CASE A: Hindustan Lever Limited Contemplates India’s poor

Contents

Introduction

Brief about HLL

Brief about Nirma

Introduction

There was an important meeting between the top managers of HLL

They were discussing on the launch of the operation of STING (the strategy to inhibit Nirma growth)

Cont…

Nirma had overtaken HLL in the detergent sector over the past decade

HLL had ignored the rural India

Three questions that had been discussed were:

Cont…

Strategy: Should HLL enter the rural market?

Marketing and Distribution: Considering the logistical hurdles of this market how should HLL plan its entry?

Design: What kind of products should HLL introduce to combat Nirma?

Brief on HLL

HLL which was the Indian subsidiary of Unilever PLC, the largest MNC

Founded in 1930 and based jointly in Netherlands and UK

Sold its products in 150 countries

Cont… The first product to be introduced in

India was Sunlight Soap

It was available to the British citizens

After exclusive foreign managers, Mr. Prakash Tandon became the 1st director

Cont….

HLL was the first to offer Indian equity and had 10% Indian participation

HLL was considered India’s largest household PMCG company

Cont…

It was the undisputed leader

It had introduced surf washing powder in 1959

Only few housewife’s could afford the product (surf) as it was costly

Brief on Nirma

Nirma was the second largest volume seller in the country in 1977

Marketing Gurus believed that Nirma was seeing a temporary success

They predicted that the margins provided by Mr. Karsanbhai Patel was very low and would not last long

Cont….

HLL considered themselves as the best

The belief was that the rural sector was to disorganised to bother about

The question arised why HLL had ignored rural market?

Cont…

C.K Prahalad & Stuart Hart help to understand so

Looked at the market as a pyramid The top tier consists 75-100

Million people who earn $20,000 a year.

Cont…

Second and Third tier consists of rising middle classes living in developing countries earning $1500-$20,000 a year

1500-1750 people lived in 2 & 3 tier

The 4th tier which consists of 4 billion people who earn less $1500

Cont…

MNC’s have focused on the 1st tier because of the highest margins they earn

Even the 2nd and 3rd tier have also been focused

Bottom has been ignored

Cont...

HLL stayed away from rural markets was not only because of physical challenges but also due to social & cultural challenges

Cont….

HLL’s would be dealing with the clients which never focused before on by MNC’s

Banners & leaflets alone were not effective

HLL could not depend on television

NIRMA OVERTAKE SURF

Mr karsanbhai patel’s products were in high demand

Nirma had pushed HLL from the top

In the men time surf remained expensive between 2.5-3.6 times than nirma

Cont…

According to HLL nirma was a low quality product

It commented that Nirma did not contain any whitening ingredient

Nor there was a perfume

Cont…

HLL blamed that Nirma contained high soda ash which affected the skin

Designing

HLL was shocked as to how Nirma was able to achieve so much success

Here Mr. Karsanbhai patel said the:

Cont….

“I found a massive market segment that was hungry for a good quality product at an affordable price…..so I decided to keep my margins low and was happy if I could net between 3 & 5%.....profits really came from the huge volumes we generated”

Distribution

Mr. Karsanbhai Patel was very aware about the distribution

He gave importance to keep the costs down

First distributed through bicycle then vans and then trucks

Advertising

Late in 1970’s televisions slowly spread in rural areas and so did the Nirma campaign ad with simple message and catchy jingle

HLL had predicted that Nirma’s bubble would burst but they were shocked that Nirma would survive on the miniscule per unit margins

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