HUL doubles Perfect Stores network, reaps sales growth

Posted On: 27-06-2012 00:00:00 12 Hindustan Unilever Ltd (HUL) has doubled its Perfect Stores network in the 2011-2012 fiscal, taking the count of retail stores covered under this scheme, to 11 lakhs. The Perfect store initiative has resulted in consistent growth in sales for HUL, and a higher market share in growth for HULs overall portfolio, accounting for more than 90% of the Companys turnover. Additionally, HUL has used technology, such as analytics Project iQ, to reach out to these stores. The companys salesmen have been provided with a hand held terminal called iQ, which gives customised recommendations for each store, once the device is synced. This helps to download data from the centre to retrieve information on the market. These initiatives have helped HUL to become more efficient, deliver stocks faster and reduce inventory on product shelves. As per media reports, Harish Manwani, Chairman HUL stated that these initiatives have resulted in improvement of overall service levels by 260 basis points in the 2011-2012 fiscal,, and an improvement of 400 basis points in modern trade.

The Trade is Turning

Ravi Balakrishnan

Brand Equity 100413

There's a compelling narrative at the heart of Walmart: The High Cost Of Low Price. Made in 2005, the documentary quickly spread across file sharing networks with its nightmarish vision of big box retail devastating small community stores. It was a classic David versus Goliath narrative with a heartbreaking twist: Goliath won most of the time. In India too, the retail landscape is characterised by a quasi David and Goliath struggle. Except here a frail Goliath is arrayed against a vast army of Davids. In 2013, modern trade makes for an unlikely bogeyman. It accounts for a meagre 8% of the $518 billion Indian retail market, according to the most recent edition of the Indian Retail Report from Deloitte. And yet, for the traditional trade players, the last few years have been anything but business as usual. Observes Sameer Satpathy, head - marketing, Marico, "Today a traditional retailer talks about assortment, ROI and walkthroughs." Adds Ankur Bisen - vice president and head, retail and consumer products at Technopak Advisors, "The first response to modern trade was fear. Partly because of this, it made the mom and pop stores think about how they can differentiate." Unlike their larger cousins, many of whom are still in 'investment mode' these stores are making money. Three major trends have dictated the rise in influence of traditional retail. According to Sunil Kataria, executive vice president - marketing and sales at Godrej, the first of these is a new generation taking over from post independence traditional traders. They are often tech savvy and upwardly mobile. And they are preparing themselves better for the inevitable onslaught of modern trade. Says Manish Tiwary, executive director - sales and customer development at Hindustan Unilever, "I've met a lot of traditional retailers who say 'partner with us, help us keep our shoppers.'" The indifferent grocers of

the past, given to stock shortages and inconvenient siestas are caring more about experience and customer retention. Some food and grocery stores have begun their own brands in spices and dry fruits. Credit and home delivery are becoming the norm. Adds Kataria, "Traditional trade has become very particular about the kind of people they hire. The more premium outlets no longer have shop boys lounging about in vests." The final aspect is specialised segments within traditional trade. Tiwary admits, "Earlier, the definition was 'big guy' or 'small guy' which wasn't a definition at all." There are now self-service stores, premium groceries and beauty stores that specialise in skin and personal care. What has also changed is how India's large FMCG companies keep these different channels engaged. Trade marketing is now a key component of BTL (below the line) spends accounting for 45% to 50% of the marketing budget. And unlike the chopping and changing that's so much a part of advertising, money allocated for trade is sacrosanct says a senior executive at an FMCG company. In a less fragmented market, trade incentives were usually built around margins and in some cases, freebies and giveaways. Kataria admits, "While vacations and gifts that were the rage 10 years ago, still continue, the excitement is no longer there. These days, going abroad is done to death. Since everything is available everywhere, the attraction of gifts is also not as strong." Around five years ago, Hindustan Unilever began a programme called Fast Forward. It was aimed at helping mom and pop stores move to a more modern shopper centric format. While Fast Forward still exists, today Hindustan Unilever prefers to draw traditional trader's attention to the strengths of what they already have instead of reinventing themselves. Backing these decisions is a programme called Perfect Stores. It is powered not by advertising or communication but analytics and research, with IT firm Mindtree and research agency Nielsen partnering the FMCG giant. This was launched as Operation Bushtree in May 2010. After studying several terabytes of data, the company is creating a customised mix for every outlet it services directly. Speaking of the change, Tiwary says, "A couple of years ago, a premium launch would be allotted 80,000 stores of which Mumbai would get 3,000 and among these there would be chemists and a good kirana. That was the extent of definition and it was up to the salesman to take calls on what's good." Via Perfect Stores, HUL knows which outlets are the most appropriate for a launch, based on purchase patterns and the store's best performing SKUs. More importantly, it helps HUL avoid stores where the stock is likely to get stuck resulting in an erosion of the company's equity. A salesman can know exactly what a store is running short on and is prompted to ask the retailer if he'd like a restock. Here Come The Davids If previously HUL was swayed by a provision store wanting a display just because the chemist next door got one, the company is now able to explain that the retailer is better served stocking large pack sizes which are more relevant to his business. HUL is also relying on the consumer innovation and insight centre or CIIC. It sets up a virtual reality store that allows retailers to get a firsthand view of how consumers interact with shops. Says Tiwari, "We transfer these into learnings on the optimum placement of categories within a store. The mix is shopper led and not transactional. Our philosophy is let's do what's good for the shoppers since that is what will benefit both of our business." Asked if the retailers prefer these to the more traditional incentives, Tiwary explains, "I have not heard of a retailer saying 'don't give me an incentive.' But we are showing them what more is possible. That in the long run, it's not about transactional margins but shopper stickiness." Godrej too is moving towards what Kataria considers a deeper sort of engagement. It has started a merchandising organisation within the sales team. While not specifying the figure, Kataria says "It's a very serious investment. Almost to the tune of the investment behind a new launch." With Godrej working on classifying stores as premium and general retail, the merchandising firm works with the

former, creating planograms and ensuring Godrej gets its share of shelf space. Kataria admits, "We could have given the money as a visibility incentive. But what we have invested in is organisational manpower, influence and upkeep." The premium stores will also get a higher level of service. Teams working on these stores do fewer but more intense calls spending an hour instead of just 15 to 20 minutes. At Marico too the focus is shifting. Says Satpathy, "One size doesn't fit all. Companies like ours have moved to channel strategies and microsegmenting each channel so we can specifically tailor the offerings. A chemist for instance needs a more technically qualified sales representative than a grocer." There's however a certain amount of scepticism on whether such an expensive and personalised exercise will yield dividends. Bisen recalls an experiment by CavinKare in dealing with retailers directly only to find it wasn't a scalable model. He says, "It's too early to say that the FMCG players are engaging. The transaction cost to reach retailers is high. It's very difficult to eliminate the chain and make the companies work directly. The moment a company tries to bypass wholesale and distribution, it's not easy."

HULs biggest national roll-out may add Rs320 cr sales in first yr

MINT 110510

Mumbai: Consumer goods firm Hindustan Unilever Ltd (HUL) could add around Rs320 crore to its revenue, following the roll-out of its most ambitious trade initiative called Perfect Stores, said an executive at Technopak Advisors Pvt. Ltd, a retail consultancy firm. For HUL, Indias largest packaged consumer goods company by revenue, it is one of the largest and fastest roll-outs of a marketing strategy to cover 80,000 stores in 72 cities with a population of at least 100,000 in the next six weeks. The objective is to raise sales in these stores by 30%. All these stores will have similar in-store display and merchandising. Since the average size of a neighbourhood grocery store is around 200 sq. ft and sales per sq. ft are Rs6,000 a year, typically one such store has a turnover of Rs12 lakh a year, according to Raghav Gupta, president of Technopak Advisors. If HUL products account for 25% of such sales, then the sales of these products at one such store will be to tune of Rs3 lakh a year, he said. Going by Guptas calculation, if this initiative leads to a 15% increase in sales, then HUL products will record a rise of Rs45,000 a year in each of these 80,000 stores. The overall increase in sales of HUL products at these stores will be Rs360 crore and, after removing the retailers margin, the growth will be Rs317 crore. Gupta, however, has taken a conservative estimate of 15% rise in sales while the company itself expects a 30% rise. Perfect Stores is the last mile of HULs go-to-market strategy that was started about three years ago. The company aims to rationalize its distribution network, make it more efficient, deliver stocks to retailers faster and reduce inventory on their product shelves. Traditionally, HUL took time to react to competitive pressures as it had a pipeline of stocks to exhaust. It typically took 10-12 weeks for price cuts to reach its customers. With a quick turnaround of stocks, the company is aiming at a zero or, at the most, one-day stocking level. Ahead of the roll-out, it ran a pilot in January-March in Coimbatore, Tanali (Andhra Pradesh), Chandigarh, Bhubaneswar and Thane. Now, the Perfect Store concept has been extended to the top 80,000 stores of the one million retail outlets that HUL reaches out to directly. The companys joint venture Hindustan Unilever Field Services Pvt. Ltd, which was form ed for modern trade channels with Smollan Holdings, an in-store execution and field services firm in South Africa, in November 2007, has now been extended to cover general trade. The national roll-out began early this month, and in the first week, HUL created around 20,000 Perfect Stores. The creation of Perfect Stores has been made possible due to a three-year history of the stores sales, said Suhas Jain, a supervisor at Mumbai with HUL.

There has been an increase of 30% in sales in Perfect Stores, said Hemant Bakshi, executive director (sales and customer development) at HUL. The focus on general retail trade is among one of the many initiatives that the Anglo-Dutch Unilevers Indian unit is looking to double its revenues. Over the year, it has been engaged with rival Procter and Gamble Co. in price wars and legal battles over washing powder supremacy. General trade accounts for 97% of the overall consumer packaged goods industry in India and grew at a rate of 13% in 2009 in value terms over a year ago, according to Nielsen Co., a market research firm. The organized retail trade industrys growth slowed to 14% in calendar year 2009 compared with 52% a year ago, as per Nielsen. For instance, Subhiksha Trading Services Ltd has shut shop and Vishal Retail Ltd has been posting losses for three quarters in a row. Others such as Aditya Birla Retail Ltd and Reliance Retail Ltd are yet to report profitability. We will do what is right for both modern trade and general trade as both continue to grow rapidly, said Bakshi. However, not everybody is convinced about the success of this initiative. Vinod Shah, owner of GR Super Store in Andheri West, a Mumbai suburb, has seen his revenue decline by 40% from Rs5-7 lakh per month to Rs4-5 lakh per month in the past few years due to the growth of modern retail in the suburb. GR Super Store is being converted into a Perfect Store. When a consumer comes in, there is an increase in sales with better display and merchandise assortment, he said. But not many consumers are visiting his shop these days; 60% of his sales are over the phone. Declining footfalls is Shahs biggest worry and he isnt sure whether the facelift can woo the consumers back to his shop.

sapna.a@livemint.com

ET MAY 2010
HUL's sales grew 110% over the last four years-- from 2004-05 to 2008-09-- compared with Godrej's 148% during the same period, according to data available from BSE. Its shares, once a darling of investors, have trailed rivals. It has raised 74.34% in the last five years-- from April 30, 2005 to April 30, 2010-- when rival Godrej Consumer Product's rose 320.88%. The bellweather sensex rose 185.3% during the period, according to Bloomberg. After the global head Paul Polman taking charge, the new mantra at Unilever is ``consumer'' and bye bye ``shareholder interest''. He is looking for increasing contributions from emerging markets such as India as sales in the Western markets falter. "It's a positive aggression, which, for a change, is not led by advertisements on television," said Harish Bijoor, brand consultant and CEO of Harish Bijoor Consults Inc.