Distribution Management of

DISTRIBUTION MANAGEMENT OF HUL
pg. 1
CORPORATE INFORMATION
Hindustan Unilever Limited, 165/166,

Registered Office Backbay Reclamation Mumbai – 400 020 Tel :
+91 – 22 – 39830000 Fax no. : +91 – 22 –
22026712
Ashok.K.Gupta, Email :
Executive Director (Legal) hllshare.cmpt@unilever.com Tel nos. : +91-
and Company Secretary 22-39832567/ 39832358 / 39832557
Lovelock & Lewes, Chartered Accountants

Statutory Auditors 252, Veer Savarkar Marg Dadar, Mumbai-
400 028
Crawford Bayley & Co. State Bank Building
Solicitors N.G.N. Vaidya Marg Mumbai – 400 023
Karvy Computershare Private Limited Unit :

HINDUSTAN UNILEVER LIMITED Plot No. 17 to
Registrar and Share 24, Vittalrao Nagar, Madhapur, Hyderabad –
Transfer Agents 500 081. Phone : +91- 40 23420818-823
Fax : +91- 40 23420814 Email :
igkcpl@karvy.com Website : www.karvy.com
Unilever India Exports Limited Bon Limited
Unilever Nepal Limited Pond’s Exports
Subsidiary Companies Limited Daverashola Estates Private Limited
Jamnagar Properties Private Limited
Shamnagar Estates Private Limited Brooke
Bond Real Estates Private Limited Hindustan
Unilever Field Services Private Limited Levers
Associated Trust Limited Levindra Trust
Limited Hindlever Trust Limited
pg. 2
pg. 3
pg. 4
1. INTRODUCTION OF HINDUSTAN UNILEVER LIMITED
Hindustan Unilever Limited (‘HUL’), formerly Hindustan

Lever Limited (it was renamed in late June 2007 as HUL), is India's
largest Fast Moving Consumer Goods company, touching the lives of two
out of three Indians with over 20 distinct categories in Home & Personal
Care Products and Foods & Beverages. These products endow the
company with a scale of combined volumes of about 4 million tonnes
and sales of nearly Rs. 13718 crores.
HUL is also one of the country's largest exporters; it has been

recognised as a Golden Super Star Trading House by the Government of
India.
The mission that inspires HUL's over 15,000 employees, including

over 1,300 managers, is to "add vitality to life." HUL meets everyday
needs for nutrition, hygiene, and personal care with brands that help
people feel good, look good and get more out of life. It is a mission
HUL shares with its parent company, Unilever, which holds 52.10% of
the equity. The rest of the shareholding is distributed among 360,675
individual shareholders and financial institutions.
HUL's brands ‐ like Lifebuoy, Lux, Surf Excel, Rin, Wheel, Fair &
Lovely, Pond's, Sunsilk, Clinic, Pepsodent, Close‐up, Lakme, Brooke Bond,
Kissan, Knorr‐Annapurna, Kwality Wall's – are household names across
the country and span many categories ‐ soaps, detergents, personal
products, tea, coffee, branded staples, ice cream and culinary products.
These products are manufactured over 40 factories across India. The
operations involve over 2,000 suppliers and associates. HUL's distribution
network comprises about 4,000 redistribution stockists, covering 6.3
million retail outlets reaching the entire urban population, and about 250
million rural consumers.
pg. 5
We have analyzed the distribution network of HUL from the

following aspects:
1. Evolution of HUL’s distribution network
2. Transportation & Logistics
3. Channel Design
4. Initiatives taken for channel member management.
5. Field force management
6. Analytical Framework
7. Financial Analysis
pg. 6
HUL’S BRANDS
1. Lifebuoy
2. Lux
3. Surf Excel
4. Rin
5. Wheel
6. Fair & Lovely
7. Pond's
8. Sunsilk
9. Clinic
10. Pepsodent
11. Close‐up
12. Lakme
13. Brooke Bond
14. Kissan
15. Knorr‐Annapurna
16. Kwality Wall's
17. Dove etc
pg. 7
pg. 8
pg. 9
pg. 10
pg. 11
DISTRIBUTION
NETWORK
pg. 12
2.1. Evolution over Time
The HUL’s distribution network has evolved with time. The first
phase of the HUL distribution network had wholesalers placing bulk
orders directly with the company. Large retailers also placed direct
orders, which comprised almost 30 per cent of the total orders
collected. The company salesman grouped all these orders and placed
an indent with the Head Office. Goods were sent to these markets, with
the company salesman as the consignee. The salesman then collected
and distributed the products to the respective wholesalers, against cash
payment, and the money was remitted to the company.
The focus of the second phase, which spanned the decades of the 40s,
was to provide desired products and quality service to the company's
customers. In order to achieve this, one wholesaler in each market was
appointed as a "Registered Wholesaler," a stock point for the company's
products in that market. The company salesman still covered the
market, canvassing for orders from the rest of the trade. He then
distributed stocks from the Registered Wholesaler through distribution
units maintained by the company. The Registered Wholesaler system,
therefore, increased the distribution reach of the company to a larger
number of customers.
The highlight of the third phase was the concept of "Redistribution

Stockist" (RS) who replaced the RWs. The RS was required to provide
the distribution units to the company salesman. The second
characteristic of this period was the establishment of the "Company
Depots" system. This system helped in transshipment, bulk breaking, and
as a stockpoint to minimise stock‐outs at the RS level. In the recent
past, a significant change has been the replacement of the Company
pg. 13
Depot by a system of third party Carrying and Forwarding Agents

(C&FAs). The C&FAs act as buffer stock‐points to ensure that stock‐outs
did not take place. The C&FA system has also resulted in cost savings
in terms of direct transportation and reduced time lag in delivery. The
most important benefit has been improved customer service to the RS.
The role performed by the Redistribution Stockists includes: Financing

stocks, providing warehousing facilities, providing manpower, providing
service to retailers, implementing promotional activities, extending
indirect coverage, reporting sales and stock data, demand simulation and
screening for transit damages.
2.2. Detail Overview
The distribution network of HUL is one of the key strengths that help it
to supply most products to almost any place in the coutry from
Srinagar to Kanyakumari. This includes, maintaining favorable trade
relations, providing innovative incentives to retailers and organizing
demand generation activities among a host of other things. Each
business of HUL portfolio has customized the network to meet its
objectives. The most obvious function of providing the logistics support
is to get the company’s product to the end customer.
Distribution System of HUL
HUL's products, are distributed through a network of 4,000 redistribution

stockists, covering 6.3 million retail outlets reaching the entire urban
population, and about 250 million rural consumers. There are 35 C&FAs
in the country who feed these redistribution stockists regularly. The
general trade comprises grocery stores, chemists, wholesale, kiosks and
general stores. Hindustan Unilever provides tailor made services to each
of its channel partners. It has developed customer management and
pg. 14
supply chain capabilities for partnering emerging self‐service stores and

supermarkets. Around 2,000 suppliers and associates serve HUL’s 40
manufacturing plants which are decentralized across 2 million square
mile of territory.
(Fig. 1 – Schematic of HUL’s Distribution Network)
Distribution at the Villages:
The company has brought all markets with populations of below

50,000 under one rural sales organisation.The team comprises an
pg. 15
exclusive sales force and exclusive redistribution stockists.The team

focuses on building superior availability of products. In rural India, the
network directly covers about 50,000 villages, reaching 250 million
consumers, through 6000 sub‐stockists.
pg. 16
(Fig. 2 – Rural Distribution Model of HUL)
pg. 17
HUL approached the rural market with two criteria ‐ the accessibility and
viability. To service this segment, HUL appointed a Redistribution stockist
who was responsible for all outlets and all business within his particular
town. In the 25% of the accessible markets with low business potential,
HUL assigned a sub stockist who was responsible to access all the
villages at least once in a fortnight and send stocks to thoe markets.
This sub‐stockist distributes the company's products to outlets in
adjacent smaller villages using transportation suitable to interconneting
roads, like cycles, scooters or the age‐old bullock cart. Thus, Hindustan
Unilever is trying to circumvent the barrier of motorable roads. The
company simultaneously uses the wholesale channel, suitably
incentivising them to distribute company products. The most common
form of trading remains the grassroots buy‐and‐sell mode. This enables
HUL to influence the retailers stocks and quantities sold through credit
extension and trade discounts. HUL launched this Indirect Coverage
(IDC) in 1960s.Under the Indirect Coverage (IDC) method, company
vans were replaced by vans belonging to Redistribution Stockists, which
serviced a select group of neighbouring markets.
Distribution at the Urban centres:
Distribution of goods from the manufacturing site to C & F agents take

place through either the trucks or rail roads depending on the time
factor for delivery and cost of transportatin. Generally the manufacturing
site is located such that it covers a bigger geographical segment of
India. From the C & F agents, the goods are transported to RS’s by
means of trucks and the products finally make the ‘last mile’ based on
the local popular and cheap mode of transport.
pg. 18
New distribution channels
Project Shakti
This model creates a symbiotic partnership between HUL and

its consumers. Started in the late 2000, Project Shakti had enabled
Hindustan Lever to access 80,000 of India's 638,000 villages .HUL's
partnership with Self Help Groups(SHGs) of rural women, is becoming an
extended arm of the company's operation in rural hinterlands. Project
Shakti has already been extended to about 12 states ‐ Andhra Pradesh,
Karnataka, Gujarat, Madhya Pradesh, Tamil Nadu, Chattisgarh, Uttar
Pradesh, Orissa, Punjab, Rajasthan, Maharashtra and West Bengal. The
respective state governments and several NGOs are actively involved in
the initiative. The SHGs have chosen to partner with HUL as a business
venture, armed with training from HUL and support from government
agencies concerned and NGOs. Armed with micro‐credit, women from
SHGs become direct‐to‐home distributors in rural markets.
The model consists of groups of (15‐20) villagers below the poverty line
(Rs.750 per month) taking micro‐credit from banks, and using that to
buy our products, which they will then directly sell to consumers. In
general, a member from a SHG selected as a Shakti entrepreneur,
commonly referred as 'Shakti Amma' receives stocks from the HUL rural
distributor. After being trained by the company, the Shakti entrepreneur
then sells those goods directly to consumers and retailers in the village.
Each Shakti entrepreneur usually service 6‐10 villages in the population
strata of 1,000‐2,000. The Shakti entrepreneurs are given HUL products
on a `cash and carry basis.'
pg. 19
The following two diagrams show the Project Shakti model as initiated
pg. 20
Project Streamline
To cater to the needs of the inaccessible market with high

business potential HUL initiated a Streamline initiative in 1997. Project
Streamline is an innovative and effective distribution network for rural
areas that focuses on extending distribution o villages with less than
2000 people with the help of rural sub‐stockists/Star Sellers who are
pg. 21
based in these very villages. As a result, the distribution network

directly covers as of now about 40 per cent of the rural population.
Under Project Streamline, the goods are distributed from C & F Agents
to Rural Distributors (RD), who has 15‐20 rural sub‐stockists attached to
him. Each of these sub‐stockists / star sellers is located in a rural
market. The sub‐stockists then perform the role of driving distribution in
neighboring villages using unconventional means of transport such
astractor and bullock carts. Project Streamline being a cross functional
initiative, the Star Seller sells everything from detergents to personal
products.
Higher quality servicing, in terms of frequency, credit and full‐line
availability, is to be provided to rural trade as part of the new
distribution strategy.
The diagram in the next page shows the model of Project Streamline.
pg. 22
pg. 23
HINDUSTAN LIVER
NETWORK
pg. 24
Hindustan Lever Network (HLN)
It is the company's arm in the Direct Selling channel, one of

the fastest growing in India today. It already has about several lakh
consultants ‐ all independent entrepreneurs, trained and guided by HLN's
expert managers. HLN has already spread to over 1500 towns and
cities, covering 80% of the urban population, backed by 42 offices and
240 service centres across the country. It presents a range of
customised offerings in Home & Personal Care and Foods.
The New Compensation plan for HLN partners provides new exciting
ways of earning substantial income in addition to offering rewrds like
revenue sharing through the innovative concept of “pools” Mother
Depot and Just in Time System
In order to rationalise the logistics and planning

task, an innovative step has been the formation of the Mother Depot
and Just in Time System (MD‐JIT). Certain C&FAs were selected across
the country to act as mother depots. Each of them has a minimum
number of JIT depots attached for stock requirements. All brands and
packs required for the set of markets which the MD and JITs service in
a given area are sent to the mother depo by all manufacturing units.
The JITs draw their requirements from the MD on a weekly or bi‐weekly
basis.
Leveraging Information technology
HUL customers are serviced on continuous replenishment. This is

possible because of IT connectivity across the extended supply chain of
about 2,000 suppliers, 80 factories and 7,000 stockists. This
pg. 25
sophisticated network with its voice and data communication facilities

has linked more than 200 locations all over the contry, including the
head office, branch offices, factories, depots and the key redistribution
stockists. They have also combined backend processes into a common
Shared Service infrastructure, which supports the units across the
country. All these initiatives together have enhanced operational
efficiencies, improved the service to the customers and have brought us
closer to the marketplace.
RS Net Initiative:
The RS Net initiative, launched in 2001, aims at connecting Redistribution

Stockists (RSs) through an internet based system. It now covers
stockists of the Home & Personal Care business and Foods & Beverages
in close to 1200 towns and cities. Together they account for about 80%
of the company's turnover. RS Net is one of the largest B2B e‐
commerce initiatives ever undertaken in India. It provides linkages with
the RSs’ own transaction systems, enables monitoring of stocks and
secondary sales and optimises RS’s orders and inventories on a daily
basis through online intraction on orders, despatches, information sharing
and monitoring. The IT‐powered system has been implemented to supply
stocks to redistribution stockists on a continuous replenishment basis.
Today, the sales system gets to know every day what HUL stockists
have sold to almost a million outlets across the country. Information on
secondary sales is now available on RS Net every day.
RS Net is part of Project Leap. Project Leap begins with the supplier
runs through the factories and depots and reaches up to the RSs. This
ensures HUL’s growth by ensuring that the right product is available at
the right place in the right quantities and at th right time in the most
cost‐effective manner. Leap also aims at reducing inventories and
improving efficiencies right through the extended supply chain.
pg. 26
RS Net has come as a force multiplier for HUL Way, the company's
action‐plan to not only maximise the number of outlets reached but also
to achieve leadership in every outlet. RS Net has enabled stockists to
place orders on a Continuous Replenishment System. This in turn has
unshackled the field force to solely focus on secondary sales from the
stockists to retailers and market actiation. It has also enabled RSs to
provide improved service to retail outlets. Simultaneously, HUL is
servicing the rural market, key urban outlets, and the modern trade as
a single concern.
Adexa iCollaboration suite
In 2000, HUL identified improved supply chain management as a

critical business priority and launched a comprehensive initiative, “Project
Leap,” tasked with increasing supplier/distributor responsiveness, reducing
inventory buffers, and optimizing planning and scheduling. HUL chose
the Adexa iCollaboration suite for facilitating centralized monitoring of
the SCM, live customer /supplier collaboration, and integrating demand
and distribution planning with production scheduling. With the aggregated
view of data provided by the iCollaboration suite, HUL was able to
combine sales and 11
distribution efforts on the diverse product lines, which resulted in
significant savings on the cost side for inventories and distribution. HUL
updates inventory positions, shipments and customer orders on a daily
basis with these software packages and can get a pulse on the market
real time.
pg. 27
(Fig. 3 – HUL’s Turnover Compared with Competitors, 2006)
pg. 28
(Fig. 4 – HUL’s Market Leadership across various FMCG Categories)
pg. 29
CHANNEL
DESIGN
pg. 30
3. Channel Design
Hindustan Lever Limited (HUL) has two types of channel selling ‐
i. Regular (traditional) retail channel,
ii. Direct Selling Channel in the name of Hindustan Lever Network

(HLN).
HUL has a well entrenched high distribution model which comprises of

C&FAs, Redistribution Stockists, wholesalers and retailers (as shown
earlier). Hindustan Unilever's distribution network is recognized as one of
its key strengths. Its focuses on Product availability, Brand
communication, and higher levels of brand experience.
HUL’s Sales Breakup through different channels:
pg. 31
Channel Structure (Special Focus is on Jamshedpur)
Typically, the goods produced in each of the HUL's 40 factories are sent
to a depot with the help of a carrying and forwarding agent (C&FA).
The company has its depot in every state of the country. The C&FA is
a third party and gets servicing fee for stock and delivery of the
products. In each town, there is at least a redistribution stockist (RS)
who takes the goods from the C&FA and sells them to retail outlets. In
Jharkhand the C&FA is in Ranchi and Jamshedpur is serviced by 3
Redistribution Stockists at Sakchi (M/s Om Prakash Agarwal), Bistupur
and Parsudih.
pg. 32
The HUL management realized certain problems with the existing sales
model. First, the model was not viable for small towns with small
population and small business. HUL found it expensive to appoint one
stockist exclusively for each town. Secondly, the retail revolution in the
country has changed the pattern the customers shop. Large retail self
service shops are becoming commonplace. In response of these
problems, HUL redesigned its sales and distribution channel and the new
system is known as 'diamond model' in the company. At the top end
of the diamond, there are the self service retail stores which constitute
10% of the total FMCG market. The middle, fatter part of the diamond
represents the profit‐center based sales team. In the bottom of the
pyramid is the rural marketing and distribution which accounts for 20%
of the business. As a result of the new distribution plan the company
has planned to reduce the number of RS in small towns.
Redistribution Stockists:
Total number of RS in Jamshedpur = 3 (at Sakchi, Bistupur, Parsudih).

This is going to be reduced to only one with effect from next month of
this year.
 Sales Margin: 4.76% which includes cash discount, unloading

expenses from depot, distribution expenses to retailers, incentive
schemes & other incidental expenses.
 Modes of transport used: Rickshaw, tempo.
 Incentive schemes: Before 2000 holiday packages and tours but

after 2000 no non‐monetary incentive for RS.
 Software systems and Information System: UNIFY 8.3 (Developed by

IBM & CMC). This software needs to be synchronized daily and the
pg. 33
system updates any information/ incentive schemes / sales figures

etc to and from the common shared platform.
 Areas of Operations: Marked for each of the RS.
 Selling Operations: RSs sells the goods to ‐
 Wholesaler (gets 1.5 % max. discount from RS)
 Retailers (gets 1.0% max. discount from RS)
Wholesaler:
Gets cash discounts and other schemes promoted by HUL (gets points
under Vijeta Scheme).
Retailers:
• Total retailer base in Jamshedpur: Approximately 1070.
• Sales Margin: Depends on the product
o Soap, detergents ‐ 8% on MRP
o Cosmetics ‐ 10% on MRP
o Food items ‐ 8% on MRP
Incentive schemes:
pg. 34
Company programs (Scheme Discounts + Cash Discounts)

TPR schemes based on Sales (1 % to 4 %)
Vijeta scheme is not for retailers.
Field Sales Force:

To meet the ever‐changing needs of the consumer, HUL has set up a
distribution network that ensures availability of all their products, in all
outlets, at all times. This includes, maintaining favourable trade relations,
providing innovative incentives to retailers and organizing demand
generation activities among a host of other things.
The important activities that HUL field sales force does are (i) target
chasing and (ii) reporting on a daily basis. Account information is
maintained on palmtops given by HUL. During our research and informal
survey of HUL field sales force, we came to know that for the last two
years, training is not being given at all to the sales force.
HUL has limited the network channel selling to categories of Home &
Personal Care (HPC) and Food products with exclusive brands for this
channel. That is, these particular brands (products) are all exclusive to
HLN, specifically developed for the Direct Selling channel, and not
available in the retail channel. The general trade comprises grocery
stores, chemists, wholesaler, kiosks and general stores. Hindustan
Unilever services each with a tailor‐made mix of services.
pg. 35
INITIATIVE TAKEN
TO IMPROVE
THE DISTRIBUTION NETWORK
pg. 36
4. INITIATIVES TAKEN TO IMPROVE THE DISTRIBUTION NETWORK
HUL has taken the following initiatives to improve its distribution

network:
 Setting up of a full scale sales organisation comprising key account

management and activation to impact, fully engage and service
modern retailers as they emerge.
 Servicing Channel partners and customers with continuous daily

replenishment.
 Leveraging scale and building expertise to service Modern Trade

and Rural Markets.
 Delayering of sales force to improve response times and service

levels.
 Revamping of its sales organisation in the rural markets to fully

meet the emerging needs and increased purchasing power of
therural population. HUL’s distribution network in rural India already
directly covers about 50,000 villages, reaching about 250 million
consumers through about 6,000 sub stockists.
 Implementation of supply chain system that connects stockists

across the country, and also includes a back‐end system
connecting suppliers, all company sites and stretching right up to
stockists. IT tools have been deployed for connectivity across the
extended supply chains. Backend processes have been combined
into a common Shared Service infrastructure.
pg. 37
 Launching of Project Shakti through which the company is able to

extend its operations in villages. HUL has also included several
NGOs and state governments as the initiative helps rural women
to improve their financial positin.
 Launching of HUL Network to leverage the channel of direct selling

by presenting customised offerings in 11 home and personal cre
and food categories. Started in 2003, it already has a base of
300,000 consultants across the country.
 Starting of franchised Lakme Beauty Salons and Ayush Therapy

centres to offer standardised services, in line with the strategy to
leverage the equity of its brands through relevant services.
 Finding out Innovative ways to reach out to its consumers,

particularly in rural areas by leveraging non‐conventional media like
wall paintings, cinema vans, weekly markets (haats), fairs and
festivals.
 Initiating the concept of Super Value Stores (SVS) in urban areas to

partner traditional stores to provide a range of services ranging
from managing their inventory to setting u POS (point of sale)
banners. In addition to this, to boost up traditional retail in the
face increasing in‐roads made by large, modern retailing chains
like Spencer’s, Reliance Fresh etc (where HUL is squeezed harder
for discounts), HUL started restructuring some of the selected SVSs
into the form of self‐service retail shops a la modern retails. This
is to protect & maintain the competitive advantage that HUL has
over its biggest competitors in the other markets (e.g., P&G), with
its very deep distribution reach through traditional retail.
pg. 38
 Launching the Unicare scheme with upmarket pharmacies and

retailers to sale its premium brands.
 Undertaking several initiatives for traditional channels in order to

improve its capabilities at the front‐end by developing skills for
stockists' sales force. Under 'Project Dronacharya', the FMCG major
continuously imparted training to over 10,000 stockist salesmen.
 Launching of several promotional schemes for existing wholesalers

and distributors. For instance, it has started the ‘Vijeta ‐ Rishta Jeet
Ka’ scheme last year to provide a platform for the wholesaler and
HUL to grow the business by earning points and rdeeming them.
pg. 39
FIELD FORCE MANAGEMENT
pg. 40
5. Field Force Management
The working cycle of a typical HUL field force member is from 21st of
every month to the 20th of the next month. During this period he is
given various targets that helps to achieve company objectives and
gives him a chance to prove his peformance relative to other.
To start with the field force member is given a particular area and his
responsibility is to cater to all the retailers in thatarea. While deciding
the area for each member of the field force, the company makes sure
that the operating area of each field member doesn't overlap with his
other colleagues. There are various methods used by the company to
incentivize the field force ‐ Monetary and Non Monetary.
In HUL, the field force is evaluated using QOC (Quality of
Contribution). It consists of 4 components ‐
1. Secondary Sale (Max points = 2.5)
2. Eco (Max points = 0.5)
3. Focus (Max points = 0.5)
4. FCS (Max Points = 0.5)
pg. 41
Secondary Sale ‐
Based on the operating area, each member is given a
specific target in terms of value (e.g., Rs. 15 lacs) for the operating
month (21st – 20th of next month). If he achieves 100% of the target he
gets 2.5 points, if he achieves 95% target he gets 1.5 points. These
points are used to add to the total QOC score as well as linked to
monetary incentive.
ECO / Width pack Target –

This is used for the penetration/reach of certain products
in the existing market. The following is a typical ECO target assigned to
a field force agent:
Lux International – 105 outlets x 1 SKU

Pears Soap ‐ 135 outlets x 1 SKU
Rin ‐ 104 outlets x 1SKU
Breeze Soap ‐ 100 outlets x 1 SKU
pg. 42
The outlets mentioned are within the operating area of the person and 1
SKU = Rs. 27/‐. Based on this the Field person calculates number of
packs he should sell to the retailers. The concerned agent receives this
target around 25th of each month and has to complete this target within
the 5th day of next onth. Upon completion he gets additional 0.5 points
added to his QOC score along with monetary incentive associated with
it. However if this is not met within 5th, he looses the opportunity.
Focus / Depth Pack target –

This is mainly used to increase the sales volume of
certain products. A typical ‘Focus’ target is given below:
Lux International – Rs 20,640 /‐ @ Rs 6/‐ per unit
Life Buoy ‐ Rs 70,220 /‐ @ Rs 10/‐ per unit
Wheel ‐ Rs 99,000 /‐ @ Rs 10/‐ per unit
Breeze Soap ‐ Rs 27,000 /‐ @ Rs 10 /‐ per unit
This target needs to be achieved within 20th of next month.

Upon achieving the target the field person is awarded 0.5 points which
is then added to his overall QOC score.
Field Capability Score (FCS) ‐ In this component, the field force

persons are required to ensure that the scheduled visit/outlet billing is
such that at least 15 items are demanded per order. If this is achieved
the retailer gets a discount of 1% on the billed amount and on the
other hand the field person gets an additional score of 0.5 which is
pg. 43
added to his QOC score. Each scheduled visit per outlet is one per
week. For example if there are 100 outlets within the operating area of
a field person then the number of visit per week is 100 and otal
number of visit per month = 100x4 = 400. 18
pg. 44
The sales person is required to achieve 90% success rate to get 0.5
points for his QOC score and at least 65% for a satisfactory
performance.
Non Monetary Methods
The other purpose of the QOC scores is to highlight the performance of

the field person among his peers. Based on the QOC various awards
are distributed to the field persons at the end of every month. These
awards are also known as ‘MOC Star’ awards. MOC stands for Monthly
operating Cycle.
 If QOC score > 4.5 – The person is eligible for 7 star award
 If QOC score > 4 – The person is eligible for 5 star award
 If QOC score > 3.5 – The person is eligible for 3 star award
In the event of exceptional performance, management representatives

from the regional office come to the zonal office to distribute the
awards. The photograph of the award winners is displayed in the office
as a source of inspiration for other sales person.
Target Setting Mechanism and monitoring
The regional office monitors the performance of various zones. A

thorough analysis is done at the end of each month and based on that
the weak products are identified or those for which thedemand has
weakened. This is the basis of setting ECO and FOCUS targets for the
field persons. Each field person is given a palmtop wherein he can feed
pg. 45
the entries on the spot where the transaction is done. This solves
basically the two purposes ‐
a) The field person is freed from the tedious task of maintaining

cumbersome records and can then concentrate on the job (thus IT is
replacing some of the field force or other channel members),
b) The sold item is immediately updated in the company information

system.
ANALYTICAL
FRAMEWORK
pg. 46
6. ANALYTICAL FRAMEWORK
We tried to analyze HUL’s distribution network in the light of 20 most

significant variables that affect the distribution part f channel
management for any organization in the business of marketing & selling
of goods. The variables, their explanations and their impact on the
HUL’s distribution network are given below –
1. Number of Consumers
In retail business dominated by traditional stores like Kirana Stores etc

(Indian retail business falls in this category), higher the no. of
consumers, higher will be the no. of channel intermediaries. The
implication of this is that there will be many layers in the channel in
such a situation and managing such a complex distribution network by
keeping tabs on every player will be a huge task. Moreover, Transport
& Logistics (“T&L”) support provided by the organization needs to be
well organized.
Implication for HUL
HUL’s key strength lies in managing its distribution network in India. HUL
is India’s largest FMCG company with unmatched distribution network,
which is built over a century focusing on traditional retail. HUL's
distribution network comprises about 4,000 redistribution stockists,
covering about 6.3 million retail outlets reaching the entire urban
population, and about 250 million rural consumers in India. It’s said that
HUL is able to touch the lives of about 2 out of every 3 Indian
consumers. This achievement is due to the sheer strength of its
distribution network (products should be good as always, otherwise they
pg. 47
will find no buyers in the long run). For a comparison, P&G, world’s
largest FMCG major, does not find its name in the list of top 5 FMCG
majors in India as its strength lies in managing modern retail (biggest
example, Wal‐Mart), but not traditional retail.
2. Geographic Dispersion of Consumers

Again, this is closely related with the previous variable, more so in a
large, geographically diverse country like in India. With the increase in
this dispersion level, more intermediaries and more layers are required
in the distribution network so as to effectively reach the length &
breadth of the country. Obviously the T&L management for such an
organization would be critical to accomplish this.
Implication for HUL
For a country as geographically diverse as India, pan‐Indian presence &

market leadership can only be possible when products reach even the
remotest parts of the country. HUL is very successful in achieving and
maintaining this reach due to its distribution network.
3. Frequency of Purchase
If the frequency of purchase is high, then transport intensity in “the last

mile” (i.e., from distributor to retailers) increases manifold. For FMCG
products, as a thumb rule we can take that the mean time between
two purchases is ~ 90 days. With the introduction of smaller form
factor packaging for FMCG goods (Re.1 /‐ shampoo sachets being a very
good example), the transport intensity increased further.
Implication for HUL
pg. 48
HUL has about 4000 redistribution stockists, who supply to approx. 6.3
million outlets across India. Since manufacturing is done at 40 plants
around the country, rationalizing the logistics and planning is a huge
task. An innovative step in that regard has been the formation of the
Mother Depot and Just in Time System (MD‐JIT). Certain C&FAs were
selected across the country to act as mother depots. Each of them has
a minimum number of JIT depots attached for stock requirements. All
brands and packs required for the set of markets which the MD and
JITs service in a given area are sent to the mother depo by all
manufacturing units. The JITs draw their requirements from the MD on a
weekly or bi‐weekly basis and supply to stockists in that area, who, in
turn, supply to retailers.
4. Tendency to Postpone Purchase
If the tendency to postpone purchase is lesser, then the product will be

easier to distribute. For example, products/services like Fire
Extinguishers, Life Insurance etc. are such that though these are
needed, the overall tendency for the consumers is to postpone the
purchases – these products/services can be termed as “necessary evil”.
For this kind of products, regular reinforcement in the minds of
consumers becomes necessary, sales field force becomes critical and use
of “expert” field force is commonplace.
Implication for HUL
Since FMCG products are used regularly and these products are not
“necessary evils”, distribution network of HUL does not require any
expert field force to sell its products. Only the recent diversification of
HUL into Home Water Purification business (“Pure It” brand) needs
dedicated field sales force.
pg. 49
5. Level of Familiarity/Knowledge (of consumer) about the Product
If the level of familiarity of consumer with the product is higher, lower

will be the importance of field sales force and higher will be the
importance of channel.
Implication for HUL
Since FMCG goods are very much familiar to consumers, channel and its
different members are very much important to HUL and field sales
force’s function is mostly limited to channelmanagement and ensuring
availability of products.
6. Degree of Brand Loyalty
If the consumers are more brand loyal, then less “push” will be required
from the channel members to sell the products as there will be
sufficient “pull” or demand from the consumers. This implies that for
products with loyal customer base, efforts from the channel members
can be much lesser for final off‐take to happen which in turn leads to
lesser margins to the channel members for those products. For faster
moving products (mostly due to brand pull), retailers may not be averse
to slightly lesser margins as rotation of the products is high and thus
his/her ROI is protected.
Retailer’s ROI = InvestmentRotationinM×arg
For a FMCG player with a non‐established brand, margins to channel
members and point of sale (POS) advertising are both important.
Implication for HUL
pg. 50
As HUL enjoys leadership position in many FMCG segments like Soaps,

Detergents, Personal Care products etc with strong brands with
continuous “pull”, HUL has less to worry about margins to channel
members or POS advertising. But this situation can change considerably
in the face of rise of a significant competitor having almost the same
reach as HULhas (e.g., ITC as it’s eating into HUL’s market share
continuously since it entered FMCG segment).
7. Purchased on Impulse
The impulse purchase products like chocolates, toffees, colas, ice creams
etc. follow Say’s Law which states that “Supply Creates Demand”,
implying availability of these products are the most critical aspect for
these to be sold and consumed. This stresses on the fact that T&L for
these products becomes very important.
Implication for HUL
HUL has only one product in this impulse purchase category ‐ Kwality
Walls (ice cream). HUL is #2 after Amul in this FMCG segment. To
increase this brand’s sale & market share, availability, visibility and
consumer mind share has to be increased and improved as well.
8. Level of Involvement (LOI)
Level of involvement (i.e., time & effort spent by the consumer)

generally depends on the product cost. If LOI is higher, lower is the
importance of availability and more critical is the supply of information
as consumer decision process depends more on elaborate information
search.
Implication for HUL
pg. 51
As FMCG products are generally Low Involvement Products, HUL has to

bother more on ensuring availability of the products, rather than supply
of information.
9. Purchased as a Basket of Goods
The products which are generally bought together by consumers as a

basket of goods (e.g., Rice, Flour powder, Cooking oil etc at the
beginning of the month) are to be made available together for final off‐
take.
Implication for HUL
This aspect partly applies to HUL’s products as some products like

shampoos, soaps, detergents may fall in a basket. Efficient distribution
network of HUL ensures availability of all such products at each selling
point (individual retailer).
10. Speed & Complexity of Decision Making Process
If the speed is low, then the complexity of the decision making process
is higher and greater is the importance of field sales force and the
salesprsons’ skill, knowledge and quality.
Implication for HUL
For FMCG products, complexity of decision making process is not there

and so, speed of decision making is high. This means that for HUL,
field sales force is of limited functional usage.
pg. 52
11. Present of Expert Influencer in the Decision Making Process
Roles of sales field force vary depending upon whether expert influencer
(e.g., doctors) is present in the process or not. If present, then
consumer buying behavior may become subcontracted and the expert
influencer becomes another customer of the network, apart from the
end‐user. In that situation two groups of sales force are needed to cater
to both the segments.
Implication for HUL
For FMCG goods, role of expert influencer is limited. But companies try
to associate brands with regulatory bodies/authorities and show
advertising with experts commenting upon superior virtues of a product
in an attempt to make the buying beaviour shift from picking/variety
seeking to subcontracted and make consumers more loyal to the brand.
These are true for HUL also (e.g., Pond’s Intitute).
12. Element of Crisis Purchase Exists
If element of crisis purchase exists in the buying decision of a product

(for example, bulbs & tubes), then its availability becomes critical.
Implication for HUL
None of the products of HUL fall under this category. Nevertheless,

availability of products of HUL is necessary for other reasons.
13. Element of Risk Aversion Exists
pg. 53
If the level of involvement of the consumer in buying decision process is

higher, risk taking tendency of the consumer will be lower or consumer
will be more risk averse. In such a situation, channel members can
“unsell” a brand by giving explicit or implicit suggestions. This implies
that in such a case, selling depends on many cases how the company
is taking care of channel members (“keeping them happy”) such that
they are not lured by other competitors or directed by grievances so as
to unsell the brand. This situation is prevalent mostly in Consumer
Durables (like TV, Refrigerators etc.). In FMCG goods, the situation does
not exist per se.
Implication for HUL
HUL is not affected for its FMCG products by this variable. For water
purifier “Pure It”, this can have considerable impact if its sale starts to
happen through channel members rather than by field sales force as is
appening now.
14. Perishability of the Product
If the product is perishable (having small shelf life; examples –

newspaper, milk, fruits etc), then the dimension of “speed” in reaching
the end consumers becomes critical & T&L assumes great significance
for the company.
Implication for HUL
The FMCG products that HUL sells are not perishable by nature, but
have limited life. So this aspect is not critical for HUL.
15. Time Band Associated with the Purchase of the Product
pg. 54
If there is seasonality/cyclicity for the demand or purchase of the

product (examples – newspaper, milk are most on demand in the 1st
three hours of the day; cooking oil, rice etc grocery items are most on
demand in the 1st week of the month), then high T&L and
infrastructural requirements are needed for the “last mile” for the time
band when demand is maximum. It is possible to have idle capacity in
the areas mentioned above outside the peak required time band.
Implication for HUL
For some of the products of HUL, the above stated variable is

significant. For example, in Food segment, Branded Atta – ‘Annapurna’;
in segments like Laundry Detergents, Shampoo & Hair Oil etc. this
element of demand time band exist to a certain extent. This
underscores the importance of T&L for HUL as the transport intensity
between distributors and retailers increases in the 1st & 4th week of a
month for the products mentioned above. This is over and above the
regular replenishment of stocks at retailers done by distributors. Festivals
like Holi etc. may also increase the demand for personal care items like
soaps, shampoos etc for a short period and distribution network should
be geared up not to miss any such opportunity.
16. Fungibility
Fungibility is the property of a good or a commodity whose individual

units are capable of mutual substitution. Examples of highly fungible
commodities are crude oil, wheat, orange juice, precious metals, and
currencies. Fungibility has nothing to do with the ability to exchange
one commodity for another different commodity. It refers only to the
ease of substitution of one unit of a commodity with another unit of
the same commodity for all intents nd purposes.
pg. 55
Fungibility is different from liquidity. A good is liquid and tradable if it

can be easily exchanged for money or for another different good. A
good is fungible if one unit of the good is substantially equivalent to
another unit of the same good of the same quality atthe same time
and place. It is said that commodities are fungible, goods
tangible, services intangible, experiences memorable &
transformations are effectual1.
As an example, one Rs. 100/‐ bank note is interchangeable with

another. Cash is fungible. A barrel of West Texas Intermediate crude oil
is fungible (direct exchange) with another barrel of the same crude oil.
Oil (of the same type) is fungible.
Fungibility does not imply liquidity, and liquidity does not imply
fungibility. Jewels can be readily bought and sold (the trade is liquid),
but individual diamonds, being unique, are not interchangeable
(diamonds are not fungible). Indian rupee bank notes are
interchangeable in London (they are fungible there), but they are not
easily traded there (they are not liquid in London). In contrast to
diamonds, gold coins are fungible. They are also liquid, especially under
a gold standard. The combination of fungibility and liquidity is one of
the reasons why gold has successfully served as money for thousands
of ears.
Further, a fungible thing can become non‐fungible under some
circumstances. For example, an old coin or a currency note may assume
a value which is way above its ‘face value’ due to historical reasons or
due to some defects in it which makes it unique from others from a
viewpoint which see it differently than its intended purpose.
The outcome of product fungibility is that the more fungible a product
becomes, higher is the chance that parts of the distribution channel it
can be replaced by IT. A good example of this is dematerialization
(Demat) route for share trading now where there is no physical
existence of shares.
pg. 56
Implication for HUL
As branded FMCG goods are not fungible per se (branding is done to

“decommoditize” & differentiate the product), the importance of channel
members will continue.
17. Degree of Customization Possible
Degree of customization directly affects economies of scale; higher the

customization, lesser the economies of scale. Also, criticality of sales
field force increases with customization levels of the offering.
Implication for HUL
For FMCG products of HUL, which are mass produced, such

customizations are not possible and thus with higher economies of scale,
lower criticality of field forces from the standpoint of customization of
product offerings, costs are lower in these respects with HUL.
18. Negative or Positive Reinforcing Product
Negative reinforcing products are those which are bought to avoid/reduce

the problem (ex. – insurance, washing machine, car battery etc). Positive
reinforcing products are those which gratify the senses (ex. – Perfumes,
Chocolates, Vacation etc). Shopping experience becomes a critical aspect
for positive reinforcing products to reaffirm the positive feelings.
Implication for HUL
“Axe” & “Rexona” deodorants are distinctly positive reinforcing products

from HUL, including others like Lux, Lakme etc. So these are seen in
pg. 57
most shopping malls etc. with high visibility displays to reaffirm the
feelings. Consumers are willing to pay higher for these brands.
18. Value/Volume Ratio (Value Density) of the Product
This ratio is very important for both the company and the retailer for its
two critical aspects – T&L cost and retailer ROI/sq. cm (retailers are
actually in real estate business in true sense). Higher the ratio, better it
is for both company and the retailer as higher ratio signifies lesser T&L
cost per unit volume transported for the company and greater ROI per
unit of shelf space for the retailer.
Implication for HUL
In general for FMCG goods and for HUL as well, value density is
relatively lower. In addition to this fact, increasing trend towards using
smaller pack sizes increases the packaging density (increased packaging
density increase cost to some extent, but favours mechanized handling
greatly, reducing handling costs). Since value density is less,
transportation costs will be higher and thus it is of economic sense to
have manufacturing plants located closure to major marets. This is the
reason HUL has various manufacturing plants (40 in totality) located
across India. This is a pointer to the fact most of the major FMCG
players (including HUL) use contracted manufacturing dispersed across
the geographic spread so as to lower transportation cost component.
pg. 58
FINANCIAL ANALYSIS
pg. 59
7. FINANCIAL ANALYSIS
We have taken data from CMIE database while analyzing the

performance of marketing & sales (including distribution) functions of
HUL and comparable companies. By ‘comparable‘, we mean those
companies whose main economic activity, as defined in the CMIE
database, is the same as HUL’s. For example, main economic activity of
HUL as defined in that database is ‐ “Cosmetics, toilet preparations, soap
& washing prep”. Obviously, one major FMCG company in India, ITC,
does not come under this purview as its major economic activity is
Tobacco business which is nearly 85% of its total revenue. But for the
sake of comparison, we have included ITC also as its non‐ tobacco FMCG
business revenue in FY ‘08 was Rs. 2511 Cr., nearly as high as Nirma,
the second largest player after HUL in HUL’s chosen category. But the
figures for advertising, marketing & distribution expenses of ITC as
percentages to its total sales may not be directly comparable to those
figures of HUL as produt categories are different and the impact of
above mentioned variables on these two company’s sales & distribution
function is dissimilar. Other major FMCG players not included in the
analysis are Nestle, Amul, Britannia & Tata Tea, which are mostly into
the Food & Beverages segment where HUL has relatively lesser presence
(Processed Foods & Ice‐cream segments together constitute only
approximately 5% of HUL’s total sales). In Tea, HUL is present
significantly, though.
In the following pages advertising, marketing & distribution expenses of
major FMCG goods (in HUL’s category mostly) are being shown.
It is to be understood here that marketing expenses
here include commissions, rebates, discounts, sales promotional,
expenses on direct selling agents & entertainment expenses whereas
distribution expenses include outward freight.
pg. 60
pg. 61
Exhibit 1: Annual Spend in Advertising, Marketing & Distribution

functions in FY ‘08
ANNUAL ANNUAL ANNUAL ANNUAL

RS.CRO RS.CRORE RS.CRORE RS.CRORE
RE
MAR-08 MAR.O8 MAR.08 MAR-08
SR COMPANY SALES ADVERTISIN ADVERT.EX MARKETIN MARKETING DISTRIBUTIO DIST.
. NAME G P. G EXP. AS % N EXPENSES EXP.AS
N EXPENSES AS% OF EXPENSES OF SALES % OF
O SALE SALE
1 HUL 14937.8 1422.9 9.53 6.07 0.04 731.41 4.90
8
2 NIRMA 2651.15 40.96 1.54 71.87 2.71 136.91 5.16
3 DABUR 2128.17 248.1 11.66 21.4 1.01 66.84 3.14
4 COLGATE 1597.3 256.51 16.06 0 0.00 35.36 2.21
PALMOLIVE
5 RECKITT 1334.76 207.85 15.57 9.34 0.70 55.88 4.19

BENCKISE
6 P&G HOME 1079.57 119.45 11.06 44.31 4.10 70.54 6.53
7 GODREJ 922.78 61.4 6.65 42.37 4.59 32.27 3.50

8 EMAMI 586.42 102.92 17.55 27.46 4.68 14.86 2.53
9 P&G 556.02 57.95 10.42 40.85 7.35 37.24 6.70
HYGIENE
AND
HEALTH
10 HENKEL 430.33 0 0.00 40.94 9.51 16.4 3.81
11 HENKEL 417.79 0 0.00 65.64 15.71 17.63 4.22
MARKETIN
G
12 ITC 21467.3 427.83 1.99 68.17 0.32 548.4 2.55
8
pg. 62
We can see here that Nirma, Godrej & Henkel (ITC also)
have less advertising expenses (as % to sales) than HUL. Importantly,
Henkel has zero advertising expenses in 2008, which may explain the
fact that awareness level in consumers for Henkel brands is low. HUL
advertising is done mainly in case of soaps (for example – “Dove”;
done mainly to reaffirm that it’s not a soap!), shampoos, deodorants
(“Axe”), laundry detergents (“Surf Excel”, “Rin”) etc. With the
pg. 63
introduction of home water purifier (“Pure It”), considerable advertising &

promotional expenses have gone into it.
Of late, we see very little of Nirma advertisements. This is apparent
from its advertising expense as % to sales, which is very low (only
1.54%). ITC is altogether a different story. Cigarettes & other tobacco
related products which constitute approx. 85% of its sales, all relate to
“intoxication” or habitual consumption patterns having intensely brand
loyal consumers and thus almost no advertising (surrogate advertising is
done) is needed either to reaffirm the brands or introduce new
consumers to the brands (there is regulatory angle as well). Current
consumers of these tobacco products are the biggest advertising agents
that ITC has and of course, they do it voluntarily and without knowing
what they’re doing. But while moving faster into non‐tobacco FMCG
business riding high on its strength of distribution network matching or
surpassing in some cases that of HUL, ITC has started aggressive
advertising campaigns (“Fiama Di Wills” shampoo, “Vivel” soap,
“Sunfeast” biscuits, “Bingo” snacks etc), directly focusing on marquee
brands of HUL like “Sunsilk” & “Lux”, increasing the heat on Britannia
for biscuits and taking on “Kurkure” & other snacks and chips from
Pepsi, Coke and others.
Advertising expenses as percentage to sales is highest for Emami, which
owns brands such as Navratna hair oil & talc, Boroplus cream & talc,
Himani Fast Relief, Fair & Handsome, Sona Chandi Chawanprash,
Menthoplus etc, each of which is advertised heavily in the mass media
(e.g., TV) with famous & expensive celebrity endorsers like Amitabh
Bachchan, Kareena Kapoor, Govinda etc. On the other hand, we see
regular advertising streams for Colgate toothpastes and other oral care
products, in which category Colgate‐Palmolive is the market leader.
Reckitt‐Benckiser advertises considerably for its brands like Herpic,
Mortein, Vanish, Clearasil, Dettol, Strepsils etc, which is the reason for
its high advertising cost as percentage of sales.
pg. 64
pg. 65
Marketing Expenses
Marketing expences are also very important issue which should be considered
while planning for product distribution. As stated earlier also, marketing
expenses here include the following –
 commissions
 rebates
 discounts
 sales promotional
 expenses on direct selling agents
 entertainment expenses etc
all the above mentioned expences should be paid keen interest while
planning for the product as well as promotional strategy of the
company.since Hindustan iniliver is an fast moving consumer goods
company it should consider the .marketing expences.the following chart
shows the marketing expences of different companies as compared to
other competitors.
pg. 66
Exhibit 3: Marketing Expenses as percentage of Sales
pg. 67
MARKETINGEXPENCESAS%TO SALES
18
MARKETING EXPENCES AS %TO
SALES
16
14
12
10
Here we see that the marketing expenses of HUL are among the lowest
in the market (only the second lowest after Colgate – Palmolive which
has very good brand pull for its “Colgate” toothpastes). This proves that
HUL is able to maintain considerable brand pull through advertising. ITC
again comes among the lowest its tobacco products require very little
‘push’ and have very high rotations. Also, ITC mostly deals with small
pg. 68
retailers and distributors (‘paan‐cigarette shops owners’) who have

marginal bargaining power.
Another revelation is that Henkel, which has zero advertising expenditure,
has the highest marketing expenses among all others. But this strategy
to ‘push’ the products through the channel partners may not be a good
one for Henkel as it might be losing out for the lack of visiility and
thus consumer mind share and brands such as Margo, Fa, Neem
toothpaste etc are losing out in the market. Further, it is also a pointer
to the fact that Henkel’s largest business share is in industrial
chemicals (adhesives, sealants – e.g., popular brand “Loctite”; this
segment constitute ~44% of worldwide sales of Henkel) and for B2B,
advertising per se is not that much important. For B2B , important is
direct‐selling approach, which generally requires negotiations, volume
discounts etc, which are reflected in highest marketing expenses (as
percentage to sales) compared to others.
P&G is in between the extremes and with considerable advertising
expenses also, it is unable to create sufficient pull for its products in
India (as evidenced by the fact that marketing expenses are also
relatively higher) or it’s getting stuck for the lack of sufficient
distribution muscle a la HUL in traditional retail in India and suffers
from ack of reach and availability at the end consumer level.
As mentioned earlier, both Colgate‐Palmolive and Reckitt‐Benckiser both
enjoys very good brand loyalties and market leadership for their key
brands like Colgate toothpastes and Dettol #1 in antiseptics), Herpic,
Mortein etc. This is corroborated by the fact that these companies have
some of the lowest marketing expenses (as percentage to sales) in the
group, as shown in the chart.
pg. 69
Distribution Expenses
Distribution expenses include the outward freight cost to the company.
Exhibit 4: Distribution Expenses as percentage of Sales
pg. 70
We have seen that T&L plays a very important role for HUL & others
who have pan‐Indian presence in FMCG business. Colgate‐Palmolive,
Emami & ITC has some of the lowest distribution expenses (as % to
sales figures) & P&G has the highest. HUL is lower in this respect than
Nirma & P&G, but higher than Henkel. This can be explained somewhat
from the impact of the variable, Time Band of purchase, on the
increased transport intensity for HUL in the last mile for some of the
products like household personal care, laundry detergent, branded atta
etc in the first & last week of the moth. ITC (tobacco), Henkel (largely
B2B) are mostly protected from this implication of the variable.
Another important thing to remember that value density of FMCG goods
is relatively lower, causing share of transportation costs in the overall
cost structure to be relatively higher. This implies dispersed
manufacturing, locating manufacturing plants nearer to major markets.
So one location manufacturing to get higher economies of scale and on
the other hand, trying to serve geographically diverse markets may not
be economically attractive for FMCG sector. Compared to HUL’s 40
manufacturing plants across India, Nirma, the 2nd largest FMCG major in
soaps and detergents category, has 6 manufacturing plants, all located
in and around Gujarat. So, transportation cost of Nirma, if it tries to
cater to pan‐Indian market will be higher. This is supported by the fact
that Nirma’s higher distribution cost percentage than HUL. For P&G, the
same reasons significantly affect its distribution cost which is highest for
the group analyzed.
pg. 71
Conclusion
It can be concluded that Hindustan uniliver has a wide range of coverage area
both in the rural and the urban area. Hindustan uniliver is one of the leading
fast moving consumer good company which operate in a systematic manner.
Hindustan uniliver manage there distribution network in an efficient

manner.Hindustan Unilever is the market leader in majority of the categories.
Though it was popular but its advertising expenditure was also huge. It has
increased its expenditure upto 26% in FY09. The net sales was Rs 4,475 crore
in this period. According to Senior executive Harish Manwani the company was
strengthening its competiveness through advertising and they see improved
turnover in the near future. The company have some future plans to improve its
distribution management .
Hindustan uniliver has efficiently managed there distribution network over

the country
Thus it can stated that HUL is ready to improve its product awareness in order
to capture the majority of the market. Competitors beware the” Big Bull is
coming to crush you”
pg. 72
REFERENCE
1. B. Joseph Pine, James H. Gilmore (1999), The Experience Economy:

Work is Theatre & Every Business a Stage, Published by Harvard
Business Press, 254 pages.
2. HUL Website (http://www.hul.co.in/)
3. Reckitt – Benckiser Website

(http://www.reckittbenckiser.com/site/RKBR/Templates/Home.aspx?
pageid=1)
4. Colgate – Palmolive Website

(http://www.colgate.co.in/app/Colgate/IN/HomePage.cvsp)
5. Emami Group (http://www.emamigroup.com/Brands)
6. Website CMIE
7. Wikipedia
8.Rural marketing book (TYbms 5th semester)
pg. 73

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DISTRIBUTION MANAGEMENT OF HUL

Hindustan Unilever Limited, 165/166,

Lovelock & Lewes, Chartered Accountants

Karvy Computershare Private Limited Unit :

1. INTRODUCTION OF HINDUSTAN UNILEVER LIMITED

Hindustan Unilever Limited (‘HUL’), formerly Hindustan

HUL is also one of the country's largest exporters; it has been

The mission that inspires HUL's over 15,000 employees, including

We have analyzed the distribution network of HUL from the

1. Evolution of HUL’s distribution network

2. Transportation & Logistics

4. Initiatives taken for channel member management.

5. Field force management

6. Fair & Lovely

13. Brooke Bond

16. Kwality Wall's

17. Dove etc

2.1. Evolution over Time

The highlight of the third phase was the concept of "Redistribution

Depot by a system of third party Carrying and Forwarding Agents

The role performed by the Redistribution Stockists includes: Financing

2.2. Detail Overview

Distribution System of HUL

HUL's products, are distributed through a network of 4,000 redistribution

supply chain capabilities for partnering emerging self‐service stores and

(Fig. 1 – Schematic of HUL’s Distribution Network)

Distribution at the Villages:

The company has brought all markets with populations of below

exclusive sales force and exclusive redistribution stockists.The team

(Fig. 2 – Rural Distribution Model of HUL)

Distribution at the Urban centres:

Distribution of goods from the manufacturing site to C & F agents take

New distribution channels

This model creates a symbiotic partnership between HUL and

To cater to the needs of the inaccessible market with high

based in these very villages. As a result, the distribution network

Hindustan Lever Network (HLN)

It is the company's arm in the Direct Selling channel, one of

In order to rationalise the logistics and planning

Leveraging Information technology

HUL customers are serviced on continuous replenishment. This is

sophisticated network with its voice and data communication facilities

The RS Net initiative, launched in 2001, aims at connecting Redistribution

Adexa iCollaboration suite

In 2000, HUL identified improved supply chain management as a

(Fig. 3 – HUL’s Turnover Compared with Competitors, 2006)

(Fig. 4 – HUL’s Market Leadership across various FMCG Categories)

Hindustan Lever Limited (HUL) has two types of channel selling ‐

i. Regular (traditional) retail channel,

ii. Direct Selling Channel in the name of Hindustan Lever Network

HUL has a well entrenched high distribution model which comprises of

HUL’s Sales Breakup through different channels:

Channel Structure (Special Focus is on Jamshedpur)

Total number of RS in Jamshedpur = 3 (at Sakchi, Bistupur, Parsudih).

 Sales Margin: 4.76% which includes cash discount, unloading

 Modes of transport used: Rickshaw, tempo.

 Incentive schemes: Before 2000 holiday packages and tours but

 Software systems and Information System: UNIFY 8.3 (Developed by

system updates any information/ incentive schemes / sales figures

 Areas of Operations: Marked for each of the RS.

 Selling Operations: RSs sells the goods to ‐

 Wholesaler (gets 1.5 % max. discount from RS)