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  • 1. IILM-GSM-09-11_PBM_SEC-A_ 1 | P a g e PRODUCT AND BRAND MANAGEMENT PROJECT ON Company study of Hindustan Unilever Limited (HUL) Submitted to- Prof. Pitamber Dwivedi Submitted by- Anish Bhattacharyya [FT-09-720] Anurag Kumar Mishra [FT-09-729] Durgesh Tiwari [FT -09-748] Jagat Singh Nagar [FT -09-754] Shwetank Kumar [FT-09-856] Sourav Mukherjee [FT- 09-862] Ravi Kumar Sinha [ FT- 09-813]

2. IILM-GSM-09-11_PBM_SEC-A_ 2 | P a g e ACKNOWLEDGEMENT We take this opportunity to convey our sincere thanks and gratitude to all those who have directly or indirectly helped and contributed towards the completion of this project. First and foremost, we would like to thank Prof. Pitamber Dwivedi We would also like to thank our batch mates for the discussions that we had with them. All these have resulted in the enrichment of our knowledge and their inputs have helped us to incorporate relevant issues into our project. for her constant guidance and support throughout this project. During the project, we realized that the degree of relevance of the learning being imparted in the class is very high. The learning enabled us to get a better understanding of the nitty-gritty of the subject which we studied. Last but not the least we would like to thank God and our parents for their cooperation and help. 3. IILM-GSM-09-11_PBM_SEC-A_ 3 | P a g e TABLE OF CONTENTS TOPICS PAGE 1. Introduction to FMCG/HUL 4 2. FMCG industry analysis 5 3. Key players of FMCG industry and their brief introduction 7 4. HUL Organization Structure Distribution Channel Market segment wise penetration Products of HUL Category wise Sales growth BCG analysis 9 5. Corporate Social Responsibility Project Shakti 14 6. Competition In the FMCG market HUL and ITC HUL and P&G 16 7. Strategic growth and Strategic market entry (Kissan Annapurna Iodized Salt) 25 8. Strategic Shifts 26 9. Financial Analysis 27 10. Brand Management 29 11. Conclusion and Recommendation 31 12. Bibliography 32 4. IILM-GSM-09-11_PBM_SEC-A_ 4 | P a g e INTRODUCTION OF FMCG INDUSTRY AND HUL IN INDIA FMCG is the 4th largest sector in Indian economy with a market size of more than $13.1 bn. And expected to become $33.4bn in 2015.200 million people are expected to shift towards processed food. India needs Rs 28bn investment in food sector. In the recession/ slowdown period FMCG industry recorded a growth of 14.5%. Growth of FMCG sector and Growth of HUL in India is as follows FMCG came into in existence in 1888 when Sun Light soap was firstly seen at KOLKATA harbor. It was made by Lever brothers in England. After that in 1895 Lifebuoy and after that Lux, Pears and Vim bar. In 1918 Vanaspati was launched. Dalda was launched in 1937. In 1931 Lever brothers made 1st subsidiary in India In 1933 they joint with Hindustan Vanaspati manufacturing company In 1935 they joint with united traders limited All these 3 players mixed together and form HUL in 1957. HUL offers 10% of its equity to Indian public Unilever holds 52.10% shares and rest is distributed amongst about 360675 individual shareholders and financial institutions Brooke bond is present in India back to 1900 and its Red Label band was launched in 1903. In 1912 it joined with lever brothers. Unilever acquired LIPTON in 1972 Ponds India ltd is working in India since 1947 and it is acquired by HUL in 1986 by an international acquisition. Tata oil Mills Company merged with HUL in 1993. In 1996 Tata made 50-50% joint venture for LAKME with HUL and in 1998 it was completely sold to HUL. HUL made 50-50% joint venture with Kimberley Clark corp. in 1994 as Kimberley clark lever ltd which makes haggis diapers and kotex sanitary pads. Unilever established its subsidiary in Nepal as NEPAL UNILEVER LTD. In 2002 HUL launched AYUSH ayurvedic soap. In 2004 it came into the water purifier segment and launched PURE-it In 2007 it formally formed as HUL from HUL that is HINDUSTAN UNILEVER LIMITED. 5. IILM-GSM-09-11_PBM_SEC-A_ 5 | P a g e FMCG industry analysis . SUPPLIER POWER Supplier concentration Importance of volume to supplier Differentiation of inputs Impact of inputs on cost or differentiation Switching costs of firms in the industry Presence of substitute inputs Threat of forward integration Cost relative to total purchases in industry Low DEGREE OF RIVALRY -Exit barriers -Industry concentration -Fixed costs/Value added -Industry growth -Intermittent overcapacity -Product differences -Switching costs -Brand identity -Diversity of rivals -Corporate stakes OTHER STAKEHOLDERS Relative power of unions, govt Low High Low to medium BARRIERS TO ENTRY Absolute cost advantages Proprietary learning curve Access to inputs Government policy Economies of scale Capital requirements Brand identity Switching costs Access to distribution Expected retaliation Proprietary products High THREAT OF SUBSTITUTES -Switching costs -Buyer inclination to Substitute -Price-performance Trade-off of substitutes BUYER POWER Bargaining leverage Buyer volume Buyer information Brand identity Price sensitivity Threat of backward integration Product differentiation Buyer concentration vs. industry Substitutes available Buyers' incentives High 6. IILM-GSM-09-11_PBM_SEC-A_ 6 | P a g e Rivalry among Competing Firms: In the FMCG Industry, rivalry among competitors is very fierce. There are scarce customers because the industry is highly saturated and the competitors try to snatch their share of market. Market Players use all sorts of tactics and activities from intensive advertisement campaigns to promotional stuff and price wars etc. Hence the intensity of rivalry is very high. Potential Entry of New Competitors: FMCG Industry does not have any measures which can control the entry of new firms. The resistance is very low and the structure of the industry is so complex that new firms can easily enter and also offer tough competition due to cost effectiveness. Hence potential entry of new firms is highly viable. Potential Development of Substitute Products: There are complex and never ending consumer needs and no firm can satisfy all sorts of needs alone. There are plenty of substitute goods available in the market that can be re-placed if consumers are not satisfied with one. The wide range of choices and needs give a sufficient room for new product development that can replace existing goods. This leads to higher consumers expectation. Bargaining Power of Suppliers: The bargaining power of suppliers of raw materials and intermediate goods is not very high. There is ample number of substitute suppliers available and the raw materials are also readily available and most of the raw materials are homogeneous. There is no monopoly situation in the supplier side because the suppliers are also competing among themselves. Bargaining Power of Consumers: Bargaining power of consumers is also very high. This is because in FMCG industry the switching costs of most of the goods is very low and there is no threat of buying one product over other. Customers are never reluctant to buy or try new things off the shelf. 7. IILM-GSM-09-11_PBM_SEC-A_ 7 | P a g e Key players of FMCG industry According to the market survey done by BUSINESS TODAY the top 10 companies of FMCG sector are given below. 1. Hindustan Unilever Ltd. 2. ITC 3. Nestl India 4. GCMMF (AMUL) 5. Dabur India 6. Asian Paints (India) 7. Cadbury India 8. Britannia Industries 9. Procter & Gamble 10. Marico Industries A brief introduction about major FMCG companies in India Dabur India Limited (Dabur) Dabur has entered into the malted food drink market with the launch of a new health drink Dabur Chyawan Junior. According to the company, they expect to capture a market share of 10 per cent of the Rs. 1,900 Crores malted food drink market over the next two years. Dabur has acquired 72.15 per cent of Fem Care Pharma Ltd (FCPL), a leading player in the womens skin care products market, for Rs 203.7 Crores in an all-cash deal. The Company is expected to create synergy by this deal. Dabur got approval from Government of Himachal Pradesh to set up another medicine manufacturing unit. The project has an expected investment of Rs. 130 Crores. Colgate-Palmolive (India) Limited Colgate Palmolive (India) Ltd, which is currently holding 75 per cent of the share capital of SS Oral Hygiene Products Private Ltd, Hyderabad, has acquired the remaining 25 per cent share capital from the local shareholders at an aggregate price of Rs 77.70 lakh. Consequently, SS Oral Hygiene Products has become a wholly owned subsidiary of the company. Nestle India Limited Nestle is planning to invest Rs 6 billion in India in 2009 for expansion of its business in the country.The company which has allotted an investment of Rs 3 billion in the Indian market in 2008, would 8. IILM-GSM-09-11_PBM_SEC-A_ 8 | P a g e be doubling the investment in 2009 as part of its business strategy. Nestle International is reinvesting and expanding in India and Nestle India will have all the financial resources to expand and grow from the parent company. Nestle India reported a good increase in its standalone net profit for the second quarter.During the quarter, the profit of the company rose 26.54% to Rs 1,210.90 million from Rs 956.90 million in the same quarter, last year. The company posted earnings of Rs 12.56 a share during the quarter, registering 26.61% growth over prior year period. Net sales for the quarter rose 23.45% to Rs 10,356.30 million, while total income for the quarter rose 23.78% to Rs 10,423.40 million, when compared with the prior year period. 9. IILM-GSM-09-11_PBM_SEC-A_ 9 | P a g e HUL: Hindustan Unilever Limited COMPANY - HUL INDUSTRY - FMCG MARKET CAP - 48571 Cr BETA - 0.4 52 Week Hi/Lo - 306/215 Average daily volume - 431633 Face Value - Rs 1 ORGANIZATION STRUCTURE VP GM Sr sales manager Area sales manager Territory sales manager Team Leader Sales executive 10. IILM-GSM-09-11_PBM_SEC-A_ 10 | P a g e Distribution Channel of HUL Market Penetration of HUL SOAPS: 43% TOOTHPASTE: 26% SAMPOOS: 21% SKINKARE: 10% Penetration HUL C&F Agents Redistribution Stockiest Whole sellers Rural Retailer Urban Retailer CUSTOMERS 11. IILM-GSM-09-11_PBM_SEC-A_ 11 | P a g e HUL products in India Personal wash:- Laundry:- Lux. Surf Excel, Lifebuoy, sun light, Liril , Rin Hamam, Wheel Breeze, Ala bleech Moti , Beauty Products:- Dove, Fair & Lovely, Pears Lakme, Rexona Ponds, Foods:- Vaseline -Kissan(Jam,Ketchup,Squashes), Aviance Annapurna (Aata and salt), Hair-Care:- Knorr Soups, Sunsilk naturals, Modern Bread Clinic , Ice-cream:- Dove Kwality Wall's Oral-Care:- Bewerages:- Pepsodent Tea:- Close-up Brooke bond, Deo spray:- Lipton, Axe taj mahal Rexona Coffee:- Water Purifier:- Brooke bond bru Pureit Disinfectants:- Dishwasher :- Domex Vim cif 12. IILM-GSM-09-11_PBM_SEC-A_ 12 | P a g e Category wise sales growth of HUL in India: Particulars Key Brands Market Size (in Rs Cr.) Market Share Rank Fabric wash Surf Excel, Wheel 8988 37.5% 1 Personal Wash Dove, Lux, Lifebuoy 6632 54.3% 1 Dish wash 57.3% 1 Skin Ponds 2792 54.5% 1 Shampoo Sunsilk, Clinic plus 2168 47.8% 1 Talcum Powder 59.7% 1 Packet Tea Red Label 4452 22.7% 1 Coffee Bru 708 44.0% 1 Jams 67.5% 1 Toothpaste Pepsoden t, Closeup 2764 29.5% 2 Ketchups 28.1% 2 13. IILM-GSM-09-11_PBM_SEC-A_ 13 | P a g e BCG ANALYSIS OF HUL Soap & Detergent and Tea are CASH COW for the company. It has high relative market share and low growth rate. Personal Products and Coffee are STARS for the company as it have high relative market share as well as high market growth rate. Only food is a segment which is a QUESTION MARK HUL is taking several steps to capture more market share so that food segment can also be a part of Star. for the company. The company have a low relative market share where as it is under high market growth rate. 14. IILM-GSM-09-11_PBM_SEC-A_ 14 | P a g e Corporate Social Responsibility HUL shows more interest in CSR also as- From 2004 to 2008 it has reduced the emission of Carbon di-oxide by more than 25% in the manufacturing. HUL follows 5 R strategies to deal with the Green House Gases (GHG): Reduce Re-Use Recycle Recover Renew HUL uses Agriculture wastages as the fuel (Ground nut shells, bagasse, saw dust, Coconut shells, cashew etc) DOMEX, a product of HUL is planning to sponsor the world toilet day on the 19th November every year. PROJECT SHAKTI ( ICICI bank is the financial partner of HUL in the project Shakti As competition is increasing day by day, its difficult to maintain the leader position & to further strengthen the distribution network HUL made a project called project SHAKTI which will serve the following purpose: A) Small, scattered settlements and poor infrastructure make distribution difficult. To Reach: Over 500,000 villages not reached directly by HUL. B) Low literacy hampers effectiveness of print media. To Communicate: Poor media-reach: 500 million Indians lack TV& radio. C) Low category penetration, consumption. To Influence: C) Per capita consumption in Unilever categories is 33% of urban level. Awareness: Project Shakti HUL soon realized that although it was enjoying a greater penetration in the rural market when compared with its competitor such as Nirma and ITC, its direct reach was restricted to only 16%. The FMCG giant was desperate to increase this share. HUL saw its dream fulfillment in the vast Indian rural market. The company was already engaged in rural development with the launch of the Integrated Rural Development Programme in 1976 in the Etah district of Uttar 15. IILM-GSM-09-11_PBM_SEC-A_ 15 | P a g e Pradesh. This program was in tandem with HUL's dairy operations and covered 500 villages in Etah. Subsequently, the company introduced similar programs in adjacent villages. These activities mainly aimed at training farmers, animal husbandry, generating alternative income, health & hygiene and infrastructure development. The main issue in rural development was to create income- generating prospects for the poor villagers. Such initiatives, linked with the company's core business, became successful and sustainable and proved to be mutually beneficial to both the company ant its rural customers. However much more remained to be done. Project Shakti was conceived following the pioneering work carried out by Grameen Bank of Bangladesh , Self Help Groups (SHGs) of rural women were formed by several institutions, NGOs and government bodies in villages across India. This group of usually 15 members contributed a small amount of money to a common pool and then offered a micro-credit to a member of the group to invest in a commonly approved economic activity. Partnering with these SHGs, HUL started its Project Shakti in Nalgonda district of Andhra Pradesh in 50 villages in the year 2000. The social side of the Project Shakti was that it was aimed 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. Most SHG women viewed Project Shakti as a powerful business proposition and are keen participants in it. There after it was extended in other states with the total strength of over 40,000 Shakti Entrepreneurs. HUL offered a wide range of products to the SHGs, which were relevant to rural customers. HUL invested significantly in resources who work with the women on the field and provide them with on-the-job training and support. HUL provided 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 translated 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. 16. IILM-GSM-09-11_PBM_SEC-A_ 16 | P a g e COMPETITION IN THE FMCG MARKET Five main competitive strategies are: Overall low cost leadership strategy Best cost provider's strategy Broad differentiation strategy Focused low cost strategy Focused differentiation strategy Here competitive strategy varies from sector to sector and company to company. Thus, it is not easy to predict a single or to find a single strategy for the whole sector. When we come on to FMCG Sector main strategies lay behind market strategies, cost, and quality strategies. Here in this report you are going to get information about such type of strategies of FMCG giants. Competitive Strategies and Comparison with ITC This Company is earlier known as Hindustan Lever Ltd. This is India's largest FMCG sector company with all type of household products available with it. It has Home & Personal Care products, and also food and Water Purifier available with it. According to Brand Equity, HUL has largest no of brands in most trusted brands list 16 of HUL's brands featured in AC-Nielson Brand Equity list of 100 most trusted brands in 2008 in an annual survey. For the entire year ending March - 2009 net turnover of company is Rs. 20'239.33 Crore which is 47.99% higher than 31st December 2007's Rs. 13675.43 Crore driven mainly by domestic FMCG's with net profit stood at Rs. 2'496.45 Crore. Products of HUL are: Annapurna; Ayush; Axe; Breeze; Bru; Brooke bond; Clinic; Dove; Fair & Lovely; Hamam; Liril; Lux; Pears; Ponds; Pepsodent; Pureit; Rexona; Rin; Sunlight; Surfexcel; Vaseline; Wheel. HUL (Hindustan Unilever Ltd.) This Company was earlier known as Imperial Tobacco Company of India Ltd. It is Currently headed by Yogesh Chander Deveshwar. Company mainly operates in the industry like Tobacco, Foods, Hotels, Stationary and Greeting Cards with the major products constitutes Cigarettes, packed foods, hotels, and apparels. For the entire year ending Mar- 2009 the turnover of company is at Rs. 15388 Crore which is 10.3% higher than previous year's Rs. 13947.53 Crore, driven mainly by robust 20% growth in non cigarette FMCG business with net profit stood at Rs. 3324 Crore. ITC Limited 17. IILM-GSM-09-11_PBM_SEC-A_ 17 | P a g e Analysis of Both Companies HUL & ITC are major companies in FMCG market in India. When we compare both companies on the basis of their strategies i.e. , their competitive strategies in the present market. When we look at the present segment breakup for both of the companies then we came to know that their different products vary too much in the market. Now let us take a comparative analysis of both the companies under some heads: HUL Hindustan Unilever (HUL) is the largest pure- play FMCG Company in the country and has one of the widest portfolio of products sold via a strong distribution channel. It owns and markets some of the most popular brands in the country across various categories, including soaps, detergents, shampoos, tea and face creams. ITC ITC is not a pure-play FMCG company, since cigarettes is its primary business. It is diversifying into non-tobacco. FMCG segments like foods, personal care, paper products, hotels and agri-business to reduce its exposure to cigarettes. Performance After stagnating between 1999 and '04, the company is back on the growth track. In the past three years, till 2008 HUL's net sales have witnessed a CAGR of 11%, while net profit has posted a CAGR of 17%. Despite diversification, ITC's reliance on cigarettes is still huge. The tobacco business contributes 40% to its revenues, and accounts for over 80% of its profit. This cash-generating business has enabled it to take ambitious, but expensive bets in new segments and deliver modest profit growth. Overall Strategy: HUL always believes in customer friendly products with major emphasis on low cost overall without compromising on the quality of the product. They are leveraging the capabilities and scale of the parent company and focusing on the value of execution. The entire product portfolio is also being tweaked to include premium offerings such as Pond's Age Miracle and dove shampoo in skin and hair care. HUL introduced Project Shakti to penetrate the rural market. ITC is focusing on delivering value at competitive prices. Its tremendous reach through extensive distribution chain has been a competitive advantage. Additionally, the company's e-choupal model for direct 18. IILM-GSM-09-11_PBM_SEC-A_ 18 | P a g e procurement is well known under which ITC partners with over 100,000 farmers for spices and wheat procurement and an even larger number for oilseeds. This kind of rural pedigree is hard to beat. Growth Drivers HUL has been launching new products and brand extensions, with investments being made towards brand-building and increasing its market share. HUL is also streamlining its various business operations, in line with the One Unilever' philosophy adopted by the Unilever group worldwide. Introduction of premium products and addition of new consumers via market expansion will be HUL's growth drivers. ITC's backward integration to ensure that its products pass efficiently from the farms to consumers has helped it to cut down supply and procurement costs. ITC's non-cigarette FMCG business leverages the large distribution network the company has developed by selling cigarettes over the years. A rich product mix, along with ramp-up of investments in its new sectors, will be instrumental in charting ITC's growth path. Risk for both the companies Being an MNC operating in India, HUL is more conservative in its strategies than its Indian counterparts. Moreover, given increasing competition, it faces the risk of being overtaken by domestic players in various categories. Prolonged inflation may lead to margin contraction, in case HUL is not able to pass on this burden to consumers. The company's large size also poses a problem, since it does not give HUL the agility to address the competition it faces from national and regional players. For HUL Increased regulatory clamps on tobacco, along with rising tax burden, pose a business risk for ITC. So, it has started an ambitious diversification plan, which has its own set of risks. With its foray into the conventional FMCG space, ITC has entered the high-clutter branded products market. This will burden its resources in terms of ad spend and brand- building. Creating brand recall and building market share in new products are ITC's key challenges. Export ban and rising crop prices pose a threat for its agri-business, taxing its margins. For ITC 19. IILM-GSM-09-11_PBM_SEC-A_ 19 | P a g e HUL AND P&G Procter & Gamble was founded in 1837 by William Procter, a British citizen who immigrated to the United States. The company first sold candles. Procter & Gamble Co. (P&G, NYSE: PG P&G is credited with many business innovations including brand management and the soap opera. ) is a Fortune 500 American multinational corporation headquartered in Downtown Cincinnati, Ohio that manufactures a wide range of consumer goods. As of mid 2010, P&G is the 6th most profitable corporation in the world, and the 5th largest corporation in the United States by market capitalization, surpassed only by Apple, Exxon Mobil, Microsoft, and Wal-Mart. It is 6th in Fortune's Most Admired Companies 2010 list. According to the Nielsen Company, in 2007 P&G spent more on U.S. advertising than any other company; the $2.62 billion spent by P&G is almost twice as much as that spent by General Motors, the next company on the Nielsen list. P&G was named 2008 Advertiser of the Year by Cannes International Advertising Festival. Proctor & Gamble is a leading member of the U.S. Global Leadership Coalition, a Washington D.C.-based coalition of over 400 major companies and NGOs that advocates for a larger International Affairs Budget, which funds American diplomatic and development efforts abroad. 20. IILM-GSM-09-11_PBM_SEC-A_ 20 | P a g e Major products of P&G Coconut-based cleaning and food products Laundry and personal cleansing products Purico Tide Star DariCreme Perla Primex Sunshine Safeguard Camay Ariel Mayon Gain PMC Bonus Victor Daz Ola Lava Agro Mr. Clean Fresco Prell Health care Crest Vicks Zest Fibresure Moncler Thermacare Ivory Pepto Bismol Laundry, personal care and hair care Hair care and laundry categories Secret Pampers Safeguard Whisper Ascend Rejoice Ariel Tide Old Spice Max Factor Zest Vidal Sassoon Clairol Ivory Nice n Easy Pantene Wella Dishwashing, fabric care and food categories Camay Joy Mr. Clean Downy Alldays Pringles 21. IILM-GSM-09-11_PBM_SEC-A_ 21 | P a g e STRATEGIES OF P&G P&G focuses on five core strengths required to win in the consumer products industry. We are designed to lead in each of these areas. Consumer Understanding No company in the world has invested more in consumer and market research than P&G. We interact with more than five million consumers each year in nearly 60 countries around the world. P&G invest more than $350 million a year in consumer understanding. This results in insights that tell us where the innovation opportunities are and how to serve and communicate with consumers. Innovation P&G is the innovation leader in this industry. Virtually all the organic sales growth delivered in the past nine years has come from new brands and new or improved product innovation. We continually strengthen our innovation capability and pipeline by investing two times more, on average, than our major competitors. In addition, we multiply our internal innovation capability with a global network of innovation partners outside P&G. More than half of all product 22. IILM-GSM-09-11_PBM_SEC-A_ 22 | P a g e innovation coming from P&G today includes at least one major component from an external partner. The IRI New Product Pacesetter Report ranks the best- selling new products in our industry in the U.S. every year. Over the past 14 years, P&G has had 114 top 25 Pacesetters more than our six largest competitors combined. In the last year alone, P&G had five of the top 10 new product launches in the U.S. and 10 of the top 25. Brand-Building P&G is the brand-building leader of this industry. It has built the strongest portfolio of brands in the industry with 22 billion- dollar brands and 20 half-billion-dollar brands. Eleven of the billion-dollar brands are the #1 global market share leaders of their categories. The majority of the balances are #2. Go-to-Market Capabilities It has established industry-leading go-to- market capabilities. P&G is consistently ranked by leading retailers in industry surveys as a preferred supplier and as the industry leader in a wide range of capabilities including clearest company strategy, brands most important to retailers, strong business fundamentals and innovative marketing programs. Scale Over the decades, we have also established significant scale advantages as a total company and in individual categories, countries and retail channels. P&Gs scale advantage is driven as much by knowledge-sharing, common systems and processes, and best practices as it is by size and scope. These scale benefits enable us to deliver consistently superior consumer and shareholder value. P&G follows Connect + Develop strategy which enables to bring innovations to life faster, more economically and more sustainably. 23. IILM-GSM-09-11_PBM_SEC-A_ 23 | P a g e HUL AND P&G ADVERTIESMENT WAR The new campaign started by Rin, a product of Hindustan Unilever Limited. It is a direct attack on the Tide Naturals product by Procter & Gamble. Note that when It is said a direct attack it means an uncensored visual shows the competitor product and then highlights how the other product is better then the former. The sequence of the ad is as follows 1. Two ladies are standing on a bus stop, waiting to pick their kids from the school bus. 2. Both are carrying their shopping basket/bag with them. 3. Lady 1 has Tide Naturals in her bag. 4. Lady 2 has Rin in her bag 5. Both ladies have a look at each others bag and Lady 1 boasts that Tide has a good fragrance and provide better whiteness/brightness to the clothes 6. In the meantime, the school bus arrives and its shown that the white shirt of Lady 2s kid is strikingly brighter and whiter then the Lady 1s kid. 7. Lady 1 gets astonished by the whiteness seen. 8. Lady 2s kid reacts by asking he mother, as to why is the other lady so observant and amazed 9. There is a disclaimer during the ad that the analysis has been done by an independent agency 10. Its then claimed that now there is promotional price of Rs. 25 on Rin as opposed to the earlier Rs. 35. As it can be noticed, there is a direct mention of the competitor product along with the visuals. This one seems to be an absolute direct attack. It is difficult to say if the ad will continue on TV. Tide would definitely come out with a protest. However, I think the damage is already done. The main point about the reduced price of Rin would definitely catch the consumers eye benefiting HUL. 24. IILM-GSM-09-11_PBM_SEC-A_ 24 | P a g e PRICE WAR BETWEEN HUL AND P&G HUL increase the grammage for wheel P&G increase the grammage of Tide by 25% P&G cut the price of ARIEL HUL reduces the price of surf exel in comparision to Ariel In the year 2010 HUL has reduced 11-17% price in detergents, 7-17% in toilet soaps and 6-7% in the toothpastes. HUL cut the price of RIN by 30% (price war with P&G). Due to which P&G reacts by cutting 20% indirect price (25% grammage hike) in TIDE. 25. IILM-GSM-09-11_PBM_SEC-A_ 25 | P a g e Strategic growth summary of HUL HUL prioritized opportunities which build upon the existing assets and capabilities. It avoided spreading their management thinly. For example: HUL first made its sales and distribution channel & supply chain management in manufacturing and selling wheat flour and utilized it into the selling breads produced by wheat flour. HUL is more focused on the innovations Example: In 1995 launched KISSAN ANNAPURNA staple foods with the message staple food including iodized salt Serving Rural population: In 2000 the 32% of the sales were from rural sector but in 2010 it is more than 50%. It follows direct communication from the customers. It believes in expanding the portfolio. Each category has a different set of supply chain, production and consumer decision making process issuing associated with it. Strategies - market entry: (Kissan Annapurna iodized salt) In 1995 HUL launched Kissan Annapurna iodized salt at that time only 10% of 6.5 million ton of salts were branded and refined HUL identified it and launched the KISSAN ANNAPURNA SALT. Firstly it launched in the few cities of the country for test marketing and then for all. Shifted from purity- a product attribute to Health consumer benefit (As a positioning strategy) Tried to shift the consumers from unbranded to brand. Started Using IODINE as a marketing strategy as there were other salts including iodine but no one was focused on that. HUL started it. Started endorsement through trusted government agencies. In 2002 it has made iodine patented in 80 countries. 26. IILM-GSM-09-11_PBM_SEC-A_ 26 | P a g e Strategic Shifts In the past 10 years, HUL has made four shifts in its business strategy, targeted at boosting growth and reach POWER BRANDS: Strategy in 2000. Focusing on fewer brands, 30 of them, and showering marketing attention on them. MASSTIGE: Strategy in 2005-06. Making premium brands (prestige) attainable for a larger section of consumers (mass). ONE UNILEVER: Strategy in 2007. Building leadership position in fast-growing markets. PUMP UP THE VOLUMES: Strategy in 2010. Global CEO Paul Polman is pushing the Indian operations chasing value growth to deliver on the volumes as well. 27. IILM-GSM-09-11_PBM_SEC-A_ 27 | P a g e Financial analysis of HUL INCOME STATEMENT (RS MILLION) Y/E MARCH 07 FY09 FY10 FY11E FY12E Net Sales 136,754 202,393 173,844 190,848 213,504 Other Operating Income 1,937 3,622 1,838 3,298 3,608 Total Revenue 138,691 206,016 175,683 194,147 2 17,112 Change (%) 13.0 48.5 -14.7 10.5 11.8 COGS 72,685 108,379 88,498 101,159 112,531 Gross Profit 66,006 97,636 87,185 92,987 104,581 Operating Exp 45,281 67,235 60,612 66,314 73,424 EBIDTA 20,724 30,402 26,573 26,673 31,157 Change (%) 13.7 46.7 -12.6 0.4 16.8 Margin (%) 14.9 14.8 15.1 13.7 14.4 Depreciation 1,384 1,953 1,814 2,006 2,132 Int. and Fin. Charges 255 253 75 112 91 Other Income Recurring 2,379 2,056 1,692 1,457 1,623 Pro fit before T axes 21,464 30,251 26,376 26,013 30,557 Change (%) 15.3 40.9 -12.8 -1.4 17.5 Margin (%) 15.7 14.9 15.2 13.6 14.3 Tax 3,643 5,244 5,644 5,463 6,417 Deferred Tax 389 0 475 468 550 Tax Rate (%) 18.8 17.3 23.2 22.8 22.8 Profit after Taxes 17,432 25,007 20,256 20,082 23,590 Change (%) 13.2 43.5 -19.0 -0.9 17.5 Margin (%) 12.7 12.4 11.7 10.5 11.0 Non-rec. (Exp)/Income 1,824 -43 -144 0 0 Reported P AT 19,256 24,965 20,112 20,082 23,590 28. IILM-GSM-09-11_PBM_SEC-A_ 28 | P a g e If we analyze this financial statement we can see that the performance of HUL has decreased over the last two years and the possible reasons for that are- Higher expenses on the advertisement part. HUL is the king of distribution channel in India but now it is getting full competition from the P&G and others like ITC, AMUL,DABUR,NESTLE etc One of most important factors is the power branding strategy of HUL due to which it has ignored most of the brands and just focusing only on the power brands. 29. IILM-GSM-09-11_PBM_SEC-A_ 29 | P a g e Brand Management at HUL HUL 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. HUL also vigorously pursues brand extension strategy. And concurrently, HUL undertakes line pruning and brand restructuring and consolidation, based on marketing compulsions. HUL is also playing the rejuvenation and re-launch game. With great benefit the corporate- level endeavors at business expansion and diversification are also throwing new challenges on the brand strategy front. HUL lends itself for a proper understanding of the complexity of the brand management task. We shall examine how HUL handles the complex demands in brand management. Such an array of brands is the outcome of a conscious corporate strategy by HUL. As a corporate, HUL 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 possession of strong brands. It is this strategy that is getting reflected in the development of a multitude of strong brands. If we take the business of bathing soaps, as an example, HUL has the objective of being a national player (not a niche or a regional marketer) and the leader therein. HUL also wants about 30 per cent of the corporate income to come from this line. So, HUL opted for the strategy of developing quite a few strong brands in this line, and among them they cover different market segments and price points. Dove, Lux, Liril, Rexona, Pears and Lifebuoy are the outcome of such a well planned brand strategy implemented over time. Lifebuoy is 100 years old and Liril 15 years old. In fact, HUL has about 10 brands of toilet soaps each having good volume of sale to its credit . The point is that decisions on brand portfolio are a fundamental expression of the companys objectives and strategy governing a given business. HUL Locates Positioning Opportunities: HUL methodically goes about the task of developing a brand portfolio across a product category. It first identifies the various positioning opportunities across benefits, target groups and price points. Existing brads are mapped across these positioning opportunities, and gaps for possible new offers are explored.The company then estimates the likely volumes for each of the possible opportunity and the financial viability and sustainability of 30. IILM-GSM-09-11_PBM_SEC-A_ 30 | P a g e the propositions in the long term. If some of these gaps look promising, HUL goes ahead with the plans. It examines the existing set of brands with the company, the product technologies available, the benefits that can be provided and other considerations that have a bearing on the companys long term interests in the business. Finally, if the company decides to go in for the new offer, a decision has to be taken as to whether new brands should be created or extensions if existing brands should be preferred or ongoing brands from the market acquired. HUL hires brands to capture new opportunities: Towards the close of the 1990s, HUL found that the germicide segment of the soap market was growing fast, with RCIs Dettol antiseptic soap leading it. HUL did not have suitable offer in its stable to capture a share of this segment. Lifebuoy was not strictly meeting the particular benefit. HUL knew that launching and developing a new brand would take a lot of time and resources, and the company would miss the market if it chose this route. HUL did not have the product formula either to enter this segment. It was in this background that HUL decided to hire the Savlon brand from J&J. Savlon was a successful antiseptic lotion, a competitor to Dettol lotion. Just as the Dettol soap owed its origin to the success of the Dettol lotion, HUL assessed that a Savlon antiseptic soap could be successfully extended from the Savlon lotion. It entered into an agreement with J&J for the use of Savlon brand name and the product formula, and launched the Savlon antiseptic soap. HUL very deftly managed successfully new brand launch and merged as a challenger to Dettol soap. J&J secures a good royalty from HUL for lending the brand. It is a potentially win-win arrangement for both companies. Repositioning and rebranding HUL has done the process of repositioning the brands. Few of them as follows; SUNSILK: Sunsilk co-creations , collaboration with 7 pioneer global hair experts BREEZE: New fragrances over the world, new look more colors, packaging Rexona: relaunched it with the coconut moistening Lifebuoy hand sanitizer: kills 99.99% germs in 15 seconds Fairness cream: Fair & lovely multivitamin Close-up: peppermint splash Pepsodent toothbrush: 25% flexibility. 31. IILM-GSM-09-11_PBM_SEC-A_ 31 | P a g e Conclusion & Recommendations HUL's up-and-running business model is a treat for investors seeking exposure in the FMCG segment. The company has delivered in the past and has the potential to do better in future. In short term. HULs growth story is evolving. ITC is eyeing the pie which HUL and other FMCG players currently enjoy. Though risky, the company's business model will pay off in the long run. ITC has proved its expertise in the cigarettes, hotels, paper and agri-businesses. Investors who want to bank on its execution ability in FMCG can consider the stock with a long-term horizon. According to us the companies should continue with their CSR and also continue with their strategies. The thing that needs to be changed is that, ITC should go for more diversification in Non cigarette segment (FMCG) while HUL should come up with the new strategies that could take the new product forward to create a new segment. A recommendation For HUL is that it should focus on rural area more. 32. IILM-GSM-09-11_PBM_SEC-A_ 32 | P a g e Bibilography