Growth Strategies in FMCG

Drive penetration with modifying/repackaging products Develop and market products especially for low and lower-middle income households Increase the share in consumer spending

 Page out of book of Unilevers path to grow strategy Unilever slashed global brand portfolio from 1100 to 400 in Q4 of 2000 More than 90% of Unilever profits came from these 400 brands Pareto distribution HLL had over 100 brands in 2001 when Vindi Banga took the reins Agricultural slowdown eroded purchasing power in rural areas Slowdown particularly severe in laundry, tea and personal wash categories 36 specific products and brands contributed 80 % to total revenues of HLL Personal Products Division (PPD) had 21 brands but 85-90 % revenues from just 9 brands!

Power Brand Strategy Rationale

 Divested holding partially / fully in most non-FMCG categories - seeds, Animal Feeds, Nickel Catalyst, Oils & Fats, Mushrooms HLCL (Chemicals & Fertilisers) in which HLL holds 50% was merged with Tata Chemicals Phased out brands such as Sunlight in detergents and Jai in toilet soaps - focus better on 36 Power Brands Marketing strategies in 2002 revolved around rejigging / relaunching established brands - Lifebuoy, Rin, Surf and Vim Advertising and promotional expenses at Rs. 824 crores in 2001 - more than 90 % accounted for by Power Brands Launch of Fair & Lovely Soap, Lifebuoy Talc, taking the Max Ice-cream brand to Confectionery brand extension into new categories

Power Brand Strategy Implementation

 In H2 of 2001, Power Brand sales were up 9 % in a situation where the FMCG market declined by 3-4 % Increase in 2001 annual profit margins by 20.9% Accelerated HLLs FMCG topline growth to 7 % in H2 of 2002 compared with 3 % in H1 of 2002 Costs for raw materials reduced by 5% On-hand inventory levels cut by 33% Customer service levels increased by 10% Top 15 brands accounted for 70% of HLLs domestic consumer business in 2004 Top five brands together accounted for sales over Rs.4000 crores

Power Brand Strategy Results

Power Brand Revenues

Power Brand Wheel Lifebuoy Lux Revenues (Rs. Cr. In 2004) 973 844 824

Brooke Bond Red Label Fair & Lovely Surf

Clinic

784
675

447
397

Power Brand Strategy Kickbacks

Migrating marginal rural brands like 501 and OK to Wheel pulled down distribution network Divested brands like Ruby Dust accounted for 70-80 % of beverage business in Maharashtra Carrier Brands piggyback on distribution chain Vanasapti brand, Dalda - no potential for "health conscious consumers - $22 billion, US based, Bunge Ltd saw potential To grow profits despite smaller volumes, managers raised prices despite commodity prices falling - consumers began to exit HLL brands Due to short-term pressure to deliver numbers, investments in brand building and advertising fell Withdrawal from small markets has given opportunity to small players - once new companies establish themselves using this as a base - may move into big league

Organizational Restructuring
HLL Turnover by SBUs
2 27 100% 90% 80% 70% 60% % 50% 40% 30% 20% 10% 0% 2000 2001 2002 Year 2003 2004 57 61 67 68 71 Others Foods HPC 37 33 30 29 6 6 3 3

Distribution Network

HLL Super Value Store Program

Project Objectives

Leverage the full potential of the Family Grocer channel through

a.
b. c.

Superior quality of service.

Demand generation activities: the Supervalue Store Program Strength collaboration for mutual growth

Trading Terms and shopper activation

1.

Visibility aids
1. 2. 3. 4. 5. Signage Pillar branding HPC Wall Super value offers Sachet Hangers : : : : : glow sign 2 brands for each PC 6 shelves 2 shelves 2 for Dets/3 for PP

2.

5.

4.

3.

Shakti- Rural Penetration

Focus for a brighter future- 638,365 villages Not reach out to 87% of Indias villages having population less than 2000 As part of project Millenium-Launched in 2001 100 shakti ammas- Nalgonda,Andhra pradesh Reach -60,000 villages, 12 states, 13500 shakti women enterpreneurs Unique Win-Win opportunity programme Contributes 100 crore to lever topline End of 2005-100 million rural Indians

Livelihood Model
Micro enterprise opportunity- Self help groups Combination of Retail Distributor & Home to Home Key enablers-Partnership from NGOs and support from State Govt. Doubling average household income End of 2005- 25,000 Shakti dealers

Shakti Vani
Improve standard of living Focus on health and hygeine Currently 10,000 vanis in M.P.& Karnataka

I-shakti
IT based rural information system agriculture, education, vocational training, health and hygiene Functional since August,2003 vision is to scale up operations to 1500 kiosks by 2005, delivering information services to over 10 million rural people across 7500 villages.

2P-3C Strategic Model For Rural India

Planning entry into rural market Rural Market Consumers Channels

Passion

Competition

Pace

FUTURE-Long-Term Growth Drivers

India is hitting a sweet spot in terms of all the ingredients to drive sustained growth in consumption.
The highest number of people in the consuming age group ever in its history Declining dependency ratio Increasing urbanization levels

The Right Age

The proportion of population in the consuming age will increase over the next few years
Over 60% of the population will be in the age group of 15-54 by 2010 compared to 58% in 2005. The ratio of non working population to working population will decline steadily over next few years.

The Right Income

The rapidly growing services sector and a pick up in industrial activity will underpin economic growth, leading to growth in per capita income. According to NCAER, the number of households in middle-high income groups itself would grow at 7.9% per year over the next 3-4 years.

The Right Place

Increasing urbanization Urban population is increasing at a rate of 2.3% per year as against a total population growth of 1.1%

The Right Psychographics

A proliferation of channels and increasing penetration of cable and satellite television has changed Indian attitudes towards consumption

New Ventures

Water
Pureit - the most advanced water purifier in the world Free from viruses, bacteria and parasites Pureit meets the germkill standard of the toughest regulatory agency in the USA, the EPA. Pureit has been initially launched in Chennai and the response has been encouraging.

Hindustan Lever Network

Hindustan Lever Network is a multicategory business opportunity in the area of network marketing in Home and Personal Care Hindustan Lever Network is now present in over 220 locations across the country servicing over 1400 towns.

SangamDirect
Direct to consumer e-tailing initiative services Scaled up in Mumbai State of the art call center and pick-n-pack facility is put in place to achieve superior service levels at optimal costs. Over 100,000 families have already tried out the convenience offered by Sangam.