A REPORT on Product/Service design from customer requirement perspective in Hindustan Unilever Ltd.
By Anurag Ranjan Das
HINDUSTAN UNILEVER LTD.
A REPORT on Product/Service design from customer requirement perspective in Hindustan Unilever Ltd.
By Anurag Ranjan Das 6ND-21725 MBA A report submitted in partial fulfillment of the requirements of PG PROGRAM (Class of 2008) ICFAI NATIONAL COLLEGE
TABLE OF CONTESTS 1) Acknowledgement 2) Preface 3) Certificate of originality 4) Executive Summary 5) Objective of research 6) Company Profile 7) Research problem and its relevance 8) Research Methodology 9) Conclusion 10) Bibliography 11)Questionnaire
ACKNOWLEDGEMENT
As any one who has written a project work, or research work, it is quite impossible to acknowledge by name every individual who has played some part in this work. I feel it difficult to express in words my profound sense of gratitude to most respected persons who helped me to make this work possible. I acknowledge my gratitude to respected faculty Ms Poonam Mallik & Ms Vandana Sharma who have been kind enough to suggest improvement of this work and make it broad, based. I would like to thank my center head Major Gen. V. S. Yadav INC-GURGAON and TEAM OF HINDUSTAN UNILEVER LTD. for their support and encouragement. Finally of course great debts are owed to my all-friends whose wholehearted support has given me the inspiration and dedication to complete this work.
Anurag Ranjan Das
PREFACE
Fast Moving Consumer Goods popularly known FMCG is as the name suggests is the most demanded products in the market. It includes every thing from food items like flour, biscuits, ice creams, etc to body products soaps, face creams to cigarettes to beverages, etc. consumers need these things in their everyday life so they invests a good portion of there income in these things. There are so many companies which are dealing in FMCG products like HUL, Dabur, Cavin Care, AMUL dealing in dairy products, etc. By the vary nature of the product the companies are seeing this as a great source of income. As large number of companies are looking this sector as a profitable venture, so for sustaining there position and gain new market they have to bring some thing unique in there products or services to gain position in the market or to sustain there. In this project my focus is on tracking down the changing requirements, preferences, needs of customers and their changing perspective on the different products offered
CERTIFICATE OF ORIGINALITY
This is to certify that the REPORT entitled PRODUCT/SERVICE DESIGN FROM CUSTOMER’S REQUIREMENT PERSPECTIVE IN
HINDUSTAN
UNILEVER
being
submitted
to
ICFAI
NATIONAL COLLEGE, GURGAON in partial fulfillment of the requirement
for
the
ADMINISTRATION
award (MBA)
of
MASTER
AND
POST
IN
BUSSINESS
GRADUATE
IN
BUSSINESS ADMINISTRATION (PGDBA) an original work carried out by ANURAG RANJAN DAS ENROL. NO. 6ND21725 under
the
guidance
of
MS.
VANDANA
SHARMA
(INC
GURGAON).The matter embodied in this REPORT is a genuine work done by the aforesaid student and has not been submitted either to this University or to any other University / Institute for the partial fulfillment of the requirement of any course of study. Signature of the Student
Signature of the guide
ANURAG RANJAN DAS
---------------------------
(6ND-21725)
FACULTY INC-GURGAON
EXECUTIVE SUMMARY
The main objective of the project is to get the full knowledge of the products of the HUL and what are they doing to get the customer loyalty, to maintain there market. This is also to find the preferences of customer and there market knowledge and product information, information about the presence of the rivals of HUL and all the other options they have in the market. What are the techniques they adopt to know about the preferences and changing needs of the customer? HUL are also looking to tap the market in rural sector, so they also taking into consideration the needs and wants of the people there. They are also studying the consumption habits of the rural people. Like most of them are daily wage earners or small peasants, so they are studying the buying patterns of them also.
OBJECTIVE OF THE RESEARCH
The main objective of this project is to find, what are the steps Hindustan Unilever Ltd. is adapting to be market leader and to differentiate itself from its competitors. What is the steps company is utilizing to find current trend in the market? Most of the product of HUL comes in the category of convenience products. They are frequently used and bought by the customers. There is large no. of players in the market, who are supplying similar product to the customers. Now, customers have become smart, they have great knowledge of market, product and suppliers. So, they are looking for the product which is providing something extra. HUL has a wide range of product in FMCG sector, covering almost every needs and wants of the customers. It has products for child, young & adult, male & female, etc. so, it has to differentiate its products taking into account the needs and demands of all the sectors of the society. Not, only product but it has to look upon the services and feed back from customers also. It should do something to give after sales service and collect feed back from the customers. The basic objective of this project is as mentioned above to find ways so that HUL remain market leader by considering all the needs & wants and fulfilling their demand.
COMPANY PROFILE
Company’s Background Hindustan Unilever Limited (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. They endow the company with a scale of combined volumes of about 4 million tonnes and sales of Rs.10,000 crores. HUL is also one of the country's largest exporters; it has been recognized 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 51.55% of the equity. The rest of the shareholding is distributed among 380,000 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, KnorrAnnapurna, 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. They are manufactured over 40 factories across India. The operations involve over 2,000 suppliers and associates. HUL's distribution
network comprising about 4,000 redistribution stockists, covering 6.3 million retail outlets reaching the entire urban population, and about 250 million rural consumers. HUL has traditionally been a company, which incorporates latest technology in all its operations. The Hindustan Unilever Research Centre (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. HUL believes that an organization’s worth is also in the service it renders to the community. HUL 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. HUL has also responded in case of national calamities / adversities and contributes through various welfare measures, most recent being the village built by HUL in earthquake affected Gujarat, and relief & rehabilitation after the Tsunami caused devastation in South India. In 2001, the company embarked on an ambitious programme, Shakti. Through Shakti, HUL 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 iShakti community portal. The program now covers 15 states in India and has over 31,000 women entrepreneurs in its fold, reaching out to 100,000 villages and directly reaching to 150 million rural consumers. By the end of 2010, Shakti aims to have 100,000 Shakti entrepreneurs covering 500,000 villages, touching the lives of over 600 million people.
HUL is also running a rural health programme – Lifebuoy Swasthya Chetana. The programme endeavors to induce adoption of hygienic practices among rural Indians and aims to bring down the incidence of diarrhea. 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 Unilever 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.
MISSION Unilever's mission is to add Vitality to life. We meet everyday needs for nutrition, hygiene and personal care with brands that help people feel good, look good and get more out of life. Our deep roots in local cultures and markets around the world give us our strong relationship with consumers and are the foundation for our future growth. We will bring our wealth of knowledge and international expertise to the service of local consumers
-
a
truly
multi-local
multinational.
Our long-term success requires a total commitment to exceptional standards of performance and productivity, to working together effectively, and to a willingness to embrace new ideas and learn continuously. To succeed also requires, we believe, the highest standards of corporate behavior towards everyone we work with, the communities we touch, and the environment on which we have an impact. This is our road to sustainable, profitable growth, creating long-term value for our shareholders,
our
people,
and
our
business
partners
-:Organizational Structure:1. Chair Man
Mr. Harish Manwani
2. CEO & Managing Director
Mr. Douglas Baillie
3. Finance & IT Director
Mr. D. Sundaram
4. Executive Director
Mr. Nitin Paranjpe
5. Directors I. Mr. Sanjiv Kakkar II. Mr. A. Narayan III. Mr. V. Narayanan IV. Mr. D. S. Parekh V. Mr. C. K. Prahalad VI. Mr. S. Ramadorai
RESEARCH PROBLEM AND ITS RELEVANCE RESEARCH PROBLEM HUL is facing the problem rather challenges from • Large no. of players in the market • Continuous changes in the taste and preferences of the customers Such problems were identified as Research Problems and the objective statement was formed on its basis.
RELEVANCE OF THE RESEARCH The relevance of the research is to find out • Acceptability among the customers • Promotional analysis
SCOPE OF THE RESEARCH The scope of the research has been limited to the Delhi & NCR Keeping in mind the objective stated, questionnaire was designed for the people. Subsequently a research was conducted.
RESEARCH METHODOLOGY: There is large no. of FMCG companies in the market, to find the defining strategies used, the methodology used is interview and survey method. Data Collection Method: For this research study, primary data as well as secondary data was collected. Primary Data has been collected through personal contact. For this purpose both questionnaire and one-on-one interview was considered with the consumers, shop owners and distributors & suppliers of the company. Secondary data has collected from magazines, newspaper, company literature and websites.
Data analysis: Analyzing codes to each question were awarded. Thereafter every questionnaire was written. After which the data were analyzed.
MAJOR FINDINGS Major competitors 1. 2. 3. 4. 5. 6. 7. 8.
Dabur Jhandu Johnson &Johnson Cavin Care Procter & Gamble Britannia ITC Gillette
METHODOLOGY FOR RESEARCH PROBLEM Following steps where taken in to consideration, to identify the research problem1. Informal investigation • Visit to the shop owners, talked to the distributors and to the consumers in the locality and surrounding areas. 2. External and Internal Analysis • Understanding customer problem • Understanding the market structure 3. Situational Analysis • Tastes & preferences • Needs & income • Major Competitors ITC Dabur Procter & Gamble Cavin Care Amul Johnson & Johnson, etc
A Compressive study of Secondary and Primary data (Informal Interviews) was collected through specific questionnaires for people and shop-owners & distributors.
SAMPLING TECHNIQUE For my survey I used Cluster Sampling technique. I selected a sample of 100 people around the area and interviewed them according to the questionnaire. In the survey I tried to find out their preferences & tastes, their purchasing habit, are they brand loyal or they consider their friends advice or some reference group during purchasing. I also tried to find out that are they satisfied with the quality or present stature of product, did they want any change in the existing product. I also interviewed some of the shop owner and distributors and try to find out what the company is doing to sustain their customer and what new changes they are bringing in their product to gain competitive advantage from other competitors
RESEARCH INSTRUMENT Research instruments, for the purpose of primary data collection were Questionnaires. The Questionnaires were designed in two sets, one is for customers and another is for shop-owners and distributors. •
The first set is to find out about the needs and preferences of the customers and what they want from in the product and also the level of knowledge about different products in the market.
•
Second set is all about what are the steps company are taking to get about the information about he changing preferences in the taste and needs of the customers and what company is doing to sustain their market position as well as to tap new market.
LIMITATIONS OF STUDY 1. The sample size may not adequately represent the national market. 2. This study has not been conducted over an extended period of time, it
do not consider any changes due to changes in the sudden needs of the customer because of some seasonal change or any kind of festivals.
DATA ANALYSIS For the analysis of data collected through survey work, a series of steps were followed which are given in a chronological order • Each question of the questionnaire was assigned codes (coding) • Each questionnaire was punched into ms-excel sheet thus forming a data base (punching) • Further the data was analyzed by using diagrams, graphs, charts etc. • The graphic rating scale and ranking method was used to measure the response and attitude of the customer.
Finally, an effort was made to extract meaningful information from analyzed data, which acted as a base for the recommendations.
MAJOR FINDINGS
The Crisis of Declining Markets Through the nineties, the FMCG markets grew at almost 15% per annum in value. Suddenly, in 2000, FMCG market growth stalled and then declined for the next four years. It is important to understand why this happened. The rapid opening up of the economy resulted in many new avenues of expenditure for the consumer’s growing income. A sharp drop in interest rates from 18% to 8% led to explosive demand for consumer durables like white goods, two-wheelers and automobiles. After all, one could drive out of a car showroom in a Maruti 800 with a down payment of only Rs. 2000. The home ownership market grew exponentially as the average age of a home loan borrower dropped from 50 in 1999 to 30 in 2004. Mobile phone ownership and usage exploded due to its amazing lifestyle and convenience benefits as well as lower prices. Entertainment, Leisure and Travel sectors also boomed. The lure of new avenues of expenditure in products and services led to consumers restricting their expanse on FMCG. It is not that they bathed less often or brushed their teeth less often or indeed washed their clothes less often. But they did downtrade to lower priced substitutes from higher quality brands. For example, a consumer buying six tablets of Lux in a month went to buying three of Lux and three cheaper brands. Or a consumer buying Surf Excel for her clothes mixed it with a cheaper powder. As a result of this shift in spending patterns, the FMCG market declined in value in the last four years creating a major challenge for growth.
The new Hindustan Lever: Focused on FMCG In 2000, 75% of our sales came from FMCG businesses. The rest came from several non-FMCG businesses which were not profitable, and did not offer prospects for long-term leadership. Besides, they were a drain on the core FMCG business, both in terms of resource and focus. They decided to disengage from all non-FMCG or commodity businesses. In all, we have divested and discontinued 15 businesses including Animal Feeds, Speciality Chemicals, Nickel Catalyst, Adhesives, Thermometers, Seeds, Mushrooms etc. with sales of Rs.1,750 crores as in 1999. Today they are a focused on FMCG company with our branded business accounting for over 90% of sales, consisting of 35 brands across 20 categories. These will be their main engines of growth, with higher levels of resource concentration, be it technology, people talent or media spend.
Building blocks of a strong Foods business In Foods, there is enormous growth potential 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. Historically their Foods business was fragmented and lacked scale. It was often commoditized with low margins. 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 theuir 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.
Today, their Foods business has a healthy gross margin and a supply chain driven by freshness. The Foods business will now invest for growth through relevant innovation.
FMCG still offers enormous potential As the largest FMCG player it was up to them to reverse the downtrading to realize its true growth potential. They could achieve this by raising the bar and becoming world class in what their brands offered and how they worked. Nothing less would do. Penetration levels in several of the categories and consumption levels in all of the categories is low by any comparison. Across the world, they are seeing a strong correlation between income levels and the size of FMCG markets. 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.100,000 crores from a current value of Rs.40,000 crores. This is an opportunity that they have to seize.
Portfolio of Strong Brands Their main challenge was to reverse the downtrading in the categories and re-establish the relevance of their brands in the mind of the consumer. In 2000, they had 110 brands, many undifferentiated and lacking scale. They chose 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.
Better Value The first step was to ensure that they offer world class quality and real differentiation backed by technology to give them the advantage over low priced competition. They have invested over Rs.400 crores, or 5% of sales, in the last three years to upgrade the brands. In several cases they reduced prices to make the brands more affordable. Better quality and more affordable prices have increased the value to the consumer. They have also launched several low unit size and price packs for single use to make the brands more accessible to all income groups. For example, they are the first to introduce a branded toothpaste in a tube at Rs.5 and a branded quality shampoo in a bottle at Rs.5.
Bigger Role in Consumers’ Lives
Perhaps the most significant change has been to move the brands beyond merely making functional claims to playing a bigger and deeper role in the lives of consumers. They had to move from selling a soap or a detergent to something far more important and central to the consumer’s life. How often have we heard someone say, “A soap is a soap is a soap!” Or indeed, “All detergents clean clothes as well”.
In the case of
Lifebuoy, it was only when they associated it with the promise of
health and protection against disease that it claimed a larger space in the consumer’s mind. It moved from being a mere soap to a health essential. Today Lifebuoy, their oldest brand, has grown at over 15% for the last three years.
Similarly, in the laundry market, Surf Excel went well beyond the benefit of ‘great clean’ by saving two buckets of water with every wash. Imagine the importance of that benefit to consumers in cities, who often get running water for only a couple of hours a day. Surf Excel is one of their fastest growing brands today. Both Lifebuoy and Surf Excel have succeeded because they are relevant to two key concerns of the Indian housewife: family health and the scarcity of water. In addition to the growing consciousness of health, consumers today are looking for ways to look good and feel good so that they can get much more out of life. In short, consumers are seeking Vitality in their lives. Their portfolio of 35 power brands is uniquely positioned to offer nutrition, hygiene and personal care benefits and thereby deliver Vitality.
Technology, the Key Differentiator Their brands and sound understanding of the local consumer are supported by a world class Research and Development capability. They have over 200 of the brightest scientists and technologists based in India. Their recent reorganization leverages the talent pool from across 16 global technology centres, of which four are in India. In all, they have over 4,000 high quality minds across Unilever working relentlessly to provide new benefits that make a real difference to the consumers.
Winning with Customers Hindustan Lever has historically had a strong bond with its customers. They have strengthened this and reinvented the way they manage their distribution channels and
their customers. The sales structure has been transformed to leverage scale and build expertise in servicing Modern Trade and Rural Markets. They have also de-layered their sales force to improve the response times and service levels. Their 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. 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.
Our Acorns: Investing in our Future
In the pursuit of growth, they have also begun to nurture some acorns for the future. These are both new businesses and new ways of engaging with consumers. Their entry into Water Purifiers, through Pureit, shows great promise. Pureit delivers 100% protection against all water-borne diseases. It provides water which is as safe as boiled water, without needing electricity or continuous tap water supply. At 17 paise per litre, it is extremely affordable for the common man. They have launched it in Tamil Nadu and are fine-tuning all aspects of the business system before a phased national launch. In urban India, Hindustan Lever Network (HLN) is their direct selling initiative selling a special range of products. It already reaches 1,400 towns with over 3 lakh consultants. Besides reach, HLN enables direct interaction with consumers and customises solutions for them to give them a complete brand experience.
Our People & Organisation
They have restructured the company, integrating eight Profit Centres into two Divisions – Home and Personal Care (HPC) and Foods. The result is a simpler and leaner organisation, less hierarchical with fewer levels and greater empowerment. This has eliminated complexity and speeded up decision making. Today the company is far more youthful in attitude and spirit. There is greater openness and transparency.
The Transformation: Investment in the Future To ensure that Hindustan Lever 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. 400 crores, or 5% of our sales. In addition there has been the cost of defending their market position. Recently an international competitor attacked their laundry business led by a price reduction of as much as 50%. They acted with speed and determination leveraging all their past experience in India and internationally. They have been able to fully protect their market leadership and share, albeit sacrificing short-term profit. They made this necessary trade-off as market share is the best means of sustaining future profit. Over time, their stronger market positions will surely lead to greater long-term profit. Despite these significant investments to strengthen the long-term competitiveness and the costs of defending the strong market position, they still remain one of the most profitable companies in the country.
CONCLUSION In recent years, the FMCG sector declined due to downtrading. Also because of presence of large number of companies trying to seize this opportunity, this force the old HLL for the change and thus, their transformation has resulted in a new HLL, which has successfully faced this challenge and reversed this trend. It has done so by substantially strengthening their brands and building capabilities. This has already begun to yield benefits and they are returning to growth. Volume growth is being followed by value growth, which in turn is bringing profit growth. India is one of the most exciting markets offering great potential. Over the next 10 years, the per capita income in India is likely to double. In FMCG, there is an opportunity to catalyze penetration, increase usage, and upgrade consumers. As a result, the FMCG market is expected to grow to over Rs.100,000 crores from its current base of Rs.40,000 crores. The new Hindustan Lever see an exciting opportunity for growth. They have 35 powerful brands covering all segments, with leading market positions in most. Today, these are stronger and more relevant to the consumer than ever. The people are energized by the scale of the opportunity and determined to seize it. The scale of the business and operations gives them the resources needed. They are delivering good services and the changes they brought in the products are well taken by the customers, by this they are generating sustainable profitable growth.
BIBLIOGRAPHY
BOOKS • Kothari, C.R., 2005 Research Methodology, Wishwa Prakashan, India.
• Kotler, Philip. 2005, Marketing Management, Prentice hall India. • Marketing Management, ICFAI University Press
Magazines • • • • •
Business Today Investors India Business World Economic Times Business Standard
WEBSITES • www.hll.com • www.fmcg.com • www.economictimes.com • www.marketwatch.com
QUESTIONNAIRE From Customer’s
1. How much is your income? a. Rs.50,000 2. How much do you invest on consumption? a. <30% b. 30-60% c. 60-80% d. >80% 3. During purchase what in influence your purchase? a. Price b. Quality c. Packaging d. Experiment e. Influence by others 4. Do you prefer any particular brand? ( If ‘yes’ which brand ) a. Yes b. No 5. Do you know about the presence of different products of different companies in the same category? a. Yes b. No 6. Have you ever tried them? a. Yes b. No 7. Are you satisfied with the products you are using? a. Yes b. No
8. Do you want any changes in the product? a. Yes b. No From Shop-owners & distributors 1. What is the market share of HUL? 2. How much is the consumption of HUL’s product with respect to the products of other companies? 3. Do you think customers are satisfied with the products and services you are offering? 4. What are the ways to get the feed back from customers? 5. On which part customers are really not satisfied? 6. How do you find the changing tastes and preferences in customers? 7. What is HUL is doing to tackle this problem?
