With the penetration of their products reaching saturation levels in many urban markets, FMCG companies had to turn towards rural areas in order to sustain revenue growth and profitability. Since the disposable income in the hands of rural people had been increasing in the late-1990s and the early 21st century, it made sense for companies to focus their energies on this segment. Industry observers also felt that HLL was at an advantage compared to most of its competitors – thanks to its consistent, pioneering efforts towards establishing well-entrenched distribution and marketing networks to reach the vast Indian rural masses. Traditionally, HLL used both wholesalers and retailers to penetrate the rural markets. A fleet of motor vans covered small towns and villages. These vans induced retailers to stock HLL products and display advertising material in their shops. In many towns, there were redistribution stockists who carried bulk stocks and serviced retailers. There were some 7,000 redistribution stockists who served over a million retail outlets. In the late-1990s, HLL realized that despite its pioneering efforts to expand its rural consumer base, a large part of the market remained untapped. Thus, the company set itself a target of contacting 16 million new village households by 1999. This was to be achieved by strongly focusing on the sales, marketing, and production of the ‘Power Brands’ in the rural markets. HLL adopted a phased approach in order to meet its target and decided to address the key issues related to availability, awareness and overcoming prevalent attitudes and habits of rural consumers. Penetrative pricing was also an important factor that was addressed. One of HLL’s initial initiatives was in the form of ‘Project Streamline’ that was introduced in select states of the country in 1998. Project Streamline addressed the problems of the rural distribution system, to enhance HLL’s control on the rural supply chain as well as to increase the number of rural retail outlets from 50,000 in 1998 to 100,000 in a time span of one year. As a part of the project, HLL aimed at providing higher quality services to consumers in terms of ‘frequency,’ ‘full-line availability’ and ‘credit.’ In mid-1998, the personal products division of HLL launched another campaign called ‘Project Bharat’ to be carried out by the end of 1999. ‘Project Bharat’ was a direct marketing exercise undertaken to address the issues of awareness, attitudes and habits of rural consumers and increase the penetration level of HLL products. Another program targeted at villages with a population of less than 2000 was simultaneously launched. Under this program, the company provided self- employment opportunities to villagers through Self-Help Groups (SHG). SGHs operated like direct-to-home distributors wherein groups of 15-20 villagers who are below the poverty line (those people whose monthly incomes was less than Rs 750 per month) were provided with an opportunity to take micro-credit from banks. Apart from this, in May 1999, the company tied up with various Non-Governmental organizations (NGOs), United Nations Development Programme (UNDP) and other voluntary organizations to increase awareness about health and hygiene in villages. The company set a goal of reaching 2,35,000 villages from the existing 85,000 and covering 75% of the population from the existing 43%. To further increase the effectiveness of the campaign, the company aimed at achieving a 65% reach through the TV media up from the current reach of 33%. Starting with Maharashtra, the company encouraged primary education in villages with the help of V-Sat connections. This helped it to create greater awareness about hygiene and cleanliness thus influencing people’s behavior, which in turn would have a direct impact on its sales. By the end of 1999, HLL had covered 13 million households through ‘Project Bharat.’ The campaign was successful in increasing penetration levels, usership and the awareness about the company’s products in the districts targeted. This also helped HLL grow at a better pace than the industry. In the shampoo market, while the urban growth rate was only 4-5%, the rural growth was at 15-16%. Similarly, in the skincare market the urban growth was only at 7-8% whereas it was 14% in the rural markets. In August 1999, HLL launched a nationwide Community Dental Health campaign in association with the Indian Medical Association (IMA) to promote its toothpaste Pepsodent. HLL stood at the second position in terms of market share in the dental care segment (37%) that comprised of Pepsodent’s 16% and Close-Up’s 21% whereas Colgate-Palmolive was the leader with over 50% market share in the Rs. 10 billion toothpaste market. The company wanted to attain the leadership status with the help of aggressive marketing initiatives. Statistics revealed that penetration levels in India were very low with the per capita consumption (of toothpaste) being only 0.75 gm. Moreover, only 47% of the Indian population used toothpaste – while 27% used toothpowder, the rest used traditional methods such as coal and neem sticks. The growth in the segment was around 3-4% in the urban market, whereas the rural market growth was projected at 9-10%. As a part of the project several infomercials were launched to increase awareness on dental hygiene and also to highlight common dental problems and their causes. These infomercials were aired on Doordarshan (India’s national television channel). Around 200 health fairs were organized, predominantly in the rural areas. Various dental health programmes as well as education & check up modules were organized at public health centers. In April 2000, the company launched another campaign called ‘Project Millennium’ wherein it targeted at increasing its share in the tea market. HLL planned ways to tap the ‘chai-ki-dukan’ (tea vendors). The company provided affordable tea packets that were suitably blended to appeal to the rural taste of ‘Kadak chai’ (strong tea). The company test marketed an especially designed product ‘chai-ki-goli’, (fully soluble ball) that was dropped in boiling milk-water combination. These were priced very attractively at four for a rupee. All these initiatives seemed to have paid off for HLL. It was found that HLL had overtaken both Colgate-Palmolive and Nirma in creating brand awareness and penetration in rural households. The survey revealed that HLL was leading with 88% rural market penetration whereas Nirma and Colgate-Palmolive followed in that order with 56% and 33% respectively. HLL’s brands had the highest penetration in many product categories. Inspired by the success of its earlier ventures, HLL went on to participate in a rural communication programme called the ‘Grameenon ke Beech’ (Amidst villagers) in August 2001. The program was launched by the Rural Communications & Marketing Pvt Ltd, (RC&M), an agency that specialized in rural advertising and marketing. The program involved setting up of company stalls, product briefings and demonstrations, interactive games, lucky draws, magic shows and the screening of a hit movie interspersed with product commercials. In late 2001, HLL launched another project called ‘Project Shakti’ in the state of Andhra Pradesh for a period of six months. Project Shakti sought to create a sustainable partnership between HLL and its low income rural consumers by providing them access to micro-credit; an opportunity to direct that credit into investment opportunities as company distributors; and reward for growth and enterprise through shared profits. At the end of six months of implementation (March 2002), HLL claimed to have achieved a 20% increase in consumption in the areas where it was carried out. This was a favorable development for the company, coming at a time of an overall economic slowdown. Having been successful in this initiative, HLL decided to expand this project to other states like Gujarat, Maharashtra and MP. The project at Gujarat was to be carried out in early-2002. HLL also planned to work with a group of NGOs to implement the project in the states of Maharashtra and MP in 2002-03. Continuing its focus on rural areas, HLL launched a massive rural campaign to reposition one of its leading brands, Lifebuoy, in February 2002. Lifebuoy was the single largest soap brand in rural India with 20 lakh soaps sold every year and had an estimated value of Rs 5 billion. The re-launch of 107-year-old Lifebuoy was primarily done to increase growth in the sluggish soap market.

1. Discuss the various measures taken by HLL to increase the awareness and penetration levels of its products in the Indian rural markets. 2. Comment on the marketing structure adopted by HLL to ensure the availability of its products in the rural areas? How far has the distribution strategy contributed to HLL’s growth in rural India?