FMCG MARKET

Fast Moving Consumer Goods (FMCG), also known as Consumer Packaged Goods (CPG), are products that have a quick turnover, and relatively low cost. Consumers generally put less thought into the purchase of FMCG than other products. The absolute profit made on a FMCG product is lower; however they are generally sold in high numbers. Hence profit in FMCG goods generally scales with the number of goods sold, rather than the profit made per item. The classification generally includes a wide range of frequently purchased consumer products including: toiletries, soaps, cosmetics, teeth cleaning products, shaving products, detergents, and other non-durables such as glassware, bulbs, batteries, paper products and plastic goods. The category may include pharmaceuticals, consumer electronics and packaged food products and drinks, although these are often categorized separately. Contrast consumer durables such as kitchen appliances that are generally replaced less than once a year. GLOBAL SCENARIO The FMCG sector is once again on the investment radar given some of the developments in the sector. With sales growth gaining momentum and selective improvement in margins this sector could be one of the dark horses going forward. One of the factors that affected sentiment in the sector was the price wars, which pressured margins lower. However, that could be a thing of the past with both Hindustan Lever and P&G now increasing prices of products. Moreover, after three years of sluggish sales growth, the sector is looking up with demand from rural markets now showing a rebound. The improvement in growth trend seen in the first half of the year is gaining further momentum, as

per the latest AC Nielsen data for retail sales. Most of the large categories have now started growing. Quite a few categories have seen price hikes in the last quarter this coupled with the decline in prices of various commodities and inputs would have a significant positive impact on the profitability of the sector

INDIAN SCENARIO The Indian FMCG sector is the fourth largest sector in the economy with a total market size in excess of US$ 13.1 billion. It has a strong MNC presence and is characterized by a well established distribution network, intense competition between the organized and unorganized segments and low operational cost. Availability of key raw materials, cheaper labour costs and presence across the entire value chain gives India a competitive advantage. The FMCG market is set to treble from US$ 11.6 billion in 2003 to US$ 33.4 billion in 2015. Penetration level as well as per capita consumption in most product categories like jams, toothpaste, skin care, hair wash etc in India is low indicating the untapped market potential. Burgeoning Indian population, particularly the middle class and the rural segments, presents an opportunity to makers of branded products to convert consumers to branded products. Growth is also likely to come from consumer 'upgrading' in the matured product categories. With 200 million people expected to shift to processed and packaged food by 2010, India needs around US$ 28 billion of investment in the food-processing industry. Automatic investment approval (including foreign technology agreements within specified norms), up to 100 per cent foreign equity or 100 per cent for NRI and Overseas Corporate Bodies (OCBs) investment, is allowed for most of the food processing sector. According to this year's Global Retail Development Index India is positioned as the leading destination for retail

investment. This followed from the saturation in western retail markets and we find big western retailers like Wal-mart and Tesco entering into Indian market. India's retail industry accounts for 10 percent of its GDP and 8 percent of the employment to reach $17 billion by 2010. There are about 300 new malls, 1,500 supermarkets and 325 departmental stores being built in the cities very soon. A shopping revolution is ushering in India where, a large population between 20-34 age groups in the urban regions is boosting demand by 11.1 percent in 2004-05 to an Rs 23,308 purchasing power. This has resulted in huge international retail investment and a more liberal FDI. In this market research report "Indian Retail Sector - An Outlook (2005-2010)" analyzes the greatly divided Indian retail market and the trends in its business. Issues such as foreign investment restrictions, modern merchandizing in India, logistics and payment terms for distribution, role of channel members and growth trends in different regions are discussed. The market research report further analyzes the sustainability of the Indian retail sector and on the basis of 25 domestic and international companies the report has given a suitable business model. The sector witnessed strong volume growth across most of the categories (cigarettes, packaged tea, shampoos, toothpastes, nutritional beverages and hair colours) during the quarter. We believe that the FMCG sector will continue this growth momentum going forward. Most of the companies have regained their pricing power and have successfully passed on the impact of increased raw material prices to the customers by taking price hikes across categories. The players are spending heavily on promotions and new launches. We expect the demand from rural market to increase sharply on account of above normal rainfall in the current year. Firm prices of LAB and soda ash - key raw materials for detergents could put pressure on margins of detergent manufacturers while rising crude oil prices could lead to spiraling in packaging cost. However, food companies are expected

to report margin improvement driven by favorable raw material price scenario. In India following are the Market Leaders in this Industry: HLL 36.4% ITC 30.3% Nestle 8.2% Major Players & their Sales Performance The Major Players in the market are: HLL, ITC, Nestle, Colgate-Palmolive, P&G, Dabur, Godrej, Nirma and Marico. HLL is the biggest player in the industry with presence in all the segments of the FMCG sector. The only company which matches HLLs presence in the entire industry is P&G.

INTRODUCTION TO HUL
Hindustan Unilever Limited (abbreviated to HUL), formerly Hindustan Lever Limited, is India's largest consumer products company and was formed in 1933 as Lever Brothers India Limited. It is currently headquartered in Mumbai, India and its 41,000 employees are headed by Harish Manwani, the non-executive chairman of the board. HUL is the market leader in Indian products such as tea, soaps, detergents, as its products have become daily

household name in India. The Anglo-Dutch company Unilever owns a majority stake in Hindustan Unilever Limited. The company was renamed in late June 2007 to "Hindustan Unilever Limited" to provide the optimum balance between maintaining the heritage of the Company and the future benefits and synergies of global alignment with the corporate name of "Unilever". This decision will be put to the Shareholders for approval in next "Annual General Meeting". HUL is one among those companies in the country that derives huge revenues (over 50 per cent) from the rural areas. The theme of the project being "Crossroads", we have chosen Hindustan Unilever Limited (HUL) as: a) It being the market leader in the sector for most of the years. b) Facing stagnation in top line growth. c) Thus, HUL is at the "Crossroads" of a major revamp in its strategy to appeal to the consumer segment. HUL as we see it now was born in 1956 through merger of 3 separate entities.

PRESENT STATURE Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer Goods company, touching the lives of two out of three Indians with over 20 distinct categories in Home

& Personal Care Products and Foods & Beverages. They endow the company with a scale of combined volumes of about 4 million tonnes and sales of nearly Rs.13718 crores. HUL is also one of the country's largest exporters; it has been recognised as a Golden Super Star Trading House by the Government of India. The mission that inspires HUL's over 15,000 employees, including over 1,300 managers, is to "add vitality to life." HUL meets everyday needs for nutrition, hygiene, and personal care with brands that help people feel good, look good and get more out of life. It is a mission HUL shares with its parent company, Unilever, which holds 52.10% of the equity. The rest of the shareholding is distributed among 360,675 individual shareholders and financial institutions. HUL's brands - like Lifebuoy, Lux, Surf Excel, Rin, Wheel, Fair & Lovely, Pond's, Sunsilk, Clinic, Pepsodent, Close-up, Lakme, Brooke Bond, Kissan, Knorr-Annapurna, Kwality Wall's are household names across the country and span many categories - soaps, detergents, personal products, tea, coffee, branded staples, ice cream and culinary products. They are manufactured over 40 factories across India. The operations involve over 2,000 suppliers and associates. HUL's distribution network, comprising about 4,000 redistribution stockists, covering 6.3 million retail outlets reaching the entire urban population, and about 250 million rural consumers. HUL has traditionally been a company, which incorporates latest technology in all its operations. The Hindustan Unilever Research Centre (HURC) was set up in 1958, and now has facilities in Mumbai and Bangalore. HURC and the Global Technology Centers in India have over 200 highly qualified scientists and technologists, many with postdoctoral experience acquired in the US and Europe.

HUL believes that an organizations worth is also in the service it renders to the community. HUL is focusing on health & hygiene education, women empowerment, and water management. It is also involved in education and rehabilitation of special or underprivileged children, care for the destitute and HIV-positive, and rural development. HUL has also responded in case of national calamities / adversities and contributes through various welfare measures, most recent being the village built by HUL in earthquake affected Gujarat, and relief & rehabilitation after the Tsunami caused devastation in South India . In 2001, the company embarked on an ambitious programme, Shakti. Through Shakti, HUL is creating microenterprise opportunities for rural women, thereby improving their livelihood and the standard of living in rural communities. Shakti also includes health and hygiene education through the Shakti Vani Programme, and creating access to relevant information through the iShakti community portal. The program now covers 15 states in India and has over 45,000 women entrepreneurs in its fold, reaching out to 100,000 plus villages and directly reaching to 150 million rural consumers. By the end of 2010, Shakti aims to have 100,000 Shakti entrepreneurs covering 500,000 villages, touching the lives of over 600 million people. HUL is also running a rural health programme Lifebuoy Swasthya Chetana. The programme Endeavours to induce adoption of hygienic practices among rural Indians and aims to bring down the incidence of diarrhoea. It has already touched 84.6 million people in approximately 43890 villages of 8 states. The vision is to make a billion Indians feel safe and secure. If Hindustan Unilever straddles the Indian corporate world, it is because of being single-minded in identifying itself with Indian aspirations and needs in every walk of life.

Our vision
To earn the love and respect of India, by making a real difference to every Indian

CHIEF PRODUCTS
Currently, HUL is India's largest fast moving consumer goods company, with leadership in Home & Personal Care Products and Foods & Beverages. HUL's brands, spread across 20 distinct consumer categories, touch the lives of two out of three Indians. They endow the company with a scale of combined volumes of about 4 million tonnes and sales of Rs.10,000 crores. With 35 Power Brands, HUL meets everyday needs for nutrition, hygiene, and personal care with brands that help people feel good, look good and get more out of life. HUL is subsidiary of Unilever which holds 51.55% of the equity. A Fortune 500 transnational, Unilever sells Foods and Home and Personal Care brands in about 100 countries worldwide. HUL has diversified product portfolio from all segments of FMCG. The major products of the firms are: Personal Care: Sunsilk, Clinic, Peposodent, Close-up, Lakme, Ayush, Lux, Breeze, Dove Home Care Surf Excel, Wheel, Rin, Hamam, Food Brooke Bond, Lipton, Kissan, Kwality Walls, Bru

PORTFOLIO STRADDLING THE PYRAMID ACROSS CATEGORIES

CATEGORY LEADERSHIP: LAUNDRY

BRANDS
Hindustan Unilever Limited (HUL) is India's largest fast moving consumer goods company with leadership in Home & Personal Care Products and Foods & Beverages. HUL's brands, spread across 20 distinct consumer categories, touch the lives of two out of three Indians. If Hindustan Unilever straddles the Indian corporate world, it is because of being single-minded in identifying itself with Indian aspirations and needs in every walk of life.

Lux Lifebuoy Liril Hamam

Breeze Dove Pears Rexona Fair & Lovely Pond's Vaseline

Surf Excel Rin Wheel

Sunsilk Naturals Clinic

Pepsodent Closeup

Axe Rexona Ayush

Lakme

Brooke Bond Lipton

Brooke Bond Bru

Kissan Annapurna Knorr

Kwality Wall's

HINDUSTAN UNILEVER LIMITED LOGISTICS A 75 YEAR HISTORY

LEADERSHIP ACROSS DIVERSE FMCG CATEGORIES

STRUCTURE OF HULS MARKET REACH IN INDIA

Retail Stockist Program

L.A.B. Program IDC Program Streamline Program

Shakti

DISTRIBUTION CHANNEL OF HUL

DISTRIBUTION SYSTEM MEANING
Distribution systems focus to enable easy access to their brands, touch consumers with a three-way convergence of product availability, brand communication, and higher levels of brand experience.

What Distribution system should do?

The most obvious function of providing the logistics support to get the companys product to the end customer. Another established role is that of financing. The channel partners are expected to extend credit to the next level of customers. Some channel members however also receive credit and the net credit extended is minimal. The most neglected role of the channel is information flow 1. outward flow - about the company offerings 2. inward flow about customers needs. However most channel members are reluctant to part with information on customers fearing disintermediation. Thereby a very vital input to a companys responsiveness is lost. Value added services that supplemented the companys effort such as local sales,repairs, promotion, repacking, minor customisation, etc.

DISTRIBUTION SYSTEM OF HUL

HUL's products, are distributed through a network of about 7,000 redistribution stockists covering about one million retail outlets.

The general trade comprises grocery stores, chemists, wholesale, kiosks and general stores.

Hindustan Unilever provide tailor services to each of its channel partners

made

HUL is using the point of purchase method for much higher level of direct contact, through in-

store facilitators, experience.

sampling,

education

and

It has developed customer management and supply chain capabilities for partnering emerging self-service stores and supermarkets.

2,000 suppliers and 7,500 distributors serve HLLs 100 factories which are decentralized across 2 million square miles of territory

DISTRIBUTION AT THE VILLAGES

The company has brought all markets with populations of below 50,000 under one rural sales organisation. The team comprises an exclusive sales force and exclusive redistribution stockists. The team focuses on availability of products. building superior

In rural India, the network directly covers about 50,000 villages, reaching 250 million consumers, through 6000 sub-stockists.

DISTRIBUTION AT THE SUPERMARKETS

HUL has set up a full-scale sales organisation, for this channel to serve modern retailing outlets. Product tests and in-store sampling is provided to consumers

HINDUSTAN UNILEVER SALES OFFICES

CAPABILITIES :LEVERAGING IT FOR GROWTH in distributions

35 Brands, 1500 skus 45 Depots, 4000 stockist DISTRIBUTION CHANNEL

Harnessing Information Technology An IT-powered system has been implemented to supply stocks to redistribution stockists. The objective is to make the product available at the right place and right time in the most cost effective manner. For this, stockists have been connected through an Internet-based network, called RS Net, for online interaction. RS Net is part of Project Leap, HUL's end-to-end supply chain.

DISTRIBUTION STRENGTH
Direct coverage 1milllion outlets Brands reach 6.3 million outlets Strong IT capability, end to end connectivity Unique channel Initiatives to Win at Point of Purchase Portfolio of category and Brands give unique reach in Modern Trade Project Shakti, a competitive advantage in Rural India

Highest Store Density In The World !

DISTRIBUTION CHANNEL

DISTRIBUTION NETWORK OF HINDUSTAN LEVER LIMITED / LIFEBUOY

As you can see above distribution network is headed by the Factories were the goods are being produced and the warehouses were they are being stored. These warehouses then issue goods to the Deposits and the CFAs. The then distributes these goods to the Redistribution Stockiest. There are number of Redistribution Stockiest in one state. They are large in number. These Redistribution Stockiest then distributes the goods to the Wholesaler as well as the Retailer. The Wholesaler then distributes these goods to the Retailer. Finally, the Retailers sell the goods to the customers. The role of Redistribution Stockiest is very significant as they are large in number and are spread all over the country densely. The Redistribution Stockiest gets all the HINDUSTAN LEVER LIMITED products for distribution and they get 5% profit on each product. Their qualification that are necessary to become a HINDUSTAN LEVER LIMITEDs Redistribution Stockiest are: (a) he/ she background should have a good/ strong financial

(b) the investment made before they are given the status of a Redistribution Stockiest. This investment depends upon the sale that is expected in the area. HINDUSTAN LEVER LIMITED says that though its distribution channels is not short for huge profits, but each has its own share in the product, and no company can snatch away that from others. They cannot manipulate. Infact, HINDUSTAN LEVER LIMITED has a more controlled distribution channel. They have not encouraged different strategies for different zones.

As distribution channels are long i.e. from factories/ warehouses to the customers the products are to be packed very diligently. After, individual packing of each soap all the soaps are packed in CLDs ( Cartoons for Local Distribution). 108 units of Lifebuoy size 125 grams and 288 units of Lifebuoy size 50 grams can be packed in one CLD. And for better convenience there are bundle of two dozen soaps which the wholesaler buyers in bulk so that it can be sell it in far of places in rural area

EVOLVING TRADE STRUCTURE

URBAN STORES

WINNING WITH GO TO MARKET APPROACH

ARTICLES
ABOUT SUPPORT TO DISTRIBUTORS
HUL provides back-end support to distributor MUMBAI: Consumer goods giant Hindustan Unilever (HUL) has tied up with a third-party logistics service provider to manage the entire back-end distribution chain on behalf of its distributors. The project is expected to take away a major burden faced by several distributors i.e., managing stock positions and delivery schedules. The company has begun a pilot exercise recently in Mumbai, one of the companys key markets. Hindustan Unilever executive director (sales & customer development) Sanjiv Kakkar told ET that the outsourced function is a crucial element in the companys distribution chain. The initiative will help the distributor and our teams to focus on customers. At present, a lot of distributors get constrained by factors like concentrating on the back-end in areas like finance, logistics and space management. The task is to create a distributor organisation that is customer facing rather than inward looking, he said. HUL is encouraging its distributors to become entrepreneurs and run the business as a professional distribution house and take on the onus to deliver growth. The initiative takes place against a backdrop of the changing retail scenario in the country. Five years back, the retail segment was one homogeneous mass and for companies like HUL, the focus was on two segmentswholesale and mass retail. In the current scenario, there are several sub-segments that have emerged. For instance,

apart from modern retail formats, there are emerging modern retail groups (top-end retailers morphing into selfservice stores), apart from the next door grocer and the kiosks (hole-in-the-wall outlets). Each of these trade segments have different requirements as the customers they cater to are also different. According to company executives, distributors typically spend at least 85% of their time managing issues related to the back-end. By relieving them of these efforts, we want to ensure that distributors spend time on market growth. They should drive growth in the market, rather than spend time in the back-end,Mr Kakkar said. The next challenge for Hindustan Unilever is to build a set of logistics service providers across the country. But HUL executives said they would proceed with caution as not too many logistic players are capable of handling issues that could arise in a high volume consumer goods business. The rollout will be in a phased manner in order to avoid business disruption, Mr Kakkar said.

FINANCIAL TURNOVER FROM VARIOUS SEGMENTS

COMPARISON OF TWO FMCG MAJORS; HUL & ITC

18 Aug, 2008, 0517 hrs IST,Kiran Kabtta, ET Bureau

This week, ETIG presents a comparison between two FMCG majors, HUL and ITC. Risk-averse investors interested in stable business & steady dividend income can consider HUL, while ITC is suited for adventurous investors who are hungry for growth, rather than stability. HUL Hindustan Unilever (HUL) is the largest pure-play FMCG company in the country and has one of the widest portfolio of products sold via a strong distribution channel. It owns and markets some of the most

popular brands in the country across various categories, including soaps, detergents, shampoos, tea and face creams. PERFORMANCE: After stagnating between 1999 and 04, the company is back on the growth track. In the past three years, HULs net sales have witnessed a CAGR of 11%, while net profit has posted a CAGR of 17%. The company is set to gain further momentum, given the revival of consumer spending. HUL sells products at different price points straddled between the entire value chain. In the past few years, it has diversified into processed foods, ice-creams , water purifiers and specialised chemicals. But home and personal care (HPC) continues to remain the bread & butter segment for the company. This division accounted for 72% of HULs revenue and 91% of its profit (before interest and tax) during the year ended December 07. So, it wont be wrong to call HUL a personal care major. GROWTH DRIVERS: The company has been launching new products and brand extensions, with investments being made towards brand-building and increasing its market share. HUL is also streamlining its various business operations, in line with the One Unilever philosophy adopted by the Unilever group worldwide. Introduction of premium products and addition of new consumers via market expansion will be HULs growth drivers. FINANCIALS: HULs net sales have recorded a CAGR of more than 11% over the past three years, while its net profit has posted a CAGR of 17% during the same period. While its sales have maintained a secular growth trend, profit margins have shown an erratic trend during the period. High dividend yield, steady growth and strong market standing in its product categories have enabled HUL to command premium valuations, compared to other FMCG companies.

RISKS: Being an MNC operating in India, HUL is more conservative in its strategies than its Indian counterparts. Moreover, given increasing competition , it faces the risk of being overtaken by domestic players in various categories. Prolonged inflation may lead to margin contraction, in case HUL is not able to pass on this burden to consumers. The companys large size also poses a problem, since it does not give HUL the agility to address the competition it faces from national and regional players. TO SUM IT UP: HULs up-and-running business model is a treat for investors seeking exposure in the FMCG segment. The company has delivered in the past and has the potential to do better in future. In the small and medium term, HUL is a better bet than ITC.

NATION WIDE MANUFACTURING

100 factories, across India The year was 1923. Lord Leverhulme, the legendary founder of Lever Brothers, was visiting India. The nationalist sentiment in India was for locally manufactured products.

Lord Leverhulme, who believed that what is good for a country is equally good for the company, responded to that aspiration because he too shared that dream. His dream ultimately was realised in 1934. In September 1934, after more than a decade of discussions in London and in India, a Lever factory was allowed to sprout on the land that had been reclaimed by the Bombay Port Trust at Sewri. From here, a month later rolled out the first cake of Sunlight soap to be manufactured in India. The same year, Lever Brothers took over the Garden Reach Factory in Kolkata. These two factories were the first in a manufacturing base, which today literally dots the length and breadth of India. From Assam to Gujarat, from Uttaranchal to Kerala. Hindustan Unilever's diverse product range is today manufactured in about 100 factories. In addition, the company outsources from 150 other units. The operations involve 2,000 suppliers and associates.

DEVELOPING BACKWARD AREAS Several HUL factories are situated in backward areas. The company has consciously responded to the national policy of development of backward areas by setting up manufacturing units in these places, which provide several direct and indirect employment opportunities for these areas, and leads to general economic development of these regions through industrialisation. In fact, all major investments of HUL, in recent years, have been either in A-Category backward areas or No-Industry Districts. These include factories in Khamgaon and Yavatmal (Maharashtra), Chhindwara (Madhya Pradesh), Orai, Sumerpur and Khalilabad (Uttar Pradesh), Haldia (West Bengal), Silvassa (Dadra & Nagar Haveli), Pondicherry, Goa,

Doom Dooma (Assam), Haridwar (Uttaranchal) and Barotiwala (Himachal Pradesh). Since 2001 itself, HUL has set up nine new factories in backward areas. Equally, HUL has an enviable track record in taking over sick enterprises, in response to requests from Government, and converting them into viable operations. The company's units at Mangalore and Rajpura all bear testimony to this achievement. In the process, HUL has saved precious jobs and developed local economies. HUL's manufacturing facilities, like the Khamgaon soap plant and the Sumerpur detergent bar unit, are recognised as among the best in the Unilever world. HUL has adopted Total Productive Maintenance (TPM) for achieving manufacturing excellence since 1994. As on date, TPM is in different stages of implementation in 28 factories. Four HUL factories have already received the TPM Consistency Award, and 14 factories have been awarded with the TPM Excellence Award.

MAHINDRA LOGISTICS AND HUL

The Times of India reports today that Hindustan Unilever (HUL) proposes to use Mahindra Logistics as a outsourcing partner to deliver goods from the dealer ( or Redistribution stockist) to the retailer. We are not very clear how this changes anything. HUL stockists had to have their own vans anyway to deliver the goods to the retailers; how will Mahindra Logistics add value? Also, will they in the first place have any interest in delivering a few pieces of soap or shampoo to a thousand or more outlets that typically define the FMCG landscape? Mahindra Logistics grew out of the the Transport Solutions Group (TSG) ,which was- we think still is- one of the largest providers of vehicles and services for BPO clients. The last mile delivery is a tough complex fulfilment process, and centralising it all with one service provider may have challenges. Most likely, Mahindra Logistics would have to use the vehicles and staff of the existing RS. Does this mean that Mahindra Logistics is another layer on top of the RS? Also, we believe upmarkets may be served well by Mahindra Logistics, given their greater experience and reach via the M&M brand into rural and semi urban India.

DATA COLLECTION TECHNIQUES

Following techniques were used for collecting data: Interviews with retailers, customers, company officials and re-distribution stockiest Questionnaire Observation Secondary data from Newspapers, Journals and Text books

HUL EXPORTS

Today, HUL is one of Indias Largest exporters of branded Fast Moving Consumer Goods. It has been recognized by the Government of India as a Golden Super Star Trading House.

Over time HUL has developed into a viable & competitive sourcing base for Unilever world wide in Home and Personal Care & Foods & Beverages category of products. HUL is also a global marketing arm for select licensed Unilever brands and also works on building categories with core country advantage such as branded basmati rice. HUL Exports offers high level of service with flexibility and responsiveness thorough out the supply chain. It has a dedicated organization structure to support this Endeavour and this has helped in growth of these businesses in particular. Intrinsic cost competitiveness in the end to end Supply chain with appropriate technology and competitive capital investment operations while delivering best in class quality enables HUL to position itself as a key sourcing hub for Unilever and also become a preferred partner for Global customers in categories we operate. HULs key focus in the exports business is on two broad categories. It is a sourcing base for Unilever brands in Home

& Personal Care (HPC) and Food and Beverages (F&B) for supplies to other Unilever companies. It also focuses on becoming a preferred supplier to both non-Unilever and Unilever clients in three categories in which India, as a country, has competitive advantage Branded Rice, Marine Products and Castor and its Derivatives . HUL enjoys international recognition within Unilever and outside for its quality, reliability and speed of customer service. HUL's Exports geography comprises, at present, countries in Europe, Asia, Middle East, Africa, Australia, North America etc

A BRIEF ON HUL'S EXPORTS PORTFOLIO Health Personal Care (HPC):

The categories under HPC include products in Skin care, Oral care, Pears ,Personal Wash & Lakme range. - Skin Portfolio includes Mass & Masstige Skin (Cream & lotions under Fair & Lovely and Dove brands), Shampoos and Conditioners (under Sunsilk brands), Vaseline & Talc (under Ponds brands). In the past the focus market was in Middle East and Asia, which is now slowing changing with current exports to European countries and robust plans to source different products to US in the near future. - Oral Care consists of Tooth Paste and Tooth Brush (under Pepsodent, Close-up, Mentadant and Signal brands). The exports are to Asian and European countries. - Pears Category consists of Bars, Hand Wash, Body Wash and Shower Gel. Pears is being sold globally including to North America / UK to the GCC / African countries extending

up to Singapore and Australia. While the bar remains the most popular product, the brand has now extended to hand wash, shower gel, body wash and face wash. Currently Pears is celebrating its 200 year anniversary which shows the rich heritage and the strong brand equity it enjoys over generations. - Personal wash category predominantly consists of Lux, Fair & Lovely Soap, Lifebuoy Handwash - Lakme Products are mainly exported to the countries with Indian Ethnic population or to geographies where the brand enjoys strong equity. The markets include Nepal, Bangladesh, United Kingdom & Maldives. Foods and Beverage s(F&B): The categories under F&B include products in Tea, Coffee & Processed Foods range. - Tea Category Includes: Tea Bags (includes Tea Bags, Flavored Tea Bags and Square Tea Bags), Instant Tea, Bulk Tea & Packet Tea. The branded packet tea, and instant tea are for Unilever's ready-to-drink tea business. The branded teas are Brooke Bond, Brooke Bond Red label, Brooke Bond Taj Mahal, Lipton, Lipton Yellow Label, Lipton Green Label, Lipton Brisk and Lipton 3-in-1 premix. - Coffee Category consists of Instant coffee & special coffee Beans (under Bon and Bru brands). The focus market for Bon is CIS markets while Bru is mainly sold to Ethnic markets / Indian diaspora world-wide. Both Bon and Bru straddle the entire gamut of formats comprising of spray dried coffee, granulated, freeze dried and pre mixes. - Processed Foods categories include Fruit Spreads / Jams, Soup Powders, Salt, Wheat Flour, Tomato Ketchup and Custard Powder. The branded processed food items consists

of Kissan, Knorr, Annapurna, Captain Cook, Brown & Polson brands. Marine Products: HUL offers a comprehensive portfolio, ranging from Surimi, Crabsticks to Shrimps and several value-added products. Among its customers is Icelandic, the world's third largest seafood company. In addition, HUL has also become a part of Unilever's supply chain in seafoods for Europe too. HUL's Marine Products brands are Ocean Diamond, Ocean Excellence, Shogun, Hima, Gold Seal, Tara and Prima. Rice: The categories are Basmati Rice and Basmati Rice-based ready-to-eat rice meals. The brands are Gold Seal, Indus Valley, Rozana and Annapurna.

SUPPLY CHAIN MANAGEMENT SOLUTION FOR HINDUSTAN UNILEVER: CASE STUDY

Existing Situation

nearly 1000 products, HUL distributes them nationally through a network of four warehouses, more than 40 agents, 7,500 wholesalers and a number of large institutional customers. HUL, in its endeavor to move from the existing push-based planning system to a pull-based system, wanted to build a Supply Chain Management (SCM) solution that would ensure informed decisions are made during procurement, manufacturing, replenishment and distribution. Specifically, the distribution operation was suffering because of a high margin of errors. There were frequent instances of excess finished-goods inventory reaching HULs distribution centers. This problem was compounded by increasing instances of out-of-stock inventory, which led to demand-supply mismatches. Finally, the system was not able to handle the dynamic nature of the companys source-destination network, and adversely affected the demand-fulfillment rates. HUL needed a solution that could provide visibility across its supply chain. Considering the diverse nature of the companys customer base, the solution needed to prioritize the demand-fulfillment process based on individual profiles. The company also required precise vehicle loading plans for the source-destination lane in tune with its dynamic network. Tool Selection In an effort to streamline its distribution network, HUL initiated a comprehensive project to seamlessly integrate its supply chain and promote collaboration. The key objectives of the initiative were: Implementation of a Supply Chain Planning and Optimization Tool. Development and implementation of a Web-enabled solution to extend visibility wholesalers across the companys network of

Adexas iCollaboration Suite 5.0 (Supply Chain Planner and Strategic Planner) was selected as the tool for production, distribution and materials functions. The Supply Chain Planners (SCP) powerful constraint-based planning capability delivers detailed-level plans. On the other hand, Strategic Planner allows HLL to decide on the product mix and manufacturing locations, and optimizes the sourcedestination network, on a long-term basis. Our Approach MindTree has a portfolio of process models, management tools, and operational best practices, which can be customized to address any SCM engagement. MindTree has a specific methodology for Adexa. Adexa-certified consultants from MindTree worked closely with HLLs IT application team and consultants from Adexa in designing a detailed system architecture, system building and model, and system-verification steps.

Solution MindTree evaluated the key supply-chain processes for each of HLLs lines of business. The solution is geared to fulfill supply and demand. It gives precise production plans for all the factories and a replenishment-based distribution plan for all the distribution centers. All entities in the supply chain were modeled on the Adexa iCollaboration suite. The key inputs for building the SCM model were distribution demand for all stock keeping units (SKUs); factory-wise capacities; and linkages between the distribution centers, finished goods warehouses, factories and suppliers. With inputs from HLLs team, MindTree contributed towards modeling the following requirements with respect to key resource and material constraints: - Shop-floor complexities (SKU-specific levels for bill of material, resource and capacity constraints) to arrive at a

feasible production plan using discrete and continuous modes of consumption. Site-specific holidays as capacity patterns. - Collaborative production planning optimizing individual plan utilization, time fences, customized threshold logic, and post-processing time for quality clearance at plants. - Equitable demand fulfillment (both planned and extraordinary) for finished goods based on customer prioritization across the supply chain. - Periods of cover and safety stock at distribution centers for SKU rationalization, handling consumer promotions, etc. - Handling in-transits on source-destination lane. - Meeting the demands from individual wholesalers by direct dispatches from factories. - Precise vehicle load plans for shipments from the factories and warehouses. - Dynamic allocation of source factories to each distribution center. - Data integration between the SCP and ERP systems was addressed with the implementation of MFG/PRO. - Implemented specific requirements through plug-in business rules in Supply Chain Planner such as work-order sizing and method (pro-duction/transportation) selection. For implementing the requirements mentioned above, MindTree developed an exclusive set of the following algorithms: Demand prioritization and equalization logic, based On pre-determined starvation levels Balancing and scheduling logic Transportation logic Vehicle loadability logic.

Results This Adexa implementation has improved HLLs proactive planning capability and manufacturing and distribution efficiency, which have helped ensure a more responsive supply chain. The solution has also helped the company gain visibility across its supply chain, reduce distribution leadtime, and minimize the total supply-chain cost. Stock availability, measured in terms of Stock Service Index, has significantly increased, moving from 65% to 90%. The company has also realized a more equitable distribution of stocks with overall mal-distribution reducing from 19% to 6% of total volume transported. Manual intervention has come down from 40% to sub-zero levels. Direct dispatches from the factories to the wholesaler network have increased. Finally, in terms of volume, indirect dispatches from finished goods warehouses have come down from a range between 70-80% to between 30-40%.

Tools Used Sun Solaris (OS), Windows NT, Adexa iCollaboration 5.0 (Supply Chain Planner and Strategic Planner) and TCL/UCL.

DISTRIBUTION IS THE KEY: CHANNEL MANAGEMENT

Marketing Channels: An Introduction 'Place' or distribution is not just about availability of products, it's a package of several components. These components have to be decided after a thorough study because most decisions involve a long term commitment of resources. A substantial part of an organizations' finished goods inventory (and thereby working capital) is locked up in the distribution chain. Channels An organization has to decide which channels it will use to reach its product to the end customer. Choices vary from a fully owned & operated channel to a complete dependence on independent distributors - and several options midway

between these two. For example, companies like HLL uses a wholesaler to distributor to retailer model while a Eureka Forbes uses its own sales force for direct selling. Coverage It may not be possible for the organization to cover markets in all segments and all geographic areas. The investments required may not be justified against returns generated. A marketer has to decide which segments to serve in which geographic areas and then plan accordingly.

MERCHANDISING AND LOGISTICS FUNCTIONS

E-commerce capability The day-to-day operations of merchandising and logistics can be classified into the following functions. PLAN: Merchandising: Product management Coding Category Management Stocking Policies Assortment Pricing

Promotions BUY: Purchasing Automated purchase orders on put away stocks Automated purchase orders for flow through stocks Vendor management MOVE: Receiving Receive from suppliers Inspection Bar code printing Interface with EDP and Financials Converters and Bulk/Repacking management Receive indents from stores and generate pick lists Transfers to stores for put-away products Allocation and transfers to stores for flow through products Returns from Stores Stock counts and stock vouchers (including PI) Damaged Goods Management Returns to Suppliers MEASURE AND CONTROL: Reports and Analysis Targets Sales performance reports Purchase and Supplier performance reports Stock reports Customer sales analysis

Promotion performance and analysis

STOCKING POLICIES
AT STORES
Each store group/specific store is assigned a set of SKUs, which it stocks and sells. For each SKU there is a minimum shelf fit (MSF), which must be stocked at each store. The maximum quantity a store can stock is dynamically determined based on a formula, which looks at the type of SKU, the predicted sales per day based on actual sales over the last 56 days (a formula is applied to calculate the sales per day) and the servicing frequency. This figure (called the dynamic MBQ) and the stocks currently available determine the indent the store raises on the warehouse. The MBQ will never be less than the MSF, which is the minimum quantity a store needs to stock. For each SKU there is

a supply unit factor (SUF), which is lot size in which the warehouse services that SKU. The indents on warehouse are rounded off to multiples of SUF. Stores have reordering schedules based on category of product and its classification. For flow through items the reorder schedule will be vendor wise. Reordering happens on the scheduled date (scheduled indents) or when stocks fall to a minimum level (20% of MBQ at present) (stock out indents).

AT WAREHOUSE
A similar reordering system implemented at the warehouse. for put away items is

The factors taken into consideration are: a) Predicted sales per day (based on 56 day sales for all stores serviced by it): 'S' b) Supplier lead-time. 'Z'

c) Internal processing time (from receipt of indent to raising of order and receiving of material to processing, bar coding and making it ready for delivery to stores) 'I' d) Replenishment cycle (time between two supplies of the same product by the supplier as per schedule): 'N' e) The buffer requirement (to take into account supplier in efficiencies/sales forecast inaccuracies): 'B' Days of delivery are defined for each product and the replenishment cycle has to be dynamically calculated. Calculation of predicted sales per day: Split the last 56 days into 8 sets of 7 days and pick up maximum daily sales in each of the 8 sets. Average of these 8 maximum shall be the daily sales for purposes of this exercise. If the item was on

promotion at any time or the sale was zero on any day during the 56-day period its sales for that period will not be considered and sales made on previous days shall be considered. Orders will be triggered by the system if: 1) Warehouse stock + order on hand <= S * (B + Z + I) or 2) Current date = Next order date which is calculated and stored every time a scheduled order is raised. Reorder quantity shall be = S * (N +B + Z + I) - current stock - order in hand. Orders will expire just before the next scheduled order is raised.

Order taking process The order taking process starts from the customer point from where a Purchase Order (P.O.) is sent directly to the distributor of HULvia mail. Further, the P.O. is downloaded and manually transferred into an Order Booking Report by the accounts head, further it's classified as per the availability of the products and then an Invoice and Load Slip is prepared. The Load slip is sent to the stores head that dispatches the products as per

specification and order.

Delivery process The Delivery process starts after the goods are been loaded in the trucks and are ready to move towards clients stores. One copy of received P.O. is taken along with original and duplicate Invoices for reference. At the clients store the goods need to be arranged as per the P.O. which is inspected by an official with the help of the G.I.N (goods inspection note). Further after the inspection the official signs on the duplicate invoice and provides a G.R.N (goods receipt note) which is filed for reference and proof. Generally takes place 3 days a week.

Conclusion
Hindustan Unilever, which once pioneered distribution in India, is today reinventing distribution - creating new channels, and redefining the way current channels are

serviced. In the process it is converging product availability, with brand communication and brand experience.