Analysis on Hindustan Unilever

8/4/2019 Analysis on Hindustan Unilever

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VISION

HUL's vision is to continuously innovate technologies to further reduce water

consumption and further increase conservation in its operations.

Simultaneously, HUL sites will progressively help communities, wherever

required, to develop watersheds.

MISSION

Unilever's mission is to add Vitality to life. We meet everyday needs for

nutrition, hygiene, and personal care with brands that help people feel good,

look good and get more out of life.

INTRODUCTION

Hindustan Unilever Limited (HUL) is India's largest fast moving consumer

goods company, with leadership in Home & Personal Care Products and

Foods & Beverages. HUL's brands, spread across 20 distinct consumer

categories, touch the lives of two out of three Indians. They endow the companywith a scale of combined volumes of about 4 million tones and sales of Rs.13,

718crores. The mission that inspires HUL's over 15,000 employees is to

"add vitality to life". With 35Power Brands, Unilever sells Foods and Home

and Personal Care brands in about100 countries worldwide.

HISTORY

Hindustan Lever Ltd (HLL) is India's largest Fast Moving Consumer Goods

(FMCG) Company. HLL' s brands like Lifebuoy, Lux, Surf Exce l, Rin,Wheel, Fair & Lovely, Pond's, Sunsilk, Clinic, Pepsodent, Close-up,

Lakme, Brooke Bond, Kissan, Knorr -Annapurna, Kwality Wall'sare

household names across the country and span a host of categories, such assoaps, detergents, personal products, tea, coffee, branded staples, ice cream and

culinary products. These products are manufactured over 40 factories across

India and the associated operations involve over 2,000suppliers and associates.

Hindustan Lever Limited's distribution network comprises about

4,000redistribution stockists, covering 6.3 million retail outlets reaching the

entire urban population, and about 250 million rural consumers. HLL is also oneof India's largest exporters. It has been recognized as a Golden Super Star

Trading House by the Government of India. Presently HLL has over 16,000

employees including over 1,200 managers. Its mission is to "add vitality to

life."The AngloDutch Company Unilever owns a majorit y stake in

Hindustan Lever Limi ted. In the late 19th and early 20th century Unileverused to export its products to India. This process began in 1888 with the



PORTER’S FIVE FORCE MODEL:

BUYER POWER: Consumer faces weak buying power because customers are fragmented and

have little influence on price or product. to

negotiate the price with the companies.

from retailers.

SUPPLIER POWER:

supplier power simply because of

the cost they incur when switching suppliers.

of business with these companies are also be

holden to their customers

THREAT OF NEW ENTRANTS:

amount of capital investment needed to enter certain segment in

house hold consumer products, the threat of new entrant is fairly low.

get its products on the shelves of the same

retailers as its much larger rivals.

Low threat of new entrants.

THREAT OF SUBSTITUTES:

helping to build a

competitive advantage, but even the pricing power of the brands can be eroded.igh threat of substitutes.

DEGREE OF RIVALRY:

in this category enjoy multitude of choices.of shampoo instead

of another ,making the industry quite competitive

SWOT ANALYSIS

STRENGTHS: – Strong and well differentiated brands with leading share positions.

Brand portfolio includes both global Unilever brands and local brands of

specific relevance to India.

– Consumer understanding and systems for building consumer insight. – Strong

R&D capability well linked with business.

– Integrated supply chain and well spread manufacturing units. – Distribution structure with wide reach, high quality coverage and ability to

leverage scale.



– High quality manpower resources.- Strong and well differentiated brands with

leading share positions

- Distinctly placed products providing reach to every segment of society.

- Consumer understanding and systems for building consumer insight-

Integrated supply chain and well spread manufacturing units- Distribution structure with wide reach, high quality coverage

- The launch of project “Shakti” has helped HUL to create brand awareness and

extensive reach in rural India.

WEAKNESSES:

– High Social costs (housing, food grains & firewood, health and other welfare

measures) in the Plantation business

-Price positioning in some categories allows for low price competition like

Amul captured Kwality‟s market. - Limited success in changing eating habits of people.- Competitors focusing on

a particular product and eating up HUL‟s share, like Nirma focusing on soapsand detergents.

OPPORTUNITIES:

– Upgrading consumers through innovation to new levels of quality and

performance.

– Emerging Modern Trade can be effectively used for introduction of more

upscale Personal Care products.

– Growing consumption in Out of Home categories. – Position HLL as a sourcing hub for Unilever companies in various countries.

– Leveraging the latest IT technology

- Untapped market in branded Ayurvedic medicines and other such consumerproducts.

- Opportunity in Food sector: changing consumer tastes

- Expansion of horizons towards more and more countries

THREATS:

– Low priced competition now present in all categories. – Grey imports.

– Spurious/counterfeit products in rural areas and small towns. – Changes in

fiscal benefits.

– Unfavourable raw material prices in oils, tea commodity etc

Strategy adopted by HUL

HUL (Hindustan Uni Lever Ltd) formerly HLL and see how the complex task

of brand management is actually handled. This company is taken for this articleas HUL is considered as one of the most successful in Brand Management.HLL



has a large brand portfolio consisting of nearly 110 bands. In every product

line, it has built a number of brands over a period of time. Quite a few brands

have come to its fold from the parent company. It has also acquired several

ongoing brands from the market. HLL also vigorously pursues brand extension

strategy. And concurrently, HLL undertakes line pruning and brandrestructuring and consolidation, based on marketing compulsions. HLL is also

playing the rejuvenation and re-launch game. With great benefit the corporate-

level endeavours at business expansion and diversification are also throwing

new challenges on the brand strategy front. HLL lends itself for a proper

understanding of the complexity of the brand management task. We shall

examine how HLL handles the complex demands in brand management. Such

an array of brands is the outcome of a conscious corporate strategy by HLL.

As a corporate, HLL wants to be a leader in every one of its businesses and the

strategy is to fight on the strength of the competitive advantage arising from the

which will lead to a significant reduction in prices of food, making food

more affordable and thereby increasing consumption. The growth in foodconsumption in turn will increase farmers‟ incomes, the slowdown of which is a

key reason for downturn in Indian industry. “We as a country have responded to

crises through concerted action born out of national consensus. The success of

the Green Revolution and the White Revolution are proof of this. Now, we need

a Food Revolution to foster a virtuous cycle of regenerative, broad-based

growth,” he said. Calling it the paradox of Indian agriculture, Mr. Banga

pointed out that while go downs were overflowing, about 42% of the rural

population and 49% of the urban population received less than the accepteddaily calorie intake norm. This is because these consumers can not afford food

at the current prices. Since food consumption has hit a plateau, farmers‟incomes have stagnated, despite rising procurement prices. Mr. Banga said thatthe policy framework has so far sought to increase agricultural income by

increasing minimum support prices or subsidies. But with food going out of the

reach of large sections even at current prices, the only way to increase farmers‟income is to increase consumption of food. HLL‟s modeling hasdemonstrated that if, for example, the price of wheat can be reduced by Rs.2 per

kg, and consumption will increase by 25% (about 41 million tones) among thelower income groups.

soaps, as an example, HLL has the objective of being a national player (not a

niche or a regional marketer) and the leader therein. HLL also wants about 30

per cent of the corporate income to come from this line. So, HLL opted for the

strategy of developing quite a few strong brands in this line, and among themthey cover different market segments and price points. Dove, Lux, Liril,

Rexona, Pears and Lifebuoy are the outcome of such a well planned brand

strategy.



Action plan by HUL:

The Chairman of Hindustan Lever Limited (HLL), Mr. M.S. Banga, addressing

the company‟sAnnual General Meeting, presented an action-

plan for a „Food Revolution‟ to sustainablyaccelerate agricultural

growth which, in turn, will regenerate and sustain demand across theeconomy. With over 70% of the population being dependent on it,

agricultural growth has a multiplier effect driving demand across all sectors

of the economy and overall GDP growth. He announced that HLL‟s modeling

had shown that a 3% incremental growth in agriculture will lead to a 2.6%

growth in the manufacturing sector, taking overall GDP growth closer to the 8%

mark.

Food Revolution:

Mr. Banga outlined a strategy

Challenge Cost:

To reduce costs, Mr. Banga said that agricultural pricing could be guided by

HLL‟s philosophy of „Challenge Cost‟, instead of the prevalent cost-plus model.

The company first determines what the consumer is willing to pay for the

benefits a product offers. It then determines an appropriate margin. The target

consumer price less the target margin gives the „Challenge Cost‟ that HLLachieves through its expertise in R&D, manufacturing and supply chain.

Mr. Banga presented a strategy and action-plan to determine and achieve such

„Challenge Costs‟ in the country‟s agriculture. He said that HLL‟s modeling hadshown that if such a strategy is implemented, the cost of wheat, for example,

can come down by Rs.2.50 per kg, If the saving is shared, it will both increaseconsumption and farmers‟ incomes. Mr. Banga proposed a three

pronged strategy encompassing a) Precision Farming to improve farm

productivity within the current land-holding pattern b) creating a structure tofacilitate growth of a vibrant food processing industry and c) identifying various

enablers for the model to work.

to match the variation of soil and terrain across time and the area of his plot

rather than following the current practice of a “one size fits all” approach whichmanages crops at the lowest common denominator.

should be forged through the establishment of Farmer Service Centres. These

would be partnership webs between the farmer and agri-input companies, banks,

insurance companies, grain handling and storage companies, and food

processors. To be run as a private enterprise, Farmer Service Centers would

have an appropriate radius of operation.

be implemented with reorientation of

Government policies towards promoting efficiencies and value addition.



RESOURCE ALLOCATION AT HUL

The giant of Indian FMCG sector, HUL from soap to food to personal care to

household care has a share in every product enters into Indian household. Now

the giant is trapped in Gorilla war fare across the product line. Different

competitors with different strategies are on the battle field. The strategicproblem evolves when the focus of different competitors is category specific

and even some are competing with cost differentiation as additional one. Ice-

cream segment is a weak point for HUL as a low revenue stream. Vadilal

and Mother dairy are fully focused to tap the ice-cream lovers. The hair

care segment is inhabited by Cavinkare, Marico, Dabur, P&G and

Garnier. Even tea market is shrunk by Tata tea and other regional

pl ayers . Medimix on the regional level; Nirma and Godrej with

good geographically expansion are eroding the toilet soap market. If Fair and

Lovely is a knight for HUL then Cavinkare is looking for a square of chess-

board to counterattack with Fairever. It‟s unusual but well expected

game when a player is playing against competitors of different strengthsand at different geographical locations. The strategic problem comes when

it‟s a matter of resource allocation. The key insight is (don‟t share with anyone)

that HUL being a part of Unilever International has to maintain a profile margin

for its mother company but on the other hand P&G gets full resource

support from the mother company. That is the only reason why P&G alwaysurge HUL for price wars. The strategic trap of HUL is witnessed by a

bottleneck in the product portfolio of the company. The options for P&G are

open for price war because of two reasons. Firstly, resource support fromP&G International and secondly the competitive challenge will have a

cascading effect on HUL. Here we have one example to understand.

The products in price war could be dete rgents and shampoos but theVicks and Whisper of P&G is standing apart of competition as leading brands

and providing a safe revenue to the company. But in case of HUL there is no

such brand which is not in influence of warfare. The chakravyu for HUL is

active from multiple dimensions. Local players like Medimix playing on price

front. Big market leaders like Colgate Palmolive and P&G playing on their

respective fronts, former on user imagery and strong brand position andlater with head on strategy. It‟s not easy to play price war with local players butHUL has to stop them from invading the market. The innovative moves of

project Shakti, Project Millennium and Operation Bharat were some

successful moves to solve the problem at regional and rural level.

However HUL does not have any turf to challenge P&G without a hit on its

revenue. Lets view a bigger picture, HUL is in war with a bunch of

companies whose each element (pa rti cular company) is focused on a

particular category. Sometime back HUL has chosen a strategy which we call

proliferation. There was N number of variants of a brand from oral care to skin



care segment. The objective was to give various options to consumers and

then back-out the non-performing variants. HUL named it as the product

line rationalization strategy. It can be witnessed by the acquisition of brand

Nihar by HUL to Marico. If you look at the performance chart of the HUL

for the past 20 years, the performance is mind blowing. Year 1990, HULentered the oral care market with Close-up with gel variant and within a span of

9 years took 18 percent market share at the expense of Colgate, the

market leader. There is a crucial need to strategically place brands on

strong positions.

BALANCED SCORE CARD

The balanced scorecard is a strategic planning and management system that is

used extensively in business and industry organizations worldwide to align

business activities to the vision and strategy of the organization, improve

internal and external communications, and monitor organization performance

against strategic goals.HUL follows a very good balanced score card system. Every department right

from marketing, logistics, sales, finance and Human resource are internally

connected. It is very important for an organization like HUL to have an internal

fixed process in a company which has very less profit margin.

Every department is very well connected. With the Indian retail boom startedalready HUL has identified the flaws in the system and has successfully

modified entire system of sales and marketing internally. It has had good

competition from proctor and gamble but it has emerged out as a leader in thefight between both of them.HR strategy of HUL is so good that the employee

satisfaction is to the highest level which enhances the motivation in the

employees and allows them to be very open in their minds for the effectivenessof the organization. Hence, we can say that balanced score card system has

been successful be it any organization.

-Unfavourable raw material prices due to inflation, reducing profitability.

- Reduction in real income of consumers due to high inflation. Export of

Sunlight soap, which was followed by Lifebuoy in 1895 and other famousbrands like Pears, Lux and Vim soon after. In 1931, Unilever set up its first

Indian subsidiary, Hindustan Vanaspati Manufacturing Company,

followed by Lever Brothers India Limited (1933) and United Traders

Limited (1935).The three companies were merged in November

19 56 an d th e ne w en ti t y th at ca me in to existence after merger was

called as Hindustan Lever Limited. HLL offered 10% of its equity tothe Indian

public, and it was the first among the foreign subsidiaries to do so. Currently,

Unilever holds 51.55% equity in the company. Brooke Bond entered

Indian market in 1900 and in 1903 it launched Red Label tea in the

country. In 1912, Brooke Bond & Co. India Limited was formed.



Unilever acquired Brooke Bond through an international acquisition.

Similarly, Lipton's link with India date back to 1898.Unilever acquired Lipton

in 1972 and in 1977 Lipton Tea (India) Limited was incorporated. Pond's

(India) had been in Indian market since 1947.possession of strong brands. It

is this strategy that is getting reflected in the development of a multitude of strong brands.

Performance Trends:

Financial Record:



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Analysis on Hindustan Unilever