hll thenewindia report final

7/29/2019 Hll Thenewindia Report Final

1/85

Hindustan Lever&he New India

Enabling armers andconnecting with customers

Clinton Barth, Dan Greene, Mark King

& Zachary Jean Paradis

Strategic Planning Workshop, Spring 2006Institute o Design, Illinois Institute o echnology


2/85

Introduction

Opportunites & Intent

Analysis

4. Indian Agriculture

Overview

Factors or Growth

National rends

Strategic Opportunites

9. Market Overview

Current market overview

Process and key players

Te Mandi system

Summary o initial ndings

16. Market Analysis

Agriculture

Overviewrends & Insights

Unmet Needs

Opportunities

Retail

Overview

rends & Insights

Umet Needs

Opportunities

27. Company Analysis

Company History

Mission Statement

Core Competencies

Strategic Planning Workshop | Spring 2006 | Barth, Greene, King, Paradis

Institute o Design | Illinois Institute o Technology

2

Strategic Plans

34. Overview

36. Enabling Agriculture

Overview

HLL Depot

Learning Network

Farmer Advocacy Board

47. Connect with Customers

Overview

HLL Retail

HLL Branded Food

53. Implementation Plans

OverviewNear term initiatives

Mid term initiatives

Far term initiatives

Conclusion

Appendices

63. A - Current HLL Offerings

64. B - Citizen Lever Initiatives

72. C - Concept Generation

73. D - Key Sources

Table o Contents


3/85

Introduction

Te rapidly changing state o Indiasagricultural and retail markets provides

Hindustan Lever with an opportunity orgrowth by enabling Indias large agriculturalsector and connecting with the growingnumber middle-class urban consumers.

Opportunities and Intent

India is currently in a period o economic growth and transormation that

is unprecedented in its history. Tis growth has created a socioeconomic

context with a growing divide between the swelling urban middle-classpopulation and the large population o poor rural armers. Tis new

middle class has a set o rising expectations and aspirations about who they

are and what products they wish to purchase while rural armers are living

barely at subsistence level.

Standing in the middle o these two increasingly disparate groups is

Hindustan Limited Lever, a company whose uture depends on both o

these groups achieving success. Rather than wait passively or the uture,

HLL can leverage its core competencies and experiences to proactively

satisy currently unmet needs in the market or both groups in addition

to helping uel Indias economic growth. Te New India outlines a suiteo broad and bold strategies or HLL to grow its business as well as the

important contexts in which they will be successul.



Introduction


4/85





India oday

Whats in this section:

Overview o current conditions in India

National trends eecting the agriculture sector

National trends eecting the urban population

Strategic Opportunities or Hindustan Lever


5/85

India Today

India is a country experiencing rapid growthand change. Te worlds largest democracy,

it is recognized as one o the most powerulmarkets emerging in Asia, boasting the ourthlargest economy worldwide in terms o GDP,and the tenth largest in terms o marketexchange rates. India is expected to grow 7- 8% in 2006 - dwarng the 3.2% estimatedgrowth o the U.S. - and a projected 5%

annually or the next 50 years.(Wilson, 10)

Overview

Indias sudden growth spurt has not only economic, but also strong social

and cultural implications. Its government struggles to keep up with the

needs o a rapidly expanding population as citizens continue to migrate

towards newly established mega-cities and a weak inrastructure and ood

supply chain shows its age. All three o these trends will eect the way

companies within India conduct business. Trough careul planning,

however, companies can create innovative ways o not only addressing these

problems, but also capitalizing on them as well. Tis section provides a

closer look at these critical trends, their causes and implications, and the

opportunities they present.

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

1975 1980 1985 1990 1995 2000

million constant US$ million $intl (PPP)

Gross Domestic Product, India, 1975 - 2000

MillionsofDollars

Figure 1.

The growth o Indias GDP is exploding

compared to developed nations like the

United States.

The World Bank Development Data Group,

2002 Report



Analysis | Indian Agriculture


6/85

Factors or Recent Growth

One o the primary drivers o Indias economic boom is its growing popu-

lation. As the second most populous nation in the world with over 1B

people, it is also the seventh largest country in terms o area. Indias total

population is expected to climb to 1.3 billion by 2030 and 1.7 by 2060.

(Upton 8)

Indias rapid growth can also be attributed in part to an increased interest

in oreign investment. Beginning in the early 1990s, the Indian govern-

ment began to drop many o the restrictions they had originally placed

on oreign investment in order to promote sustainable growth. (Upton 8)

Consequently, the nation became an attractive investment or both na-

tional and international organizations seeking to capitalize on its enormous

potential, leading to a rapid growth in the I and services. Tese sectors

quickly became the leading contributors to Indias GDP.

Social and Economic Trends

Indias recent population and economic boom has resulted in several

nation-wide and interrelated trends. First, there has been an enormous rise

in the population o the middle class as many Indians move rom rural

areas to urban centers to capitalize on the better earning potential created

by the city-based services industry. Second, the Indian government has

begun to investment enormously in an increasingly strained inrastructure.

Lastly, the agriculture sector is struggling to keep up with unprecedented

levels demand or a variety o oods.

Rise o the Middle-class

As people move rom rural to urban areas in search o the opportunities

typically ound there, city populations are swelling. At least 28 percent o

Indias populace inhabits the nations cities (Landes 30), and many more

move in and out o them or temporary work. In the extreme southern

states, nearly hal the population resides in cities. In 1991, India had 23

cities with one million or more people a decade the number had swelled

to 35 (Waldman). Spurred by explosive overall population growth, a

booming middle class is driving a now unprecedented ood demand.

Te rise o a new, more auent middle class has also spawned a new type

o consumer. Middle-class households harboring greater buying power

include roughly 200 million consumers and constitute the astest growing

segment o the population (Landes 30). Additionally, this group tends to spend

a relatively large share o its income on ood and branded products. Te

Population Growth of India, China, and the USA

PopulationSizeinMillions

India China USA

1 9 50 1 9 60 1 9 70 1 9 80 1 99 0 2 00 0 2 01 0 2 02 0 2 03 0 2 04 0 2 05 0

0

250

500

750

1,000

1,250

1,500

1,750

Figure 2.

Indias population is expected to surpass that

o China in 200.

UN World Population: World Population Prospects,

The 1998 Revision

Percentage of Poverty by State in India 2000 - 01

44%

24%

29%

below 10%

10 - 20%

20 - 30%

30 - 40%

40 - 50%

n/a

Figure 3.

Although a huge new middle class has

emerged, poverty is still prevalent, especially

in rural areas.

Wikipedia.com, Article on India



6



7/85

result is a growing segment o the population underserved by current ood

oerings.

Increased Investment in Inrastructure

As more outside companies outsource service and I jobs to India, and as

the population continues to grow, the national inrastructure is becoming

increasingly strained. Historically, Indias restrictive protectionist policies

have been detrimental to the development o their inrastructure by

restricting access to the technologies o more developed nations. When the

policy reorms o the early 90s began allowing outside involvement, the

Indian government renewed their eorts to improve the countrys lagging

inrastructure, largely in order to support the demands o a swelling urban

workorce.

An improved inrastructure would benet all industries within India,

but particularly sectors that rely heavily on distribution, like HLL and

the agriculture sector as a whole. Access to technology has always beenlimited or Indian armers, and improved communication and distribution

channels between armer and processor will increase productivity and aid

in the modernization o the severely outdated industry.

Insucient Agricultural Supply

Higher income growth has reduced the incidence o poverty but also

boosted ood demand to unprecedented levels. While the service sector has

enjoyed steady growth, the agriculture sector has experienced stagnation

and suers rom low productivity and lack o investment. Government

policies, highly ragmented arms, market systems, and outdated

techniques all contribute to an agricultural system that soon will not beable to support the national demand. With a contribution o 25% o

national GDP, the continued growth o India is dependent on an ecient

and healthy agricultural system.

HLLs interest in this disheartening trend is obvious. Realizing that existing

policies are harming the agriculture sector, the Indian government has

begun to repeal or lessen restricting power o many o them. Although still

not widely practiced, ood manuacturers have been aorded a new level

o direct contact with armers and the ability to circumvent previously

necessary steps in the supply chain. Hindustan Lever now possesses the

resources and means to help modernize a dangerously lagging industry,as well as the ability to strengthen the quality, quantity and price o their

supply.

Indias growth and poverty rates

IncomeGrowthRate(%)

1 97 3/ 74 1 97 7/ 78 1 98 3 1 98 7/ 88 1 99 3/ 94 1 99 9/ 00

60

50

40

30

20

10

0 0

1

2

3

4

5

6

7

8

I nc ome G ro wt h R at e P ove rt y R at e ( %)

Figure 5.

Higher incomes and decreased poverty has

inversely eected the demand or ood.

The Elephant is Jogging, Amber Waves, Volume

2, Issue 1, 2004.

50

40

30

20

10

0

Agriculture Industry

Manufacturing Service

1984 1994 2003 2004

Sector Contributions to Gross Domestic Product

%o

fG

DP

Figure 4.

The IT/Service sector is outstripping all other

contributors to GDP.

Wikipedia.com, Article on the Economy of India





8/85

Strategic Opportunity

While not immediately apparent, all three o these trends oer HLL

distinct possibilities or growth. Te rise o the middle class has created a

new type o Indian consumer who is underserved by the current market.

A strengthening o the nations inrastructure allows HLL opportunities to

increase the eciency o their supply chain and bring their massive scale

to bear on issues and opportunities. Te insucient agriculture sector has

led the Indian government to drop outdated policies and provided HLL

with the regulatory license to create positive change. HLL can capitalize

on the economic possibilities these trends present as well as mitigate any

potentially negative implications by initiating a proactive strategy to bring

about positive change and satisy underserved markets.

A more complete understanding o the unctions, players and trends o the

current market will acilitate a better understanding o how these trends are

eecting the agricultural industry.

Projected growth of BRIC nations

RealGDPGrow

th(%yoy)

2 00 5 2 01 0 2 01 5 2 02 0 2 02 5 2 03 0 2 03 5 2 04 0 2 04 5 2 05 0

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

India China Russia Brazil

Figure 6.

India shows the most rapid growth potential

o the BRIC countries.

Dreaming with BRICs: The Path to 2050, A Report

prepared by Goldman Sachs, 2003





9/85



MarketOverview


Current market overview

Process and key players

Te Mandi system

Summary o initial ndings


10/85

The Current Market

As India and oreign investors ocus on theI and services industry in urban areas, the

countrys agricultural sector has been letbehind.

Overview

Indias agriculture industry remains decades behind much o the countrys

other economic sectors. While cities and service industries thrive as a result

o the attention and investment o both national and private organizations,

the agriculture and retail ood industries have not enjoyed the same

advancement. Outdated production methods, an inecient market

system and lack o organized retail outlets combine to create a dicultenvironment or organizational success. By examining the key players o

the current agricultural market process and the value each contributes,

industry-wide trends and restraints become more apparent.



10

Analysis | Market Overview


11/85

Current Process

Te existing market process is a airly linear value chain based on the

simple exchange o money or ood. In this chain, armers use agri-inputs

on small ragmented arms to produce crops; these crops are sold to

commission agents in government-sanctioned Mandis at below market

value. Te agents resell the crops at market value or higher to processors

(like HLL) or grocers. Next, the crops are processed and distributed to a

reseller (generally open air markets). Finally, urban consumers purchase

both the processed and unprocessed agriculturally-based products. Tis

chain is both inecient and inequitable.

Users

Activity

Detail

Farmers

Suppliers

1. Farmer purchases agri-

inputs.

2. Farmer plants and

cultivates ood

3. Crop is harvested and

transported to the nearest

Mandi

1. Agri-inputs are bought

rom either commercial

suppliers (expensive) or

the government (less

eective).

2. Due to debt, lack o

education and aversion

to risk, armers are using

outdated and potentially

harmul arm methods.

3. The armer must take

his own ood to the

market and oten loses

part during transport.

Farmers

Commission Agents

4. Farmer learns the

market price o his crop

5. Food is weighed

6. Commission agents bid

on armers crop

7. Farmer is paid or his

crop

4. The Mandi is the

only place where the

armer can get pricing

inormation.

4a. The price is set by the

government.

5. The weighing process

is oten sloppy, resulting

in crop-mixing and loss o

material or the armer.

7. It can oten take days

or the armer to receive

his payment.

Processors

9. Processor transports

ood to plant or

processing.

10. Food is processed and

packaged or distribution

11. Processed ood is

distributed to retailers

11. Retailers are oten in

remote areas and dicult

to reach.

Retailers

12. Retailers buy ood

rom processors

13. Retailers sell ood to

end-users through small

markets or bazaars.

13. Fragmented markets

are dicult to penetrate.

Commission Agents

Processors

8. Processors place

bids to buy ood rom

Commission Agent

8. Processors buy crops

at a marked-up price

without armer beneft.

8a. Processor has no

access to armer and

thereore no method or

quality control.

Production Market Processing/Distribution RetailRe-SalePhase

Figure 7.

This process matrix shows the airly

linear phases o agricultural production,

processing and reselling consideirng users,

activities and details.



11



12/85

Key Players in the Current Value Web

Te key players in the value web, rom seed to sale, are as ollows:

Supplier

Agri-inputs are provided to the armer by either private corporations or the

Indian government. While government inputs are much cheaper, they are

also much less eective in their yields. Private companies maintain much o

the more eective hybrid stock, but have long been accused o exploiting

armers.

Farmer

While the armer is central to the entire process, he has the least powerul

role. Although the Indian government does oer some aid and price

protection, armers are usually at the mercy o both exploitive suppliers and

commission agents, each constantly trying to maximize their prots. Razor-

thin margins and outdated policies, thereore, make it dicult or armers

to make any sort o sustainable progress.

Commission Agent

Te commission agent is the middle man between the armer and

processor. Tey were originally instituted to ensure that air price crop

prices or armers as well as protection rom exploitive processors. In recent

times, however, it is the agents who have been taking advantage, oten low-

balling the armer while charging processors a premium. Te commision

agent is a remnant o an archaic market system.

Processor

Te processor buys crops rom the commission agents or transportto their processing plants where the ood is processed, packaged and

shipped. raditionally barred rom any direct contact with armers, they

consequently lack control over the quality o their product and little

infuence over what type o crops armers grow. Hindustan Lever currently

occupies this place in the supply chain.

Distributor

Te distributor is responsible or delivering the processed ood to retail

stores and city-based markets as well as small markets and bazaars in the

rural areas. Remote regions are oten dicult to reach, particularly due

to poor road conditions. Hindustan Lever serves as distributor o theirproducts.

Reseller

Resellers range rom large supermarkets in the cities to small open-air

Figure 8.

The majority o the 600 million armers in

India have little chance

to upgrade their arms and

increase their earnings.



12



13/85

Figure 9.

This diagram o the current value web shows

the Farmers difcult position between

Suppliers and Agents. It also shows how

HLL sits between agri-production and selling

to end-consumers.

markets in rural villages. Even though India boasts more than a billion

customers and a retail ood market estimated at $133 billion, small Mom

& Pop shops continue to dominate retail ood sales. Organized chain stores

are emerging and expanding rapidly, but currently only account or about

1 percent o ood sales (Landes 33-34).

Government

Te Indian government has several aid and subsidy programs in place to

asssist armers, however many o them are expensive and actually result in

excessive debt or armers. Under the guidance o the National Agricultural

Cooperative Marketing Federation o India Limited (NAFED), the

government also enacted a number o strict policies aimed at protecting

the armer rom exploitive organizations. However, these policies are now

being repealed as they have proven detrimental.

Food

Money

Information/Resources

Government

HLL(Distributor)

HLL(Processor)

ConsumerResellerFarmer

Supplier

Agent

Government supplies

market price toCommission Agents

Government

provides farmers

with subsidies

Farmer buys

agri-inputs from

suppliers

Commission

agent buys

crops from

farmers

Processor

buys food

from agents

Reseller sells

to consumer

through small

marketsReseller receives food

from distributor and

pays processor



1



14/85

The Mandi System

As outlined in the previous section, Indian armers must sell their ood

through commission agents at state designated mandis without the benet

o direct contact with processors.

Te current market system still primarily operates under policies created

by the National Agricultural Cooperative Marketing Federation o India

Limited (NAFED) in 1958. Born out o an understanding o the key

role agriculture plays in Indias economy, the NAFED was created to help

promote the marketing, processing and trade o agricultural produce and

to protect armers rom exploitation at the hands o large corporations. o

carry out these directives, the mandi system was developed.

Designed to encourage ree market trading o agricultural produce,

the mandi system also boasted the added protection o a minimum

market price established by the government. Tis was accomplished

by requiring all armers to bring their crops to one o several state-

wide mandis. Operating currently as it did when rst established, a

government-appointed bidder evaluates the produce and sets an initial

price. Commission agents then begin to bid on the crop until it is sold

to the highest bidder. Te highest bidder then weighs the crop and pays

the armer, who then in turn re-sells the crop, at a signicant prot, to a

processor like HLL.

While the mandi system does accomplish its initial goal o providing

armers with a minimum return, current ineciencies in the system cancel

out any benets armers might have seen in the past. At the village level,armers are responsible or transporting their own crops to the mandi. Te

crop is consolidated by the kacha aadtiya, where armers are charged a

commission to be part o a truck load. Further, 2% - 5% o the crop will

have been lost in spillage and transport by the time it reaches the mandi

where, once again, ees and commission charges are exacted (Upton 3).

Although agents are supposed to weigh the crops and pay armers

immediately, they oten wait days beore doing so without being penalized.

During such waits, armers must pay to use ineective storage acilities,

leading to degradation in crop quality and additional losses due to spillage

and pestilence. Te weighing system itsel is also very inecient thanksto the use o manual scales that only accommodate small increments o

crops at a time and allow commission agents to consistently manipulate

measurements to their advantage.



1



15/85

Finally, armers suer as a result o the time a trip to a mandi requires.

Many spend a ull day getting there, and several more waiting or their

crops to be bid upon and purchased. Tus, armers become stuck in the

unenviable position o not being able to turn down an agents bid due

to the time and resources already expended to transport the crops to the

mandi. Additionally, because there is no way to access pricing inormationprior to arrival at the mandi, armers never know how much they will

receive or their crop until they get there, where pressure immediately

mounts on them to sell.

Summary

A study o the current agricultural market in India reveals a system that

inadequately serves most o those involved. Te supply side o the chain is

hampered by outdated methods and policies, while the retail hal suers

rom ineciencies and a lack o variety or consumers.

While HLL does not operate directly in either o these sectors, its prots

are directly aected by both. Te ineciencies and resource depletion on

the supply side o the chain threaten HLLs sustained operation, while

an untapped consumer market on the retail side oers an attractive

opportunity. In the next section, we will examine these two areas in order

to determine possible strategic directions.



1



16/85



16

Market Analysis


Agriculture

Overview o Agricultural Sector

rends & Insights

Unmet Needs o the Indian Farmer

Opportunities in Agricultural Sector

Retail

Overview o Retail Sector

rends & Insights

Umet Needs o Urban Consumers

Opportunities in Urban Retail


17/85

Market Sector Analysis

Te Green Revolution o the 1960s wasresponsible or much o the success that India

is beginning to enjoy. However, the age andineciencies o the resulting productionmethods and market system are becomingincreasingly apparent as they are unable tosatisy growing demand.

Overview

Users at both ends o the value chain -- armers and consumers -- are beingunderserved by the current state o the Indian agricultural market. Farmers

have no access to aordable inputs or inormation, and no direct contact

with the processors who buy their crops. Urban Indian consumers are not

satised with the retail channels or oerings they are presented.

Both areas oer HLL a strong opportunity. On the armer end, HLL has a

vested interest in increasing the quantity and availibility o their inputs. On

the retail side, HLL has the ability to grow their product line to satisy new

demand while also tansorming the traditional Indian retail channels. Tis

section will look at some o the user needs that must be met, along with

the strategic opportunities they present.



1

Analysis | Market Sector


18/85

Agriculture Sector

Tanks to rich land, population resources, and technological advancements

brought on by the Green Revolution in the late 1960s, India has been

able to increase its ood production by 400% in the last 50 years, moving

rom an overall ood decit to a surplus (Landes 30). oday, the agriculturesector in India remains central to the countrys success. Until recently,

arming was the number one contributor to Indias economy, and even

today it remains the third biggest contributor at 35%. It is also the

countrys largest employment sector, employing 65% or about 650 million

Indians. Its eect on the countrys overall economic success is obvious. As

noted earlier, Indias economy is expected to grow 7.5 - 8% in 2006 and

arm output is essential as a key driver o sustainable economic growth.

World Bank Vice-President Ian Johnson recently revealed that studies show

that a 1% growth in arm sector productivity leads to at least 6% rise in

earnings o the lower income arming group (PI Feb 5, 6). A rise in this

enormous groups income could have a tremendous overall impact on theIndian economy.

While the Green Revolution was responsible or helping India get to where

they are today, the production and market processes established then have

since outlived their useulness. Indian agriculture is horribly inecient,

with average crop yields among the lowest in the world. In order to meet

the rising demand or ood throughout the country while remaining a

positive orce in Indias economic development, production methods,

resource usage, market systems and investment resources must all be

improved.

Trends & Insights in Agriculture

Further research and analysis into the agriculture has revealed the ollowing

trends:

Lack o Funding & Support

Te low production levels o small arms create thin margins or armers,

oten just enough to live on. An average armer, with about nine acres o

armland, could expect an annual net income o approximately Rs. 20,000

($443) rom soybeans and wheat together (Upton 3). Low incomes lead

to limited capacity to invest in inputs and technology. Although, thegovernment has a subsidy system in place to help armers with the purchase

o arm inputs, allowances dont provide or more eective seeds or

chemicals available rom private companies. Non-governmental nancing

is available but very expensive, oten driving armers into irreparable debt



1

Analysis | Agriculture Sector


19/85

and leading to a high rate o suicide among armers.

Due to a lack o personal savings and expensive credit, Indian armers

are extremely risk averse. Rebounding rom one bad season oten proves

impossible. With the lack o a national insurance program exacerbating

nancial problems, armers are unable to experiment with new techniques

in an attempt to grow their arms and income. Finally, governmentregulations concerning the purchase, storage and movement o arm goods

have limited the amount o direct involvement rom private organizations.

Private investments only contribute 1.4% o total agricultural output

compared to 24% or the economy as a whole (Landes, 33).

Inecient Farming Methods

Although India is one o the worlds largest nations in area, it is quickly

depleting its arable land. India currently utilizes an estimated 77% o the

available cultivable land. In addition, the land that is available is being

more and more heavily armed, with crop intensity increasing by 130%

rom 1970 to 1990. Tis makes each successive season less successul unlessthis intensity is balanced with quality ertilizer. Additionally, the average

size o an Indian arm is under 4 hectares compared to a US average o

440 acres and there are over 90 million individually controlled arms

throughout the country (FAO). Te small, ractured arm structure is

inecient in both production and income.

Small arms are also not able to justiy use o larger equipment designed or

scaled and more ecient methods o irrigation and harvesting. Not only

are small landholders unable to aord the equipment but it is impractical

on such small arm plots. Currently, two thirds o the area under

cultivation is unirrigated and wholly dependent on rainall or its irrigationneeds. Tis connes the bulk o agricultural growth to a ew well-endowed

pockets while the overall industry remains mostly stagnant.

Indian armers also suer rom one o the highest illiteracy rates in the

world. Tis leads to a lack o ormal training and understanding o more

ecient methods, with armers continuing to use outdated methods taught

during the Green Revolution ty years ago.

Lack o access to inormation

One o the undamental reasons armers were required to go to a

mandi was that it was the only way or them to get price inormation.Fity years later, armers continue to suer rom the almost total lack

o communications in the rural areas. Not only does this continue to

necessitate trips to the mandi, but it also slows the prolieration and

adoption rate o new arming methods. Furthermore, armers are unable to

access inormation regarding new arming methods so thereore continue



1



20/85

to use outdated ones.

Te lack o communication is also a problem or processors like Hindustan

Lever. Because they are not able to open a direct dialogue with armers,

they lack infuence over what types o crops are ultimately grown. Without

direct access, it is impossible or HLL to establish any sort o relationshipwith their suppliers.

Progress Restricted by Policy

A lit on oreign investment restrictions in the I and service sectors was

largely responsible or jumpstarting Indias growth in the 1990s. However,

the agricultural industry still has yet to experience a similar loosening o

restrictions. Historically, private investors have been discouraged by policies

that place restrictions on everything rom size o land ownership, private

storage and movement o arm goods to the scale o ood processing plants.

Te restrictions also hamper the armers ability to grow their businesses.Tis outdated market system continues to be inecient and costly. Land

sale and lease restrictions make the benets o arm consolidation dicult

to achieve. Additionally, a lack o protection or parties involved in contract

arming make the practice less attractive to risk-averse armers.

However, in light o the steadily increasing population and the agriculture

industrys inability to keep up, the Indian government has begun to loosen

restrictions in hopes o increasing private investment and boosting overall

productivity. Policies limiting private storage and interstate transport o

ood as well as direct contact between armer and processor have recently

been dropped in order to promote agricultural modernization and growth.

Unmet Farmer Needs

Te aorementioned insights were helpul in determining the unmet needs

o the armers, in turn oering a possible strategic direction or HLL to

take. Te main needs identied were:

Resources including aordable inputs, insurance or credit, and private

investment

Farmer organization due to inability to communicate

Inormation/education to improve eciency o arming techniques or

market perormance

Direct access to processor or market price inormation



20



21/85

Agricultural Opportunities

As the Indian government reduces the amount o restriction it places on

the agricultural market, they are creating new opportunities or private

investors to infuence the entire agricultural process. By allowing more

direct contact between processors and armers, HLL is in a position to

positively eect the supply side o the chain.

While this may seem like a low-rewards strategy, it must be understood

that the rewards o this approach will be realized on the other end o

the chain. By working with the armers to raise the eciency o crop

production, HLL will gain more plentiul and higher quality inputs. With

the amount o arable land and the returns on that land steadily decreasing,

the only growth strategy let open to HLL is to increase the eciency o its

supply.

Co-creation is an essential part o this strategy. More specically, HLL

can work with armers to educate them on better and more ecient

production. Tis is a win-win situation or both parties armers get better

returns on their land and HLL gets better product. HLL can also work to

provide armers with needed inputs at a cheaper price as well as nancing

and insurance options. Finally, HLL can make market inormation

available to armers, providing them with a better understanding o their

crops value while allowing HLL to buy direct.



21



22/85

The Retail Sector

Population density in some o Indias cities top 28,834 persons per km

(2005 Mumbai) (http://encyclopedia.worldvillage.com/s/b/Mumbai).

Overall, as noted earlier, the numbers o urban dwellers is on the rise,

comprising approximately 28% o Indias population and growing at about3% annually (Landes 30). Although India is still home to a large share o

the worlds poor, this percentage is declining, and a signicant, relatively

auent, middle class has emerged in urban areas. Middle-class households

with buying power well above average include roughly 200 million

consumers and constitute the astest growing segment o the population.

Because the average Indian household spends about 55 percent o its

income on ooda much higher share than in developed countries

changes in ood prices resulting rom new domestic and trade policies

are also driving changes in ood demand. Middle-income and urban

consumers are likely to spend an even greater percentage o their incomeon upgrading and diversiying their diets, requiring high quality, yet

convenient oods (Landes 31).

Tis new class o consumers should have a signicant eect on what

products are produced and brought to market. An increase in demand

or ruits, vegetables, edible oils, and animal products since the 1980s

has caused producers, distributors, and retailers to scurry to ll the

markets with these products. Consumers now require that their ruits

and vegetables are resh, and are increasingly particular about where they

shop or them and what they buy. Suppliers are currently having diculty

responding to the rising demand due to poor inrastructure, inecientmarkets, and low investment.

Urban Indians in smaller cities, and until recently in the large cities as

well, had to travel to many dierent resellers to ulll all o their ood and

hygiene needs. A ew o these include:

Departmental stores: Similar to convenience stores in the United States,

departmental stores are scattered throughout small and large cities. Most

urban Indians purchase the majority o their processed oods and other

staples here, such as sea salt and rice. Tese stores are intended to be easily

accessible or urban populations, where people can quickly run out topurchase goods to make their meals.

Open air markets: Fruits and vegetables have long been important in

Indians diets, as the country is largely vegetarian. In the cities, people visit

open air markets to purchase their resh ruits and vegetables. Tis type



22

Analysis | Retail Sector


23/85

o market remains the primary location to ulll peoples ever-increasing

desire or the best and reshest produce.

Meat stalls: Small locations primarily selling a variety o meats.

Pharmacy: Indians purchase their hygiene products (soap, shampoo, etc.)and medicines here.

Tis market structure is not only taxing on consumers, but it also makes

it nearly impossible or retailers to accommodate their customers needs

(Gottumukkala).

Trends & Insights

Several trends relating to the Indian consumer shopping experience have

emerged.

Organized chain stores are a growing market

Since approximately 2001, organized chain grocer stores have emerged and

are expanding rapidly in order to garner a higher percentage o Indias USD

133 billion retail ood market. In 2004, chain stores accounted or only

about 1 percent o ood sales (Landes 33-34) but are increasing rapidly in

number and market share in large metropolitan cities.

Change in eating patterns

Indian ood consumption patterns have diversied signicantly in recent

years. Consumption o ruits, vegetables, edible oils and animal products

is rising much aster than that o wheat and rice, staple grains in theIndian diet (Landes 31). For example, poultry is nding broad consumer

acceptance and the sector is growing 10-15 percent per year ranking it

among the astest growing poultry markets in the world.

Indian are becoming more demanding shoppers

Tis trend is leading to the emergence o a new retail model in India: as

consumers have more money, they are not only looking or higher quality

oods, but also demand more compelling experiences. In Madhra Pradesh,

supermarkets are becoming very popular and in many ways are similar

to those in Western countries. Shoppers can nd all types o oods, both

domestic and imported, and peruse the aisles with their shopping carts.When they are nished shopping, they queue to have their purchases

scanned and prepared to leave the store (Gottumukkala).

In some ways, however, Indian supermarkets have become more

sophisticated than many o their Western counterparts. Tey have become



2



24/85

destinations, not just a space to purchase goods. rips to the supermarket

have become social outings or the whole amily, eaturing ca areas

where people can congregate and have coee and pastries. Many also have

incorporated sections where people can listen to music (Gottumukkala).

Stores still sufer rom lack o penetration

Supermarkets are not yet the answer to all o Indians shopping needs,

however. Not yet as ubiquitous as departmental stores, people only visit

them to purchase large amounts o ood or to socialize. Te supermarket

is considered an outing, not a local place to make all o ones purchases.

In order to be assured o quality, most consumers still do their shopping

at the traditional departmental stores, stalls, and markets, purchasing 1-3

days worth o supplies at a time. Additionally, with the rise o incomes,

more households employ domestic aids, who preer the convenience o the

departmental stores and the quality o the meat stalls and open-air markets.

Unmet Urban Consumer Needs

As an increasing number o Indians relocate to the cities, the ollowing

consumption needs are ailing to be met:

Consumers are still lacking the variety o ood they desire

Larger stores are not as convenient as most would like

Retail market Opportunities

Te rapid infux o the middle-class and the mass migration to cities has

opened up dramatic new opportunities or businesses. astes and spendinghabits o these groups are changing, and a company such as HLL could

create new opportunities by accommodating their needs.

It will be essential that any new player in this urban market understand

their customers and provide goods and services that satisy them. As in

much o the civilized world, consumers spending power is being harnessed

by companies able to deliver on desires. Tis not only involves telling

customers what they want to hear through marketing, but also being

attentive to their needs.

Middle-class urban Indians seem to want a shopping experience that isimmersive, where they can buy high-quality goods at convenient locations.

Te division between the dierent markets is inconvenient or most

Indians. Additionally, because departmental stores are primarily requented

or reasons o accessibility and supermarkets or the experience, HLL

should seek to uniy these attributes via the creation o chain stores that

ulll both material and social needs.



2



25/85

HLL can also satisy consumer needs by guaranteeing a variety o superior

goods at their markets. Te experience and goods presented will need to be

localized or dierent states, as peoples tastes vary widely rom region to

region.



2



26/85

Market Opportunities

wo distinct opportunities emerged romanalysis o the current market:

Te 650 million armers who currentlyhave little access to aordable agri-inputs,knowlege, or to purchasers o their cropspresent a vast market opportunity to theright company. In addition, enabling thisgroup to be more productive would have a

proound eect on Indias economy overall.

Urban middle-class consumers needsor new premium branded products andexperiences are not being met.

1.

2.



26

Analysis | Market Opportunities


27/85



2

CompanyAnalysis


Company Background

Mission Statement

Core Competencies


28/85

Hindustan Lever Limited

Hindustan Lever Limited is one o Indiasoldest and most eciently run companies.

Te company is managed natively andemploys over 40,000 throughout the sub-continent. Moreover, their brands are thestrongest in their respective categories withover 2/3 o the Indian population using HLLproducts everyday.(hll.com)

Overview

Now that weve established two opportunities in the market, we must

examine how HLL is best equipped to capitalize on them. An analysis

o the companys historical and current perormance reveals several core

competencies that can be leveraged to meet these opportunities.



2

Analysis | Hindustan Lever


29/85

Background

Unilevers presence in India began in 1888, when goods rom England

under the name Lever Brothers rst showed up in Indian ports. By 1931,

Unilever had set up its rst Indian subsidiary, Hindustan Vanaspati

Manuacturing Company, ollowed by Lever Brothers India Limited

(1933) and United raders Limited (1935). Te three companies

merged to orm the company Hindustan Lever Ltd. in 1956, the rst

oreign subsidiary to oer a percentage o its equity to the Indian public.

Currently, Unilever holds 52% o the equity in HLL, with the remaining

shareholding being distributed among 380,000 individual and corporate

investors. HLL is single-minded in identiying itsel with Indian aspirations

and needs in every walk o lie regardless o income.

HLL has mastered orming business relationships with companies and

individuals. Over the years, they have partnered with or acquired the

ollowing companies:

Brooke Bond

Lipton

Ponds

ata Oil Mills Company

Lamke Limited (another ata company)

Kimberly Clark Corporation

Kothari General Foods

Cadbury India

Kwality Icecream Group

Modern FoodsCooked Shrimp and Pasteurized Crabmeat (Amalgam Group o

Companies)

Pepsi

oday, Hindustan Lever Limited (HLL) is Indias largest Fast Moving

Consumer Goods (FMCG) company, touching the lives o two out o

three Indians and employing over 40,000. Teir businesses are comprised

o over 20 distinct categories in Home & Personal Care Products and

Foods & Beverages. Current sales in India are approximately Rs. 10,000

crores (Rs. 100 billion or USD 223 million) annually, comprising 4 million

tons o goods. HLL is also one o Indias largest exporters.

HLL Revenue by Percentage of Product Sales - 2003

Food Products

Home Cleaning

Personal Products

Chemicals,

Agri-products

Other

44%

24%

29%

2%

1%

Figure 10.

2% o Hindustan Levers revenues are

generated by ood products.

H.L.L. Annual Report, 2003



2



30/85

The Hindustan Lever Mission

HLL ollows its parent companys mission to add vitality to

lie. Tey strive to meet everyday needs o nutrition, hygiene,

and personal care products that help people eel good, look

good, and get more out o lie. Tey own over 80 actories, work

with over 2,000 suppliers and associates, and have a distribution

network o about 7,000 redistribution stockists, covering the entire

urban population and about 250 million rural customers.

Core Competencies

Hindustan Lever has several demonstrated core competencies. Te are best

illustrated through an exploration o the many initiatives the company has

undertaken in recent years. Te ollowing section is a summary o ndings.

For a complete list please see Appendix B.

Distribution

With respect to distribution related activities like sales and marketing,

HLL is second to none in pushing the boundaries o what is possible

nancially, structurally, and logistically. Beyond its pioneering work

FMCG distribution, the company has sought to instill in its customers an

Personal Care Food Laundry Water Treatment

Personal Wash

Lux

Liebuoy

Liril

Ha

Breeze

Dove

Pears

Rexona

Skin Care

Fair & Lovely

Ponds

Hair Care

Sunsilk Naturals

Clinic

Oral Care

Pepsodent

Close-up

Deodorant

Axe

Rexona

Cosmetics

Lakme

Tea

Brooke Bond

Lipton

Foods

Kissan

Knorr Annapurna

Coffee

Bru

Ice Cream

Kwality Walls

Sur Excel

Rin

Wheel

PureIt

Figure 11.

Hindustan Levers product architecture

shows the breadth o their oerings. Reer to

Appendix A or a complete list.



0



31/85

elevate sense o brand experience while simultaneously providing greater

and more varied access to its products as well as improved clarity to its

communications. New initiatives include raising brand visibility through

in-store promotions, store-based product acilitators, and sel-service. HLL

has enabled an even urther level o personalization and brand experience

in the direct sales arena with its ground-breakingHindustan Lever Network,having amassed an army o consultants 250,000 strong with access to 80%

o city dwelling Indians.

Figure 12.

Hindustan Lever Limited has our Core

Competencies which are key to responding

to current opportunities within the market.

Marketing SalesNative

know-howInnovation

distribution

Native know-howButtressing the novel initiatives is an unmatched commitment to training

not only its own employees but channel partners as well -- more than

300,000 in total -- resulting in a supremely condent sales and marketing

orce with the ability to maximize the brand experience or consumers.

Furthermore, because HLL employees are generally native born, hail rom

all regions o India, and encompass a wide spectrum o social classes,

cultures, and religions, an extra layer o intimacy is granted to them in

their eorts to promote the brand.

Also vital to HLLs business model and mission are the programs that they

have created to aid the communities o India, whether wealthy or poor.Tese projects all under the category o Citizen Lever, and incorporate

health & hygiene education, womens empowerment, water management,

education & rehabilitation o special or underprivileged children, care or

the destitute and HIV-positive, and rural development.



1



32/85

HLL has also responded in cases o national calamity and adversity,

contributing generously through various welare measures. Most recently,

HLL has rebuilt a village in earthquake aected Gujarat, and provided

relie and rehabilitation ater the sunami caused devastation in South

India in 2004.

Over the last three years the company has embarked on an ambitious

program, Project Shakti. Trough Shakti, HLL is creating micro-enterprise

opportunities or rural women, thereby improving their livelihood and the

standard o living in rural communities. Shakti also includes health and

hygiene education through the Shakti Vani Program, and creating access to

relevant inormation through the iShakti community portal. Te program

now covers about 50,000 villages in 12 states. HLLs vision is to take this

program to 100,000 villages impacting the lives o over a 100 million rural

Indians.

HLL is also running a rural health program Liebuoy Swasthya Chetana.Te program endeavors to induce adoption o hygienic practices among

rural Indians and aims to bring down the incidence o diarrhea. It has

already touched 70 million people in approximately 15,000 villages o 8

states. Te vision is to make a billion Indians eel sae and secure.



2


Business

Model

BrandChannelServiceProduct

System

Product

Performance

Core

Process

Enabling

Process

Networking Customer

Experience

Happy Homes

Lifebuoy Swasthya Chetana

Fair & Lovely Foundation

Out-of-Home

Health Institute

Nutrition & Health

Enterprise takeovers

TPM

Exports

Project Shakti Project Shakti Project Shakti

Greening Barrens Greening Barrens

Supermarket MarketingSupermarket Marketing

RSNet RSNet

HLL Network (HLN) HLL Network (HLN)

Health & Beauty Health & Beauty Health & Beauty

Ice Cream Cart Ice Cream Cart Ice Cream Cart Ice Cream Cart

Rebranding

3 Roses3 Roses

Rebranding

Figure 13.

Hindustan Levers history o success

is apparent across all ten types o

innovation.


33/85

Innovation

HLL has traditionally been known as a company that values technology

and invests heavily in developing new processes and innovations that

make the company run more eciently. Tey currently employ over 200

scientists and technologists, many with advanced degrees rom the U.S.

and Europe, who run Global echnology Centers and the Hindustan LeverResearch Centre (HLRC), established in 1958 and now with acilities in

Mumbai and Bangalore. As an ancillary benet o its subsidiary status,

HLL enjoys access to Unilever R&D resources, expanding its ability

to innovate as well as its grasp o the most current trends. Resulting

advancements allowing or the substitution o expensive ingredients with

cheaper ones has led to savings in the billions. Other breakthroughs have

elevated the company to leader status (like in hybrid seed production) have

yielded widespread quality improvements in all o its dierent brands.

Finally, applied research has helped to make HLL exports both a globally

competitive and sustainable enterprise.

SummaryHindustan Levers experiences in civil responsibility and native know-how

will assist in establishing stronger relationships with armers. A proven

history o innovation will help with the creation and establishment o new

communications systems or armers. Marketing and distribution skills will

be leveraged to help bring new products to market and connect with a new

segment o consumers.

Tis enormous network o brands, innovation, and distribution has

made HLL extremely protable to this point, and makes them prime to

undertake a complete overhaul o Indias agricultural system. Te resulto such a project would likely have eects on the company and the entire

population o India that could quite literally change the world.





34/85



Strategic Plans


Statement o Strategies

Enable Agriculture

Overview

HLL Depot

Learning Network


Connect Consumers

Overview

HLL Retail

HLL Branded Food


35/85

Strategies or The New India

With current trends and the companys corecompetencies in mind, Hindustan Lever

Limited has two broad growth strategiesit can pursue at each end o its value web:Enable Agriculture and Connect Consumers.

Strategy Overview

HLL currently sits between agricultural production and retail sales,

working primarily as a processor, marketer and distributor o branded

consumer health and beauty, home cleaning and packaged ood products.

In its current position, it touches both ends o the value web yet has astrategic stake in neither. Tese two broad strategies will look to grow HLL

revenues by ullling unmet needs in the market as well as shore up their

strategic position.



Strategic Plans | Overview

Enable Agriculture

HLL Learning

Network

Farmer

Advocacy Board

HLL Depot

Educate Village Leaders

Mentor Farmers

HLL University

Educational NewsletterWired Communities

Resource Provisions

Resale of Bulk Purchases

Access to Equipment

Guidance ServicesFarmer Organization

Financing/Credit/Insurance

Efficiency Research

Project Sailesh

E-Choupal Network

HLL Service Desk

HLL Depot RetailCrop Pick-up

Quality Scanner

Better Scales

Storage

Connect Consumers

HLL Branded

Food

HLL Retail

Tiered Food Products

Vitamin Supplements

HLL Seal of Freshness

HLL BreweryBrand Campaign

Regional Grocer Chains

HLL Branded Foods

IKEA for Food

POP MaterialsLeverage Non-food Brands

The New India

Figure 14.

Concept system hierarchy or the New

India strategic plan.


36/85

Enable Agriculture

At one side o the value web, in the agricultural sector, Hindustan Lever

can use its size and nancial might to help transorm the sector while

beneting greatly through better crop prices, a more consistent quality

o inputs, and the ability to support new products. On this side o theweb, armers are hamstrung by government policy, little ormalized

agricultural education, a lack o negotiating power, and middle men

who take a percentage o yield while adding little to no value. Hindustan

Lever Limited will help transorm the industry through three system level

initiatives: HLL Depot, the HLL Learning Network, and nally, a Farmer

Advocacy Board.

Key to this broad Enable Agriculture strategy is recognition that the

transormation o the Indian agricultural industry is imperative or Indias

economic growth to continue, and consequently, HLLs continued success

in the market. Rather than attempting to aect this transormationthrough government subsidies and handouts, HLL must instead empower

Indian armers to become more productive, resulting in an increase o their

earning, investment and spending powers. Should individual arms and

armers nd themselves unable to achieve a higher state o productivity and

sel-reliance, HLL will enable their relocation to cities via equitable buyouts

o land and educational programs that will integrate the rural populace

into their new urban surrounding. Tis will also provide a wellspring o

possible workers or city-based HLL actories and the new HLL Retail

initiative documented later in this report.

Only by working with armers directly in a co-creative ashion can thetransormation and the Enable Agriculture strategy pay dividends or

Hindustan Lever. I the strategy works, it will not only help armers and

their amilies lead easier lives but will provide real benets to the Indian

economy and a signicant brand respect and revenue increase or HLL.

Tus, through the ollowing systems, HLL will help to modernize

agriculture, enable continued economic growth in India, and support a

move to the city or rural citizens who wish to move there.



6

Strategic Plans | Enabling Agriculture


37/85

Enable Agriculture Value Web

Enable Agriculture is a balanced strategy that both replaces and adds

nodes to the current value web. It is most aggressive in its move to replace

Commissions Agents and the traditional mandi system. Te HLL Learning

Network and Farmer Advocacy Board add additional nodes to the value

system with little cost to HLL. Tese nodes are primarily inormation-

based so their value is disproportionately high compared to their nancial

cost to HLL. Each adjustment in the value web directly addresses armers

needs, sometimes in multiple ways.

Government

Farmer

Supplier

Agri-inputs, fnancing

and organizational tools

Advocacy board buys

agri-inputs rom suppliers

HLL buys ood directly

rom armer

HLL Learning

Network

HLL Farmer

Advocacy Board

HLLDepot

Inormation and tools or

communication

Government

provides armers

with subsidies

HLL unds Learning

Network

Food

Money

Inormation/Resources



Strategic Plans | Enabling Agriculture


38/85

HLL Depot

For the over 650 million agricultural workersin India with currenly little access to market

inormation or the end-buyers o their crops,HLL Depot will provide a suite o systemsthat inorm and empower them, resulting inbetter prices or their yields.

Overview

Te current market structure o the Indian agriculture system was

established by the Indian government to protect armers. Te government

mandated the use o an open market system in order to guarantee that thearmers were receiving air value or their crop and not entering into poor

agreements with large corporations. However, the mandi system as it exists

today does more to harm those it was designed to protect.

Te breakdown o the mandi system is mainly due to the increased power

o the commission agents (CA). Craving ever higher prot margins, they

have usurped armers negotiating power and created a system in which

they dictate prices, air value or not. In addition to unair pricing, other

mandi problems include inaccurate weighing o goods and requiring the

armers to wait (oten days) or payment.

Some companies, however, have discovered loopholes in the system. Te

key is providing armers with an alternate location to perorm the services

that were traditionally only available at the mandi, namely access to pricing

inormation that would ultimately determine whether armers should

sell their crops at the mandi or directly to processors. In addition to this

strategy, HLL can oer other services that the mandi lack -- complimentary

crop pick-up and rapid payments, or example -- to position themselves

as a preerred alternative. Such an option would aord armers a stronger

position in the decision making process, while HLL would enjoy direct

contact and more infuence with their suppliers.

o be eective, HLL will be required to be in close proximity to the

armers. Whether converting choupals (traditional meeting places or

Indian armers to exchange advice and inormation) to HLL-choupals or

creating a new networks entirely, HLL must establish physical presence



Strategic Plans | Enabling Agriculture | HLL Depot


39/85

within rural communities as well as online in order to best serve their

interests.

Trough these measures, HLL primarily aims to create a more seamless

process o getting well-grown crops rom the armers to the consumer

(whether in rural communities or in cities). In addition, these projects willpromote HLLs brand recognition while positively impacting Indians lives

and economy.

Te ollowing are HLL Depot system components that the company could

implement in order to circumvent the mandis (and thereby the CAs),

enabling them to work directly with the armers.

Detailed System Concepts

Project Sailesh aka Shakti or Farmers

HLL must leverage the distribution network and brand recognition thatthey have established through Project Shakti. As Project Shakti supported

Unilevers tagline eel good, look good, get more out o lie through

education and disbursement o hygiene products, they can likewise

with oods. Project Sailesh will build on the existing network o people

(especially women) involved in Project Shakti to teach the rural poor about

nutrition, as well as provide them access to the oods that will ulll this

mission.

Te major dierence between Project Shakti and Project Sailesh is that as

Shakti distributes products that are preserved and have a very long shel-

lie, the products distributed in Sailesh are resh and must be consumedquickly (or distributed with vehicles able to preserve the ood). For this

reason, the choupals will be leveraged as central points where armers will

not only sell their produce to commission agents, but to locals as well.

E-Choupal network

HLL must build a network similar to ICs e-choupals that will enable

them to cut out the mandis with the governments blessing. Since the

government is concerned with the armers receiving a air price or their

crops, they have also recently been open to allowing other systems that

acilitate that goal. HLLs astest route to building out this network would

be to partner with IC, the highly successul subject o a Harvard BusinessReview case study on the topic. ICs e-choupal network is limited in

only one o the states o India and is also limited in terms o crop pricing

inormation. HLL could use IC technology to build the network out to

include all crops and encompass every geographical region o India.





40/85

By building such a network, HLL will have direct access to armers who

produce many dierent kinds o crops throughout the country. Te armers

will also regain the power ormerly bequeathed to the commission agents.

Depending on the markets, HLL may even consider paying armers above

the current market price o crops, as Starbucks has done in the U.S. with

coee beans.

An alternative to the e-choupals might be a roaming choupal. HLL could

employ agents and outt them with trucks that could drive to local arms

with pricing inormation, goods to be sold, and inormation to aid the

armers with their crops yields. Tis would supplement a central, physical

location.

HLL service desk

At the HLL local location, an expert, perhaps a ormer commission agent,

will be available to aid armers with rst-hand knowledge o the issues they

are acing. Tis expert will be charged with maintaining HLLs business

on a day-to-day basis, including interacting with armers, perorming

and maintaining all on-location serving, and reporting back to HLL with

news pertinent to the company. He will essentially act as an expert liaison

between the armers and HLL. In addition, this service desk will allow

or immediate payment to armers or their crops, in stark contrast to the

current mandi system.

Hire Commission Agents to Work at HLL Depot

As the vommission sgents have acquired signicant power in the value

chain o ood production and distribution, HLL must not simply cut

them out o the picture. Tey have developed expertise in their locales, andeliminating them would not only waste that knowledge, but also alienate

a very powerul body. HLL must thereore look or ways to employ them,

possibly through commission incentives. Employment possibilies might

include desk operations at HLL local locations, roaming experts in the

communities o armers, or other areas o the HLL company.

HLL Depot Retail

In addition to the HLL purchasing crops rom the armers at the local

locations, HLL must also use this opportunity to sell products to the

armers. As access to ertilizers, seeds, tools, and other implements are

scarce, the HLL Depot will be an additional service to the communities,as well as a supplemental income source or HLL. Moreover, it will be an

important actor in ensuring armers produce the best quality crops or the

company.



0



41/85

Crop pick-up

HLL should devise a way o not only purchasing crops rom the armers,

but also picking them up. Tis would relieve a currently heavy burden on

the armers, as well as improve HLLs quality control.

Quality reshness scanner (quality control agents)

HLL must ensure that the best quality crops are produced so that they

can be sold at the maximum price to consumers. For this reason, quality

control agents must be employed either to scan produce coming in to be

sold by armers or to go out into the elds and ensure that the armers are

properly cultivating their elds.

Better scales

In response to the errors made at mandis, local agents in the communities

must be outtted with better scales to properly weigh armers ood. Tese

scales must be not only accurate, but consistent. HLL could 1) produce

scales themselves, 2) contract out production and put their name on the

scales, or 3) simply ensure that good scales reach the local locations.

Storage

Te HLL local location must have a space to properly store produce beore

it can go to the central distribution center. Without it, armers precious

yields could go to waste. HLL might leverage their ice cream cart reezer

technology to acilitate this.

Strategic Mix

HLL Depot is a balanced strategy ocused on replacing the commissionagent / mandi node in the value web. Tis new node cuts out the middle-

man and supports multiple and currently unmet armer needs by fowing

both inormation and more money to the armer while also allowing HLL

to obtain more consistent inputs at lower prices.



1



42/85

HLL Learning Network

For the over 600 million armers in Indiawith little to no ormal education in modern

cultivation techniques, the HLL LearningNetwork will leverage the network created byProject Shakti and other rural initiatives toprovide a convenient and comprehensive suiteo agri-education programs.

Overview

Agricultural Education looks to improve current arming practicesby providing armers with knowledge and tools or communication.

Educational initiatives, accomplished through both high and low tech

means, will raise social and economic standings o the rural class by

providing them with the means to produce more eciently and at higher-

quality, while at the same time providing Hindustan Lever with access to

better inputs at a lower price.

Te main ocus o the HLL Learning Network is to teach armers the

most productive means o arming. One way o achieving this is through

the establishment o one large or several small educational institutions.

However, due to the dispersed nature o villages and low economicopportunity, other non-traditional methods o direct education must also

be introduced.

Te other ocus o the Learning Network mission is to empower armers

and villagers to make better choices or themselves. Te Empowerment

Network provides armers and villagers with tools that allow them to

make better decisions or themselves and share inormation across villages.

Newsletters will provide inormation regarding nutrition and arming

practices, and Wired Communities will allow villages to transer and share

inormation with one another.

While these concepts can have an immediate, positive eect on millions

o armers with nominal expense on Hindustan Levers part, maximum

impact depends on both the continued rise o literacy rates among armers

and a strengthening o Indias communications inrastructure.



2

Strategic Plans | Enabling Agriculture | HLL Learning Network


43/85


Educate Village Leaders

While its not easible to educate Indias 600 million armers, educate

the right ones can be an eective way to get the message passed along.

Tereore, Hindustan Lever trained and unded teachers will travel between

villages, instructing leaders on various subjects ranging rom proper diet

and nutrition, best practice arming techniques, and advice on what crops

to plant in uture years.

HLL trained mentor armers

It is oten more powerul to show than to tell. Hindustan Levers mentor

program, through direct instruction with villages, is used to show armers

how to best harvest their land. Mentor armers would visit arming villages

with modern equipment and techniques in an attempt to get armers to

adopt new methodologies by showing them in practice. Tis technique is

especially useul among the risk-averse, where buy-in is oten dicult to

achieve through conversation.

HLL University

A more traditional approach to education would be the establishment o

local or state-wide universities where armers could come to learn more

about modern arming approaches. While this would require a signicant

investment on the part o HLL, it has ar reaching implications not only

within the agriculture industry, but also or HLLs reputation o good

citizenship and social consciousness.

Nutritional/Education Newsletter

An ecient and low-tech way o providing inormation to villagers

in remote areas, Newsletters can be used to educate armers and their

amilies in proper nutrition and arming techniques. HLL produced

and made available or ree in the many local markets, the Newsletters

seek to improve nutrition standards, help armers decide what types o

crops to plant, and teach the most eective ways o arming, while also

ullling Hindustan Levers strong commitment to social responsibility and

complementing other initiatives such as Project Shakti.

Wired Communities

Wired Communities utilize Indias growing communications inrastructure

to connect villages and encourage the ree fow o inormation. A village-

wide communications hub would be established to allow armers to

leverage simple and economical methods o digital communication such

as SMS or email. Farmers would be able to share and learn rom past crop

planting and sale inormation, as well as increase cooperation between





44/85

villages that were previously unable to easily communicate.

Strategic Mix

Te HLL Learning Network is another balanced strategy which adds a

completely new educational node to the value web. Supporting armersunmet needs or certain types o ormal agricultural training through

already established HLL-built, the network also provides the company with

a new type o research and development tool, both in villages and at HLL

University.





45/85


For the hundreds o millions o Indianarmers toiling away on small and inecient

arms with little means to increase theirproductivity, HLLs Farmer Advocacy Boardwill work to organize and maximize agri-productivity through a suite o programs andtools which consolidate land use and nancenew levels o crop output.

Overview

Due to their level o infuence and abundance o resources, Hindustan

Lever is in the unique position to help their service providers improve their

oerings. Te Farmer Advocacy Board utilizes the strength and size o HLL

to work on behal o the armers to provide increased access to agri-inputs

and equipment while also providing guidance, nancial assistance, and

organizational and eciency aid. Both parties benet rom the increased

eciencies o size this relationship provides.


Resource Provisions

Hindustan Lever leverages their buying power and a more organized arm

structure to assist armers in obtaining agri-inputs that were previously cost

prohibitive or ill-suited to the small, ragmented arm size.

Resale o bulk input purchases

Hindustan Lever can obtain substantial savings by making bulk purchases

rom the suppliers o agri-inputs such as seeds, ertilizer and chemicals.

Tey then resell these supplies to the armer at little or no mark-up,

allowing armers who only buy or one arm each season to enjoy

substantial savings and the increased benets o modern inputs.

Access to modern equipment

Hindustan Lever is able to leverage their nancial resources to purchase

inputs and equipment and through loan or leasing programs, make them

available at cost to armers who normally wouldnt be able to aord them.



Strategic Plans | Enabling Agriculture | Farmer Advocacy Board


46/85

Working in conjunction with a more organized arm structure, armers are

able to use modern, robust harvesting and irrigation equipment to increase

arm eciency.

Guidance Service

Hindustan Lever uses their expertise in management and research and

development to help armers organize themselves into a more cooperative

structure, provide drastically needed capital and insurance, and pioneer

new models o eciency.

Farmer Organization

Hindustan Lever can help eliminate the ineciencies created by small,

ragmented arms by organizing armers into alliances that eectively

establish larger co-operative arms. Tese eciencies will positively impact

the supply chain by allowing armers to plant, harvest and sell crops

through a larger, more organized structure.

Financing/Credit/Insurance

Due to the relatively slim margins created within the traditional arming

structure, Indian armers are very hesitant to try new techniques in the

absence o proper insurance covering crop ailures. Hindustan Lever can

provide insurance programs that will help lessen armers exposure to these

risks. Tey can also oer nancing or credit to urther encourage adoption

o new, more ecient techniques.

Farming Eciency research

Hindustan Levers competencies in research & development can be used

to create new, more ecient ways o arming. By making these new

techniques available to armers at little or no cost, they will increase the

quality and volume o their inputs.

Strategic Mix

Te Farmer Advocacy Board is a relatively aggressive strategy in that it

introduces a node in the value web that moves to organize armers. While

organized armers may hold more negotiating power with HLL, they will

also be more productive and more fexible in terms o providing supply o

specic crops and volume as HLL has a need.



6

Strategic Plans | Enabling Agriculture | Farmer Advocacy Board


47/85

Connect Consumers

At the other side o the value web, in the retail and consumer sales sector,

Hindustan Lever has a window o opportunity to be a dominant player

in the urban retail grocer business. Tis rapid and tremendous rise in

the size and buying power o the middle-class consumer population hascreated a vast need or aspirational and branded products. HLL is already

capitalizing on this need in some ways by introducing premium health

and beauty products. However, urther rewards can be reaped by directly

entering the retail business and by producing a new wider range o branded

consumer products. More specically, HLL can pursue two system

strategies to address unmet needs in the market: H

hll thenewindia report final

Documents