Hindustan Unilever: Scaling a cost-efficient distribution and sales network in remote markets - By Raghav Narsalay, Ryan T. Coffey and Aarohi Sen ...
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Hindustan Unilever: Scaling a cost-efficient distribution and sales network in remote markets By Raghav Narsalay, Ryan T. Coffey and Aarohi Sen Case Study
Hindustan Unilever: Scaling a cost-efficient distribution and sales network in remote markets
Consumer goods companies have been among the first to make quality. The company therefore needed to
headway in low-income markets of emerging economies. Yet they rely heavily on its brand to promote its
products. However, brand building was
face an uphill battle once they get beyond cities to often-remote
made more difficult by the absence of
rural areas, where distribution and sales networks capable of traditional media and advertising channels
profitably supporting operations of necessary scale are difficult in rural villages.
to build. With “Project Shakti,” Hindustan Unilever has answered this
challenge through a blend of strong local connections and changes
to its organizational structure. Strategies for success
Consistently ensuring top leadership
Impact of the inclusive Recently, Project Shakti has expanded its participation in the project: HUL’s
business initiative operations to include men (Shaktimaan) chairman and board remained heavily
as part of its distribution network. These involved during the 15-month pilot stage.
Through Project Shakti, Hindustan Unilever Shaktimaans are all husbands of Shakti Managers presented monthly progress
(HUL) markets and sells its health and Ammas. Their employment not only boosts reports to the board during this phase and
beauty care products to low-income household income; it has also helps to HUL’s supply chain leads were also expected
consumers in rural Indian villages. Such improve the retention rates of Shakti to provide support upon the request of
villages often lie entirely outside the reach Ammas—an increasingly critical factor a pilot program manager. After the pilot
of mainstream media, and they cannot be for the long-term sustainability of phase, six projects—including what became
reached cost effectively through the usual Project Shakti. known as ‘Project Shakti’— were identified
marketing channels, such as retail stores or by the board as potentially viable, scalable
online shopping sites. With 45,000 Shakti Ammas and 26,000 and worthy of further investment. For
Shaktimaans, HUL today reaches an the next three years, the six managers, or
To reach consumers in villages, HUL has estimated 3 million rural households a venture leaders, appointed to oversee a
recruited local female entrepreneurs— month through this initiative. given project continued to present to HUL’s
Shakti Ammas (“Shakti” – power and board once every three months. Drawing
“Amma” – mother)—across 15 states to act on a standardized set of 3- to 6-month
as salespeople and brand-builders. HUL’s Barriers to scale performance benchmarks, the board was
products are delivered to central locations able to assess each project and determine
where Shakti Ammas purchase the goods Infrastructure deficit: Poor physical its viability while also quickly shelving
and from there to thousands of villages. infrastructure made it difficult to use HUL’s projects that were not scalable. Only two
well-established urban distribution network out of the six ideas made it to the market.
Shakti Ammas generate income under to support its Project Shakti operations in One was for Pureit, a water purifier; the
a commission-based model. They earn rural locations. other was Project Shakti.
approximately Rs. 2000-3000 (US$41 –
$59) a month, double or triple a typical Negative incentives: Many low income Designing unique metrics and making
village income they would likely have families participate in government-led adjustments to organizational structure:
earned before joining HUL. HUL also offers initiatives that guarantee rural employment. One of the keys to Project Shakti’s success
Shakti Ammas free courses on hygiene. While Project Shakti workers generally has been the design of metrics to ensure
These courses help Shakti Ammas market earn more, they are not paid every day that the initiative is continually aligned
HUL’s products, but more importantly like those employed by the government with HUL’s strategic priorities. For the
they also help them understand how to programs. Thus, retaining workers who first three years of the project – the pilot
stave off diseases in their villages through have immediate cash flow problems stage – HUL’s focus was on determining
better hygiene. became more difficult for Project Shakti. the scalability of the initiative. Accordingly,
financial targets – for example, profit
Institutional deficits: Many of the
household products HUL planned to
market with Project Shakti were already
available in rural villages, such as shampoo
and soaps – though usually of a lesser
2 | Accenture Institute for High Performance | Copyright © 2012 Accenture. All rights reserved.
Hindustan Unilever: Scaling a cost-efficient distribution and sales network in remote markets
growth – were not considered important oversee capability development. During With seasonal migration a common
metrics during this phase. Instead, the this phase, each manager from the occurrence in rural India, the ability to
company examined three-to-six month contracting firm provided localized continue to map population density quickly
targets on sales volume and the number of attention to 400-500 Shakti Ammas, and is a key competitive advantage, and a
villages where the project was operational. their success was measured based on sales critical factor in building a flexible rural
growth and improvements in the women’s supply chain.
Next, the company focused on the sales techniques. HUL also developed a
sustainability of its Shakti Amma network. management team at the state level. These
It hired a new layer of managers, each of managers were assessed on typical financial “Having seen Project Shakti from
which was responsible for 2,000 Shakti indicators, such as revenue growth and inception, I recall many instances
Ammas. Their performance was measured profitability, and were specifically tasked
when this project could have
according to the average income level of with driving cost efficiency by standardizing
the Shakti Ammas in their network; their the project’s operations. been shut down or veered off-
access to credit from alternative sources, course; and it was only the deep
such as self-help-groups to fund their Using technology to design a flexible belief in the organization, from
business; and the ability of Shakti Ammas rural supply chain and sales network: the chairman to the salesman in
to generate revenue in addition to their HUL Customer data on low-income rural Indian the field, that it was the right
business (for example, by selling mobile populations is extremely limited, and their
thing to do… that it was nurtured
phone credit to villagers)—all of which are tastes and preferences are notoriously
critical to the network’s sustainability. diverse and hard to determine through
when it was small. Today it is an
traditional customer surveys. As a result, integral part of our business.”
Following the sustainability phase, HUL built a GPS and density mapping
HUL instituted a two-fold change to technology to design its rural supply chains –Hemant Bakshi, Executive
their organizational structure in order and sales network. The population density Director, Home & Personal Care.
to improve cost efficiency and capability and the distance between villages play
development. At the ground level, HUL a key role in determining the number of
hired a third-party contracting firm to Shakti Amma and Shaktimaan recruits,
their placement, and the volume of the
product the supply chain needs to handle.
3 | Accenture Institute for High Performance | Copyright © 2012 Accenture. All rights reserved.Company information About Accenture
Hindustan Unilever (HUL) is India’s largest Accenture is a global management
fast-moving consumer goods company. consulting, technology services and
HUL currently offers over 35 brands in outsourcing company, with 257,000
India spanning 20 categories including people serving clients in more than
soaps, detergents, shampoos, skin care, 120 countries. Combining unparalleled
toothpastes, deodorants, cosmetics, tea, experience, comprehensive capabilities
coffee, packaged foods, ice cream and across all industries and business functions,
water purifiers. It’s estimated that HUL has and extensive research on the world’s
sold products to two out of every three most successful companies, Accenture
Indians. collaborates with clients to help them
become high-performance businesses and
The company has over 16,000 employees governments. The company generated net
in India and recorded an annual turnover revenues of US$27.9 billion for the fiscal
of around Rs.217.36 billion (approximately year ended Aug. 31, 2012. Its home page is
US$ 4.53billion) in FY2011-12. HUL is a www.accenture.com.
subsidiary of Unilever, which holds about
52 percent of equity in HUL.
About the Accenture Institute
for High Performance
About authors:
The Accenture Institute for High
Raghav Narsalay leads the research team Performance creates strategic insights
in India for the Accenture Institute for High into key management issues and
Performance. He is based in Mumbai. macroeconomic and political trends
through original research and analysis.
Ryan T. Coffey is a senior specialist Its management researchers combine
with the Accenture Institute for High world-class reputations with Accenture’s
Performance. He is based in Mumbai. extensive consulting, technology and
outsourcing experience to conduct
Aarohi Sen is a specialist with the innovative research and analysis into how
Accenture Institute for High Performance. organizations become and remain high-
He is based in Delhi. performance businesses.
Copyright © 2012 Accenture
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