lever. Business World. 30 Aug. 2004. Census of India. 2001. Ibid.
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HLL Project Shakti To Cover All Rural India. The Financial Express. 2 Mar. 2004. -amma: literally, mother but also a general term for elder women in India. Prahalad, C.K.. The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits. Upper Saddle River, NJ: Wharton School Publishing, 2004.
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