Rural Marketing Strategies of HUL

CHAPTER-1

INTRODUCTION

Over the past few years, the rural markets have emerged as one of the most lucrative markets for
Indian companies. In the recent past, many organizations have forayed into rural areas and this
has proved fruitful and beneficial for them. The Indian rural markets provide abundant
opportunities for organizations to enter and operate profitably. The large population base of rural
India enables the companies to earn a reasonable amount of revenue. 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 India has emerged as a large market for numerous goods and services such as financial
services, FMCG, healthcare and telecommunications. In today's competitive scenario, the rural
markets are as vital as the urban markets for marketers.

Rural Markets are Becoming More Important

The rural markets have become a favourable destination for marketing companies in view of the
following reasons:

 Competition in Urban Markets - The level of competition in the urban markets has intensified
and is increasing tremendously. It is also stated by many experts that the urban markets are
almost saturated. Therefore, penetration into rural markets is inevitable for sustained business
growth. The rural markets are relatively untapped and this provides better scope for growth.
 Changing Consumption Pattern in Rural Areas - The consumption pattern in rural India and
the demand for new products have shown an encouraging trend. The purchasing power of
rural consumers has increased significantly over the past decade. This, in turn, has
transformed the consumption pattern.
 Improved Lifestyle - The rural consumer is no longer dependent only on traditional products.
For instance, in most villages, shampoos have substantially replaced the traditional product
shikakai which the rural people have been using since years. Similarly, the use of gas
cylinders has become popular in place of conventional chulas. Today, the consumption

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basket of rural people is not limited to agricultural and allied products. They are keen on
buying modern products that can augment their style of living.
 Huge Population Base - The huge population base in rural India provides a massive
opportunity for the companies to sell their products and services on a sizeable scale. Apart
from a large population, the increased presence of media and higher literacy level has created
a lot of awareness amongst them.
 Rapidly Growing Market - At a conference organized by the Confederation of Indian
Industry (CII-Northern Region), Somak Ghosh, President, Corporate Finance and
Development Banking said, "India's rural markets are growing at double the rate of urban
markets. The total number of rural households has risen from 135 million in 2001-02 to 153
million in 2009-10 giving a tremendous push to the rural retail opportunity." The rural
consumer is changing and is now willing to experiment with new products. On the one hand,
they purchase products of basic necessity, while on the other hand they are even buying
luxury products that can offer some comfort. Therefore, the opportunities in these markets
are quite large and need to be explored.

Following table shows the contribution of rural market to total all India market:
Table-1: Contribution of ‗Rural Market‘ to All– India Market

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THE FOUR P’s IN RURAL MARKETING

The 4 Ps of marketing might have to be modified as per the requirements and expectations of
the rural people.
 Rural Product Strategy
The rural markets generally prefer simple and easy to use products. The packaging has to
be convenient and cost-effective. Sophisticated packaging that only adds to the cost and
does not provide any additional convenience is of no help. For instance, the sachet
revolution played a great role in making many consumer products popular in the rural
areas. The product literature should be simple and easy to grasp. The information
provided should outline the functional benefits clearly and in a transparent manner. The
products should be able to cater to the distinct needs of rural customers and provide value
for money.
Examples
 HUL developed a combined soap and shampoo that was cost-effective and also less harsh
on hair than ordinary soaps. HUL launched the new soap-cum shampoo ‗Breeze 2-in-1‘
 LG Electronics launched its Sampoorna television with Devanagari script on-screen
display, which also provided better signal reception in rural areas.
 Bank of India introduced the concept of Bhumiheen credit cards to extend credit card
facilities to landless farmers.
 Nokia has introduced mobile phones for rural markets with features that suit the rural
users such as local language, call limits, etc.

 Rural Pricing Strategy

The rural customer is price sensitive and expects value for money. Therefore, the pricing
has to be in line with this expectation. Marketers have to therefore devise strategies that
can make their products affordable for rural customers. Many companies have opted to
offer their products in smaller units so as to make them more viable for the rural markets.
More importantly, the concept of value engineering should be applied to rural markets to
make the products affordable. This technique involves replacing costly raw materials
with cheaper ones, without sacrificing quality and functionality. This concept has already
been implemented in the food industry, where soya protein has replaced milk protein in

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many food products. Although soya protein is cheaper as compared to milk protein, the
nutrition value remains the same. However, if the product belongs to an expensive
category like high end mobile phones, then the positioning has to be done in a way that
the product is perceived as a bundle of utilities by the rural customer, which still provides
value for money in its category.
Examples
 Godrej has introduced its Cinthol, Fair Glow and other Godrej products in 50 gram packs
that are priced at Rs. 4-5, particularly for the markets of Uttar Pradesh, Madhya Pradesh
and Bihar.
 Lux toilet soap is made available in 25 gram packs in rural areas.
 Philips introduced its free power radio, a radio that does not require power or battery for
operation, for Rs. 995.
 Tata Tea introduced a new brand of tea, Agni Sholay, in three different packs to cater to
the needs of all the segments in rural areas. It was priced at Rs. 31.50, Rs. 13 and Rs. 6.50
respectively for 250, 100 and 50 gram packs.

 Rural Place Strategy

All possible efforts should be made to make the products available at the doorstep of the
target audience. Direct contact with the local vendors and retailers has to be established.
Cooperative societies, public distribution system, feeder markets, village weekly markets,
fairs and festivals can be utilized to ensure adequate distribution of one's products.
Formulating an integrated and efficient channel of distribution remains a challenge for
the marketers. However, several companies have been able to establish a distribution
system that has catered to the rural people efficiently.
Examples
 ITC, through its format echoupal, uses the Internet to communicate and reach out to the
rural people.
 Hindustan Unilever uses vans to deliver its products to local vendors and retailers in rural
areas, thus vastly improving its reach. The delivery vans serve as mobile warehouses.

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 Ajanta India distributes its products (toothpaste, toothbrush, shaving cream, etc.) through
the paan wala as well as through chemist stores. The company has approximately 700
distributors all over the country.
 Many companies even use animal carts to carry their products, so that they can reach
even the remotest areas which are not connected by motor able roads.

 Rural Promotion Strategy

The promotional activities should be undertaken through media that are comfortable and
appropriate for the rural areas. Positive word-of-mouth through local reference groups
and opinion leaders is considered as the key to success in the rural markets. Traditional
art forms such as puppet shows and street plays or creating awareness through village
panchayat members can prove to be fruitful. Other methods like distribution of
pamphlets, use of mobile publicity vans and advertising on walls can also assist in
establishing a relationship with the rural masses.
Examples
 Asian Paints selected some opinion leaders in the villages and painted their houses to
demonstrate that the colour does not come off.
 Life Insurance Corporation of India made use of puppet shows to create awareness
amongst the rural people regarding the importance of insurance products.
 ICICI Prudential promoted its product in the haats, mandis and other local markets
organized in the rural areas. It also educated the rural people by advertising through
mobile vans.
 Many companies use folk theatre formats as a means to promote their products. The
Government of India utilized this medium for selling seeds and fertilizers.

From Four P's to Four A's

The traditional four P's of marketing -- product, price, place and promotion, as outlined
above -- have been replaced by a different framework for analysis. "A number of companies
have worked on various elements of the marketing mix to improve the four A's --
affordability, awareness, availability and acceptability -- for rural markets," he says. "FMCG
companies innovated on package sizes to introduce low price points. They have customized

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promotional strategies for rural markets using local language and talent. Some FMCG
players continue to expand rural penetration (HUL's Project Shakti, Tata Tea's Gaon Chalo).
Coca-Cola's Parivartan program has trained more than 6,000 retailers to display and stock
products. Dabur has created a training module ASTRA (Advanced sales training for retail
ascendance) in several regional languages. A number of auto companies have launched rural-
specific campaigns."

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CHAPTER-2
COMPANY PROFILE

In 1888, Lever Brothers started exporting Sunlight laundry soap to India. Meanwhile,
Margarine Unie also exported vanaspati, or hydrogenated edible fat to the same country.
Therefore, when Margarine Unie and Lever Brothers merged in 1930, the products already
had considerable presence in India.
In 1931, Unilever established the Hindustan Vanaspati Manufacturing Company, its first
subsidiary in India, followed by two more subsidiaries—Lever Brothers India Limited and
United Traders Limited. In 1956, these three companies, which marketed soaps, vanaspati
and personal products, merged to form Hindustan Lever, in which Unilever now has a 51 per
cent stake.
The company has pursued growth through acquisitions and joint ventures. In April 1993,
Hindustan Vanaspati merged with Tata Oil Mills Company in an amalgamation that brought
in a soaps and detergents brand portfolio to compliment that of Hindustan.
In a related move, in 1995, Hindustan and yet another Tata company, Lakme, formed a 50:
50 joint venture, Lakme Lever, to market Lakme‘s market-leading cosmetics and other
appropriate products of both the companies.
Subsequently, in 1998, Lakme Limited sold its brands to Hindustan and divested its 50 per
cent stake in the joint venture to the company. Growth continued in 1994 when the company
formed 50: 50 joint ventures with two US-based companies, Kimberly-Clark Corporation and
S.C. Johnson & Son, and the Netherlands-based Gist Brocades. Kimberly-Clark Lever Ltd.
markets Huggies diapers and Kotex sanitary pads.
The portfolio of Lever Johnson (Consumer Products), formed in 1995, includes the Raid
range of mosquito repellent mats, coils and cockroach killing aerosols and Glade air
fresheners. Furthermore, the company established a subsidiary in Nepal, called Nepal Lever
Ltd. (NLL). Its factory is the largest manufacturing investment in the Himalayan kingdom.
The NLL factory manufactures Hindustan products like soaps, detergents and personal
products both for the domestic market and exports to India. The 1990s also witnessed a string
of crucial mergers, acquisitions and alliances on the foods and beverages front.

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In 1992, Brooke Bond acquired Kothari General Foods, with significant interests in instant
coffee. In 1993, it acquired the Kissan business from the UB Group and the Dollops ice
cream business from Cadbury India.
As a measure of backward integration, Tea Estates and Doom Dooma, two plantation
companies of Unilever, were merged with Brooke Bond. Then in July 1993, Brooke Bond
India and Lip ton India merged to form Brooke Bond Lipton India Ltd. (BBLIL), enabling
greater focus and ensuring synergy in the traditional beverages business.
Further expansion occurred in 1994 when BBLIL launched the Wall‘s range of frozen
desserts. By the end of the year, the company entered into a strategic alliance with the
Kwality ice cream group families and in 1995 the Milkfood 100 per cent ice cream marketing
and distribution rights too were acquired.
The same year, the company also bought from Pepsi Foods its tomato processing assets at
Zahura (Punjab). Finally, BBLIL merged with Hindustan in January 1996.
Meanwhile, in 1995, Hindustan restructured its businesses, selling its fertilizer and industrial
chemicals business to the group company. Hind Lever Chemicals (erstwhile Stepan
Chemicals), and acquiring from Stepan its popular detergents business. This was done to
allow the fertilizer and industrial chemicals business to grow rapidly through fresh
investments in expansion.
The internal restructuring culminated in the merger of Pond‘s India Ltd. (PIL) with
Hindustan in 1998. The two companies had significant overlaps in personal products,
specialty chemicals and exports businesses, besides a common distribution system since 1993
for personal products.

This includes 15 months as the accounting year has changed from December to March.
Sources: Company, Edelweiss Research and Emkay Research, 27 August 2010.
In January 2000, in a historic step, the government decided to award 74 per cent equity in the
State-owned Modern Foods Industries Ltd. (MFIL) to Hindustan Lever, thereby kick-starting

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the first major strategic sale of government equity in a public sector undertaking (PSU) to a
private partner.
Meanwhile, in 2001 HLL decided to focus on power brands, entered the confectioneries
category and also launched supporting services like Lakme beauty salons. The Lever Gist
Brocades, a 50 : 50 joint venture of HLL and DSM of The Netherlands, was sold to Burns
Philip India in 2002.
The year 2003 saw the company merge its key food brands Knorr and Annapurna under one
brand name, Knorr Annapurna. Let us now look at the bottom line of the company, shown in
Table 12.2, as the end result of the company‘s business plan.
HUL reported a like-to-like growth of over 15 per cent in financial year 2009; however,
while the first half growth was a healthy volume and value mix, the growth in the last two
quarters of 2008 were predominantly value led price hikes in the soaps and detergents
category at over 25 per cent.
However, analysts see substantial slowdown in HUL‘s growth as price-led growth disappears
(in fact there are price cuts in soaps and detergents category) and volume growth subsides.
Volume growth has declined sharply from 10 per cent in the quarter ended March 2008 to 6.8
per cent in the quarter ended September 2008 to 2.3 per cent in the December 2008 quarter to
– 4 per cent in the first quarter of 2009. HUL‘s volume growth is expected to remain at best
in low single digit. This could pose a risk to the company‘s growth estimates of 10-11 per
cent in 2009-10.
The financial year 2011 poses huge challenges to the company as its power brands are losing
market share to local and regional players. HUL had a tough time with fluctuating sales in
2007, and then picked up well after corporate restructuring and innovative campaigns.
A 33 per cent spurt in advertisement and promotion in the first quarter ended 30 June 2010
dragged down HUL‘s net profit by 1.8 per cent to Rs. 533.21 crore, despite a 60 basis point
reduction in supply chain cost. HUL‘s volume grew by 11 per cent and net sales grew 7 per
cent at Rs. 4,794 crore as compared to Rs. 4, 476 crore in June 2009. HUL‘s current
operating margin of 14 per cent is lower than its peak operating margin registered in 2002.

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CHAPTER-3
SWOT ANALYSIS

SWOT ANALYSIS OF HUL

Strengths:
 Strong and well-differentiated brands with leading share positions. Brand portfolio
includes both global Unilever brands and local brands of specific relevance to India.
 Consumer understanding and systems for building consumer insight.
 Strong R&D capability well linked with business.
 Financial resources.
 Integrated supply chain and well-spread manufacturing units.
 Distribution structure with wide reach, high quality coverage and ability to leverage
scale.
 Access to Unilever global technology capability and sharing of best practices from other
Unilever companies.
 Productive and professionally trained the manpower resources.
 Distinctly placed products providing reach to every segment of society.
 Consumer understanding and systems for building consumer insight.
 Project Shakti helped HUL create brand awareness and reach extensively into rural India.
 Well placed to take advantage of growth in rural India and lower strata of the society
through ‗shakti‘.
 It could look at introducing products (like margarine) from its parent company in order to
cater to changing consumer tastes and opportunities in the food sector.
 It can be a leader in exports by positioning itself as a sourcing hub for Unilever
companies in various countries.
Weaknesses
 Increased consumer spends on education, consumer durables, entertainment, and travel
resulting in lower share of wallet for FMCG.
 Limited success in changing eating habits of people.

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 Complex supply chain configuration, unwieldy number of SKUs with dispersed

manufacturing locations. HUL already has taken steps to minimize the same.
 Price positioning in some categories allows for low price competition, like Amul
captured Kwality‘s market.
 High social costs (subsidised housing, foodgrains and firewood, health and other welfare
measures) in the plantation business.
 Competitors focusing on a particular product and eating up HUL‘s share like Nirma
focusing on soaps and detergents.
Opportunities
 Market and brand growth through increased penetration, especially in rural areas.
 Brand growth through increased consumption depth and frequency of usage across all
categories.
 Potential outsourcing business in India.
 Upgrading consumers through innovation to new levels of quality and performance.
 Emerging modern trade can be effectively used for introduction of more upscale personal
care products.
 Growing consumption in out-of-home categories.
 Position HUL as a sourcing hub for Unilever companies in various countries.
 Leveraging the latest IT technology.
 Growing consumer base due to increasing income levels and new consumers from lower
strata of the society.
 Untapped market in branded Ayurvedic medicines and other such consumer products.
 Opportunity in the food sector: changing consumer tastes.
 Expand horizon to more countries.
Threats
 Low priced competition now present in all categories.
 Grey imports.
 Spurious/counterfeit products in rural areas and small towns.
 Changes in fiscal benefits.
 Unfavourable raw material prices in oils, tea, and so on.

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 Unfavourable raw material prices due to inflation reducing profitability.

 Heavy onslaught of competition in the core categories from emerging players like ITC
will result in higher advertising expenditure.
 Reduction in real income of consumers due to high inflation.
 FMCG dealing with overcapacity utilization.
 Health conscious environment friendly customers.
 Scarce water problem affecting demand for detergents and related goods.

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CHAPTER-4
RESEARCH METHODOLOGY

Data Collection
Primary data is collected through personal contact. Secondary literature is drawn from
proprietary sources available on various websites. The other sources include research papers
published in online and printed journals, news agencies, blogs, etc. The literature sourced has
further been edited and categorized to make it suitable to study the considered objective. This
exploratory research investigates the various initiatives taken by Hindustan Unilever Limited to
reach the rural consumer.
Sample size
The sample size has been chosen as 30. Only male respondents have been chosen since they are
the prime decision makers.

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CHAPTER-5
DATA ANALYSIS & INTERPRETATION

1, Demographics (age of respondents)

Age of respondents

40%
18-25
above 35-40
60%

Analysis
-18 out of 30 respondents are of age of 18-25 years.
-12 out of 30 respondents are above age of 35-40 years

Interpretation
-60% of respondents are of age of 18-25 years.
- 40% of respondents are above age of 35-40 years.

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2. What do you use to overcome body odour?

Product preferred

40%
Spray
soap/powder
60%

Analysis:
-12 out of 30 respondents prefer spray for body odour.
-18 out of 30 respondents prefer soap/powder for body odour.

Interpretation:
-40% of respondents prefer spray for body odour.
-60% of respondents prefer soap/powder for body odour.

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3. How much are you willing to pay for the product?

Price willing to pay

20%

Less than 80
80-100

80%

Analysis:
-6 respondents are willing to pay less than 80 INR for the product.
-24 respondents are willing to pay 80-100 INR for the product.

Interpretation:
- 20% agreed to consider purchasing axe if the product was more economical( <80 INR)

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4.What are your preferred frangrances?

Natural fragrances preferred

1%

13%

Sandalwood
43%
Mogra
Rose
Jasmine
43%

Analysis & interpretation:

-43% prefer sandalwood
-43% prefer mogra
-13% prefer rose
-1% prefer jasmine

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CHAPTER-6
FINDINGS, CONCLUSION & SUGGESTIONS

Findings
 60% of respondents are of age of 18-25 years and 40% of respondents are above age of
35-40 years.
 40% of respondents prefer spray for body odour and 60% of respondents prefer
soap/powder for body odour.
 20% agreed to consider purchasing axe if the product was more economical( <80 INR)
 43% prefer sandalwood, 43% prefer mogra, 13% prefer rose, 1% prefer jasmine

Conclusions
HUL has been following a sustained approach to tap the vast potential of India‘s rural market.
The evolution of HUL‘s rural marketing strategies from an indirect approach to rural area to the
door step marketing through Shaktiamma shows that the company has come a long way since it
took its first rural initiative back in the 1960‘s. A variety of changes are on the horizon which
would impact rural distribution plans of HUL -
 Technology of digital maps – to study existing rural distribution reach and to draw up
plans for increasing reach. Maps help for smarter route planning.

 Improved road infrastructure across the country leading to improved access to even
remotest of villages.

 Reach of Television to rural area has rural consumers watching all programmes and ads
as in the city. Aspiration to use same products as city folks is on the rise and buying
habits of rural consumers is changing accordingly.

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CHAPTER-7
BIBLIOGRAPHY
1. Azad, Priyanka(2010, November), ―Go Rural: Marketing Mantra for the Competitive Era‖
Marketing Mastermind, pp.20-23.
2. Baijoor, Harish. (2009, June18). Knowledge@wharton.
3. Krishnamacharyulu, C.S.G. and Ramakrishna, Lalitha (2002). Rural Marketing.
4. Paul,Nidhi(2010 May),HUL‘s ―Khushiyon Ki Doli‖ – A new Campaign Strategy.
www.technospot.in
5. Ramkishen,Y. (2004, 2nd Edition). Rural & Agricultural Marketing.
6. 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.
7. Srivastava, Samar. (2010, September). Hindustan Unilever‘s Bharat Darshan,Forbes India.
8. Srivastava, Arpita. (2008, November), ―Effective Product Positioning Strategies for the Rural
Markets – A Winning Proposition‖, Marketing Mastermind, pp.42-47.

9. Subramanian, Samanth. (2009 March), ― Mother of all rural marketing schemes‖.

www.livemint.com
10. Vijayraghavan, Kala. Malviya,Sagar. (2011 May), ―Hindustan Unilever taps banks, telecom
firms to reach rural India wider‖, www.economictimes.indiatimes.com
11. HUL Corporate website. www.hul.co.in

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