SWOT for HUL – Project Shakti

Strengths:

1st Mover Advantage HUL was the first company to tap the ‘less viable and difficult to access’ rural markets. Though less viable and difficult to access, the size of the market is huge, roughly 500 million people in more than 5 lakh villages. HUL, through Shakti, was the sole provider here and enjoyed a monopoly.

Strong Sales and Distribution NetworkHUL’s smart and innovative marketing strategies successfully served the major rural markets which were well connected with urban centres. HUL established a strong Sales and Distribution network here by appointing rural distribution stockists for all of its profit centres. This distribution network helped it reach the inaccessible markets faster and more efficiently as supplies could be sought from the nearby rural RS (Redistribution Stockists).

Product MixHUL’s product mix was such that it catered to most of the major needs of the consumer. It made soaps and other cosmetics for personal care, detergents for cleaning purposes, foods and beverages. It had something to offer to everyone which gave it more business opportunities

Products for every segmentWhile it had ‘Surf’ for the high income group, HUL also made ‘Wheel’ to target the lower income segment. With a variety of products to offer, it could serve more people.

Win – Win Initiative (cause – related marketing)Through Shakti, HUL spread awareness about the importance of hygiene. It taught the young children of rural India to wash hands frequently and this translated into a decline in deaths due to hygiene related disorders like diarrhoea (India contributes 30% of world’s diarrhoea deaths). Thus there was a social benefit in this initiative while HUL could promote its brand – ‘Lifebuoy’.

Women of the HouseShakti was promoted through the women of the households. Women are the key buying - decision makers in the product categories where HUL operates. Thus, it established a good name for itself in their minds and could retain them.

Reduced ImitationWith genuine HUL products easily available in the rural markets, the incidences of imitation and fake products reduced.

Weaknesses:

Only a few key brandsThe company promoted only a few key brands through this project. Customers looking for other brands were not catered to. Project Shakti focussed mainly on Lifebuoy.

Lesser MarginsThe rural consumer buys in lesser quantity. So the company had developed smaller SKUs and this increased its packaging costs. Also, the target customer was not very affluent and so, the product had to be priced even lesser. This really shrunk HUL’s margins.

Dependence on VolumesThe success of this project relied on volumes. With lesser margins, a lot was required to be sold to make the project viable. After launch in December, 2000 in Nalagonda district of Andhra Pradesh, the project broke even after 4 years.

Poor Reach of Electronic MediaHUL traditionally used massive advertising and marketing of its products through the electronic media to create brand awareness and generate customer interest. However, here was a market where the electronic and print media was virtually non-existent, and further, a majority of the target audience was illiterate and ignorant.

Cultural ChallengesWomen in the hinterlands of India have traditionally been ‘home-makers’ and the society finds it difficult to see them in new roles, like entrepreneurs. Finding acceptance for the idea of women promoting HUL’s products in their areas was difficult. Moreover, these women had no experience of business and the risk appetite was low.

High Cost of Scaling UpServing the market efficiently would require excessive scaling up. That is, extending reach to the entire rural market and bringing in more and more Shakti entrepreneurs. It was costly to do so.

Language Barrier and Infrastructural ConstraintsThe market was as diverse as it was huge. HUL had to deal with people coming from varied backgrounds, speaking different languages and behaving differently, which was often a challenge. Secondly, infrastructure posed major issues in the supply of its products. Members of the Shakti initiatives had to use local means of transport – cycles, bullock carts, motor cycles, jugaads. Such a supply chain was unreliable.

Opportunities:

Huge MarketHalf of India’s 1.2 billion population lives in these villages which have largely been neglected by other players because of the challenges in doing business here. For HUL, this was an opportunity.

Low PenetrationWherever the rural markets were supplied with fast moving consumer goods, the penetration was very low. So a large chunk of the market was still not served.

Rising IncomesIncome levels in rural India have been on the rise, thanks to government initiatives like NREGA. Thus, the market is expanding as more and more people now want to buy HUL’s products and have the ability to do so too.

Aspirational ProductsHUL makes aspirational products, that is, products which people desire and would buy if they are able to do so. Brands like Lux and Dove have been marketed so well that they have earned a solid reputation. People associate these brands with affluence and prosperity and aspire to use them.

Social InitiativeProject Shakti promotes the concept of hygiene. It has been fairly successful in pushing diarrhoea deaths down and therefore, it might be supported and encouraged by other stakeholders like the government, NGOs and the community as a whole.

Threats:

CompetitionEvery move of HUL has been emulated by competition and the same holds for Project Shakti as well. The local and unorganized sector is another major competitor of HUL in this market.

Skeptical Of MNCsPeople of developing countries are very sceptical of MNCs and this initiative might also be looked at with an eye of doubt

High Demotivation LevelMembers of Shakti, having a low risk appetite, might get demotivated and back out of the project.