Hll Shakti Fbi Report

TH E IN DIAN I NSTIT UT E O F PLA NN IN G AN D MA NAGEM EN T

PROJECT REPORT ON

SUBMITTED TO:

Prof. MANINDER SINGH

SUBMITTED BY:

BHUMESH SHARMA (23) MANISH CHANDRA (41) SAURABH AGARWAL (61) SHIV NARAYAN (64) SUSHANT KISHORE (83) VINEET GOEL (79) VINUP KUMAR (80) VIRENDER S. CHAUHAN (81) SECTION: FB-1

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BATCH: SS/2004-06/PGP

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ACKNOWLEDGEMENT We know that the helping hands of many people back up the success. The guidance of our teachers proves to be icing on the cake. The same is the case with our project. Even our project wouldn’t have been possible without the eminent guidance of our teachers, suggestion of our colleagues and a sincere thanks to our respondents for their valuable views. We are thankful to Prof. MANINDER SINGH for giving us continuous help and guidance for the project. We are indebted to our colleagues at IIPM for their contributions in improvements and reviewing the project report. We express our heartful gratitude to all who assisted and supported to accomplish our goal. Above all we are thankful to almighty that blossomed us with his blessings for the completion of the project.

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TABLE OF CONTENTS

1. INTRODUCTION.....………………………………………………...4 2. HISTORICAL PROSPECTIVE…………………………………….6 3. HOW IT WORKS…………………………………………………....9 4. FINANCIALS……………………………………………………….11 5. OFFERINGS OF THE COMPANY……………………………....12 6. UNIQUE BUYING PROPOSITION….…………………………...15 7. COMPANY’S PLACE IN THE MARKET………………………...16 8. FUTURE…………………………………………………………….19 9. RECOMMENDATION…………………………………………..…22 10. APPENDIX………………………………………………………..25

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INTRODUCTION

Everybody wants brands. And there are a lot more poor people in the world than rich people. To be a global business and to have a global market share you have to participate in all segments. -

Keki Dadiseth, erstwhile Chairman, HLL . -

The basic objective of Project Shakti is to economically empower underprivileged rural women by creating income-generating capabilities and providing a sustainable micro-enterprise opportunity in addition to improving rural living standards through health and hygiene awareness. -Sharat Dhall, Marketing Manager -Rural, HLL

In the early 2000s, around 700 million people, i.e. 70% of the Indian population lived in 6,27,000 villages, in rural areas. Of this, 90% were concentrated in villages with population less than 2000. According to a study conducted in 2001 by the National Council for Applied Economic Research (NCAER), there were as many "middle income and above" households in rural areas as there were in urban areas. There were almost twice as many "lower income households" in rural areas as in urban areas. There were 2.3 million "highest income" households in urban areas as against 1.6 million in rural areas. NCAER projections indicated that the number of "middle income and above" households was expected to grow to 111 million in rural India by 2007, compared to 59 million in urban India. Gone were the days when a rural consumer had to go to a nearby town or city to buy a branded product. The growing power of the rural consumer was forcing big companies to flock to rural markets. At the same time, they also threw up major challenges for marketers. Servicing rural markets involved ensuring availability of products through a sound distribution network, overcoming prevalent attitudes and habits of rural customers and creating brand awareness. Price-sensitivity was another key issue. Rural income levels were largely dependent on the vagaries of monsoon, and demand was not easy to predict. Thanks to TV, consumer awareness in rural areas had increased. Rural expenditures on Fast Moving Consumer Goods (FMCG) were growing at an impressive rate of 20 -25%. Several companies were taking rural marketing seriously, one of them being Hindustan Lever Ltd (HLL), Unilever's Indian subsidiary. In 2004, HLL was India's largest FMCG company, with 30 power 5

brands (Exhibit: I), turnover of over Rs. 10,000 crores and 40,000 employees. HLL derived around 50% of its sales from rural areas. HLL's rural marketing initiatives began way back in 1988, when the company had launched 'Wheel' for the rural and lower income urban consumer. These efforts had intensified since the late 1990s when HLL like many other companies faced flat growth in the urban markets. In early 2004, as it reviewed its past performance, HLL realized that bulk of its future growth was likely to come from rural areas. The challenge for HLL was to exploit this opportunity in a profitable manner. The objectives of Project Shakti, explains Dalip Sehgal, Executive Director, New Ventures & Marketing Services, HLL, is creating opportunities to increase rural family incomes puts more money in their hands to purchase the range of daily consumption products - from soaps to toothpastes - that HLL makes. It also enables HLL access hitherto unexplored rural hinterlands. Says Sehgal, "We looked at several models of rural distribution, even at the Grameen Bank model in Bangladesh, before we decided on the pilot in Nalgonda to figure out this model. Now the model has been refined based on our learning here and we expect to roll out quickly in other states." For HLL greater penetration in rural areas is also an imperative - presently over 50 per cent of its incomes for several of its product categories like soaps and detergents come from rural India. The challenge for HLL now is to take its products to towns with a smaller population - under 2,000 people. As Sehgal points out, HLL's conventional hub-and-spoke distribution model which it uses to great effect in both urban and semi-urban markets, wouldn't be cost-effective in penetrating the smaller villages. Now, with this new distribution model, the smaller markets are now being referred to as `Shakti markets'.

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HISTORICAL PROSPECTIVE HLL's INITIATIVE IN RURAL DEVELOPMENT: Hindustan Lever Limited (HLL) and its constituent companies have been in India since 1931. Over these decades, while HLL has benefited from the developments in the country, it has contributed equally to these developments. HLL has consciously woven India's imperatives with the company's strategies and operations. The company’s main contributions include developing and using relevant technologies, stimulating industrialization, boosting exports, adding value to agriculture and generating productive employment and income opportunities. HLL has been proactively engaged in rural development since 1976 with the initiation of the Integrated Rural Development Programme in the Etah district of Uttar Pradesh, in tandem with the company’s dairy operations. This Programme now covers 500 villages in the district. Subsequently, the factories that HLL continued establishing in less-developed regions of the country have been engaged in similar programmes in adjacent villages. These factory-centered activities mainly focus on training farmers, animal husbandry, generating alternative income, health & hygiene and infrastructure development. The company has acquired a wealth of experience and learning from these activities. KEY LEARNING’S ON RURAL DEVELOPMENT: The principal issue in rural development is to create income-generating opportunities for the rural population. Such initiatives are successful and sustainable when linked with the company’s core business and is mutually beneficial to both the population for whom the programme is intended and for the company. Based on these insights, HLL launched Project Shakti in the year 2001, in keeping with the purpose of integrating business interests with national interests.

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WHY SHAKTI?  Empowering Women in Rural India The objective of Project Shakti is to create income-generating capabilities for underprivileged rural women, by providing a sustainable micro enterprise opportunity, and to improve rural living standards through health and hygiene awareness. Following the pioneering work carried out by Grameen Bank of Bangladesh, several institutions, NGOs and government bodies have been working closely, for nearly five years, to establish Self Help Groups (SHGs) of rural women in villages across India. Their experiments clearly indicate that micro-credit, when carefully targeted and well administered can alleviate poverty significantly. A crucial lesson learnt was that rural upliftment depended not on successful infusion of credit, but on its guided usage for better investment opportunities This is where HLL's Project Shakti is playing a role in creating such profitable micro enterprise opportunities for rural women.  Catalyzing Prosperity In Indian Villages Under the project, HLL offers a range of mass-market products to the SHGs, which are relevant to rural customers. HLL is investing significantly in resources who work with the women on the field and provide them with on-the-job training and support. This is a key factor in ensuring the stabilization of their fledgling businesses. HLL imparts the necessary training to these groups on the basics of enterprise management, which the women need to manage their enterprises. For the SHG women, this translates into a much-needed, sustainable income contributing towards better living and prosperity. Armed with micro-credit, women from SHGs become direct-to-home distributors in rural markets.  Risk-Free Micro Enterprise That Yields High Returns A typical Shakti entrepreneur conducts a steady business which gives her an income in excess of Rs.1,000 per month on a sustainable basis. As most of these women live below the poverty line, and hail from extremely small villages (with populations of less than 2000), this earning is very significant, and almost twice the amount of their previous household income. For most of these families, Project Shakti is enabling families to live with dignity, with real freedom from want.

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In addition to money, there is a marked change in the woman's status within the household, with a much greater say in decision-making. This results in better health and hygiene, education of the children, especially the girl child, and an overall betterment in living standards. The most powerful aspect about this model is that it creates a win-win partnership between HLL and the consumers, some of whom will depend on the organization for their livelihood, and builds a self-sustaining cycle of growth for all.

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HOW IT WORKS Typically, a woman from a SHG selected as a Shakti entrepreneur receives stocks at her doorstep from the HLL rural distributor and sells direct to consumers as well as to retailers in the village. Each Shakti entrepreneur services 6-10 villages in the population strata of 1,0002,000 people. Typically, as Sehgal points out, a Shakti entrepreneur sets off with 4-5 chief brands from the HLL portfolio - Lifebuoy, Wheel, Pepsodent, Annapurna salt and Clinic Plus. "These are the core brands, they we layer it with whatever else is in demand like talcum powder or Vaseline during winters," elaborates Sehgal. These brands apart, other brands which find favour with a rural audience are: Lux, Ponds, Nihar and 3 Roses tea. Typically, unit packs are small. All the brands are national and HLL is cool to the idea of creating a rural-specific brand as it will only dissipate the advertising media effort for the brands. To get started the Shakti woman borrows from her SHG and the company itself chooses only one person. With training and hand-holding by the company for the first three months, she begins her door-to-door journey selling her wares. The impact is slow and HLL too is not expecting any quick returns on this project. In Andhra, so far, since the experiment began, HLL has seen 15 per cent incremental sales from rural Andhra, which contributes 50 per cent to overall sales from Andhra of HLL products. But analysts see this rural foray as something the company has got to do. As Nikhil Vora, Sr. Vice President of research group ASK Raymond James explains, if there is one company that can take on the onus of developing the rural markets, it's HLL. Says he: "HLL contributes 20 per cent of the total FMCG business in the country. So, clearly, the onus is on HLL to grow the market. Returns may not happen in the next five years, but a lot of consumer understanding and insights comes from an exercise like Project Shakti, which in turn can lead to product innovation." An analyst with a leading brokerage points out that a lot of HLL's rural initiatives in the recent past have not paid off because of poor rural incomes. But, a monsoon revival and greater rural incomes can mean payback time for projects like Shakti. "Large companies like HLL have to push greater into rural areas. Brand loyalty is declining among urban consumers; they're looking mostly for consumer promos; regional brands too are snapping at their heels. So, to attain growth, going rural has become an imperative," she says. Concurs K.N. Siva Subramanian, Sr. Vice President, Franklin Templeton India Ltd: "The (HLL) management had recognised the impending saturation of the urban markets some time back and launched aggressive plans to capture the rural markets. However, a slowdown in the agricultural sector resulted in rural incomes remaining flat and affecting sales. We believe that by targeting lower price points

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and further expanding the distribution network, companies can tap the potential of rural markets. Initiatives like Project Shakti will help them in establishing and consolidating their base in rural markets." Regional brands, or even larger FMCG companies, do not have the kind of distribution reach that HLL has established and in the long run, that could prove a winner for HLL, according to analysts.

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FINANCIALS (TURNOVER) Consumption of Hindustan Lever’s (HLL) products in rural households has increased by 15-20% after the multinational kicked off Project Shakti in 2001. This is part of the findings from a dipstick conducted by market research firm IMRB to ascertain the impact of Project Shakti on HLL’s financials. The dipstick was a randomly selected sample in areas where Project Shakti operates. As per the findings, there has been an increase in market share of HLL’s toothpaste (Pepsodent), personal wash (Lifebuoy, Rexona and Breeze), washing powder (Wheel) and tea (Brooke Bond) categories. Further, penetration of iodized salt (Annapurna) and skin cream (Fair & Lovely and Pond’s) is said to have gone up. There has also been an increase in the regular usage of HLL brands, the study reveals. Shakti targets small villages with population of 2000 people or less. It aims at creating livelihoods for rural women, organized in self-help groups (SHGs), to improve their standards of living. Shakti provides critically needed additional income to these women and their families, by equipping and training them to become an extended arm of the company’s operation. The income is to the tune of Rs 700-Rs 800 per month per person. This income is higher in Andhra Pradesh. “Sales through Project Shakti contribute 10-15% of HLL’s rural sales. It has also helped us in replacing and wiping out counterfeits,’’ said HLL executive director, new ventures and marketing services, Dalip Sehgal. Rural sales contribute around 40% to HLL’s overall sales which were at Rs 9,927 crore in calendar year 2004. Through Project Shakti, the company has almost doubled its direct coverage in rural India with the project extending upto 70,000 villages, inching closer to the one lakh mark. The number of Shakti dealers—Shakti Ammas, as they are referred to—has gone up to 17,000, with the projected number being 25,000 by December this year. “The potential is another one lakh direct coverage in 2-3 years. Beyond this, however, it may not be viable,’’ said Sehgal. “With Shakti becoming a bigger brand itself, it enables the company to get better recognition of its entire product portfolio. We realized that physical presence is important. Brand saliency for our leading brands has gone up by nearly 40%,’’ Sehgal added. The next big task at hand for HLL is to improve literacy among 150-odd Shakti Ammas under a pilot which is being carried out in Andhra Pradesh. It is a six week programme and HLL is hopeful that this would bring about better understanding of the business among the women. For these women, an increase

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in earnings has also led to a status in the society, an aspirational tool which marketers latch on to for enhancing sales of consumer products.

OFFERINGS OF THE COMPANY The fast-moving consumer goods (FMCG) segment in India is going rural with a vengeance. The lead is being taken by the country’s largest FMCG company, Hindustan Lever (HLL). The Rs 11,000-crore behemoth has indicated that it is enhancing its rural penetration, despite the higher costs this would entail. Says HLL chairman M S Banga: “This exercise may not pay in the immediate future, but will definitely give longterm dividends. Incidentally, over 50 per cent of the sales of HLL’s fabric wash, personal wash and beverages are in rural areas. And we see a future in going rural in a major way.” The improved agricultural growth is expected to boost rural demand, though not at too sizzling a rate. Moreover, the price drop in personal products, after the recent excise duty reductions, is also expected to drive consumption. “Better agricultural yields will give farmers more spending power, making the rural markets bullish,” says an analyst. As a result, HLL has planned a rural marketing programme that is expected to result in a marked growth in the consumption of the company’s products in the rural market. HLL will adopt a three-pronged marketing strategy - new price points, sizes and awareness campaigns - for its detergents and soaps segment to augment rural growth. Deep penetration The goal is to reach 2,35,000 villages, up from the current 85,000; 75 per cent of the population, up from 43 per cent today; and a message reach of 65 per cent, up from the current television reach of 33 per cent. The company is expressly aiming at reaching villages with populations less than 2,000. The rural penetration exercise is going to be complemented by a 15-per cent hike in advertisement expenditure. Say company sources: “We have found ways and means to trigger growth in rural areas. For instance, cutting across categories, we have conceived products that are relevant to rural needs. A unique example is HLL’s Lifebuoy soap. In rural India, health is of paramount importance, because indisposition is very directly related to loss of income. Lifebuoy, whose core equity has been health 13

through vigorous cleansing, has, for decades now, been synonymous with soap in rural India. At the same time, we are making the products affordable.” In fact, HLL is now creating a market even for apparently premium products by offering them in small-pack sizes, like sachets, whose unit prices are within the reach of rural consumers. Initiated in the 1980s, sachets today constitute 70 per cent of HLL’s shampoo sales.

The sources add: “We have managed to create a market for products like premium stain-removing detergents (Surf Excel), beauty soaps (Lux), talcum powder (Pond’s), toothpaste (Pepsodent) and skin cream (Fair & Lovely) by offering them in low unit price packs.”

HLL is also going to non-conventional media to spread the word about its rural presence. The sources add that media like wall paintings, cinema vans, weekly markets (haats), fairs and festivals will be increasingly used. “Communication through fairs and festivals is going to be backed by direct consumer contact,” says Banga. Rural involvement HLL has launched a direct contact programme called Lifebuoy Swasthya Chetana. This project aims at covering about 5-crore people in 15,000 villages in 10 states. “The project intends to generate awareness about good health and hygienic practices, and specifically, how the simple habit of washing hands with soap is essential to maintaining good health. The initiative will involve interaction with students and senior citizens, who are expected to act as change agents,” say HLL marketing personnel. But generating awareness will pay dividends only when steps are taken to ensure constant availability of products. Accordingly, HLL is focusing on its retail network as well. “We have progressively strengthened our distribution reach in rural India, which today has about 33 lakh outlets,” HLL marketing officials say. In 1998, they add, “we launched Project Streamline to further extend our distribution reach. With this project, we now directly cover about 46 per cent of the rural population. In the coming years, we will further strengthen our distribution through mutually beneficial alliances with rural self-help groups (SHGs).”

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Besides, HLL has also begun a pilot project called Project Shakti, whereby SHGs are being offered the option of distributing relevant products of the company as a sustainable income-generating activity. HLL’s decision to focus on niche marketing also seems to be showing results. The company had recently decided to focus on 30 power brands out of its portfolio of more than 110 brands. Explaining the move, Banga says: “Today, focus is crucial and niche marketing is the order of the day. You cannot fight every battle - you have to identify the strengths and persist with them.” And that is precisely what HLL seems to be doing.

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UNIQUE BUYING PROPOSITION A pack for every budget But the potential is even larger, both in terms of consumption and penetration. The fact that 70% of the population accounts for only 50% of even relatively wellpenetrated categories, like soaps & detergents, indicates the enormous scope of consumption-led growth in these categories. Therefore such categories will derive growth out of increased usage. In categories, which are relatively less penetrated, like personal products, rural India offers an even bigger growth opportunity through greater penetration and then consumption. For example only three out of 10 consumers in rural markets use shampoo or skin care products. Therefore growth in such categories will emerge, as more consumers purchase these products, and then continue to use them regularly. Hindustan Lever has taken many initiatives over the decades to create markets in the rural hinterlands. By marketing relevant products, at affordable prices. A unique example is Hindustan Lever's Lifebuoy soap. In rural India, health is of paramount importance, because indisposition is very directly related to loss of income. Lifebuoy, whose core equity is health and hygiene, has for decades now been synonymous with soap in rural India. At the same time, if products have to come up the order in the rural purchase hierarchy, they have to be affordable. If rural India today accounts for about half of detergents sales, it is because HLL has developed low-cost value-for-money branded products, like Wheel. The company has also taken initiatives to create markets even for apparently premium products, by offering them in pack sizes, like sachets, whose unit prices are within the reach of rural consumers. For example, initiated in the 1980s, sachets (Rs.2, Re.1, or 50 paise) today constitute about 55% of Hindustan Lever's shampoo sales. With media reach gradually increasing, rural consumers today, where the media has its footprints, share the same aspirations with their urban counterparts. HLL has responded to the trend with low unit price packs of even other products - Lux at Rs.5, Lifebuoy at Rs.2, Surf Excel sachet at Rs.1.50, Pond's Talc at Rs.5, Pepsodent toothpaste at Rs. 5, Fair & Lovely Skin Cream at Rs.5, Pond's Cold Cream at Rs.5, Brooke Bond Taaza tea at Rs.5.

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COMPANY'S PLACE IN THE MARKET The Competitors The Indian FMCG markets have witnessed some of the classic struggles involving HLL. So far Levers have been able to stand their ground but times are changing. HLL’s response to the latest challenges is being eagerly studied by the corporate India. There are following some of the examples: HAVE you heard of the `sachet' salesman, the man on a cycle who pedals to the local grocer to sell sachets of pickles and spices? If not, you may soon get to meet such a person. Because Chennai-based CavinKare Pvt Ltd is using this novel approach to distribute its food products. The company's Foods Division, barely 15 months old, realised the importance of putting in place a comprehensive distribution plan even before its first product hit the shelves. It began by creating two separate brands - Chinni's for smaller pack sizes and Priya for larger packs - so that the two segments can be treated separately. And the company has been using a separate sales force for each brand ever since. Says Satish Mane, Chief Executive Officer (Foods), at CavinKare: "We have launched pickles and spices in single-serve sachets that cost as little as 50 paise. Besides offering the consumer convenience, they encourage out-of-home consumption and allow consumers to taste a variety of flavours at an affordable price. And instead of using the conventional distribution route, we have created a `sachet' sales force that sells only sachet packs to small retailers including cigarette and paan shops." He says creation of a separate `sachet' sales force ensures that the smaller pack sizes get retailer attention and shelf space and asserts that this is not an experiment but a dedicated mode of sales and the results have been encouraging so far. Not only CavinKare but several other FMCG companies have also started to use unconventional routes to distribute their products, leaving no stone unturned in their quest for consumers. After waging a bitter price war through most of 2004, the FMCG majors are now eyeing distribution as the next function which needs an overhaul to keep pace with fast-changing consumer preferences. Companies are not only finding it tough to create an extensive distribution network along conventional lines, a la Hindustan Lever Ltd or Coca-Cola India; they are also looking to place their products where there is more visibility. And, being aware that in smaller towns and villages the access to consumers may be limited, several FMCG companies have taken to unconventional modes of distribution. In a similar quest to capture consumers in remote villages, Kolkata-based Emami Ltd has tied up with the Posts and Telegraph Department to place its products across 5,000 post offices. The pilot project has been initiated

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in Maharashtra. The President (Sales) of Emami's distribution arm, J.B. Marketing & Finance Ltd, Hari Gupta, says that eventually the company wants to reach all the 1.05 lakh post offices across India. Besides, Emami will also use `echoupal' outlets - where a computer literate villager conducts trade on the Net across Madhya Pradesh and Uttar Pradesh to gain better access. "We chanced upon the idea of using post offices after we realised that the local post office is the communication hub for a small village or even a small town. People invariably visit the post office to get mail, make outstation calls and for other similar purposes and placing Emami products there would be sure to give them more visibility," he adds. Also, ITC Ltd has been successful in eliminating middlemen by creating echoupals where farmers use credit to buy FMCG goods. Yet another example has been set by e-governance projects such as the one being conducted by the Andhra Pradesh Government. Begun as a project to increase the common man's interface with the Government, the e-seva project has roped in Wipro Consumer Care and Lighting (WCCL) to place it products for sale at e-seva points. Says Kumar Chander, Vice-President (Marketing), at WCCL, "This helps us access remote markets and a totally different set of consumers." CavinKare's personal products division too is enthused by Emami's experiment involving post offices and e-choupals. "The idea of placing products at post offices is very interesting. We may evaluate this option, especially for products such as shikakai powder, shampoo and hair dye," says K.S. Ramesh, Executive Director and CEO, CavinKare. However, Kumar Chander of Wipro Consumer sounds a note of caution. He says that alternative distribution channels do not offer better margins and are, at best, tools to gain accessibility in certain areas. Also, distribution costs across such channels are identical to those in conventional routes, so there is little saving. He says that while using such channels to expand product reach and gain accessibility has become important for most FMCG companies, the unconventional route is not expected to become a major revenue generator in the coming years. And, some FMCG majors such as Dabur India Ltd and Nirma do not believe in deviating from the tried and tested conventional methods. So, while alternative distribution options are gaining acceptability, it may be some time before these become a rage. Competition will finally catch up with whatever distribution mode a marketer can use but the issue is that if the brand has pull it makes life easier in two ways — better sales and distribution cost and the products can also get into outlets where space or capital constrains multiple brands from being stocked thereby giving an

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advantage. In that context, it looks like distribution is the next function FMCG firms will focus on for the coming year! HLL's challenges are of another nature. It still has to improve the incomes of the Shakti entrepreneurs in order to retain their interest. To do that, it may need to widen its offerings - on its own or in partnership with other companies. It may also consider local manufacturing by these entrepreneurs, where they use ingredients supplied by Lever to make the final product. Above all, Lever would probably do well to allow its distributors to run the channel.

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FUTURE HLL envisions the creation of 25,000 Shakti Entrepreneurs covering 100,000 villages, and touching the lives of 100 million rural people by the year 2005.

In order to achieve this goal, Project Shakti plans to extend to the states of West Bengal, Punjab and Rajasthan in addition to expanding operations in the eight existing states. Having perfected the model in Nalgonda, in 2003 HLL plans to extend Shakti to a 100 districts in Madhya Pradesh, Gujarat and UP. There are other plans brewing:  One is to allow other companies which do not compete with HLL to get onto the Shakti network to sell their products. Talks are on with battery companies like Nippo, TVS Motor for mopeds, insurance companies for LIC policies. "We wanted to first stabilize the project before we can look at other companies. It requires somebody with scale and size to build a platform and then invite other companies onto this platform," elaborates Sehgal. The most powerful aspect about this model, emphasizes Sehgal, is that it creates a win-win partnership between HLL and its consumers, some of whom will also draw on the organisation for their livelihood, and it builds a self-sustaining virtuous cycle of growth for all.  The next stage of Project Shakti is even more ambitious. HLL is now in the process of piloting `I-Shakti', an IT-based rural information service that will provide solutions to key rural needs in the areas of agriculture, education, vocational training, health and hygiene. The project will be piloted in Nalgonda district again. Based on a palm pilot, HLL is looking at sourcing appropriate low-cost hardware from Hewlett-Packard while Unilever Research out of London is developing the consumer interactivity software. The premise of the i-Shakti model is to provide need based demand driven information and services across a large variety of sectors that impact the daily livelihood opportunities and living standards of the village

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community. The i-Shakti kiosk will be operated by the Shakti Entrepreneur, which further strengthens the relationship we have already cultivated and builds new capacity. HLL expects that the information provided would improve the productivity of the rural community and unlock economic and social progress. To catalyze overall rural development, HLL hopes to collaborate with mainstream institutions (both corporate and not-for-profit organizations) that are experts in agriculture, health, insurance, financial services and education. For Example: Through i-Shakti kiosks, ICICI Bank and HLL will work together to provide a new delivery channel for rural India, which offers a multitude of products and services to the rural customer. In the first phase, Life and General Insurance will be offered through this channel. Other financial services including Investment products (Equity, Mutual Funds, Bonds) ICICI Bank Pure Gold (gold coins), Personal Credit, Rural Savings Accounts and Remittances will be introduced subsequently.

THERE are about 4.36 lakh women self-help groups in Andhra Pradesh covering nearly 58.29 lakh poor women. AP alone has about half of the SHGs organised in the country. The SHGs are also popularly called DWCRA groups and this name became popular after the DWCRA programme (Development of Women and Children in rural areas) through which women's groups were assisted initially. The SHGs not only save but also take small loans out of the corpus available with the group. The group corpus consists of savings , government assistance as well as bank loans. Members use the loan out of the group corpus for their personal needs initially. However, in the long run such loans are utilised for income generation activities. Since the inception of the SHGs, an amount of Rs

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1,362.98 crore has been mobilised as corpus by these groups and it is estimated to reach Rs 1,500 crore by the middle of this year. The women's savings movement, explains C.S. Ramalakshmi, Commissioner, Women Empowerment, Govt of AP, started in 1993 as an offshoot of the total literacy campaigns conducted by the government. Rural women organised themselves into `thrift and credit' groups with one rupee saving a day and this mass movement, in which 58 lakh members saved more than Rs 800 crore is rotated internally and lent amongst members twice in a year as per the interest rates fixed by the groups. Such amounts are used for their daily consumption needs as well as for making goods to sell. It is into this strong network that HLL tapped to launch Project Shakti. While the savings was there among the SHGs, there was no channel of investment. Now, HLL has provided a window of opportunity to invest and earn.

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RECOMMENDATIONS Call it the so called Project Shakti or mere HLL’s rural India distribution network, you will hardly find any difference. If there is any difference then the difference lies in the people’s perception. It will not be wrong to say that Self Help Groups (SHG) is the backbone of the project Shakti because HLL makes Shakti entrepreneurs out of the SHG. Everyone wondered why HLL has so much attachment with Andhra Pradesh later it was revealed that Andhra Pradesh has the largest number of SHG,i.e, slightly less than half a million, which is sixty percent of total number of SHG in India. HLL Shakti works on the model ‘Bottom of Pyramid’ (BOP) propounded by C.K. Prahalad, in which company first sees the potential of the BOP market and then according to need and want decides to roll out project Shakti foot prints. Till now HLL made profits out of just few years (four) old project with help of few thousands (approx 5000) Shakti entrepreneurs covering eight states (130 districts and 35000 villages). Apropos to the said facts and figures we would like to recommend.  INCREASE THE REACH: India’s biggest advantage is its huge population which is in every aspect is a good signal for any FMCG major. 70% percent of India resides in rural areas. Huge potential is still untouched; HLL should pull up its socks and work faster towards this by making as many Shakti entrepreneurs either through SHG or by any other means. SHG are there in every part of rural India so the need for the day is to reach them as soon as possible. Every Shakti entrepreneur covers 1000 to 1400 homes within the radius of 12 kms. Usually to return to the same home it will take a Shakti entrepreneur 100-125 days due to the poor social infrastructure and mode of transport. Apropos to the given facts we would like to recommend  INCREASE THE NUMBERS: Rural consumers generally don’t buy in bulk and expect Shakti women to revisit their house on regular basis. But due to the constraints, entrepreneurs find it difficult to visit frequently. An idea here is to increase the number of Shakti entrepreneurs within the given reach, i.e, 1000-1400 homes. Advantages to this are firstly visit the target consumers frequently and secondly spend more time in order to convert non-consumers into consumers by educating the customer about health and hygiene. Generally a rural woman takes loan from the SHG for initial payment on a specific terms and conditions. SHG also have other projects under them under various schemes of government and self-started schemes, which also require funds. Micro credit is firstly not easily available and secondly the interest rate 23

varies between 10-12%. Apropos to the said facts and figures we would like to recommend:  AVAILABILITY OF CREDIT: With a marketing network in place in coming years, Mission Shakti will be the biggest movement in the state to eradicate poverty and for the empowerment of women. SHGs are likely to make village moneylenders jobless, and would be able to do away with the middle man in trade, if bank credit is adequate and the marketing network functions efficiently. Even a HLL local distributor can extend one time credit to the entrepreneur, which is common in only specified areas. Money drives HLL to rural India and same motivator drives women of SHG to be a part of HLL Shakti. A Shakti entrepreneur earns Rs700-Rs1000 a month from the sale of goods worth Rs 10,000-15,000. The 15-month pilot project in Andhra Pradesh turned out to be a good learning ground. For instance, the company initially decided to save distributor margins by cutting one layer of distribution - the local distributor. These savings helped in giving higher margins to the Shakti entrepreneurs and retailers. Stocks were directly sent to the Shakti distributor from the local C-and-F (carry and forward) depots. However, Shakti's still trying to effectively bring down distribution costs. Targeting the Bottom Of Pyramid is at least 5-10 per cent costlier than selling in urban markets. HLL need to keep driving costs down, especially while scaling up. Manpower costs are one area where a lot could be done - it forms 80 per cent of total costs in selling to the BOP. The task is manpower intensive as employees are required to identify and develop new BOP markets, train the entrepreneurs and revisit existing markets to ensure that it has adequate stocks. Hence, HLL is experimenting with three-four pilot models. It has rolled out mobile trainers who move from village to village and perform multi-functions from selecting entrepreneurs, training them and hand holding. It is also experimenting with exclusive trainers. Apropos to the said facts and figures we would like to recommend  INCREASE THE MARGINS: In order to impact both livelihood opportunities and living standards of rural communities ‘i-Shakti’ - an ITbased rural information service has been developed to provide information and services to meet rural needs in agriculture, education, vocational training, health and hygiene. The premise of the i-Shakti model is to provide need based demand driven information and services across a large variety of sectors that impact the daily livelihood opportunities and living standards of the village community. The i-Shakti kiosk will be operated by the Shakti Entrepreneur, which further strengthens the relationship we have already cultivated and builds new capacity. HLL expects that the information provided would improve the productivity of the rural community and unlock economic and

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social progress. To catalyze overall rural development, HLL hopes to collaborate with mainstream institutions (both corporate and not-for-profit organizations) that are experts in agriculture, health, insurance, financial services and education, with i-Shakti in place HLL could easily reduce the overhead costs. Allowing Shakti entrepreneurs to sell products other than the HLL portfolio but not the other FMCG brand gives another reason to earn extra. The principal issue in rural development is to create income-generating opportunities for the rural population. Such initiatives are successful and sustainable when linked with the company’s core business and is mutually beneficial to both the population for whom the programme is intended and for the company. Based on these insights, HLL launched Project Shakti in the year 2001, in keeping with the purpose of integrating business interests with national interests. Apropos to the said facts and figures we would like to recommend  WHY ONLY RURAL WOMEN: even the UPA government Rural Employment Guarantee Scheme includes people from all walks of life then why HLL just embrace women. Rural India has huge amount of seasonal and disguised unemployment (generally unemployed men). This segment can also be used as distributors because firstly they are more active as compare to women and secondly they can also work in night when head of the family of the consumer household is available. Recommendations could be countless but right timings are inevitable. HLL should also work with more organizations (profit and non-profit) along with state governments to bring all possible resources to the rural India in order to create a win-win situation for all parties. A lot has to be done, doing things efficiently is required but effectiveness is the call for the day.

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APPENDIX For Rojamma, Project Shakti means being able to educate her daughters – A LIVE CASE Rojamma is a single parent living in Kurumurthy, a small rural village 150 kilometres south west of Hyderabad in the Indian state of Andhra Pradesh. From a very poor background, she was married at seventeen to a man with whom she had two daughters but who then left her to fend for herself. At first she earned a few rupees working in her mother’s field but she found it difficult to live on. A few years ago she joined a women’s self-help group that was formed in the village to help women like Rojamma. “It felt good to be part of a group but that’s not the same as eating food”, she remembers. But then a man from Hindustan Lever came to Kurumurthy and told the women about Project Shakti. “From that moment my life changed”. Hindustan Lever is Unilever’s business in India. Its brands include such wellknown names as Lifebouy, Lux, Surf, Vim, Pond’s and Lipton, as well as local brands, such as Kissan, Annapurna, Lakme, Fair & Lovely and Wheel. The company generates around half its business from India’s towns and cities and half from rural areas, where its products are sold in some 100,000 villages with populations of 2,000 or more. By the end of the 1990s, however, the company realised that to increase its market share it had to expand the market. The challenge was how to reach the 500,000 villages with smaller populations in more remote parts of the country, where there are millions of potential consumers but no retail distribution network, no advertising coverage and poor roads and transport. Hindustan Lever’s solution, called Project Shakti (which means ‘strength’ in Sanskrit), was both bold and innovative. The company decided to tap into the growing number of women’s self-help groups that had been springing up around the country. These groups, about one million of which now exist across India, are usually formed to help women save money and borrow from each other to avoid the excessive demands of unscrupulous moneylenders. Hindustan Lever made presentations at rural self-help group meetings, initially in Andhra Pradesh, and invited women, including Rojamma, to become direct-to-consumer sales distributors. The company provides selfhelp group women with training in selling, commercial knowledge and bookkeeping, teaching them to become fully-fledged microentrepreneurs. The women who are trained can then choose to set up their own business or to become Project Shakti distributors – or Shakti Ammas (‘mothers’) as they have become known. Each woman who becomes a distributor 26

invests 10,000 – 15,000 rupees (US$220-330) in stock at the outset – usually borrowing from self-help groups or micro-finance banks facilitated by Hindustan Lever. Each aims to have around 500 customers, mainly drawn from her village’s self-help groups and from nearby smaller villages. Most generate sales of 10,000-12,000 rupees a month, netting a monthly profit of 700-1,000 rupees (US$15-22). For those with husbands who work in the fields, this typically doubles the household income. For single mothers like Rojamma, it is a far cry from the handful of rupees she earned working in her mother’s field. Project Shakti has proved to be a great success for Hindustan Lever and for women in India. The project started in a few pilot villages in Andhra Pradesh in 2000. In 2002 it expanded to two states and by the end of 2004 had grown to over 13,000 Shakti women entrepreneurs covering 50,000 villages in 12 states, selling to 70 million consumers. This represents a 30% increase in rural population reached. Hindustan Lever has had strong support from over 300 partners, including NGOs, banks and both state and local government departments, who recognise the potential for economic growth by encouraging women to become entrepreneurs. Andhra Pradesh typically had a 3% success rate in creating entrepreneurs among women’s self-help groups prior to Project Shakti. This initiative has a 90% success rate so, not surprisingly, Andhra Pradesh’s Women’s Empowerment Commissioner, Ms Ramalakshmi, requests monthly updates on Project Shakti’s progress. In 2003 Hindustan Lever started to pilot an information technology initiative called i-Shakti. This is designed to meet rural villagers’ information needs and provide organisations with communications access to those parts of the country not reached by TV, radio and newspapers. This involves creating village ‘kiosks’ containing internet-linked computers run by entrepreneurs. i-Shakti was formally launched in partnership with the Government of Andhra Pradesh in November 2004, and aims to have 3,500 i-Shakti kiosks on stream by the end of 2005. Mostly housed in the homes of Shakti entrepreneurs, i-Shakti kiosks provide villagers with free information on a wide range of topics, including health and hygiene, agriculture and horticulture, child and adult education, finance, employment, and entertainment. Content is in the local language and has been specially developed by institutions and NGOs with experts in these fields, including the Azim Premji Foundation for children’s education, the Tata Consultancy Services’ Adult Literacy Programme and ICRISAT (International Crops Research Institute for the Semi-Arid Tropics) for information on agriculture.

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i-Shakti also includes an interactive service in which villagers can email questions to a panel of experts and receive a response within 24 hours. Sharat Dhall, Hindustan Lever’s Business Head for the Shakti initiative, is excited about i-Shakti’s capabilities: “Farmers can find a quick solution to pest problems with their crops, villagers can email their symptoms to a doctor and get a diagnosis in hours rather than days, and computer programs with voiceovers will teach people who are illiterate”. Hindustan Lever and its partners are funding the initiative in the initial stages, but in future it is planned to charge content providers and brand advertisers to make the initiative self-financing and to generate incomes for i-Shakti entrepreneurs. While Hindustan Lever is intent on building its rural sales and market share, it is equally committed to improving the lives and livelihoods of people in India. Shakti Vani (‘Voice’) takes Project Shakti a stage further. Hindustan Lever is now training rural women to give talks to villagers about basic health practices, such as good hygiene, disease prevention and pre- and post-natal care. “Project Shakti’s role in creating incomes for underprivileged rural women and helping to empower them economically is more important than sales alone”, says Sharat Dhall. He believes Project Shakti, i-Shakti and Shakti Vani will have the potential to act as a catalyst for creating new markets and generating rural microeconomies. He recognises this is something that Hindustan Lever cannot achieve alone and is actively building links with noncompetitive partners, such as ICICI Bank, which specialises in micro-loans. At the same time, competitors and companies from other sectors are watching Project Shakti very closely and are expected to develop similar distribution models. Project Shakti’s goal is to recruit 100,000 Shakti entrepreneurs covering 400,000 villages and 400 million consumers by 2008. “I believe it can become the biggest rural operation in the history of Indian business and change the way companies look at reaching consumers living in the smallest of villages”, says Sharat Dhall. For the thousands of women like Rojamma who have become Shakti entrepreneurs, this initiative has already changed their lives in ways that are much more profound than the income they earn selling soaps and shampoos. It has brought them self-esteem, a sense of empowerment and a place in society. As Rojamma says: “When my husband left me I had nothing except my daughters. Today everyone knows me. I am someone now”. It has also meant she has been able to send her daughters to school, giving them the chance in life she didn’t have, although Rojamma’s aspirations for them remain modest: “I hope they have happy marriages and they too become Shakti Ammas”.

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