Sales & Distribution

Management
(Team Project)

Submitted to- Group- 6

Prof. Hitesh Manocha Rohit Kumar- MABSPG2023056

Anamika Singh- MABSPG202306

Dhruv Agrawal- MABSPG2023014

Rahul Agrawal-MABSPG23034

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Introduction- Hindustan Unilever Ltd.

Hindustan Unilever Limited stands as India’s foremost

Fast Moving Consumer Goods (FMCG) Company,
boasting a rich legacy spanning 90 years within the
nation. It is a company characterized by its extensive
array of brands and the dedicated individuals who
propel its mission of fostering sustainable living.
Remarkably, nine out of ten Indian households engage
with at least one of its brands, seeking to enhance their
well-being and derive greater fulfilment from life's
experiences.
With a robust portfolio comprising over 50 brands
across 16 FMCG categories, Hindustan Unilever
Limited plays an integral role in the daily routines of countless consumers throughout India.
Annually, the company manufactures an impressive 65 billion units, ensuring widespread
accessibility through its extensive network of nine million retail outlets alongside numerous
digital commerce platforms. HUL products for example are sold through more than 8 million
outlets and it has a distributor network of 5000 in India.

At the core of its operations lies the Compass business strategy, seamlessly integrating
sustainability throughout every facet of its business endeavors. This approach not only
facilitates consistent growth but also fosters competitiveness, profitability, and social
responsibility. In an era marked by rapid digital transformation and an increasing emphasis
on sustainability, Hindustan Unilever Limited remains steadfast in its commitment to its
purpose-driven journey, geared towards a future that is both aligned with its mission and
responsive to evolving global trends.
The market capitalization of HUL is ₹ 5,31,405 Cr and its recorded in 2023 was increased by
15.51% from PY revenue 52446 Cr. It grew at 15% compounded three annually growth rate.
The current market price of its share is 2263.

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Distribution Channels
Evolution of Distribution Channels
 Phase 1: Wholesaler network
HUL has a large distribution network comprising 5000 redistribution stockists and 40 C & F
agents (Clearing and Forwarding Agents). The first phase of the HUL distribution network
had wholesalers placing bulk orders directly with the company. Large retailers also placed
direct orders, which comprised almost 30 per cent of the total orders collected. The company
salesman grouped all these orders and placed an indent with the Head Office. Goods were
sent to these markets, with the company salesman as the consignee. The salesman then
collected and distributed the products to the respective wholesalers, against cash payment,
and the money was remitted to the company.
 Phase 2: Registered Wholesaler
The focus of the second phase, which spanned the decades of the 40s, was to provide
desired products and quality service to the company's customers. In order to achieve this, one
wholesaler in each market was appointed as a "Registered Wholesaler," a stock point for the
company's products in that market. The company salesman still covered the market,
canvassing for orders from the rest of the trade. He would then distribute stocks from the
Registered Wholesaler through distribution units maintained by the company. The Registered
Wholesaler system, therefore, increased the distribution reach of the company to a larger
number of customers.
 Phase 3: Redistribution Stockist
The highlight of the third phase was the concept of "Redistribution Stockist" (RS) who
replaced the Registered Wholesaler (RW). The RS was required to provide the distribution
units to the company salesman. The RS financed his stocks and provided warehousing
facilities to store them. The RS also undertook demand stimulation activities on behalf of the
company. The second characteristic of this period they realised that the RS would be able to
provide customer service only if he was serviced well. This knowledge led to the
establishment of the "Company Depots" system. This system helped in transhipment, bulk
breaking, and as a stock point to minimise stock-outs at the RS level.

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Present Scenario
HUL's products, manufactured across the country, are distributed through a network of about
5,000 redistribution stockists covering about nine million retail outlets. The distribution
network directly covers the entire urban population. In addition to the ongoing commitment
to the traditional grocery trade, HUL is building a special relationship with the small but fast
emerging modern trade. Their scale enables them to provide superior customer service
including daily servicing, improving their range availability whilst reducing inventories.
They are using the opportunity of interfacing more directly with our consumers in this retail
environment through specially designed communication and promotions. This is building
traffic into the stores while yielding high growth for their business. The recent measures to
make the system more effective are described here.
a) C& FAs as buffer stock points:
The C&FAs act as buffer stock-points to ensure that stock-outs did not take place. The
C&FA system has also resulted in cost savings in terms of direct transportation and
reduced time lag in delivery. The most important benefit has been improved customer
service to the RS. The role performed by the Redistribution Stockists has also
undergone changes over the years. Financing stocks, providing manpower, providing
service to retailers, implementing promotional activities, extending indirect coverage,
reporting sales and stock data, screening for transit damages are some of the functions
performed by the RS today.

b) Formation of mother report

HUL has grown manifold over the years. In the process, the number of factories and
the number of SKUs too have increased. In order to rationalise the logistics and
planning task, an innovative step has been the formation of the Mother Depot and Just
in Time System (MD-JIT). Certain C&FAs were selected across the country to act as
mother depots. Each of them has a minimum number of JIT depots attached for stock
requirements. All brands and packs required for the set of markets which the MD and
JITs service in a given area are sent to the mother depot by all manufacturing units.
The JITs draw their requirements from the MD on a weekly or bi-weekly basis.

c) RS Net
An IT-powered system has been implemented to supply stocks to redistribution
stockists on a continuous replenishment basis. Launched in 2001, RS Net is part of
Project Leap, HUL’s end-to-end supply chain initiative. Project Leap begins with the
supplier, runs through the factories and depots and reaches up to the RSs. The
objective is to catalyse HUL’s growth by ensuring that the right product is available at

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 the right place in the right quantities and at the right time. Leap also aims at reducing
inventories and improving efficiencies right through the extended supply chain.
Retail Promotion Measures
HUL is also emphasising on making their brands prominently visible in the crowded stores.
Their outlet visibility programmes cover over 25,000 outlets in key cities, deploying a large
number of third party merchandisers and agencies to ensure superior display of their
products. Greater interaction is key to touching consumers and they are using the point-of-
purchase for a much higher level of direct contact. For example, Lakme Beauty Advisors in
key outlets promote sales and provide specific information and product testing, facilitating
an informed choice to women seeking beauty solutions. Encouraged by this, they are
undertaking a similar initiative across many of their other brands where in-store facilitators
offer promotions and provide product information. For many developing categories, in-store
sampling, education, and experience will play a major role in building their brands.
a) Go to market (GTM) initiative: Go to market (GTM) initiative, launched in Mumbai
last year, is an attempt to revamp its national distribution network and streamline its
supply chain. The project has been a success in Mumbai, where it was started in June,
and will be rolled out in 42 cities and towns across India by the end of 2009. In
Mumbai, the company consolidated its 21 distributors into four ‘mega distributors’,
who now account for sales of about Rs.480 crore. The consolidation is aimed at giving
the distributors, who typically operate on a 4% profit margin, a bigger share of the pie
at a time when they are being wooed by other sectors. At least a couple of HUL
distributors are now owners of close to Rs. 100 crore companies, up from the Rs. 8-10
crore business they had just under an year ago. They now want to leverage these,
ensure that their distributor-partners make sustainable returns and be prepared for the
emerging market of 2013.

b) Hindustan Lever Network :

Started in 2003, Hindustan Unilever Network (HUN) is HUL's Direct Selling arm.
Through this they have presence in over 1,500 towns covering 80% of the urban
population backed by 28 offices and over 130 service centres across the country. It
already has about 7 lakh consultants - all independent entrepreneurs, trained and
guided by HUN's expert managers and trainers. HUN’s mission is to a create
millionaire club in India. Hindustan Lever Network presents a range of customised
offerings, covering 11 categories across Home & Personal Care and Foods.

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c) Self-service Stores
Self-service stores and supermarkets, provide consumers with a great opportunity for
brand interaction with consumers. Hindustan Lever has proactively developed new
capabilities in customer management and supply chain for partnering this emerging
channel. They now have a business system in place that delivers excellence in
customer service, while driving growth for HUL.

 For example, recently Sunsilk mobile salons at stores provided consumers an

opportunity to have a great hair wash and try the new relaunched product.
 Similarly, the Dove Litmus test in stores demonstrates the brand’s compelling benefit
of mildness compared to other soaps.
 They also undertake in-store sampling for their range of Beverages and Food
products like tea, coffee and soups.

d) Out-of-Home Opportunity
Growing out-of-home consumption is a global trend. In Europe, for example, food
sales in out-of-home channels are growing three times faster than in grocery outlets.
HUL has over 15,000 tea and coffee vending points across the country. They are also
creating new touch points, through specially designed kiosks, to impact brand
preference. They are setting up these in the education, entertainment, leisure, and
travel segments to catch consumers on the go. Their alliance with Pepsi will
significantly strengthen their presence in the out-of-home channel.

Flow Chart of HUL distribution channel

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Details of Intermediaries of HUL
C& FA

LinkedIn Profile- Harpal Singh

Redistribution Stockist

LinkedIn Profile- Venkatagiritharan Krishnamoorthy

Role of Harpal Singh (C&FA) of HUL

 They make sure that they have just enough stock in the warehouse and ordering more
when they need it, so they never run out of things and customers can always get what
they want.
 Using technology to make the warehouse run smoother, keep track of all the stuff they
have, and make sure everything gets to where it needs to go on time.
 Figuring out the best ways to get things from one place to another really fast and
without any problems, so everything arrives on time and doesn't cost too much money.
 Helping out the stores that sell their stock by answering their questions quickly, fixing
any problems they have, and making sure they're really happy with what they do.

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Role of Redistribution Stockist
 RS often provide financing support to retailers by extending credit terms or offering
financial assistance for purchasing HUL products.
 Play a vital role in implementing promotional activities such as advertising campaigns,
in-store promotions.

Channel Partners
 SBI
• In 2020, HUL partnered with SBI to provide credit access to HUL's retailers and
dealers. This partnership allows retailers to get up to ₹50,000 in instant paperless
overdraft facilities to pay their bills to distributors.
 Big Basket
• HUL has partnered with BigBasket.com to launch new variants of Knorr soups online.
 Project Shakti
• Partnership between HUL and its consumers enables access to 8000 villages to India.
• Partnership with self help group of rural women.
• Appointment of shakti entrepreneur(Shakti amma) distributes stock received from
distributor directly to consumers and retailers in the village.
• Each Shakti Amma services 6 to 10 villages.
• Each Shakti entrepreneur is given products on "cash and carry basis".

HUL Digitization
Hindustan Unilever Limited (HUL) has been digitizing its business to become an intelligent
enterprise. The company has implemented next-generation technologies to increase speed
and agility and reduce the environmental impact of its operations. HUL's digitization efforts
include:
Nano factories
HUL has set up nano factories that can produce in batches of kilograms instead of tonnes,
which allows for faster product roll-out.

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Dapada factory
The World Economic Forum (WEF) has recognized the Dapada factory as an Advanced
Fourth Industrial Revolution Lighthouse and Sustainability Lighthouse for its digitally
enabled manufacturing processes.
Shikhar app
HUL's flagship digital platform, the Shikhar app, allows retailers to order and pay for orders
digitally. Shakti entrepreneurs in rural India have played a key role in digitizing HUL's retail
channels by using the Shikhar app to order and pay for orders digitally.
Digitized sales
More than 40% of HUL's overall sales are digitized across platforms, including ecommerce
channels and the Shikhar app.
HUL Samadhan centre- distributors
Future-fit Distribution Infrastructure
Samadhan is fully integrated with our digital order capturing platform and aims to deliver
speedier and reliable service to the retail outlets through warehouse automation and
optimised last mile logistics.

Problems and challenges faced in managing this distribution

channel.
The biggest problem faced by HUL in managing this distribution channel is related to the
margin structures of the company.
There have been incidences of HUL changing its fixed and variable margins for its
distributors in a bet to increase its profitability.
According to a news report, Hindustan Unilever (HUL), the owner of brands like Lux,
Lifebuoy, Surf Excel, Rin, Pond's, and Dove, has lowered the fixed margin by 60 basis
points. Simultaneously, the company has raised the variable margins for its distributors,
increasing them by 100 to 130 basis points. This has led to a widespread boycott of HUL
products by the distributors in Maharashtra.
FMCG companies usually offer two types of incentives to their distributors: fixed margins
and variable margins. Fixed margins typically range from 450 to 600 basis points and remain
constant. On the other hand, variable margins are influenced by factors like performance and
can fluctuate accordingly. These incentives form a significant part of how FMCG companies
support their distributor networks.

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The second issue that is faced by HUL is the price disparity between traditional distributors
and organized B2B distributors, such as Jiomart, Walmart, Carry, Booker, ElasticRun, and
Udaan.
The traditional distributors have been complaining against HUL that it is selling its products
at lower prices to B2B channels. Hence B2B retailers are offering FMCG products to
retailers and local shops at lower prices than what the traditional distribution channel offers
and it is now “adversely affecting their reputation and goodwill.

How conflicts are resolved within the organization?

The conflicts are resolved through constant talks and negotiations between the stakeholders.
HUL told the distributors that they are an important component of their distribution channel
and that the company will take corrective actions on the issues.
HUL has assured it will protect distribution channel interests, adding that if something goes
wrong, then distributors can communicate the same to the company. HUL makes all efforts
to address any specific issue bilaterally with its distributors to mutual satisfaction.
There is a proper standard of procedure to resolve issues in a way that solution mutually
benefits both parties.

Covid 19 has brought disruptive changes in the working of almost

every organization Identify at least two areas which are greatly
affected by Covid 19. How this organization is handling these
changes with reference to Distribution Management policies?
The COVID-19 pandemic has led to significant disruptions across various industries, forcing
organizations to adapt swiftly to unprecedented challenges. Hindustan Unilever Limited
(HUL), a leading consumer goods company, has encountered substantial impacts on its
operations, particularly in distribution management. This report highlights two key areas
greatly affected by the pandemic and examines how HUL has adjusted its distribution
management policies to mitigate these challenges.

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TWO AREA GREATLY AFFECTED ARE:
1. Supply Chain Disruptions:
The pandemic-induced restrictions, including lockdowns, travel bans, and disruptions in
transportation networks, severely impacted HUL's supply chain operations. Manufacturing
facilities faced shutdowns or operated at reduced capacity, leading to production delays and
shortages of essential products. Additionally, fluctuating consumer demand and panic buying
patterns exacerbated supply chain challenges.
2.Shift in Consumer Behavior:
COVID-19 altered consumer behavior significantly, with preferences shifting towards e-
commerce channels and contactless transactions. Traditional brick-and-mortar retail outlets
experienced reduced foot traffic due to social distancing measures and consumer
apprehensions about visiting physical stores. Consequently, HUL witnessed a surge in online
orders and a decline in offline sales, necessitating adjustments in distribution strategies to
meet evolving consumer preferences.

DISTRIBUTION MANAGEMENT POLICY :

1.Agile Supply Chain Management:
HUL implemented agile supply chain management practices to enhance flexibility and
responsiveness in the face of dynamic market conditions. This involved diversifying
sourcing channels, optimizing inventory levels, and establishing strategic partnerships with
alternative suppliers. By adopting a multi-tiered approach to sourcing raw materials and
finished goods, HUL aimed to minimize disruptions and ensure continuity in its supply chain
operations.
2. Digital Transformation and E-Commerce Integration:
Recognizing the growing significance of e-commerce channels, HUL accelerated its digital
transformation initiatives to enhance online capabilities and integrate e-commerce into its
distribution network. The company leveraged technology-driven solutions such as online
ordering platforms, mobile applications, and data analytics tools to streamline order
processing, inventory management, and last-mile delivery logistics. By expanding its e-
commerce presence and strengthening partnerships with online retailers, HUL sought to cater
to changing consumer preferences and capture growth opportunities in the digital
marketplace.

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To motivate channel partners, both financial and non-financial techniques are used by
the managers. For the chosen organization, study these techniques used.
Financial techniques:
 Sales Incentives and Commissions:
HUL offers attractive sales incentives and commissions to channel partners based on
their sales performance. This financial reward system encourages partners to focus on
selling HUL products and achieving sales targets.

 Volume Discounts:
HUL provides volume-based discounts to channel partners who purchase goods in
larger quantities. These discounts not only reduce the cost per unit for partners but also
incentivize them to increase their order size, leading to higher sales volumes for HUL.

 Credit Facilities:
Offering favorable credit terms, such as extended payment periods, helps alleviate
financial pressure on channel partners. By providing flexible payment options, HUL
supports partners in managing their cash flow effectively, strengthening their financial
stability, and fostering loyalty.

 Cooperative Advertising Funds:

HUL allocates funds for joint advertising and promotional activities with channel
partners. This financial support enables partners to implement marketing campaigns
that enhance brand visibility and drive sales, while sharing the costs with HUL

Non-Financial Techniques:
 Training and Education Programs:
HUL invests in comprehensive training and education programs for channel partners.
These initiatives equip partners with product knowledge, sales techniques, market
insights, and customer service skills, empowering them to excel in their roles and
drive performance.

 Recognition and Awards:

HUL recognizes the achievements of channel partners through awards, accolades, and
public acknowledgment. By celebrating top-performing partners and highlighting their
success stories, HUL boosts morale, fosters a sense of pride, and encourages continued
excellence.

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 Exclusive Access to Resources:
HUL provides channel partners with exclusive access to resources, tools, and
information that add value to their businesses. This could include market insights,
customer data, promotional materials, or customized support services, enhancing the
partnership and incentivizing partners to prioritize HUL products.

 Joint Business Planning:

Collaborative joint business planning initiatives involve channel partners in decision-
making processes and align mutual objectives. By soliciting partner input, feedback,
and insights, HUL demonstrates a commitment to partnership, fosters a sense of
ownership, and encourages active engagement.

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