hll shakti fbi report

8/14/2019 Hll Shakti FBI Report

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BATCH: SS/2004-06/PGP

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ACKNOWLEDGEMENT

We know that the helping hands of many people back up the success. The

guidance of our teachers proves to be icing on the cake. The same is the case

with our project. Even our project wouldnt have been possible without the

eminent guidance of our teachers, suggestion of our colleagues and a sincere

thanks to our respondents for their valuable views.

We are thankful to Prof. MANINDER SINGH for giving us continuous help and

guidance for the project. We are indebted to our colleagues at IIPM for their

contributions in improvements and reviewing the project report.

We express our heartful gratitude to all who assisted and supported to

accomplish our goal.

Above all we are thankful to almighty that blossomed us with his blessings for thecompletion of the project.

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TABLE OF CONTENTS

1. INTRODUCTION........4

2. HISTORICAL PROSPECTIVE.6

3. HOW IT WORKS....9

4. FINANCIALS.11

5. OFFERINGS OF THE COMPANY....12

6. UNIQUE BUYING PROPOSITION....15

7. COMPANYS PLACE IN THE MARKET...16

8. FUTURE.19

9. RECOMMENDATION..22

10. APPENDIX..25

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INTRODUCTION

Everybody wants brands. And there are a lot more poor peoplein the world than rich people. To be a global business and tohave a global market share you have to participate in allsegments.

- Keki Dadiseth, erstwhile Chairman, HLL .-

The basic objective of Project Shakti is to economically empower underprivilegedrural women by creating income-generating capabilities and providing asustainable micro-enterprise opportunity in addition to improving rural livingstandards through health and hygiene awareness.

-Sharat Dhall, Marketing Manager -Rural, HLL

In the early 2000s, around 700 million people, i.e. 70% of the Indian populationlived in 6,27,000 villages, in rural areas. Of this, 90% were concentrated invillages with population less than 2000. According to a study conducted in 2001by the National Council for Applied Economic Research (NCAER), there were asmany "middle income and above" households in rural areas as there were inurban areas. There were almost twice as many "lower income households" inrural areas as in urban areas. There were 2.3 million "highest income"

households in urban areas as against 1.6 million in rural areas.

NCAER projections indicated that the number of "middle income and above"households was expected to grow to 111 million in rural India by 2007, comparedto 59 million in urban India. Gone were the days when a rural consumer had togo to a nearby town or city to buy a branded product. The growing power of therural consumer was forcing big companies to flock to rural markets. At the sametime, they also threw up major challenges for marketers. Servicing rural marketsinvolved ensuring availability of products through a sound distribution network,overcoming prevalent attitudes and habits of rural customers and creating brandawareness. Price-sensitivity was another key issue. Rural income levels were

largely dependent on the vagaries of monsoon, and demand was not easy topredict.

Thanks to TV, consumer awareness in rural areas had increased. Ruralexpenditures on Fast Moving Consumer Goods (FMCG) were growing at animpressive rate of 20 -25%. Several companies were taking rural marketingseriously, one of them being Hindustan Lever Ltd (HLL), Unilever's Indiansubsidiary. In 2004, HLL was India's largest FMCG company, with 30 power

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brands (Exhibit: I), turnover of over Rs. 10,000 crores and 40,000 employees.HLL derived around 50% of its sales from rural areas.

HLL's rural marketing initiatives began way back in 1988, when the company hadlaunched 'Wheel' for the rural and lower income urban consumer. These efforts

had intensified since the late 1990s when HLL like many other companies facedflat growth in the urban markets. In early 2004, as it reviewed its pastperformance, HLL realized that bulk of its future growth was likely to come fromrural areas. The challenge for HLL was to exploit this opportunity in a profitablemanner.

The objectives of Project Shakti, explains Dalip Sehgal, Executive Director,New Ventures & Marketing Services, HLL, is creating opportunities to increaserural family incomes puts more money in their hands to purchase the range ofdaily consumption products - from soaps to toothpastes - that HLL makes. It alsoenables HLL access hitherto unexplored rural hinterlands. Says Sehgal, "We

looked at several models of rural distribution, even at the Grameen Bank modelin Bangladesh, before we decided on the pilot in Nalgonda to figure out thismodel. Now the model has been refined based on our learning here and weexpect to roll out quickly in other states."

For HLL greater penetration in rural areas is also an imperative - presently over50 per cent of its incomes for several of its product categories like soaps anddetergents come from rural India. The challenge for HLL now is to take itsproducts to towns with a smaller population - under 2,000 people. As Sehgalpoints out, HLL's conventional hub-and-spoke distribution model which it uses togreat effect in both urban and semi-urban markets, wouldn't be cost-effective in

penetrating the smaller villages. Now, with this new distribution model, thesmaller markets are now being referred to as `Shakti markets'.

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HISTORICAL PROSPECTIVE

HLL's INITIATIVE IN RURAL DEVELOPMENT:

Hindustan Lever Limited (HLL) and its constituent companies have been in Indiasince 1931.

Over these decades, while HLL has benefited from the developments in thecountry, it has contributed equally to these developments.

HLL has consciously woven India's imperatives with the company's strategiesand operations. The companys main contributions include developing and usingrelevant technologies, stimulating industrialization, boosting exports, addingvalue to agriculture and generating productive employment and incomeopportunities.

HLL has been proactively engaged in rural development since 1976 with theinitiation of the Integrated Rural Development Programme in the Etah district ofUttar Pradesh, in tandem with the companys dairy operations. This Programmenow covers 500 villages in the district. Subsequently, the factories that HLLcontinued establishing in less-developed regions of the country have beenengaged in similar programmes in adjacent villages.

These factory-centered activities mainly focus on training farmers, animalhusbandry, generating alternative income, health & hygiene and infrastructuredevelopment.

The company has acquired a wealth of experience and learning from theseactivities.

KEY LEARNINGS ON RURAL DEVELOPMENT:

The principal issue in rural development is to create income-generatingopportunities for the rural population. Such initiatives are successful andsustainable when linked with the companys core business and is mutuallybeneficial to both the population for whom the programme is intended and for thecompany.

Based on these insights, HLL launched Project Shakti in the year 2001, inkeeping with the purpose of integrating business interests with national interests.

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WHY SHAKTI?

Empowering Women in Rural India

The objective of Project Shakti is to create income-generating capabilities for

underprivileged rural women, by providing a sustainable micro enterpriseopportunity, and to improve rural living standards through health and hygieneawareness.

Following the pioneering work carried out by Grameen Bank of Bangladesh,several institutions, NGOs and government bodies have been working closely, fornearly five years, to establish Self Help Groups (SHGs) of rural women invillages across India. Their experiments clearly indicate that micro-credit, whencarefully targeted and well administered can alleviate poverty significantly.

A crucial lesson learnt was that rural upliftment depended not on successful

infusion of credit, but on its guided usage for better investment opportunities

This is where HLL's Project Shakti is playing a role in creating such profitablemicro enterprise opportunities for rural women.

Catalyzing Prosperity In Indian Villages

Under the project, HLL offers a range of mass-market products to the SHGs,which are relevant to rural customers. HLL is investing significantly in resourceswho work with the women on the field and provide them with on-the-job trainingand support. This is a key factor in ensuring the stabilization of their fledgling

businesses.

HLL imparts the necessary training to these groups on the basics of enterprisemanagement, which the women need to manage their enterprises. For the SHGwomen, this translates into a much-needed, sustainable income contributingtowards better living and prosperity. Armed with micro-credit, women from SHGsbecome direct-to-home distributors in rural markets.

Risk-Free Micro Enterprise That Yields High Returns

A typical Shakti entrepreneur conducts a steady business which gives her an

income in excess of Rs.1,000 per month on a sustainable basis. As most of thesewomen live below the poverty line, and hail from extremely small villages (withpopulations of less than 2000), this earning is very significant, and almost twicethe amount of their previous household income.

For most of these families, Project Shakti is enabling families to live with dignity,with real freedom from want.

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In addition to money, there is a marked change in the woman's status within thehousehold, with a much greater say in decision-making. This results in betterhealth and hygiene, education of the children, especially the girl child, and anoverall betterment in living standards.

The most powerful aspect about this model is that it creates a win-winpartnership between HLL and the consumers, some of whom will depend on theorganization for their livelihood, and builds a self-sustaining cycle of growth forall.

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HOW IT WORKS

Typically, a woman from a SHG selected as a Shakti entrepreneur receivesstocks at her doorstep from the HLL rural distributor and sells direct to

consumers as well as to retailers in the village.

Each Shakti entrepreneur services 6-10 villages in the population strata of 1,000-2,000 people.

Typically, as Sehgal points out, a Shakti entrepreneur sets off with 4-5 chiefbrands from the HLL portfolio - Lifebuoy, Wheel, Pepsodent, Annapurna salt andClinic Plus. "These are the core brands, they we layer it with whatever else is indemand like talcum powder or Vaseline during winters," elaborates Sehgal.These brands apart, other brands which find favour with a rural audience are:Lux, Ponds, Nihar and 3 Roses tea. Typically, unit packs are small. All the brands

are national and HLL is cool to the idea of creating a rural-specific brand as it willonly dissipate the advertising media effort for the brands. To get started theShakti woman borrows from her SHG and the company itself chooses only oneperson. With training and hand-holding by the company for the first three months,she begins her door-to-door journey selling her wares.

The impact is slow and HLL too is not expecting any quick returns on this project.In Andhra, so far, since the experiment began, HLL has seen 15 per centincremental sales from rural Andhra, which contributes 50 per cent to overallsales from Andhra of HLL products. But analysts see this rural foray assomething the company has got to do. As Nikhil Vora, Sr. Vice President of

research group ASK Raymond James explains, if there is one company that cantake on the onus of developing the rural markets, it's HLL. Says he: "HLLcontributes 20 per cent of the total FMCG business in the country. So, clearly, theonus is on HLL to grow the market. Returns may not happen in the next fiveyears, but a lot of consumer understanding and insights comes from an exerciselike Project Shakti, which in turn can lead to product innovation."

An analyst with a leading brokerage points out that a lot of HLL's rural initiativesin the recent past have not paid off because of poor rural incomes. But, amonsoon revival and greater rural incomes can mean payback time for projectslike Shakti. "Large companies like HLL have to push greater into rural areas.

Brand loyalty is declining among urban consumers; they're looking mostly forconsumer promos; regional brands too are snapping at their heels. So, to attaingrowth, going rural has become an imperative," she says. Concurs K.N. SivaSubramanian, Sr. Vice President, Franklin Templeton India Ltd: "The (HLL)management had recognised the impending saturation of the urban marketssome time back and launched aggressive plans to capture the rural markets.However, a slowdown in the agricultural sector resulted in rural incomesremaining flat and affecting sales. We believe that by targeting lower price points

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and further expanding the distribution network, companies can tap the potentialof rural markets. Initiatives like Project Shakti will help them in establishing andconsolidating their base in rural markets." Regional brands, or even larger FMCGcompanies, do not have the kind of distribution reach that HLL has establishedand in the long run, that could prove a winner for HLL, according to analysts.

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FINANCIALS (TURNOVER)

Consumption of Hindustan Levers (HLL) products in rural households hasincreased by 15-20% after the multinational kicked off Project Shakti in 2001.

This is part of the findings from a dipstick conducted by market research firmIMRB to ascertain the impact of Project Shakti on HLLs financials.

The dipstick was a randomly selected sample in areas where Project Shaktioperates. As per the findings, there has been an increase in market share ofHLLs toothpaste (Pepsodent), personal wash (Lifebuoy, Rexona and Breeze),washing powder (Wheel) and tea (Brooke Bond) categories. Further,penetration of iodized salt (Annapurna) and skin cream (Fair & Lovely andPonds) is said to have gone up. There has also been an increase in the regularusage of HLL brands, the study reveals.

Shakti targets small villages with population of 2000 people or less. It aims atcreating livelihoods for rural women, organized in self-help groups (SHGs), toimprove their standards of living. Shakti provides critically needed additionalincome to these women and their families, by equipping and training them tobecome an extended arm of the companys operation. The income is to the tuneof Rs 700-Rs 800 per month per person. This income is higher in AndhraPradesh.

Sales through Project Shakti contribute 10-15% of HLLs rural sales. It hasalso helped us in replacing and wiping out counterfeits, said HLL executivedirector, new ventures and marketing services, Dalip Sehgal.

Rural sales contribute around 40% to HLLs overall sales which were at Rs9,927 crore in calendar year 2004. Through Project Shakti, the company hasalmost doubled its direct coverage in rural India with the project extending upto70,000 villages, inching closer to the one lakh mark. The number of ShaktidealersShakti Ammas, as they are referred tohas gone up to 17,000, withthe projected number being 25,000 by December this year.

The potential is another one lakh direct coverage in 2-3 years. Beyond this,however, it may not be viable, said Sehgal. With Shakti becoming a biggerbrand itself, it enables the company to get better recognition of its entire product

portfolio. We realized that physical presence is important. Brand saliency for ourleading brands has gone up by nearly 40%, Sehgal added.

The next big task at hand for HLL is to improve literacy among 150-odd ShaktiAmmas under a pilot which is being carried out in Andhra Pradesh. It is a sixweek programme and HLL is hopeful that this would bring about betterunderstanding of the business among the women. For these women, an increase

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in earnings has also led to a status in the society, an aspirational tool whichmarketers latch on to for enhancing sales of consumer products.

OFFERINGS OF THE COMPANY

The fast-moving consumer goods (FMCG) segment in India is going rural with avengeance.

The lead is being taken by the countrys largest FMCGcompany, Hindustan Lever (HLL). The Rs 11,000-crorebehemoth has indicated that it is enhancing its ruralpenetration, despite the higher costs this would entail.

Says HLL chairman M S Banga: This exercise may notpay in the immediate future, but will definitely give long-term dividends. Incidentally, over 50 per cent of the sales of HLLs fabric wash,

personal wash and beverages are in rural areas. And we see a future in goingrural in a major way.

The improved agricultural growth is expected to boost ruraldemand, though not at too sizzling a rate. Moreover, the pricedrop in personal products, after the recent excise dutyreductions, is also expected to drive consumption. Betteragricultural yields will give farmers more spending power,making the rural markets bullish, says an analyst.

As a result, HLL has planned a rural marketing programme that

is expected to result in a marked growth in the consumption ofthe companys products in the rural market. HLL will adopt a

three-pronged marketing strategy - new price points, sizes and awarenesscampaigns - for its detergents and soaps segment to augment rural growth.

Deep penetration

The goal is to reach 2,35,000 villages, up from the current 85,000; 75 per cent ofthe population, up from 43 per cent today; and a message reach of 65 per cent,up from the current television reach of 33 per cent. The company is expresslyaiming at reaching villages with populations less than 2,000. The rural

penetration exercise is going to be complemented by a 15-per cent hike inadvertisement expenditure.

Say company sources: We have found ways and means to trigger growth inrural areas. For instance, cutting across categories, we have conceived productsthat are relevant to rural needs. A unique example is HLLs Lifebuoy soap. Inrural India, health is of paramount importance, because indisposition is verydirectly related to loss of income. Lifebuoy, whose core equity has been health

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through vigorous cleansing, has, for decades now, been synonymous with soapin rural India. At the same time, we are making the products affordable.

In fact, HLL is now creating a market even for apparently premiumproducts by offering them in small-pack sizes, like sachets, whose

unit prices are within the reach of rural consumers. Initiated in the1980s, sachets today constitute 70 per cent of HLLs shampoosales.

The sources add: We have managed to create a marketfor products like premium stain-removing detergents (SurfExcel), beauty soaps (Lux), talcum powder (Ponds),toothpaste (Pepsodent) and skin cream (Fair & Lovely) byoffering them in low unit price packs.

HLL is also going to non-conventional media to spread the word about its ruralpresence. The sources add that media like wall paintings, cinema vans, weeklymarkets (haats), fairs and festivals will be increasingly used. Communicationthrough fairs and festivals is going to be backed by direct consumer contact,says Banga.

Rural involvement

HLL has launched a direct contact programme called Lifebuoy SwasthyaChetana. This project aims at covering about 5-crore people in 15,000 villages in10 states. The project intends to generate awareness about good health andhygienic practices, and specifically, how the simple habit of washing hands withsoap is essential to maintaining good health. The initiative will involve interactionwith students and senior citizens, who are expected to act as change agents,say HLL marketing personnel.

But generating awareness will pay dividends only when steps are taken toensure constant availability of products. Accordingly, HLL is focusing on its retailnetwork as well. We have progressively strengthened our distribution reach in

rural India, which today has about 33 lakh outlets, HLL marketing officials say.

In 1998, they add, we launched Project Streamline to further extend ourdistribution reach. With this project, we now directly cover about 46 per cent ofthe rural population. In the coming years, we will further strengthen ourdistribution through mutually beneficial alliances with rural self-help groups(SHGs).

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Besides, HLL has also begun a pilot project called Project Shakti, whereby SHGsare being offered the option of distributing relevant products of the company as asustainable income-generating activity.

HLLs decision to focus on niche marketing also seems to be showing results.

The company had recently decided to focus on 30 power brands out of itsportfolio of more than 110 brands. Explaining the move, Banga says: Today,focus is crucial and niche marketing is the order of the day. You cannot fightevery battle - you have to identify the strengths and persist with them.

And that is precisely what HLL seems to be doing.

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UNIQUE BUYING PROPOSITION

A pack for every budget

But the potential is even larger, both in terms of consumption and penetration.The fact that 70% of the population accounts for only 50% of even relatively well-penetrated categories, like soaps & detergents, indicates the enormous scope ofconsumption-led growth in these categories. Therefore such categories willderive growth out of increased usage. In categories, which are relatively lesspenetrated, like personal products, rural India offers an even bigger growthopportunity through greater penetration and then consumption. For example onlythree out of 10 consumers in rural markets use shampoo or skin care products.Therefore growth in such categories will emerge, as more consumers purchasethese products, and then continue to use them regularly.

Hindustan Lever has taken many initiatives over the decades to create marketsin the rural hinterlands. By marketing relevant products, at affordable prices.

A unique example is Hindustan Lever's Lifebuoy soap. In rural India, health isof paramount importance, because indisposition is very directly related to loss ofincome. Lifebuoy, whose core equity is health and hygiene, has for decades nowbeen synonymous with soap in rural India.

At the same time, if products have to come up the order in the rural purchasehierarchy, they have to be affordable. If rural India today accounts for about halfof detergents sales, it is because HLL has developed low-cost value-for-money

branded products, like Wheel. The company has also taken initiatives to createmarkets even for apparently premium products, by offering them in pack sizes,like sachets, whose unit prices are within the reach of rural consumers. Forexample, initiated in the 1980s, sachets (Rs.2, Re.1, or 50 paise) today constituteabout 55% of Hindustan Lever's shampoo sales. With media reach graduallyincreasing, rural consumers today, where the media has its footprints, share thesame aspirations with their urban counterparts. HLL has responded to the trendwith low unit price packs of even other products - Lux at Rs.5, Lifebuoy at Rs.2,Surf Excel sachet at Rs.1.50, Pond's Talc at Rs.5, Pepsodent toothpaste at Rs. 5,Fair & Lovely Skin Cream at Rs.5, Pond's Cold Cream at Rs.5, Brooke BondTaaza tea at Rs.5.

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COMPANY'S PLACE IN THE MARKET

The Competitors

The Indian FMCG markets have witnessed some of the classic strugglesinvolving HLL. So far Levers have been able to stand their ground but times arechanging. HLLs response to the latest challenges is being eagerly studied by thecorporate India. There are following some of the examples:

HAVE you heard of the `sachet' salesman, the man on a cycle who pedals to thelocal grocer to sell sachets of pickles and spices? If not, you may soon get tomeet such a person. Because Chennai-based CavinKare Pvt Ltd is using thisnovel approach to distribute its food products. The company's Foods Division,barely 15 months old, realised the importance of putting in place a

comprehensive distribution plan even before its first product hit the shelves. Itbegan by creating two separate brands - Chinni's for smaller pack sizes andPriya for larger packs - so that the two segments can be treated separately. Andthe company has been using a separate sales force for each brand ever since.

Says Satish Mane, Chief Executive Officer (Foods), at CavinKare: "We havelaunched pickles and spices in single-serve sachets that cost as little as 50paise. Besides offering the consumer convenience, they encourage out-of-homeconsumption and allow consumers to taste a variety of flavours at an affordableprice. And instead of using the conventional distribution route, we have created a`sachet' sales force that sells only sachet packs to small retailers including

cigarette and paan shops." He says creation of a separate `sachet' sales forceensures that the smaller pack sizes get retailer attention and shelf space andasserts that this is not an experiment but a dedicated mode of sales and theresults have been encouraging so far.

Not only CavinKare but several other FMCG companies have also started to useunconventional routes to distribute their products, leaving no stone unturned intheir quest for consumers. After waging a bitter price war through most of 2004,the FMCG majors are now eyeing distribution as the next function which needsan overhaul to keep pace with fast-changing consumer preferences. Companiesare not only finding it tough to create an extensive distribution network along

conventional lines, a la Hindustan Lever Ltd or Coca-Cola India; they are alsolooking to place their products where there is more visibility.

And, being aware that in smaller towns and villages the access to consumersmay be limited, several FMCG companies have taken to unconventional modesof distribution. In a similar quest to capture consumers in remote villages,Kolkata-based Emami Ltd has tied up with the Posts and Telegraph Departmentto place its products across 5,000 post offices. The pilot project has been initiated

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in Maharashtra. The President (Sales) of Emami's distribution arm, J.B.Marketing & Finance Ltd, Hari Gupta, says that eventually the company wants toreach all the 1.05 lakh post offices across India. Besides, Emami will also use `e-choupal' outlets - where a computer literate villager conducts trade on the Net -across Madhya Pradesh and Uttar Pradesh to gain better access.

"We chanced upon the idea of using post offices after we realised that the localpost office is the communication hub for a small village or even a small town.People invariably visit the post office to get mail, make outstation calls and forother similar purposes and placing Emami products there would be sure to givethem more visibility," he adds.

Also, ITC Ltd has been successful in eliminating middlemen by creating e-choupals where farmers use credit to buy FMCG goods. Yet another examplehas been set by e-governance projects such as the one being conducted by theAndhra Pradesh Government. Begun as a project to increase the common man's

interface with the Government, the e-seva project has roped in Wipro ConsumerCare and Lighting (WCCL) to place it products for sale at e-seva points. SaysKumar Chander, Vice-President (Marketing), at WCCL, "This helps us accessremote markets and a totally different set of consumers."

CavinKare's personal products division too is enthused by Emami's experimentinvolving post offices and e-choupals. "The idea of placing products at postoffices is very interesting. We may evaluate this option, especially for productssuch as shikakaipowder, shampoo and hair dye," says K.S. Ramesh, ExecutiveDirector and CEO, CavinKare.

However, Kumar Chander of Wipro Consumer sounds a note of caution. He saysthat alternative distribution channels do not offer better margins and are, at best,tools to gain accessibility in certain areas. Also, distribution costs across suchchannels are identical to those in conventional routes, so there is little saving. Hesays that while using such channels to expand product reach and gainaccessibility has become important for most FMCG companies, theunconventional route is not expected to become a major revenue generator inthe coming years.

And, some FMCG majors such as Dabur India Ltdand Nirma do not believe indeviating from the tried and tested conventional methods. So, while alternativedistribution options are gaining acceptability, it may be some time before thesebecome a rage.

Competition will finally catch up with whatever distribution mode a marketer canuse but the issue is that if the brand has pull it makes life easier in two ways better sales and distribution cost and the products can also get into outlets wherespace or capital constrains multiple brands from being stocked thereby giving an

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advantage. In that context, it looks like distribution is the next function FMCGfirms will focus on for the coming year!

HLL's challenges are of another nature. It still has to improve the incomes of theShakti entrepreneurs in order to retain their interest. To do that, it may need to

widen its offerings - on its own or in partnership with other companies. It mayalso consider local manufacturing by these entrepreneurs, where they useingredients supplied by Lever to make the final product. Above all, Lever wouldprobably do well to allow its distributors to run the channel.

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FUTURE

HLL envisions the creation of 25,000 Shakti Entrepreneurs covering 100,000villages, and touching the lives of100 million rural people by the year 2005.

In order to achieve this goal, Project Shakti plans to extend to the states ofWestBengal, Punjab and Rajasthan in addition to expanding operations in the eightexisting states.

Having perfected the model in Nalgonda, in 2003 HLL plans to extend Shakti to a100 districts in Madhya Pradesh, Gujarat and UP. There are other plans brewing:

One is to allow other companies which do not compete with HLL to get

onto the Shakti network to sell their products. Talks are on with batterycompanies like Nippo, TVS Motor for mopeds, insurance companies forLIC policies. "We wanted to first stabilize the project before we can look atother companies. It requires somebody with scale and size to build aplatform and then invite other companies onto this platform," elaboratesSehgal. The most powerful aspect about this model, emphasizes Sehgal,is that it creates a win-win partnership between HLL and its consumers,some of whom will also draw on the organisation for their livelihood, and itbuilds a self-sustaining virtuous cycle of growth for all.

The next stage of Project Shakti is even more ambitious. HLL is now in theprocess of piloting `I-Shakti', an IT-based rural information service that will

provide solutions to key rural needs in the areas of agriculture, education,vocational training, health and hygiene. The project will be piloted inNalgonda district again. Based on a palm pilot, HLL is looking at sourcingappropriate low-cost hardware from Hewlett-Packard while UnileverResearch out of London is developing the consumer interactivity software.The premise of the i-Shakti model is to provide need based demanddriven information and services across a large variety of sectors thatimpact the daily livelihood opportunities and living standards of the village

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community.

The i-Shakti kiosk will be operated by the Shakti Entrepreneur, whichfurther strengthens the relationship we have already cultivated and buildsnew capacity. HLL expects that the information provided would improve

the productivity of the rural community and unlock economic and socialprogress.

To catalyze overall rural development, HLL hopes to collaborate withmainstream institutions (both corporate and not-for-profit organizations)that are experts in agriculture, health, insurance, financial services andeducation. For Example: Through i-Shakti kiosks, ICICI Bank and HLL willwork together to provide a new delivery channel for rural India, whichoffers a multitude of products and services to the rural customer. In thefirst phase, Life and General Insurance will be offered through thischannel. Other financial services including Investment products (Equity,

Mutual Funds, Bonds) ICICI Bank Pure Gold (gold coins), Personal Credit,Rural Savings Accounts and Remittances will be introduced subsequently.

THERE are about 4.36 lakh women self-help groups in Andhra Pradesh coveringnearly 58.29 lakh poor women. AP alone has about half of the SHGs organised inthe country. The SHGs are also popularly called DWCRA groups and this name

became popular after the DWCRA programme (Development of Women andChildren in rural areas) through which women's groups were assisted initially.The SHGs not only save but also take small loans out of the corpus availablewith the group. The group corpus consists of savings , government assistance aswell as bank loans. Members use the loan out of the group corpus for theirpersonal needs initially. However, in the long run such loans are utilised forincome generation activities. Since the inception of the SHGs, an amount of Rs

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1,362.98 crore has been mobilised as corpus by these groups and it is estimatedto reach Rs 1,500 crore by the middle of this year.

The women's savings movement, explains C.S. Ramalakshmi, Commissioner,Women Empowerment, Govt of AP, started in 1993 as an offshoot of the total

literacy campaigns conducted by the government. Rural women organisedthemselves into `thrift and credit' groups with one rupee saving a day and thismass movement, in which 58 lakh members saved more than Rs 800 crore isrotated internally and lent amongst members twice in a year as per the interestrates fixed by the groups. Such amounts are used for their daily consumptionneeds as well as for making goods to sell. It is into this strong network that HLLtapped to launch Project Shakti. While the savings was there among the SHGs,there was no channel of investment. Now, HLL has provided a window ofopportunity to invest and earn.

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RECOMMENDATIONS

Call it the so called Project Shakti or mere HLLs rural India distribution network,you will hardly find any difference. If there is any difference then the difference

lies in the peoples perception. It will not be wrong to say that Self Help Groups(SHG) is the backbone of the project Shakti because HLL makes Shaktientrepreneurs out of the SHG. Everyone wondered why HLL has so muchattachment with Andhra Pradesh later it was revealed that Andhra Pradesh hasthe largest number of SHG,i.e, slightly less than half a million, which is sixtypercent of total number of SHG in India.

HLL Shakti works on the model Bottom of Pyramid (BOP) propounded by C.K.Prahalad, in which company first sees the potential of the BOP market and thenaccording to need and want decides to roll out project Shakti foot prints. Till nowHLL made profits out of just few years (four) old project with help of few

thousands (approx 5000) Shakti entrepreneurs covering eight states (130districts and 35000 villages). Apropos to the said facts and figures we would liketo recommend.

INCREASE THE REACH: Indias biggest advantage is its huge populationwhich is in every aspect is a good signal for any FMCG major. 70%percent of India resides in rural areas. Huge potential is still untouched;HLL should pull up its socks and work faster towards this by making asmany Shakti entrepreneurs either through SHG or by any other means.SHG are there in every part of rural India so the need for the day is toreach them as soon as possible.

Every Shakti entrepreneur covers 1000 to 1400 homes within the radius of12 kms. Usually to return to the same home it will take a Shaktientrepreneur 100-125 days due to the poor social infrastructure and modeof transport. Apropos to the given facts we would like to recommend

INCREASE THE NUMBERS: Rural consumers generally dont buy in bulkand expect Shakti women to revisit their house on regular basis. But dueto the constraints, entrepreneurs find it difficult to visit frequently. An ideahere is to increase the number of Shakti entrepreneurs within the givenreach, i.e, 1000-1400 homes. Advantages to this are firstly visit the target

consumers frequently and secondly spend more time in order to convertnon-consumers into consumers by educating the customer about healthand hygiene.

Generally a rural woman takes loan from the SHG for initial payment on aspecific terms and conditions. SHG also have other projects under them undervarious schemes of government and self-started schemes, which also requirefunds. Micro credit is firstly not easily available and secondly the interest rate

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varies between 10-12%. Apropos to the said facts and figures we would like torecommend:

AVAILABILITY OF CREDIT: With a marketing network in place in comingyears, Mission Shakti will be the biggest movement in the state to

eradicate poverty and for the empowerment of women. SHGs are likely tomake village moneylenders jobless, and would be able to do away withthe middle man in trade, if bank credit is adequate and the marketingnetwork functions efficiently. Even a HLL local distributor can extend onetime credit to the entrepreneur, which is common in only specified areas.

Money drives HLL to rural India and same motivator drives women of SHGto be a part of HLL Shakti. A Shakti entrepreneur earns Rs700-Rs1000 amonth from the sale of goods worth Rs 10,000-15,000. The 15-month pilotproject in Andhra Pradesh turned out to be a good learning ground. Forinstance, the company initially decided to save distributor margins by

cutting one layer of distribution - the local distributor. These savingshelped in giving higher margins to the Shakti entrepreneurs and retailers.Stocks were directly sent to the Shakti distributor from the local C-and-F(carry and forward) depots. However, Shakti's still trying to effectively bringdown distribution costs. Targeting the Bottom Of Pyramid is at least 5-10per cent costlier than selling in urban markets. HLL need to keep drivingcosts down, especially while scaling up. Manpower costs are one areawhere a lot could be done - it forms 80 per cent of total costs in selling tothe BOP. The task is manpower intensive as employees are required toidentify and develop new BOP markets, train the entrepreneurs and revisitexisting markets to ensure that it has adequate stocks. Hence, HLL is

experimenting with three-four pilot models. It has rolled out mobile trainerswho move from village to village and perform multi-functions fromselecting entrepreneurs, training them and hand holding. It is alsoexperimenting with exclusive trainers. Apropos to the said facts andfigures we would like to recommend

INCREASE THE MARGINS: In order to impact both livelihoodopportunities and living standards of rural communities i-Shakti - an IT-based rural information service has been developed to provideinformation and services to meet rural needs in agriculture,education, vocational training, health and hygiene.

The premise of the i-Shakti model is to provide need based demanddriven information and services across a large variety of sectors thatimpact the daily livelihood opportunities and living standards of the villagecommunity. The i-Shakti kiosk will be operated by the Shakti Entrepreneur,which further strengthens the relationship we have already cultivated andbuilds new capacity. HLL expects that the information provided wouldimprove the productivity of the rural community and unlock economic and

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social progress. To catalyze overall rural development, HLL hopes tocollaborate with mainstream institutions (both corporate and not-for-profitorganizations) that are experts in agriculture, health, insurance, financialservices and education, with i-Shakti in place HLL could easily reduce theoverhead costs. Allowing Shakti entrepreneurs to sell products other than

the HLL portfolio but not the other FMCG brand gives another reason toearn extra.

The principal issue in rural development is to create income-generatingopportunities for the rural population. Such initiatives are successful andsustainable when linked with the companys core business and is mutuallybeneficial to both the population for whom the programme is intended andfor the company. Based on these insights, HLL launched Project Shaktiin the year 2001, in keeping with the purpose of integrating businessinterests with national interests. Apropos to the said facts and figureswe would like to recommend

WHY ONLY RURAL WOMEN: even the UPA government RuralEmployment Guarantee Scheme includes people from all walks of life thenwhy HLL just embrace women. Rural India has huge amount of seasonaland disguised unemployment (generally unemployed men). This segmentcan also be used as distributors because firstly they are more active ascompare to women and secondly they can also work in night when headof the family of the consumer household is available.

Recommendations could be countless but right timings are inevitable. HLLshould also work with more organizations (profit and non-profit) along with

state governments to bring all possible resources to the rural India in orderto create a win-win situation for all parties. A lot has to be done, doingthings efficiently is required but effectiveness is the call for the day.

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APPENDIX

For Rojamma, Project Shakti means being able to educate herdaughters A LIVE CASE

Rojamma is a single parent living in Kurumurthy, a small rural village 150kilometres south west of Hyderabad in the Indian state of Andhra Pradesh. Froma very poor background, she was married at seventeen to a man with whom shehad two daughters but who then left her to fend for herself. At first she earned afew rupees working in her mothers field but she found it difficult to live on.

A few years ago she joined a womens self-help group that was formed in thevillage to help women like Rojamma. It felt good to be part of a group but thatsnot the same as eating food, she remembers. But then a man from HindustanLever came to Kurumurthy and told the women about Project Shakti. From thatmoment my life changed.

Hindustan Lever is Unilevers business in India. Its brands include such well-known names as Lifebouy, Lux, Surf, Vim, Ponds and Lipton, as well as localbrands, such as Kissan,Annapurna, Lakme, Fair & Lovelyand Wheel.

The company generates around half its business from Indias towns and citiesand half from rural areas, where its products are sold in some 100,000 villageswith populations of 2,000 or more. By the end of the 1990s, however, thecompany realised that to increase its market share it had to expand the market.The challenge was how to reach the 500,000 villages with smaller populations inmore remote parts of the country, where there are millions of potential consumersbut no retail distribution network, no advertising coverage and poor roads andtransport.

Hindustan Levers solution, called Project Shakti (which means strength inSanskrit), was both bold and innovative. The company decided to tap into thegrowing number of womens self-help groups that had been springing up aroundthe country. These groups, about one million of which now exist across India, areusually formed to help women save money and borrow from each other to avoidthe excessive demands of unscrupulous moneylenders. Hindustan Lever madepresentations at rural self-help group meetings, initially in Andhra Pradesh, andinvited women, including Rojamma, to become direct-to-consumer salesdistributors.

The company provides selfhelp group women with training in selling, commercialknowledge and bookkeeping, teaching them to become fully-fledgedmicroentrepreneurs. The women who are trained can then choose to set up theirown business or to become Project Shakti distributors or Shakti Ammas(mothers) as they have become known. Each woman who becomes a distributor

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invests 10,000 15,000 rupees (US$220-330) in stock at the outset usuallyborrowing from self-help groups or micro-finance banks facilitated by HindustanLever. Each aims to have around 500 customers, mainly drawn from her villagesself-help groups and from nearby smaller villages.

Most generate sales of 10,000-12,000 rupees a month, netting a monthly profit of700-1,000 rupees (US$15-22). For those with husbands who work in the fields,this typically doubles the household income. For single mothers like Rojamma, itis a far cry from the handful of rupees she earned working in her mothers field.

Project Shakti has proved to be a great success for Hindustan Lever and forwomen in India. The project started in a few pilot villages in Andhra Pradesh in2000. In 2002 it expanded to two states and by the end of 2004 had grown toover 13,000 Shaktiwomen entrepreneurs covering 50,000 villages in 12 states,selling to 70 million consumers. This represents a 30% increase in ruralpopulation reached.

Hindustan Lever has had strong support from over 300 partners, includingNGOs, banks and both state and local government departments, who recognisethe potential for economic growth by encouraging women to becomeentrepreneurs. Andhra Pradesh typically had a 3% success rate in creatingentrepreneurs among womens self-help groups prior to Project Shakti. Thisinitiative has a 90% success rate so, not surprisingly, Andhra Pradeshs WomensEmpowerment Commissioner, Ms Ramalakshmi, requests monthly updates onProject Shaktis progress.

In 2003 Hindustan Lever started to pilot an information technology initiative called

i-Shakti. This is designed to meet rural villagers information needs and provideorganisations with communications access to those parts of the country notreached by TV, radio and newspapers. This involves creating village kioskscontaining internet-linked computers run by entrepreneurs.

i-Shakti was formally launched in partnership with the Government of AndhraPradesh in November 2004, and aims to have 3,500 i-Shaktikiosks on stream bythe end of 2005. Mostly housed in the homes of Shaktientrepreneurs, i-Shaktikiosks provide villagers with free information on a wide range of topics, includinghealth and hygiene, agriculture and horticulture, child and adult education,finance, employment, and entertainment.

Content is in the local language and has been specially developed by institutionsand NGOs with experts in these fields, including the Azim Premji Foundation forchildrens education, the Tata Consultancy Services Adult Literacy Programmeand ICRISAT (International Crops Research Institute for the Semi-Arid Tropics)for information on agriculture.

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i-Shakti also includes an interactive service in which villagers can emailquestions to a panel of experts and receive a response within 24 hours. SharatDhall, Hindustan Levers Business Head for the Shaktiinitiative, is excited abouti-Shaktis capabilities: Farmers can find a quick solution to pest problems withtheir crops, villagers can email their symptoms to a doctor and get a diagnosis in

hours rather than days, and computer programs with voiceovers will teach peoplewho are illiterate.

Hindustan Lever and its partners are funding the initiative in the initial stages, butin future it is planned to charge content providers and brand advertisers to makethe initiative self-financing and to generate incomes fori-Shaktientrepreneurs.

While Hindustan Lever is intent on building its rural sales and market share, it isequally committed to improving the lives and livelihoods of people in India. ShaktiVani (Voice) takes Project Shakti a stage further. Hindustan Lever is nowtraining rural women to give talks to villagers about basic health practices, such

as good hygiene, disease prevention and pre- and post-natal care.

Project Shaktis role in creating incomes forunderprivileged rural women and helping to empowerthem economically is more important than sales alone,says Sharat Dhall. He believes Project Shakti, i-Shaktiand Shakti Vaniwill have the potential to act as a catalystfor creating new markets and generating rural micro-economies. He recognises this is something thatHindustan Lever cannot achieve alone and is activelybuilding links with noncompetitive partners, such as ICICI Bank, which

specialises in micro-loans. At the same time, competitors and companies fromother sectors are watching Project Shakti very closely and are expected todevelop similar distribution models.

Project Shaktis goal is to recruit 100,000 Shaktientrepreneurs covering 400,000villages and 400 million consumers by 2008. I believe it can become the biggestrural operation in the history of Indian business and change the way companieslook at reaching consumers living in the smallest of villages, says Sharat Dhall.

For the thousands of women like Rojamma who have become Shaktientrepreneurs, this initiative has already changed their lives in ways that aremuch more profound than the income they earn selling soaps and shampoos. Ithas brought them self-esteem, a sense of empowerment and a place in society.

As Rojamma says: When my husband left me I had nothing except mydaughters. Today everyone knows me. I am someone now. It has also meantshe has been able to send her daughters to school, giving them the chance in lifeshe didnt have, although Rojammas aspirations for them remain modest: Ihope they have happy marriages and they too become Shakti Ammas.

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