A

Project Report
On
Rural Market

Session 2010-2012

Submitted To Submitted By
2

Dr. Amit Nagpal Sabyasachi Roy

Executive Summary

A debate continued for a long time amongst the Indian marketers, both
practitioners & academicians, on the justification for the existence of
the distinct discipline of rural marketing. Consequently, two schools of
thought emerged. The first school believed that the products/services,
marketing tools & strategies that are successful in urban areas, could
be transplanted with little or no more modifications in rural areas.
However, the second school saw a clear distinction between urban &
rural India, & suggested a different approach, skills, tools & strategies
to be successful in rural markets. what differentiates the two markets
is not mere income, but a host of other infrastructural &socio-cultural
factors. Thus, the rural market cannot be tapped successfully with an
urban marketing mindset & would definitely require its thorough
understanding. In other words, the approach toward rural markets
needs to be distinct from the one adopted for the urban markets. Thus,
in a large rural economy like India’s, rural marketing has emerged as
an important &distinct internal sub-division within the marketing
discipline. This sub-division clearly highlights the differences between
rural marketing & mainstream marketing.
3

Table of Contents
Chapter.1 Profile of Rural Marketing

1.1 Introduction to Rural Marketing

1.2 Definition of Rural Marketing
1.3 Statistical Approach to Rural Marketing
1.4 Evolution of Rural Marketing
1.5 The Reasons to Prefer the Rural Areas
1.6 Characteristics of Rural Marketing
1.7 Classification of Rural Marketing

Chapter.2 Consumer Behavior in Rural Areas

2.1 Characteristics of Rural Consumer

2.2 Rural Consumer Class
2.3 Factors Influencing Rural Consumer Behavior
2.4 Model of Rural Consumer Behavior
2.5 Rural Marketing Strategy

Chapter.3 Rural Distribution Network

3.1 Introduction
3.2 Functions of Rural distribution
3.3 Strategies of Rural Distribution
3.4 Statement of the Problem of Rural Marketing

Chapter.4 A Brief Profile of Hindustan Lever Limited

4.1 Introduction
4.2 Present Scenario
4.3 HLL’s Initiative in Corporate Social Responsibility
4.4 Introduction to SHAKTI
4.5 Expectations of Shakti in Future

Chapter.5 A Case Study on HLL’s Project Shakti

5.1 Introduction to Shakti

5.2 The Objectives of Shakti
5.3 The Idea of Shakti to Achieve
5.4 The Motto of the Shakti Sandesh
5.5 Business Activity of Shakti
5.6 Achievement Model of Project Shakti
5.7 The Reasons for Shakti to Start
5.8 Shakti – The Present Scenario
5.9 The Ways of Development: I-Shakti
5.10 The Expectations of Market towards Project Shakti
5.11 Channel of distribution used by HLL
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Chapter.1 Profile of Rural Marketing

1.1 Introduction to Rural Marketing:

The rise in rural marketing provided volume growth to all leading companies in the beginning of 90’s.
Rural markets are facing many challenges to target rural markets.
Higher rural incomes driven by agricultural growth have increased the purchasing power to consume
branded and value-added products in rural areas. Marketers and manufacturers are increasingly aware of
the purchasing power, size and demand base of the Indian hinterland. Efforts are been made by them to
understand the attitude of rural consumers.
Marketers want to follow the principle of WALK THEIR WALK and TALK THEIR TALK.
Marketing mix is framed according to rural tastes and lifestyles.
For example: MIRC ELECTRONICS, which owns the Onida television brand, launched IGO, which was
positioned as a value-for-money brand targeted at rural markets, especially customers who were upgrading
their black-and-white TVs, which constitutes 65% of the total colour television buyers. The ad campaign
screamed loudly in rural lexicon: “kasam se, kya TV hai!”

1.2 Definition of Rural Marketing:

According to Prof. Ramkishen Y, “Rural marketing is the process of developing, pricing, promoting,
distributing rural-specific goods and services, leading to exchanges between urban and rural markets, which
satisfies consumer demand and also achieves organizational objectives.”

Let us understand this definition and its implications: -

• Rural marketing involves a two way marketing process.
6

• Every want is backed by an ability and willingness to buy. These are known as ‘demands’.
Marketers are now trying to satisfy the rural demands by customizing the products and
manufacturing the products as per the demand.

1.3 Statistical Approach to Rural Marketing:

 Government agencies like IRDA (Insurance Regulatory and Development Authority) and NCAER
(National Council for Applied Economic Research) define ‘rural’ as “villages with a population of less
than 5,000, with 75% of the male population engaged in agriculture, etc.”
 Two-thirds of the country’s consumers live in rural areas, which are around 700 million people, and
almost 26% of the National income is generated there.
 10 consecutive monsoons have led to 26% of GDP as returns from agriculture. This has increased their
purchasing power.
 India is divided into 597 districts, and has 6,38,667 villages, of which 32% can be reached as they are
connected by pucca roads.
 However, 68% of the rural market lies untapped due to various reasons ranging from inaccessibility to
lack of awareness.
 In all there are more than 3.8 million retail outlets in rural India, averaging 5.8 shops per village.
 The rural market has been growing at 3-4% per annum, adding more than 1 million new consumers
every year.
 It now accounts for close to 50% of the volume of consumption of fast-moving consumer goods
(FMCG) in India.

As a result Rural India is becoming an important part of the market development strategies
of all FMCG and consumer durables companies as well as service companies.

1.4 Evolution of Rural Marketing:

The Glorious Past (1940-1990):

In 1949, Asian Paints was the first company to enter rural markets. In 1960 HLL saw rural
markets as an opportunity and entered with lifebuoy soap. Today HLL dominates rural markets and have its
presence in more than 1 lakh villages. Major players like Colgate and Dabur followed in. in 80’s companies
like Nirma, Cavinkare, and Marico entered rural markets. MNC’s like P&G (Proctor & Gamble) also found
potential in rural markets.

The Pulse of the Present (1990-2000):

Around 70% of the population lives in rural India, which is almost 700 million in
number. A 1% increase in their purchasing power can lead to an increase of Rs.10,000 crores in the
government revenues. Cos. Are launching a range of products to cater to the changing lifestyles in rural
India. MNC’s like LG, Samsung, Revlon and insurance biggies like Birla Sun life, Max New York Life and
Prulife are entering rural markets in a big way. But till today these have altogether tapped only 1-lakh
villages out of the 6-lakh odd villages.

1.5 The Reasons to Prefer Rural Areas:

Presently, companies operating in India are left with only two options, i.e. either to go Global
or to go Rural. The cost of going global is very high and also it’s tough to penetrate markets in other
countries. Rural India is emerging as a large market for a number of goods and services. So, it’s better to
target the rural market. Marketers find a similarity between the criticality of rural as well as urban markets.
Some reasons for the same are listed below: -
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a) Saturation of urban markets: There is cutthroat competition in urban markets. Due to the wide
variety of choices of products, it becomes difficult for existing companies to maintain their market
share. Compared to urban markets, the rural markets provide better opportunities.
b) A huge untapped market: With a rural population of more than 700 million, it has a huge potential
and market areas as only around 1-lakh villages are tapped out of the 6-lakh odd villages.
c) Rising disposable incomes: Good monsoons during the past 10 years have raised farmers’
incomes. Non-farm sectors now account for almost 50% of the total rural incomes. It is a market
that corporatists cannot afford to ignore. Another reason for the rising disposable incomes of the
villages is that Agricultural income is non-taxable.
d) Remittances from abroad: Many households in rural India have one of their family members
abroad, mostly in Gulf countries. People working there send their savings to their families in
India, which is an additional source of income.
e) Impact of the media: The growing reach of the electronic media has created a huge change in the
lifestyles of rural consumers because of TV programmes like soaps and other serials. Rural people
are spending more on lifestyle products these days. Modi, Revlon, for instance sells more lipsticks
in the rural market than in urban areas. Last year rural sales were Rs.25 crores; only Rs.12 crores
came from the urban market.

1.6 Characteristics of Rural Marketing:

India is a big country and its rural markets have varied characteristics that change
from people to people, region to region. Some of the main features of India’s rural markets are: -

1) Diverse Nature: There are 6,38,667 Indian villages in all.

 Out of these 50% share a very small population of less than 500 and a limited
purchasing power. Many of these villages don’t even have a single shop.
 In the second category there are 2,50,000 villages with a population between 500-
2000. There are at least 5 shops per village.
 Lastly there are 60,000 villages with a population of more than 2000.
 Companies should try and focus on the last two categories more as they have high
potential. Regional disparities heavily influence economic development, social
interaction patterns, mobility patterns and awareness levels.
 This in turn influences purchasing power.

2) Urban Market Saturation:

 There is a cutthroat competition in urban markets, which have reached a stage of
saturation.
 As a result, marketers are shifting focus to greener pastures in rural markets, as there
is equal number of households in rural areas as in urban areas.

3) Rising Disposable Income of Rural Customers:

 New tax structures, good monsoons, the green revolution and the Administered
Pricing Mechanism (APM) have raised disposable incomes in rural areas.
 It is ironic that rural people spend so lavishly on weddings, ceremonies and festivals
amidst deficiency.
 Today the rural consumer shop for ‘value’.
 It is this ‘income’ that the companies are going to tap in the near future.

4) Rising Literacy Levels:

 Nearly 45% of rural Indians are literate out of which 59% are men and 31% are
women.
8

 Around 12 crore people in villages are literate as compared to 12.5 crore in urban
India.
 Every year produces 60 lakh literate people.
 Farmers are remarkably well informed about the changing world around them.
 The increased enrolment in schools has also generated a wave of rural demand for
lifestyles and aspiration products. Hence, one cannot make generalizations about
Indian Rural Markets.

5) Spread of Cable Television:

 The growth of satellite TV channels has had a major impact on villagers.
 It has led to a change in lifestyle and consumption patterns.
 Television has high capacity to raise interest levels as it has greater accessibility
compared to other media.
 Rural consumers now aspire to buy brands rather than to just purchase commodities.

1.7 Classification of Rural Marketing:

URBAN RURAL

RURAL URBAN

RURAL RURAL

Urban to Rural (U2R): A major part of rural marketing falls in this category. It is the transaction
where urban products are sold in the rural areas. The urban products, which are generally sold in rural
areas, are pesticides, fertilizers, seeds, FMCG, tractors, bicycles, consumer durables, etc.

Rural to Urban (R2U): It is basically where agricultural products are marketed in urban areas.
Usually a farmer seeks to sell his produce in an urban market. An agent or middlemen plays a crucial role
in this marketing process. These are basically cooperatives like AMUL, MAPRO, etc. Products sold under
R2U category include seeds, fruits, vegetables, milk and milk products, forest produce like beeswax,
honey, spices, cotton for textile mills etc.

Rural-to-Rural (R2R): This includes activities that take place between two villages in close
proximity to each other. The transactions involve areas of expertise a particular village has. Items in this
category include agricultural tools, handicrafts, bullock carts, dress materials etc.
9

Chapter.2 Consumer Behavior in Rural Areas

2.1 Characteristics of Rural Consumer:

 Literacy level:

Consumers Literacy level in %

Urban India 52%
Rural India 45%

The literacy rates are much lower in the villages of underdeveloped states like Bihar, Andhra Pradesh, etc.
 Income level:

Consumers Income level

Urban India High
Rural India Low
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Low purchasing power, standard of living, per capita income, economic and social positions are the traits
of rural consumers.

 Location Pattern of Rural Consumer:

India

Urban Rural

3,200 cities & Towns 6, 38,667 villages

6,300 villages 3,00,00 1.5 lakh

Villages villages

5,000 person’s 500 people 200 people

Or less or less

 Reference Groups: Typically, in a rural area the reference groups are primary health workers, doctors,
teachers and panchayat members, the village trader or the grocer, commonly called ‘Baniya’ or
‘Mahajan’ are an important influence in the decision making of rural customer. A marketer needs to be
aware of these influences that can effect changes in the rural customer’s consumption patterns.
 Occupation: Consumption patterns differ according to income levels. Typically, in a rural area the
principal occupation is farming, trading, crafts, plumbing, electric works, primary health workers and
teachers.
 Media Habits: Rural people are fond of music and folklore. In rural areas a popular form of
entertainment is the ‘Tamasha’ and ‘Nautanki’. And then there are television, radio and video films.
 Other Variables: Culture, language, religion, caste and social customs are some other important
variables for profiling a rural customer. Rural consumers have a lot of inhibitions and tend to be rigid
in their behavior. A company has to take intense care while targeting them.

2.2 Rural Consumer Class:

Groups Population Examples

1. Affluent Group 150 million people Cash rich wheat farmers in
Punjab, Chilly merchants in
Andhra Pradesh (Guntur).
2. The Middle Class 300 million people Sugarcane farmers in Uttar
Pradesh, Jute farmers in West
11

Bengal.
3. The Poor Size is very large The poorest farmers growing
Jowar, Bajra, etc. of Bihar,
Orissa.

2.3 Factors Influencing Rural Consumer Behavior:

 Stimuli
 Perception
a. Exposure
b. Interpretation
 Attitudes
a. Changing Effect
b. Changing Beliefs
c. Changing Behavior
 Needs and Motives
 Demographics
 Culture
 Believes and Value
 Social Class
 Influence Groups
a. Reference Groups
b. Opinion Leaders
c. Innovations

2.4 Model of Rural Consumer Behavior:

Need Pre-Purchase Evaluation of Purchase

Recognition Research Alternatives Decision

Post-Purchase
Behavior

Need recognition: A rural customer first recognizes his needs and accordingly thinks of purchasing the
products. This is the first step in the Simple Decision Making Model. EX: Ramlal, Sarpanch of Sonawani
District, wants to purchase a color TV.

Pre-purchase Search: Once there is need recognition, the next step is to do a pre-purchase search. EX:
consider the earlier example, Ramlal may go to a nearby city and visit a showroom that has multiple
products.
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Evolution of alternatives: the third step is to basically to pick up the best alternative from the available
options. EX: Ramlal may look for the products of Videocon, Onida, and LG that are available with the
dealer and may finally select one of them.

Purchase decision: This is the action that result in the purchase of the product from among available
alternatives. The customer may plan to purchase a specific product that suits his needs and is within his
budget. EX: Ramlal may plan to go for LG’s Sampoorna colour TV, as it has a vernacular on-screen
display, better sound and superior picture quality. Besides, it is priced at only Rs. 8,500.

Post-purchase behavior: This is the final step in the Simple Model of Consumer Behavior. The buyer’s
relationship with the seller does not come to an end with the purchase, especially in the case of
commodities like consumer durables. This is not an important factor for FMCG. EX: Ramlal may see
whether LG has a service centre nearby, in the event of the product needing servicing.

2.5 Rural Marketing Strategy:

Introduction:
The stagnation in the urban markets, cutthroat competition and shrinking product life cycles are
forcing marketers to go rural. Pioneer marketers used an insensitive approach to their advantage. They took
the urban brand, tweaked the product a wee-bit, extended the brand to low-unit packs, modified the
packaging marginally, took the urban advertisement and dubbed it in the vernacular. That was the way rural
marketing was done.
A more sensitive approach has to be adopted to succeed in the rural markets. The conservative
approach resulted in huge losses and erasing of brands completely from the rural landscape e.g. LUX
shampoo and POLAR fans. New rules have to be framed to succeed in the rural markets. It’s a bit like
handling a honeycomb; you want to take out the honey, but you don’t want to be stung by the bees!
Let us see how a company can adopt a rural marketing strategy that achieves the desired results. A
company entering the rural markets will do it as:
 A new entrant: A company starts its life in markets and then ventures in the urban
areas. For example, CavinCare and Asian Paints
 A mid-entrant: An organization will enter the rural markets after tasting success in
urban markets. These companies seek to earn around fifty percent of their revenue
from the rural markets. For example, HLL and LG.
 The late entrant: Companies in this category will enter the rural markets with a lot
of skepticism. After being successful in the urban markets for a long tine, they
finally decide to enter rural markets. For example Cadbury and Nestle.

A company has to decide when it wants to enter the rural market. Basically a company will enter the rural
market for the following reasons:
 To look for new markets.
 To expand existing markets.
 To increase potential customers.
 To sustain profitability and increase market share.

The rural marketing strategy involves three stages:

i. The Planning Stage

ii. The Execution and Implementation Stage
iii.The Feed Back Stage

Rural Marketing Strategy:

Planning Stage
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Profile of Rural
Market

Segmentation,
Profile of Rural
Targeting &
Consumer
Positioning

Study Consumer
Behavior

Execution and Implementation Stage

Rural Product
Rural
Communication Rural Pricing

Rural Sales
Force Rural
Management Distribution

Feedback Stage

Monitor the Rural

Strategy

Feedback
&Control
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Chapter.3 Rural Distribution Network

3.1 Introduction:

 Rural distribution is considered as a nightmare because of the 6-lakh odd villages spread across the
country.
 To make it easier, one needs to ask from where rural consumers buy. In the case of durables, 90% is
purchased from towns with a population of 20,000 plus.
 The situation with FMCG is more complex but not insurmountable.
 Direct supply to the 20,000 plus population feeder towns should be quite sufficient, as each distributor
would, in turn, have supply networks of 100-plus outlets in 50-odd locations, which can cover all
villages up to the 2000-plus population category.

3.2 Function of Rural Distribution:

Rural Distribution Network can be divided into two categories:

RURAL DISTRIBUTION

PHYSICAL CHANNELS OF
DISTRIBUTION DISTRIBUTION
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Multiple tiers

Non-availability of dealers

Poor viability of retail

Outlets

Inadequate Bank Facilities

Inadequate Credit Facilities

1) Physical distribution: Physical distribution is the process of delivering products to the marketing
channels and consumers. It encompasses the various activities involved in the physical flow of the
product, from the manufacturer to the consumer. The following diagram illustrates the various
processes of physical distribution:

Transportation

Warehousing Communication

Transportation :-
The transportation infrastructure remains underdeveloped in rural India. Although India
has the fourth largest railway network in the world, many parts of rural India remain outside its reach. As
regards road transport, nearly 50% of the 6 lakh-odd villages do not have all-weather roads. Waterways are
an easy transport option in state like Kerala, Jammu and Kashmir. Many cos. use animal carts to carry their
goods. There are around 2 lakh mobile cycles traders in rural India that are penetrating rural markets and
the mobile traders are of immense help.

Communication :-
Communication plays a pivotal role in distribution for rural markets. Lack of proper facilities
like telephones, postal devices, Internet etc. in rural areas poses lots of problems to marketers in servicing
their retailers. Companies are using Internet as a communication tool and are harnessing the power of
Internet in rural areas. It provides e-mail services in vernacular languages.

Warehousing:-
Companies find it difficult to suitable go downs in many parts of rural India. There are no public
warehousing facilities in the interiors of rural India.

CWS/
SWCs Three-tier rural
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Warehousing
Set-up

CO-OPERATIVES

RURAL GODOWNS

At the apex level, Central warehousing corporation (CWC) and State warehousing corporations (SWCs)
do not provide their services beyond the district level. They reach only up to the nodal points or major
markets centers. In the middle tiers are the co-operatives at the mandi level. Then there are rural godowns,
which are owned by panchayat heads. All these provide warehousing facilities only to their own members.
As a result it is a big problem for a company to store its goods in rural areas. Companies like HLL and ITC
have feet of delivery vans for rural distribution. It is better for companies to have their own mobile
warehouses rather than to depend on central go downs. Thereby they can save the cost of constructing
warehouses of their own.

2) Channels of distribution: Channels play a pivotal role in marketing by performing a number of vital
distribution functions. Firms rely on marketing channels to generate customer satisfaction and to
achieve differentiation over the competition. Channels are thus a vital source of competitive
advantage for the firm. The following are some problems of rural channels of distribution:
(a) Multiple Tiers, Higher Costs and Administrative problems: In the first place, the rural
distribution chain requires a larger number of tiers, compared to the urban one. The long distances
to be covered from the product points and the scattered locations of the consuming households
cause this situation. At the minimum, the rural distribution chain needs the village-level
shopkeeper, the mandi-level distributor and the wholesaler/ stockist in the town. And on top of
them are the manufacturers’ own warehouses/branch office operations at selected centers in the
marketing territory. Such multiple tiers and scattered outfits push up costs and make channel
management a major problem. It becomes expensive as well as unmanageable.
(b) Non-Availability of Dealers: Another problem is the availability of dealers. Many firms
find that there are a limited number of suitable dealers. Even if the firm is willing to start from
scratch and try out rank new comers, the choice of candidates is really limited.
(c) Poor Viability of retail outlets: Retail sales outlets in the rural markets suffer from poor
viability. A familiar paradox in rural distribution is that the manufacturer incurs additional
expenses on distribution; still the retail outlets find that the business is unremunerative. The
scattered nature of the market and the multiplicity of the tiers in the chain use up the additional
funds. Moreover, the business volume is not enough to sustain the profitability of all the groups
and the retail outlet suffers the most.
(d) Inadequate Bank Facilities: Distribution in rural markets is also handicapped due to lack
of adequate banking and credit facilities. Rural outlets need banking support for three important
purposes:
• To facilitate remittances to principals and to get fast replenishment of stocks.
• To receive supplies ‘through bank’ (retiring documents with the bank)
• To facilitate credit from banks.
As banking facilities are inadequate in rural areas, rural dealers are handicapped in all these
aspects. It is estimated that there is only one bank branch for every fifth village.
(e) Inadequate credit facilities: Inadequacy of institutional/ Bank credit is another constraint. Rural
outlets are unable to carry adequate stocks due to lack of credit facilities. Thus there is a vicious
circle of lack of credit facilities leading to adequate stocking and loss of business, finally resulting
in poor viability of outlets. In order to tackle the problem of channels of distribution effectively, a
marketer needs to implement the following strategies: -
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• Relying on private village shops- For a large variety of consumer products, private shops
are the main channels in the rural markets. They are also the cheapest and the most convenient channel to
align with. Considering the many constraints that the village shopkeeper in India has to operate under. He is
forced to deal in a large number of products in order to make his operations viable.
• Satellite distribution- The concept of satellite distribution is strongly recommended to
penetrate the rural market. Stockists are appointed in major towns and feeder towns. They, by and large,
discharge the following functions: financing, warehousing, sub- distribution. Depending on the size of the
stockists and the product line, these functions are performed with varying degrees of competence. They
function as authorized retailers or franchised dealers of the company and are recognized officially as
forming part of the company’s marketing network, operating through the stockists. The manufacturer
supplies goods to the stockists either on a consignment or on cash or a credit purchase basis. The stockists
take care of distribution on the terms and conditions determined by the manufacturer or agreed upon by the
parties. The volume of business done by the retailers vary, partly because of their location and partly
because of their own capacity for doing business.

HUBS AND SPOKES MODEL:

S
S
1
2

A2
S S
4 3 S
2 S
3
S
S
1
2 Whol
A3
esaler
town
A1 S
1 S
S 4
4
S S
3 S 2
1
A4
S
S 3
4

A1-A4 semi-wholesale S1-S4 satellite markets

This process continues as long as the market and consumption level keep expending and the
supply also catches up. At any point of time, a certain number of retail points always hover round
particular stockists. Hence the system is known as the ‘satellite distribution system’. The advantage of
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this system is that market penetration takes place in the interiors of rural markets without the
manufacturer having to expand his direct stock point network.
• Syndicated distribution- channels of distribution are a major problem for a new company
targeting the rural market for the first time. The biggest problem a new company faces is that there to many
levels in the channels (multiple-tier), and setting up a distribution channel for rural markets is a costly
proposition. Coca-cola India purchased by the Parle brands (thumbs up, Limca, etc.) for Rs.550 crores in
1993 mainly to use Parle’s existing distribution network. But small companies cannot afford to buy another
company for distribution. The solution for small companies is to tie up with a leading company the already
has a presence in the rural market to distribute products through its distribution network. The golden rule is
the small companies should not deal in the same product that the leading company sells. A successful
model of syndicated distribution is P&G using the rural distribution network of Marico to sell Ariel, Tide,
etc. in the initial stages, Cavincare uses distribution network of Amrutanjan Pain Balm for its Chik
Shampoo.

3.3 Strategies of Rural Distribution:

Strategies of Rural
Distribution

Integrated Combining Rural National &

Marketing IN & OUT Supermarkets Regional Chain
Outlets operations Stores

3.4 Statement of the Problem of Rural Marketing:

Although the rural market offer a vast potential but we cannot forget to recognize the fact that
it is not easy to operate there. Rural marketing is a time consuming affair and requires considerable
investments in terms of evolving appropriate strategies. The major problems faced by companies targeting
rural markets are:

1) Deprived People and Deprived Markets:

 Rural people are tradition-bound and fatalistic.
 They strongly believe in old customs, traditions, habits, taboos and practices.
 They also face significant deprivation of basic human needs.

2) Lack of Proper Physical Communication Facilities:

 Communication with these villages is difficult and highly expensive.
 Moreover 300,000 villages in the country have no access to telephones.
 Even today, most villages are inaccessible during the monsoons.

3) Transport:
 Many rural areas are not connected by rail transport.
 At least 50% of the roads are poorly surfaced, some are totally destroyed and many are severely
damaged due to monsoons and lack of servicing during years.
 This lead to isolation of the interior villages. And the use of bullock carts looks inevitable for many
years into the future.
19

4) Many Languages and Dialects:

 The number of languages and dialects vary widely from state to state, region to region, and probably
from district to district.
 It is difficult for marketers to design promotional strategies in different languages and local dialects.
 These rural areas also lack telecommunication facilities adding to the problems faced by the marketers
in the distribution of goods and services.

5) Dispersed Markets:
 Rural populations are scattered over a large land area and it is almost impossible to ensure the
availability of a brand all over the country.
 Rural buyers aren’t concentrated unlike urban buyers.
 Advertising in such a highly heterogeneous market, which is widely spread, is very expensive.

6) Low Per Capita Income:

 Even though 26% of GDP is generated in rural areas, it is shared by 76% of the population.
 So, per capita incomes are low. Moreover demand for goods in rural markets depends upon the
agricultural situation, which depends upon the monsoon to a large extent.
 Therefore demand is not stable or regular.

7) Low Levels of Literacy:

 Literacy rates are low in rural areas compared to urban areas.
 This lead to the problem of communication.
 The print medium is ineffective in rural areas since its reach is poor.

8) Prevalence of Spurious Brands and Seasonal Demand:

 For any branded product there are a multitude of ‘local variants’, which are cheaper and therefore more
desirable for villagers.
 Rural people are cautious about there buying decisions.
 They like to give a product a trial, and buy it again only after getting personal satisfaction.

9) Different Way of Thinking:

 There is a vast difference in the lifestyles of rural and urban people.
 An urban customer is given many more choices than his rural counterpart.
 A rural customer has two to three brands to choose from, whereas an urban counterpart has more
choices. It’s only a difference in the way of thinking.
 The rural customer lives fairly simply as compared to his urban counterpart.
 Life in rural areas is still governed by customs and traditions and people do not easily adopt new
practices.

10) Distribution Problem:

 Effective distribution requires a village-level shopkeeper, mandi/ taluka-level wholesaler or preferred
dealer, a distributor or stockist at the district level and a company owned depot or consignment
distribution at the state level.
 So many tiers increase the cost of distribution.
 There are more macro-level concerns about purchasing power parity, per capita household expenditure
and regional and cultural variances.
 These all problems taken together make up the great hurdle that one can ill-afford to either ignore or
take for granted.
 Infrastructure also poses a major problem when a marketer thinks of targeting rural markets.
20

11) Narrow Consumption Basket:

 According to NCAER’s India Market Demographics Report, 1998, almost 55% of the FMCG
produced in the country were consumed by the villagers between 1992-1993 and 1997-1998, with
annual average growth rate of 14%.
 These figures are estimated on a narrow consumption basket of about 20 most expendable goods and
do not signify either the potential size of the market nor the dynamics of the product preferences and
life cycles.

Chapter.4 A Brief Profile of Hindustan Lever Limited

A Brief Profile of Hindustan Lever Limited (HLL)

4.1 Introduction:

Hindustan Lever Limited (HLL) is India's largest fast moving consumer goods company, with
leadership in Home & Personal Care Products and Foods & Beverages. HLL's brands spread across 20
distinct consumer categories, touch the lives of two out of three Indians. They endow the company with a
scale of combined volumes of about 4 million tonnes and sales of Rs.10,000 crores.

The mission that inspires HLL's 36,000 employees, including about 1,350 managers, is to "add
vitality to life".

With 35 Power Brands, HLL meets every day needs for nutrition, hygiene, and personal care
with brands that help people feel good, look good and get more out of life. HLL’s parent company,
Unilever, holds 51.55% of the equity. A Fortune 500 transnational, Unilever sells Foods and Home and
Personal Care brands in about 100 countries worldwide. The rest of the share holding is distributed among
3,80,000 individual shareholders and financial institutions.

HLL is India's largest marketer of Soaps, Detergents and Home Care products. It has the
country’s largest Personal Products business, leading in Shampoos, Skin Care Products, Colour Cosmetics
and Deodorants. HLL is also the market leader in Tea, Processed Coffee, branded Wheat Flour, Tomato
Products, and Ice cream, Soups, Jams and Squashes. HLL is also one of the country's biggest exporters and
has been recognized as a Golden Super Star Trading House by the Government of India; it is a net foreign
exchange earner. HLL is India's largest exporter of branded fast moving consumer goods. HLL is also
driving exports in chosen areas where India has a competitive advantage – Marine Products, Basmati Rice,
Castor Oil and its Derivatives. It is India's largest exporter of Marine products, and one of the largest global
players in castor.
21

4.2 Present Scenario:

 Largest FMCG Company: Hindustan Lever Limited (HLL) 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. They endow the company with a scale of
combined volumes of about 4 million tonnes and sales of Rs.10,000 crores. HLL is also one of the
country's largest exporters. The Government of India has recognized it as a Golden Super Star Trading
House.
 HLL's brands: HLL’s major brands like Lifebuoy, Lux, Surf Excel, Rin, Wheel, Fair & Lovely, Pond's,
Sunsilk, Clinic, Pepsodent, Close-up, Lakme, Brooke Bond, Kissan, Knorr-Annapurna, and Kwality
Wall's – are household names across the country. They span many categories - soaps, detergents,
personal products, tea, coffee, branded staples, ice cream and culinary products.
 Factories: They are manufactured in close to 80 factories. The operations involve over 2,000 suppliers
and associates.
 HLL's distribution network: It comprises of about 7,000 redistribution stockists, and it directly covers
the entire urban population, and about 250 million rural consumers. HLL’s distribution network is
recognized as one of its key strengths which helps reach out its products across the length and breadth
of this vast country. The need for a strong distribution network is imperative, since HLL’s corporate
purpose is “to meet the everyday needs of people everywhere.”
 Technologies: HLL has traditionally been a company, which incorporates latest technology in all its
operations. The Hindustan Lever Research Center (HLRC) was set up in 1958, and now has facilities
in Mumbai and Bangalore. HLRC and the Global Technology Centers in India have over 200 highly
qualified scientists and technologists, many with post-doctoral experience acquired in the US and
Europe.
 Social Services: HLL believes that an organization’s worth is also in the service it renders to the
community. HLL is focusing on health & hygiene education, women empowerment, and water
management. It is also involved in education and rehabilitation of special or underprivileged children,
care for the destitute and HIV-positive, and rural development. HLL has also responded in case of
national calamities / adversities and contributes through various welfare measures, most recent being
the village built by HLL in earthquake affected Gujarat, and relief & rehabilitation after the Tsunami
caused devastation in South India.
 Over the last three years the company has embarked on an ambitious programme, Shakti.
 Through Shakti, HLL is creating micro-enterprise opportunities for rural women, thereby improving
their livelihood and the standard of living in rural communities.
 Shakti also includes health and hygiene education through the Shakti Vani Programme, and creating
access to relevant information through the I-Shakti community portal.
 The programme now covers about 50,000 villages in 12 states. HLL's vision is to take this programme
to 100,000 villages impacting the lives of over a 100 million rural Indians.
 HLL is also running a rural health programme – Lifebuoy Swasthya Chetana. The programme
endeavors to induce adoption of hygienic practices among rural Indians.
 It has already touched 70 million people in approximately 15000 villages of 8 states. The vision is to
make a billion Indians feel safe and secure.
 If Hindustan Lever straddles the Indian corporate world, it is because of being single-minded in
identifying itself with Indian aspirations and needs in every walk of life.
 And they prove it by the latest redesign done for the HLL brands LUX and Wheel:

HLL’s brands redesign:

 India’s two most popular FMCG brands got a makeover recently. HLL roped in ELEPHANT
DESIGN, a Pune based design house for the redesign strategy.
 One of them is Rs. 7500 crores-toilet soap LUX, which was redesigned for market abroad.
22

 And the second one being Rs. 1000 crores detergent brand WHEEL for which all aspects of redesign –
its logo, new packaging and promotional material was done by Elephant Design for the Indian market.
 The brief for both the brands was to make them look fresh and contemporary while maintaining their
emotional connect with the user.
 The design revamp is expected to provide a fresh impact of the FMCG giant in the face of rigid
competition in foreign and domestic markets.
 The challenge for WHEEL was to make the brand look fresher, slicker and yet reflect its image as a
value for money soap.
 The objective of redesign was to convey that an improved product was available at the old price.
 In Wheel’s white powder now added was the Lemon-fresh “power boosters”.
 Redesigning of logo was done to make it look more meaningful and with the use of more colours in the
logo, Elephant tried to make it look more dynamic, fresh and premium.
 The smarter green wheel on the pac k creates play of dimensions; illustration on the backside of the
pack has been made in a fresh style.
 The images and expressions on the pack communicate the feeling of a good wash, enhanced fragrance
and a premium look. This all adds to the overall effect of the revamped “WHEEL”.

Product Mix:

HLL

Home & Personal car Food & Beverages

Personal wash: oral care: Foods:

Lux Pepsodent Kwality walls
Lifebuoy Close-up
Liril
Hamam
Breeze Beverages:
Dove Tea/ Coffee:
Peers Brook bond/ Bru
Rexona Lipton
3 Roses tea
Hair care: Colour cosmetics: A1 tea
Sunsilk naturals Lakme
Clinic plus
Nihar

Skin care: Ayurvedic personal &

Fair & lovely health care:
Ponds Ayush
23

Laundry:
Surf excel
Rin
Wheel

4.3 HLL’s initiative in Corporate Social Responsibility:

 Corporate Social Responsibility (CSR) in Hindustan Lever Limited (HLL) is rooted in its Corporate
Purpose - the belief that "to succeed requires the highest standards of corporate behavior towards our
employees, consumers and the societies and world in which we live".
 HLL's CSR philosophy is embedded in its commitment to all stakeholders - consumers, employees, the
environment and the society that the organization operates in.
 HLL believes that it is this commitment, which will deliver sustainable, profitable growth.
 HLL's key CSR initiatives are undertaken with a long-term view. Initiatives that are sustainable have
long-term benefits and an ongoing business purpose.
 As early as in the 1950s, HLL focused on import substitution when balance of payments was an issue.
 Since the 1980s, most of HLL's investments have been in designated backward areas and zero-industry
districts, spreading industrialization.
 HLL has revived sick industries and has developed local entrepreneurship.
 HLL is also involved in a number of community support activities, like education and rehabilitation of
special or underprivileged children, care for the destitute and HIV-positive, and rural development.
 In recognition of these initiatives, HLL received the prestigious TERI-CSR Special Award for the year
2002-03 from “The Energy and Resources Institute (TERI)”, which was established in 1974.
 TERI is world famous for its commitment to and initiatives in every aspect of sustainable
development.

HLL is also a socially responsible company in running programmes for the sake of the society, namely:

 Greening barrens
 Shakti
 Lifebuoy swasthya chetana
 Fair & lovely foundation
 Happy homes
 Yashodadham

4.4 Introduction to Shakti:

 Hindustan Lever Limited’s (HLL’s) rural self-help group initiative to push the penetration of its
products deeper has paid off.
 In terms of contribution to HLL’s rural sales, 10% -- 15% comes from this initiative, which was
launched two years back. The rural market constitutes over 40% of HLL’s total sales of about
Rs.10,000 crores.
 In terms of incremental gains, the company now reaches out to around 10,000 villages. In general,
rural women in India were underprivileged and required a sustainable source of income.
 NGO’s (Non-Government Organization), governmental bodies and other institutions have been
working to improve the status of rural women.
 “SHAKTI” is a pioneering effort in creating livelihoods for rural women, organized in Self-Help
Groups (SHGs), and improving living standards in rural India.
24

 Shakti provides critically needed additional income to these women and their families, by equipping
and training them to become an extended arm of the company's operation.
 Started in 2001, Shakti has already been extended to about 50,000 villages in 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 supporting the rural
initiative of HLL.
 Shakti already has about 13,000 women entrepreneurs in its fold.
 A typical Shakti entrepreneur earns a sustainable income of about Rs.700 -Rs.1,000 per month, which
is double their average household income.
 Shakti is thus creating opportunities for rural women to live in improved conditions and with dignity.
 In addition, it involves health and hygiene programmes, which help to improve the standard of living
of the rural community.
 Shakti's ambit already covers about 15 million rural population. Plans are also being drawn up to bring
in partners involved in agriculture, health, insurance and education to catalyze overall rural
development.
 Shakti Vani is a social communication programme where women are trained in health and hygiene
issues; village communities are addressed through meetings at schools, village baithaks, SHG meetings
and other social fora.
 In 2004, Shakti Vani has covered 10,000 villages in Madhya Pradesh, Chattisgarh and Karnataka.

HLL has formulated a strategy for rural markets known as ‘Operation Bharat’.

OPERATION BHARAT – HLL’s Rural Product strategy:

 HLL launched “Operation Bharat” in the year 1997to create brand awareness for its rural brands.
 The strategy also involved promoting the sales of its special packs for rural areas.
 HLL provided hampers at discounted prices of Rs. 5, Rs. 10, Rs. 15 and Rs. 20, each of which had a
clinic shampoo bottle, a tube each of Pepsodent and Fair & Lovely, and Pond’s Dream flower Talc, in
different sizes and combinations.
 The idea behind this is to have a product each for hair care, dental care, skin care and body care.
 Consumers were also made aware of the benefits of using HLL products, and the affordability of the
pack sizes on offer.
 The project thus successfully addressed issues of awareness, attitudes and habits.
 Hopefully, as consumers in rural areas get exposed to such value-added, value-for-money, alternatives,
they will continue to buy the different categories of products.
 Operation Bharat is now targeting 65,000 villages and the strategy has proved to be successful for
HLL.
 Its long-term strategy is to target 1.5 lakhs villages by the year 2005.

4.5 Expectation of Shakti in Future:

 An organization, which successfully stands the test of time, is one that transforms itself in line with
changes in the environment.
 Hindustan Lever’s continued success in India over the past 75 years is marked by conscious
transformations, building on the past and reshaping for the future.
 In Foods, they see enormous growth potentially in leading the evolution of consumers to branded and
processed foods.
 Over the last few years they have focused on putting in place the building blocks of a strong Foods
business.
25

 They recognized that changing food habits would require considerable investment, which the current
business simply could not afford. Therefore they divested the non-value added parts like Vanaspati.
 They have consolidated their portfolio and improved the gross margins by over 13% through product
mix and cost reduction.
 They have also cleared the supply chain of all old stock and geared up for fresh availability on shelf.
The foods business will now invest for growth through relevant innovation.
 Over the next 10 years, per capita income in India is likely to touch China’s current levels. At those
levels, the FMCG market will be over Rs. 1,00,000 crores from a current value of Rs. 40,000 crores.
This is an opportunity that they well poised to seize.
 They choose to focus on 35 power brands covering all consumer appeal and price segments. They are
already seeing the benefits; six brands – Brooke bond, Lifebuoy, Lux, Fair & Lovely, Rin and Wheel –
have emerged as mega brands in the last five years, each with sales of more than Rs. 500 crores.
 Perhaps the most significant change has been to move their brands beyond merely making functional
claims to playing a bigger and deeper role in the lives of consumers.
 Today lifebuoy, their oldest brand, has grown at over 15% for the last three years.
 They have strengthened this and reinvented the way they manage their distribution channels and
customers.
 The sales structure has been transformed to leverage scale and build expertise in servicing Modern
Trade and Rural Markets.
 They have also delayered their sales force to improve their response times and service levels.
 It has been extended to 60,000 villages in 12 states, already touching 75 million people. By the end of
the year, Shakti will cover 100 million people.
 To ensure that HLL remains competitive in the long-term, they have made significant investments in
product quality, pricing and marketing.
 As mentioned earlier, the investment in product quality alone has been in excess of Rs. 4000 crores, or
5% of their sales.
 In addition there is a cost of defending their market position.
 They have made this trade-off necessary that market share is the best means of sustaining future
profits.
 Over time their stronger market positions will surely lead to greater long-term profit.
 Despite these significant investments to strength the long-term competitiveness and the costs of
defending there strong market position, they still remain one of the most profitable companies in the
country.
 HLL's vision for Shakti is to scale it up across the country, covering 100,000 villages and touching the
lives of 100 million rural consumers.
 Given the success of the initiative, the company is now planning to expand Project Shakti in 400
districts by 2006.
 HLL will cover 100 districts through Project Shakti by the end of this calendar year.
 I-Shakti, the Internet-based rural information service, has been launched in Andhra Pradesh, in
association with the Andhra Pradesh Government's ‘Rajiv Internet Village Programme’.
 The service is now available in Nalgonda, Vishakapatnam, West Godavari and East Godavari districts.
 I-Shakti has been developed to provide information and services to meet rural needs in medical health
and hygiene, agriculture, animal husbandry, education, vocational training and employment and
women's empowerment.
 The vision is to have 3,500 kiosks across the state. HLL want to spread the use of Internet through I-
Shakti not only in Andhra Pradesh but also throughout India.
26

Chapter.5 A Case Study on HLL’s Project Shakti

5.1 Introduction to Shakti:

 Hindustan Lever Limited (HLL) and its constituent companies have been in India since 1931.
 Over these decades, while HLL has benefited from the developments in the country, it has contributed
equally to these developments.
 HLL has consciously woven India's imperatives with the company's strategies and operations.
 The company’s main contributions include developing and using relevant technologies, stimulating
industrialization, boosting exports, adding value to agriculture and generating productive employment
and income opportunities.
 HLL has been proactively engaged in rural development since 1976 with the initiation of the Integrated
Rural Development Programme in the Etah district of Uttar Pradesh, in tandem with the company’s
dairy operations.
 This Programme now covers 500 villages in the district. Subsequently, the factories that HLL
continued establishing in less-developed regions of the country have been engaged in similar
programmes in adjacent villages.
 These factory- centered activities mainly focus on training farmers, animal husbandry, generating
alternative income, health, hygiene and infrastructure development.
 The company has acquired a wealth of experience and learning from these activities.
27

 The principal issue in rural development is to create income-generating opportunities for the rural
population.
 Such initiatives are successful and sustainable when linked with the company’s core business and is
mutually beneficial to both the population for whom the programme is intended and for the company.
 Based on these insights, HLL launched Project Shakti in the Year 2001, in keeping with the purpose of
integrating business interests with National interests.

5.2 The Objectives of Shakti:

• To create income- generating capabilities among underprivileged rural women by providing a

sustainable micro- enterprise opportunity for them.
• To improve rural living standards through health and hygiene education.

5.3 The Idea of Shakti to Achieve:

• Avail micro- credit from government/ banks/ loans for self help groups, and a stable “income-
generating activity” offered by HLL will stimulate wealth creation in the village.
• Women from self- help groups to operate like rural direct-to-home sales distributors for HLL
products.
28

GOALS: 50,000 villages—25,000 Entrepreneurs by 2005

5.4 The Motto of Shakti Sandesh:

THINK BIG. START SMALL. MOVE FAST.

5.5 Business Activity of Shakti:

 Year 2000 found Peddakaparthy village, in the Nalgonda district of Andhra Pradesh, in the throes of a
new revolution.
 A revolution propelled by a vision to better the lives of rural women and support them in their move
towards economic independence. It was the inception of Project Shakti.
 Today, with over 5000 entrepreneurs, Project Shakti has traversed 130 districts in eight states.
 A journey only made possible by our spirited entrepreneurs and the steadfast support received from
numerous individuals and organizations including NGOs and SHGs.
 Project Shakti remains indebted to them and is hopeful of their continued patronage and support.
 They aspire to have 25,000 Shakti Entrepreneurs in their midst, covering 100,000 villages and reaching
100 million rural people, by year 2005.
 As they set forth, they earnestly hope that they have made several poignant struggles easier towards a
life of dignity.
 Typically, women from a SHG selected as a Shakti entrepreneur receives stocks at her doorstep from
the HLL rural distributor and sells direct to consumers as well as to retailers in the village.
 To get started the Shakti women borrows from her SHG and the company itself chooses only one
person from SHG.
 Each Shakti entrepreneur services 6-10 villages in the population strata of 1000-2000 people.
 Some Shakti entrepreneur selling upwards of Rs.15000 a month worth of products can make a gross
profit of over Rs.1000 a month.
 29

 Their attempt has been to educate rural consumers on the value they can derive from an HLL product.

5.6 Achievement Model of Project Shakti:

A Win-Win Model:

Faster turnaround of money

Better repayment rates
Social Responsibility

Bank

Income/
Investment
Income
Opportunity
Generating
Govt. SE*
Activities
Education/
Awareness
Efficiency and
Productivity
Access to urban
Markets and
Information
HLL

5.7 The Reasons for Shakti to Start:

Corporate Social Responsibility
Better product reach
 The objective of Project Shakti is to create income-generating capabilities for underprivileged rural
women, by providing a sustainable micro enterprise opportunity.
 It also aims to improve rural living standards through health and hygiene awareness.
 Following the pioneering work carried out by Grameen Bank of Bangladesh, and several other
institutions, NGOs and government bodies have been working closely, for nearly five years, to
establish Self Help Groups (SHGs) of rural women in villages across India.
 Their experiments clearly indicate that micro-credit, when carefully targeted and well administered can
alleviate poverty significantly.
 A crucial lesson learnt was that rural upliftment depended not on successful infusion of credit, but on
its guided usage for better investment opportunities.
 This is where HLL's Project Shakti is playing a role in creating such profitable micro enterprise
opportunities for rural women.

Catalyzing prosperity in Indian villages:

30

 Under the project, HLL offers a range of mass-market products to the SHGs, which are relevant to
rural customers.
 HLL is investing significantly in resources that work with the women on the field and provide them
with on-the-job training and support. This is a key factor in ensuring the stabilization of their fledgling
businesses.
 HLL imparts the necessary training to these groups on the basics of enterprise management, which the
women need to manage their enterprises.
 For the SHG women, this translates into a much-needed, sustainable income contributing towards
better living and prosperity.
 Armed with micro-credit, women from SHGs become direct-to-home distributors in rural markets.

Risk-free micro enterprise that yields high returns:

 A typical Shakti entrepreneur conducts a steady business, which gives her an income in excess of
Rs.1,000 per month on a sustainable basis.
 As most of these women live below the poverty line, and hail from extremely small villages (with
populations of less than 2000), this earning is very significant, and almost twice the amount of their
previous household income.
 For most of these families, Project Shakti is enabling families to live with dignity, with real freedom
from want.
 In addition to money, there is a marked change in the woman's status within the household, with a
much greater say in decision-making.
 This results in better health and hygiene, education of the children, especially the girl child, and an
overall betterment in living standards.
 The most powerful aspect about this model is that it creates a win-win partnership between HLL and
the consumers, some of whom will depend on the organization for their livelihood, and builds a self-
sustaining cycle of growth for all.

5.8 Shakti – The Present Scenario:

31

 The model was piloted in Nalgonda district of Andhra Pradesh in 50 villages in the year 2000.
 The Government of Andhra Pradesh took the pioneering step of supporting the initiative by enabling
linkages with the network of DWACRA Groups of rural women set up for their development and self-
employment.
 Most SHG women view Project Shakti as a powerful business proposition and are keen participants in
it.
 It has since been extended to in Andhra Pradesh, Karnataka, Gujarat, Madhya Pradesh, Uttar Pradesh,
Tamil Nadu, Chattisgarh and Orissa.
 As part of their training programme, all HLL Management Trainees spend about 4 weeks on Project
Shakti in rural areas with NGOs or SHGs.
 Assignments include business process consulting for nascent enterprises engaged in the manufacture of
products such as spices and hosiery items.
 HLL envisions the creation of 25,000 Shakti Entrepreneurs covering 100,000 villages, and touching
the lives of 100 million rural people by the year 2005.
 In order to achieve this goal, Project Shakti plans to extend to the states of West Bengal, Punjab and
Rajasthan in addition to expanding operations in the eight existing states.
32

Product Mix:
HLL

Home & Personal care Food & Beverages

Personal wash: oral care: Foods:

Lux Pepsodent Kwality walls
Lifebuoy (Rs.1 candy)
Hamam
Breeze Beverages:
Tea:
3 Roses
A1 tea
Hair care: Colour cosmetics: Green label
Sunsilk naturals Elle 18
Clinic plus
Nihar

Skin care: Ayurvedic personal &

Fair & lovely health care:
Ayush
(New entry)
Laundry:
Surf excel
Rin
Green Wheel

5.9 The Ways of Development: I-Shakti:

 Hindustan Lever Ltd, which had launched an Internet-based rural information service I-Shakti in
Andhra Pradesh, expects to set up over 1,000 such kiosks by the end of the year in the state.
 The company opened its 250th kiosk at Puttapaka village of Nalgonda district, extending its services to
Nalgonda, Visakhapatnam, West Godavari and East Godavari districts.
 I-Shakti is an IT-based rural information service network that has been developed to provide
information and services to meet villagers' needs in medical, health and hygiene, animal husbandry,
agriculture, education and women's empowerment among others.
33

 The programme is being rolled out in association with Andhra Pradesh's Rajiv Internet Village
Programme and it is an extension of HLL's Project Shakti.
 Meanwhile, the company was also planning to extend its reach of Project Shakti to over 1,00,000
villages by 2005 from the present 20,000 villages in 196 districts of Andhra Pradesh, Karnataka,
Madhya Pradesh and Tamil Nadu among others.
 The scaling up will result in creating over 25,000 entrepreneurs and helping over 10 crores rural
consumers.
 Project Shakti is aimed at creating incomes for under-privileged rural women by providing a
sustainable micro enterprise opportunity.

 A key factor that has inhibited the development of rural India has been lack of access to critical
information and services.
 Given India’s large geography and weak infrastructure, it is often difficult to reach out to the rural
areas.
 In order to impact both livelihood opportunities and living standards of rural communities.
 ‘I-Shakti’- an IT-based rural information service has been developed to provide information and
services to meet rural needs in agriculture, education, vocational training, health and hygiene.
 The premise of the I-Shakti model is to provide need based demand driven information and services
across a large variety of sectors that impact the daily livelihood opportunities and living standards of
the village community.
 The I-Shakti kiosk will be operated by the Shakti Entrepreneur, which further strengthens the
relationship we have already cultivated and builds new capacity.
 HLL expects that the information provided would improve the productivity of the rural community and
unlock economic and social progress.
 To catalyze overall rural development, HLL hopes to collaborate with mainstream institutions (both
corporate and not-for-profit organizations) that are experts in agriculture, health, insurance, financial
services and education.
 ‘I-Shakti’ kiosks have been set up in 8 villages in Andhra Pradesh, and have been functional since
August 2003.
 The kiosks have received an overwhelming response from the local populace.
 During the launch of these kiosks, important village members like the Sarpanch, schoolteacher and
doctor are invited to help reinforce relationships with the villagers.
 The kiosks remain open from 9 a.m. to 7 p.m., six days of the week. To enable access to the services,
users have to register themselves first and obtain the unique registration number. An id card with the
registration number is provided for use every time they visit the kiosk.
 The information provided in the above areas is culled from the best available resources, taking
additional care to ensure that information, especially in areas like agriculture, is locally relevant and
includes inputs from home-grown experts.
34

 These experts are also available on request, to help provide solutions to problems raised by users
through a query mailing system.

A System running on Interactive dialogue:

 HLL uses a system running on interactive dialogue. Every area expert provides content online to every
satellite village. This is how Shakti entrepreneurs operate an I-shakti kiosk.
 A farmer from the village can obtain a quick solution to a pest problem with his crops.
 People can also send queries on health and hygiene to a local doctor for a speedy response.
 Villagers can avail of discount coupons from the kiosk for medical treatment from doctors operating in
local areas.

This can be explained diagrammatically as:

:

 'I-shakti’ has also tied up with Azim Premji Foundation to deliver innovative educational modules to
students of classes VIII-XII through the kiosk. Local schoolteachers have also been involved in the
process.
35

 A similar partnership is in place with Tata Adult Literacy for adult education.
 Involving the locals, augments institutional knowledge with local expertise, that greatly benefits the
village community and provides them with a customized ‘web space’ on subjects of immediate
relevance.
 Information is updated on a regular basis and new sections are added.
 Feedback is sought from the users on the quality of content based on which, improvisations have been
made to satisfy user requirements.
 The system is based on an interactive dialogue technology developed & patented by the Unilever
Corporate Research Team, U.K.
 The system enables a deeper understanding of individual user needs and thereby improves the quality
of services rendered to them.
 Ogilvy Outreach and Interactive worked with HLL to develop the content for the system, while
Tessella provided key software development and support services.
 APonline, a joint venture between TCS and the Government of Andhra Pradesh, which has the
mandate to enable e-governance, services to both urban and rural community, has tied up with I-Shakti
to launch these services in rural Andhra Pradesh.
 This is one of the first rural service delivery projects of APonline.
 The services include application forms for caste, nativity, income certificates, agricultural grievances,
and utility bill collection to name a few. Over fifty new services will be added in the next six months.
 Through I-Shakti kiosks, ICICI Bank and HLL will work together to provide a new delivery channel
for rural India, which offers a multitude of products and services to the rural customer.
 In the first phase, Life and General Insurance will be offered through this channel.
 Other financial services including Investment products (Equity, Mutual Funds, Bonds) ICICI Bank
Pure Gold (gold coins), Personal Credit, Rural Savings Accounts and Remittances will be introduced
subsequently.

5.10 The Expectations of Market towards Project Shakti:

 There are other plans brewing, one is to allow companies, which do not compete with HLL to get onto
the Shakti network to sell their products.
 Talks are on with a variety of companies selling batteries, mopeds and insurance companies for LIC
policies.
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 They wanted to first stabilize the project before they can look at other companies.
 It requires somebody with scale and size to build a platform and then invite other companies onto this
platform.
 The most powerful aspect about this model is that it emphasizes in creating a win- win partnership
between HLL and its consumers, some of whom will also draw on the organizational for their
livelihood, and it builds a self sustaining virtuous cycle of growth for all.

 The next stage of project Shakti is even more ambitious. HLL is now in the process of piloting “I-
SHAKTI”, an IT- based rural information service that will provide solutions to key rural needs in the
areas of agriculture, education, vocational training, health and hygiene.
 The project will be piloted in Nalgonda district again.
 Based on a hand held digital device, HLL is looking at sourcing appropriate low cost hardware from
Hewlett-packer while Unilever corporate research out of London is developing the consumer
interactivity software.
 Women in the rural areas are the catalyst of change and that is why its whole programme keeps women
in focus.
 It’s like popcorn in a machine; one burst at first and then everything begins popping. Here too, one
woman as an agent of change bursts into a movement and it is strengthen.

5.11 Channel of Distribution used by HLL:

Generally most of the textbooks talk about the 4 level channel of distribution, namely:
 Zero level
 One level
 Two level
 Three level

Zero level involves no middlemen, which can help companies to save upon cost. The three level
COD involves the following steps:
3 level COD:

Manufacturer

Wholesaler
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Level 1

Level 2 Stockist

Level 3 Retailer

Consumer

The urban market uses this distribution channel. But in case of rural markets, companies use a different
COD, which is up to 4 levels, 6 levels or maximum, an 8 level channel. For this, we first need to
understand the distance in the rural market.

City

Project Harvest

District

Project Streamline

Village

Satellite Village
Project Shakti
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Tribal Areas

 For example consider a city with a population Forest

of 20 million. To transport the goods from city to the
district, we have rail routes.
 So, we can put a warehouse at the district level. Now consider a district with a population of around 10
lakhs EX: Ahmednagar.
 Suppose in Ahmednagar there are around 110 villages, which are accessible through road transport.
So, a warehouse can be put at a village also.
 Now take into account any village (ex: Saphale with a population of around 10,000).
 Villages are linked to satellite villages through kutcha roads. Ex: Nevasa with a population of 2000.
 So, companies should either use bullock carts or bicycles for transport.
 Between satellite villages and tribal areas, there are only fields and the population of tribal areas is
around 200 only.
 Since there are no proper transportation facilities here, companies cannot put a warehouse.
 Now, the only option left to reach satellite villages or tribal areas is on foot.
 So, what companies like HLL do is that they hire SHG’s to sell their products.
 Women in the SHG’s personally collect the products from the distributors in the villages and sell it in
their areas.
 Self Help Groups (SHG’s) is a group of 18-20 women coming together to market and sell HLL’s
FMCG brands. These women are known as Shakti Entrepreneurs.
 HLL have not created these SHG’s model. They only use it. Actually, these SHG’s are MICRO
CREDIT INSTITUTIONS employed by SAHARA group of companies. This is the core business of
Sahara industries.
 What HLL does is that from every SHG they select one woman as Shakti Entrepreneur to be a
representative of HLL in rural areas to sell HLL’s brands in and around villages.
 MART (Marketing and Research Team) a private MR agency from Delhi provides training to these
SHG’s in marketing and selling products in rural areas.

Channel of Distribution adopted by HLL in Rural Markets (Project Shakti):

HLL’s clearing and

forwarding agent

RDS (Re-Distribution
Stockist)

Star sellers
MACTS (Mutually Aided
MART (Marketing and Co-operative Thrift Society
Research Team)

Retailers

Consumers
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SHG’s (Self Help

Groups)

Now let’s see the link between the distribution system applied by HLL and the distance in the rural
markets:
It is actually the logistics management but it is known as “Channels of Distribution”. The reason behind
this can be explained diagrammatically: -

Transportation

Communication
Flow Logistics

Warehousing Supply Chain

Inventory Management

Logistics is divided into 3 parts: -

 Transportation
 Warehousing
 Supply Chain

But in case of rural markets, due to improper means of transportation there are no warehousing
facilities available in the satellite villages. That is why distribution in rural areas is known as channels of
distribution.
Link between COD and the distance in the rural markets:
The clearing and forwarding (C&F) agent is at the CITY level. There are around 3000 C&F
agents in the city. Then comes the RDS, which is at District level. Further the goods are either distributed
through star sellers i.e. the distributors or the MACTS, which is a co-operative society and both are at the
village level. An MR agency “MART” assists and trains the distributors in order to sell and market the
goods. Lastly, is the distribution in the satellite villages, which is either done by MACTS directly i.e.
MACTS supply the goods at satellite villages with the help of SHG’s and retailers.