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Environmental factors of India at that time :-

y The economy, markets and competitive environment were changing.y Keeping ahead required taking account of changes and doing business in different ways.y India had a major chunk of companies in private sector which were family owned and familyrun.y Country lacked basic infrastructure in many areas.y Growth opportunities in India were highest in lower price segments.y igh gap between lower and higher end strata.

Project Millennium

It was a plan to turn the FMCG giant, HLL, into a collection of entrepreneurial virtual companies each

with its own virtual CEO.

They wanted to decentralize and break up the company to create small entrepreneurial businesses.

Main issues identified :-

y Maintaining aggressiveness and quickness of the company.y Passing on experience without interferingy Delivering what consumer expects

About HLL 1998 to 1999

y It was investor savy as it performed well at stock exchanges.y One of the best and strongest distribution networks.y 55% of total revenue was from Indian rural areas. Thus this was the area with high potential.y Introduced 64 product innovations,y Had one of the best professional management.y They had a structured hierarchyy Their Managers had the ability to continuously outperform themselvesy They had detailed systems which helped HLLs managers deliver world class resultsy In over 10 years, revenues and profitability had not dipped even once.

HLL in comparison with peers

y HLL had an ROE of50.8% which was almost double the industry average of 28.7%. Thus it was ata very good position. Nestle, Britannia, Cadbury, P&G had an ROE lower than industry average.

y P/E ratio for HLL was 68.7, much higher than industry average of 47.8. This depicts a goodposition. Nestle has a slightly higher P/E ratio of 48.5 as compared to industry average.

Britannia, Cadbury, P&G had an P/E lower than industry average.

Thus looking at the industry, HLL was at a very good position.

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Edge HLL had

y Flexibility to change according to time.y Ability to rebuild the oldy Good HR practicesy Strong R&Dy Use of technology

Future plans

Personal care and processes foods were identified as thrust areas for growth.

They planned a capital expenditure of Rs 2 Bn to develop cold storage chains to improve its ice cream

and atta businesses.

They needed to have products catering bottom end in order to maintain 51 % market share.

Some strategies applied

Ice Cream

HLL acquired 30 ice cream factories, but all were in bad shape and poor hygienic conditions.

Existing market :

y poor product qualityy sales split between parlor based products - bricks or cups and Impulse buys hand held.

Potential identified :

y Higher margins in impulse buying.y Push cart sales

Issues

y Distribution channelsy High cost of establishing and maintaining a cold chain throughout the country.y How to grow the markety High cost of dry ice used to maintain temperature of -50oC in push cart.

Strategy

y Established Kwality Walls as the new brand and brought all products under this brand name.y They screened the 30 factories and introduced sub brands such as Feast, Cornetto and Snacks.

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y R&D developed liquid pouches which was cheaper than dry ice.y Pouches maintained a temperature of -23oC which was safer for children.y R&D developed a smaller and compact push cart with lower capital cost and carrying capacity.y They wanted to engage push cart concessionaries each responsible for managing 20 push carts

who would retain a 10% margin.

Results

y Larger and more rewarding distribution system.y They were prompted to explore possibility of expanding the market by developing a frozen

refreshment product priced at Rs 2-3 as a substitute for bottled beverages.

POPULAR FOODS

Existing market :

y Amounted to 3200 bn with single largest segment (40%) being staples (wheat, sugar, salt)y Other large segments included milk products, meats and edible fats.y HLL participation in food was limited to Dalda.

Potential identified :

y Salt and atta market.Issues

y Complex processing of atta that required R&D strengths.y Short shelf life of atta.y They conducted market research while developing the atta business to understand consumers.

They concluded soft chapattis and nutrition were the prime requirements.

y Competitive pricing.Strategy

y Test marketing for salt and atta.y Popular foods business was parked within the detergent group as the distribution requirement

for both were similar.y They accessed bakery know- how to provide what the customer demanded.y For pricing, they decided to maximize savings in supply chain. They organized wheat

procurement network which allowed it to obtain desirable strains of wheat at a lower cost.

y Farmers were asked to grow harder wheat that would result n softer chappatis.

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Advantages Regional players had over HLL

y Structural advantagesy No expensive head officesy Lower geographical costsy Lower transport costsy Different mix of trade margins and lower level of advertisingy Lower profit expectations

REBUILDING THE BRANDS

Cost reduction strategy Polypacks

HLL saved Rs 7 per ton on polypacks by printing in 3 colors on the front but single color on back.

The R&D team found a new polymer which would make better polypacks at lower cost.

Dalda

Dalda was the original cash cow within HLL which funded the growth of detergent business.

ISSUES PRE LIBERALISATION

It had been ignored for a long time as its manufacture and sale was heavily regulated, making it

uneconomic

POST LIBERALISATIONPrice controls were lifted.

POTENTIAL

HLL management took a fresh look at Dalda and found that it was a powerfull brand as : -

1. It was a cheap substitute for pure gheeBut it was low on growth and financial performance.

STRATEGY

They decided to try and rejuvenate Dalda. For this

1. Production and supply chain was re-engineeredResult : Closure of one factory and new agreements with 7 third party manufacturers.

2. Supplier finance grew from 4% of sales in 1996 to -3% of sales in 1997Result : Working Capital Requirements were reduced.

3. Along with these better packaging and distributionResult : Improved Return on Capital Employed from 4%in 1996 to 27% in 1997.

4. Dalda business unit started working with R&D team to develop modified versions ofDaldaResult : 2 new versions of dalda

a) Light Dalda : Yellow fat with higher gross margin than normal dalda

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b) Healthier ghee : Effort to get closer to pure ghee in taste and texture.

EMPOWERING PEOPLEHLL had a well deserved reputation as an excellent recruiter and developer of people.

HYBRID CULTURE

Brooke Bond, Ponds, lipton and others possessed core Unilever values and culture but had also evolved

their own unique characteristics over a period of time.

EXAMPLE

HLL : Managers described it as a restless company, target driven, with everyone striving to outperform

others. Responsibilities were shared.

Brooke Bond : Had far more command and control than HLL. Managers would not go beyond their own

objectives.

Ponds : Managers felt they were more entrepreneurial than HLL and they felt they had flexibility to

achieve their targets.

CHALLENGE

To create a new HLL culture after mergers .

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Several jobs overlapped or became redundant once the process of integrating the cultures started.

Strains were produced in company as there were too many managers at some level and too few at

others.

RECRUITMENT

According to HLL, They offer careers, no jobs.

1. Direct Recruits (DR)They were brought in through head-hunters to fill a specific position.

2. Management Trainee (MT)They were recruited through campus at all major business schools. Company preferred group

discussions to one to one interviews. They had a highly structured training program which

provided them with lot of exposure.

They believed that managers should be very humble and thus they were required to drive a

push cart and sell for a month

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3. Non MBAThey were sent to IIM-Ahmedabad for a 2 and half week basic business course. Their training

included Rural Development Program where they spent 6 weeks with a village elder and working

on projects like building roads, negotiating with government offices etc. This experience helped

trainees understand realities of life and assisted them in their careers. Besides this was the

strata HLL wanted to cater to.

Thus the company laid high emphasis on training their employees, irrespective of position they joined

at. The company rarely hired externally for senior positions as it had a rich pipeline of candidates and

they preferred people who were used to the training process and company culture.

It was said about HLL that if you understand the system it appears logical and rational , otherwise, it

appears bureaucratic, slow and difficult.

They inculcated the values of integrity and ethics in their managers.

Appraisal process was open and enabled managers to know exactly where they stood

EMPLOYEEDEPARTURE

Recruitment of some of the best talent in the country combined with a robust training program and

rotation through a range of jobs and product categories made HLL managers highly attractive and this

led to regular departures. They expected only 25% of new trainees to be there after 15 years of joining.

Drawbacks HLL managers faced not allowing them to work as effectively outside the company: -

1. HLL way functionalized them2. They were accustomed to lot of support from each other (peer group, functions, senior

manager).

TEAMWORK

HLL had a tradition of putting together teams quickly. The concept there was that when there is a huge

problem and people sit down as a team to address it, they may not reach a solution but solution comes

within sight.

The process of team creation was driven by the concept of unified objectives which were established on

company-wide level every 5 years through the process of strategic planning.

The best thing is that after the debate once a decision is taken, everyone falls in line and works in

unison to achieve corporate objective.

BUSINESS GROUPSTRATEGIC PLAN

This was a 5 year plan and responsibility of business head of each business. It reflected the plan for each

brand. It defined a market share and revenue target and this drove the investment required to create

sufficient capacity. The plan translated into a target for each year. The annual target was broken up into

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into quarterly and monthly numbers which had to be met. Whenever there was a problem in meeting

target, everyone pulled together as a team to get back on track.