HUL: Project Shakti business model overview

With the urban market saturated, FMCG companies are now targeting the rural markets. In spite of the income imbalance between urban and rural India, rural holds great potential since 70% of India's population lives there. Due to the recent government measures like waiver of loans, national rural employment guarantee scheme and increasing minimum support price, disposable income in rural India has been rapidly increasing. However, rural markets present their own sets of problems. These include poor infrastructure, dispersed settlements, lack of education and a virtually nonexistent medium for communication. Furthermore, retailers cannot be present in all the centres as many of them are so small that it makes them economically unfeasible. Hindustan Unilever Limited (HUL) to tap this market conceived of Project Shakti. This project was started in 2001 with the aim of increasing the company's rural distribution reach as well as providing rural women with income-generating opportunities. This is a case where the social goals are helping achieve business goals.

The recruitment of a Shakti Entrepreneur or Shakti Amma (SA) begins with the executives of HUL identifying the uncovered village. The representative of the company meets the panchayat and the village head and identify the woman who they believe will be suitable as a SA. After training she is asked to put up Rs 20,000 as investment which is used to buy products for selling. The products are then sold door-to-door or through petty shops at home. On an average a Shakti Amma makes a 10% margin on the products she sells.

An initiative which helps support Project Shakti is the Shakti Vani programme. Under this programme, trained communicators visit schools and village congregations to drive messages on sanitation, good hygiene practices and women empowerment. This serves as a rural communication vehicle and helps the SA in their sales.

The main advantage of the Shakti programme for HUL is having more feet on the ground. Shakti Ammas are able to reach far flung areas, which were economically unviable for the company to tap on its own, besides being a brand ambassador for the company. Moreover, the company has ready consumers in the SAs who become users of the products besides selling them.

Although the company has been successful in the initiative and has been scaling up, it faces problems from time to time for which it comes up with innovative solutions. For example, a problem faced by HUL was that the SAs were more inclined to stay at home and sell rather than going from door to door since there is a stigma attached to direct selling. Moreover, men were not liable to go to a woman's house and buy products. The company countered this problem by hosting Shakti Days. Here an artificial market place was created with music and promotion and the ladies were able to sell their products in a few hours without encountering any stigma or bias.

This model has been the growth driver for HUL and presently about half of HUL's FMCG sales come from rural markets. The Shakti network at the end of 2008 was 45,000 Ammas covering 100,000+ villages across 15 states reaching 3 m homes. The long term aim of the company is to have 100,000 Ammas covering 500,000 villages and reaching 600 m people. We feel that with this initiative, HUL has been successful in maintaining its distribution reach advantage over its competitors. This programme will help provide HUL with a growing customer base which will benefit the company for years to come.