HUL expands distribution network by 50% in two years2 min read . Updated: 02 Jun 2014, 11:45 PM IST
HUL also relaunched nearly two-thirds of its products portfolio, it said in its annual report for the year 2013-14
Mumbai: Hindustan Unilever Ltd (HUL), India’s largest consumer packaged goods company, undertook its most aggressive expansion drive by increasing its distribution network by 50% over the last two years.
The company also relaunched nearly two-third of its products portfolio, it said in its annual report for the year 2013-14 released on Monday.
The company had said in its 2011-2012 annual report that it had reached 2 million stores across urban and rural India.
Hindustan Unilever also increased the number of perfect stores from 80,000 in 2010 to one million in 2013, the company said.
A perfect store ensures that the right products are available on the shelves and are marketed clearly.
“Pilot studies in India and Argentina show that outlets enrolled for the ‘perfect stores’ programme grow on average 4% more than other outlets," said a 2012 Hindustan Unilever annual report.
The Indian subsidiary of Unilever also added more than 17,000 Shakti entrepreneurs in 2013, taking the total count to 65,000. Shakti entrepreneurs are a network of rural women reaching out and selling the company’s goods in villages where it has limited reach.
Hindustan Unilever has also developed a low-cost distribution model based on the mobile phone.
According to the latest census, India has 7-8 million small stores selling consumer packaged goods across 600,000 villages and 5,500 towns.
Hindustan Unilever also relaunched 60% of its portfolio in one year—making it one of the highest number of relaunches taking place in a single year.
“HUL is gearing up for the next stage of growth and demand revival," said Abhijit Kundu, an analyst at Antique Stock Broking Ltd.
Hindustan Unilever is the largest company in the sector and if it increases spends, then other companies have to follow suit, said Kundu.
However, as of now, marketing spends have been on the lower side and have not increased as there has been pressure on input costs and sales growth. Going ahead, if the demand picks up, other companies will follow suit with higher spends, he added.
The focus on expansion has benefited the company as it grew its volumes ahead of the market. The ₹ 2.18 trillion consumer packaged goods industry’s growth halved to 9.4% in 2013 from 18% a year ago. The growth was largely driven by value, while volume growth was negligible, said Nielsen, an information and insights provider.According to Nielsen, the firms that stood out against this backdrop were those that invested in expanding in rural markets.
Hindustan Unilever’s shares on Monday rose 0.02% to close at ₹ 601.05 on a day when BSE Sensex gained 1.93% to end the day at 24,684.85 points.