Interventions

Reaching the last mile

Post economic reforms, the demand of FMCG products has increased manifolds in rural India. But reaching more than six lakh villages for any company is a herculean task. HUL, through its shaktimaan initiative, is offering an alternative source of income to jobless men in the villages. Madhvendra S Chauhan finds out the project’s reach.
Reaching the last mile

When HUL Chairman, Harish Manwani announced of trebling its rural coverage over two years, it set the challenge for the marketing team to increase the penetration through various distribution channels available. But there were challenges as the strategies implemented earlier were not as effective as they were supposed to be. This increase in rural coverage will be a big leap, “and to my mind, will be a huge driver of future growth,” Manwani had said on the sidelines of Annual General Meeting in 2010.  “While competitors are closing gaps, we have to continuously create new gaps.” So had HUL found a new magic formula that would help it crack open the large rural opportunity?

In this challenging task, self help groups (SHG) were considered to be helpful and a new project named shakti was launched in 2000 to enable poor rural women into entrepreneurs. The project started with just 17 women is now boasts of having 45000 plus members. Using Self-Help Group (SHG) members, HUL extends its direct reach into untapped markets and builds its brands through local influencers. Now these shakti ammas help HUL reach over 100,000 villages and over three million households every month. Project shakti contributes to 10 per cent of the company’s rural turnover nationally. In most shakti markets, claims HUL, it’s dominant and enjoys a market share, which is qualitatively better as compared to non-shakti markets.

Men in focus
Through project Shakti, which was launched in 2001, the Anglo-Dutch multinational has already penetrated villages in 16 states. While there are no fixed selection criteria, a shaktimaan is chosen based on his locational advantage and his proximity to villages which are to be covered. Since the shaktimaan is a male member of the shakti household, his additional income from this programme results in an increase in household income. A shakti entrepreneur typically earns an average of Rs 1,000 per month. It is estimated that the shaktimaan would earn 2.5 times this amount, given the arduous task he has been given to perform.

Project shakti has proved to be a great success for HUL and for rural impoverished women in India. The project first started in 2000 in a few pilot villages in Andhra Pradesh. In 2002, it expanded to two states and by the end of 2004 had grown to over 13,000 shakti women entrepreneurs in 12 states. As per the company reports, at present there are about 45,000 shakti ammas working under HUL’s sustainable living plan. The shaktimaan initiative is further extension of project shakti, however the focus this time is to penetrate more villages with the help of unemployed male members of shakti amma families.

Harminder Sahni, MD at Wazir Advisors says, “I think its complimentary to Shakti project that was for rural women. Atleast it ensures gender equality now. As much as women need jobs, rural men too need more avenues for jobs and income. It should certainly help the rural economy.” As the spokesperson of the FMCG giant says, “HUL now has over 30,000 shaktimaans (through the project shakti network) across the country. The shaktimaan initiative has helped to not only further augment the income of the shakti amma family but also helped increase the rural direct distribution coverage of the company.”

Redefining Distribution
Harish Manwani during his address at this year’s annual general meeting was very specific on the potential of rural India. HUL has a “strong association with rural India”, said Manwani. The company reaches to 1.3 lakh villages across India with the help of 45,000 shakti Ammas and more than 30,000 Shaktimaans. Through the shaktimaan initiative, men in the shakti amma families distribute HUL products in villages adjoining the respective shakti village. Through the GIS (Geographical Information System), villages around the ‘shakti’ families are tracked and based on this they are allotted five to six villages.

“They go to these villages and sell HUL products. The shaktimaans have also been given bicycles to ensure smooth travelling between villages,” adds the spokesperson. This approach of HUL has helped augment incomes in the shakti families. A male member earns anywhere between Rs 700 to Rs 1,000 and 10 per cent commission on the net sales of company’s products. The company spokesperson informed that HUL has also started distributing Tata Teleservices’ telecom products in the rural markets in a few Indian states through its rural stockists and shakti network.
By adding telecom products distribution through its channel partners and shakti network, HUL is building scale and improved viability for its channel partners to reach more small villages without diluting their earnings. “HUL through its alliances is trying to open new avenues in rural distribution where we build superior reach through scale and shared resourcing/ costs,” he further adds.

As a change in the strategy, HUL’s more rural intensive focus has resulted in company reaching directly to villages that have a population of less than 2,000 through its project shaktimaan.  Apart from project shakti and shaktimaan, the company also launched Khushiyon Ki Doli programme in 2010 to expend its reach in more villages. Later, the programme was extended to West Bengal, Bihar, Maharashtra, Andhra Pradesh and Uttar Pradesh, in 2011. This multi-brand campaign helped cover around 70,000 villages, 4 lakh retailers and 250 lakh consumers. Khushiyon Ki Doli is a cost efficient rural brand activation module, which assisted in increasing reach of various home and personal care brands of the company.

During the recently concluded annual general meeting (AGM) of the multinational giant in July 2012, Harish Manwani spoke about the importance of rural India for Hindustan Unilever. “More than 40 per cent of our products are consumed in the fast growing markets of rural India. We have been pioneers in developing rural markets through affordable brands and an unparalleled distribution reach, “ he said.

Replicable Model
The success of these initiatives has attracted attention of other FMCG players too. Some new initiatives such as Dabur’s ‘foot soldiers’ have started emerging and shows an increasing level of interest of companies in exploring and innovating new marketing strategies. This model is not adding any additional cost to the company and it does not require large number of distributors. This approach has helped the company in reducing the number of distributors in rural India.

The shakti ammas and shaktimaans are not paid employees of the company. HUL gives Shaktimaans (male members), a bicycle, to be able to service villages within a 3 to 5 kms radius and hence cover a larger area than a woman, shakti amma, can cover on foot. “On an average a shaktiman does approximately double the business of a shakti amma and helps reach media-dark regions which no other large FMCG company has penetrated,” said the HUL spokesperson.

“Project shakti benefits business by significantly enhancing HUL’s direct rural reach, and by enabling its brands to communicate effectively in media-dark regions,” says company’s spokesperson.  Distribution in these hamlets helps build its brands and creates category usage for bottom-of-the-pyramid consumers through entry level packs such as Rs 3 dove shampoo sachets and detergent sachets priced at Rs 1.  HUL estimates that its unconventional direct-to-consumer distributors channel could break even within a year or so of sales. By 2015, HUL plans to have a total of 75,000 shakti ammas and shaktimaans operating in the field.

“Through the GIS (Geographical Information System), villages around the ‘shakti’ families are tracked and based on this, shaktimaans are allotted five to six villages. They go to these villages and sell HUL products. Project shakti contributes significantly to our rural sales and is growing in double digits,” the spokesperson said.

The last mile challenges
The initiative’s success can largely be attributed to its income generation option in the ‘media dark regions’. Despite some challenges, HUL has been successfully operating and minting the profits through these resources. In the long run, money will be a bigger issue as schemes like MNREGS are offering good monetary compensation with lesser efforts. So the challenge of keeping them (shakti ammas and shaktimaans) engaged will be a tough task.

On the one hand, involvement of more and more rural men and women are strengthening distribution network but on the other hand, experts are skeptical about thin margins. The spurt in the numbers of shaktimaans, as experts view, will not be a viable solution in the long run.  However, the company seems to be all set to expand its reach to the remotest part of the country with the help of this new army of workers. On the viability of the initiatives, Sahni added, “I think it will be viable as the overheads costs are negligible for the shaktimaan and his expectations of income are also limited. The more enterprising ones will certainly taste the success and may add other brands and categories to their offer – even non HUL stuff- to enhance their overall income despite low margin percentage, by hawking more stuff to their network of customers. And also consumption is bound to increase in volumes too in rural areas anyway, but availability of desired items is certainly a catalyst for increased consumption and aspirations.”

Initiatives like shaktimaan are a boon for both; companies as well as the rural men as it will help the poor and needy in their quest for livelihood. Reaching these tough terrains have always remained difficult and any lucrative income option will certainly attract rural men to participate. This (project shaktimaan) will not only help companies in expanding their reach in difficult areas like naxal infested belts, tribal areas and hilly regions of the country. Some companies have already started similar programs to widen their reach in the hinterland. Companies’ interest in enabling their last mile reach will certainly benefit the masses in the rural.

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The Changing Face of Rural India