MUMBAI: Hindustan UnileverBSE -0.62 % has initiated a project each for urban areas and rural markets to double its direct reach and ensure it retains its advantage of having the largest distribution network in the country even as rivals inch closer.
Project Telecalling for urban areas and Project Columbus for rural areas aim to double the country's top consumer products firm's direct reach to four-million outlets over the next two years.
A HUL spokesperson declined to comment on the distribution initiatives.
A market analyst said the urban initiative has the potential to change the distribution paradigm of the consumer product industry. "Project Telecalling aims to tap the uncovered outlets via telephone calls and deliver the ordered quantity, reducing the cost of additional salesmen to reach such outlets," Anand Mour of ICICI Securities said in a recent investor note. "Project Telecalling can change the distribution paradigm in the FMCG industry - in our opinion it is easily replicable by other FMCG companies."
Project Columbus seeks to expand Hindustan Unilever's distribution reach to over 150-million rural consumers directly in 2013. The move comes at a time rivals such as Procter & Gamble and ITCBSE -0.16 % have been aggressively expanding their reach. Over the past three years, both these firms have invested significant amounts in increasing their footprint with a focus on rural areas. P&G already covers about 5.6-million outlets in the country against HUL's retail network of over 7.2-million outlets.
"HUL can grow either by increasing their reach in terms of number of outlets or how well it serves those outlets. The new initiative addresses both these aspects," Piyush Kumar Sinha, professor of marketing at the Indian Institute of Management, Ahmedabad, said. "The only issue is that sales staff may not be able to push products on phone as they can in person," he said.
Market research firm Nielsen recently started extensive survey of small grocery, or kirana, stores across nearly two-dozen Indian cities to help consumer goods makers target these outlets more effectively.
"Consumer companies have a 'spray and pray' model through which they distribute products in every outlet and hope it sells. We are doing a census of over 20 cities in India, enumerating every single outlet to find out the best way products can be distributed," Piyush Mathur, president at Nielsen India, told ET recently.
Over the past three years, the growth of the Indian consumer sector worth 2 lakh crore has slowed down. HUL's volume growth has declined from a peak of 14% in March 2011 to a low of 5% in June 2013. The newdistribution initiatives are expected to help the market leader deal better with slowdown issues, particularly with its expansion in the rural market.