If I ask you to list down 10 daily-use products in your house, your list will most probably include names like Surf, Lifebuoy, Vaseline etc. What’s interesting is that all these iconic brands have the same parent company — Hindustan Unilever or HUL.
HUL is India’s biggest FMCG (fast moving consumer goods) company and has a history of 90+ years. In 2021-22, it clocked a turnover of INR 50,336 crores!
Now, there are many interesting areas to explore about HUL. But today, we’ll dive deeper into a less talked about aspect of their business — HUL’s CSR (corporate social responsibility) initiatives and how they blend perfectly into their business model.
In fact, HUL’s social initiatives have been a key driver of their rural marketing & growth. Enough of the teaser, let’s dive right into it then!
Firstly, some specifics on CSR obligations for Indian companies
If your company is registered in India and,
- has a net worth of > 500 crores, OR
- a turnover of > 1000 crores, OR
- a net profit of > 5 crores,
you will be required to undertake and execute some socially relevant activities.
At least 2% of the net profit made in the past 3 years must be spent on these initiatives.
There are certain norms regarding where and how the companies can spend their CSR amount. But in the past, profitable companies have taken up various initiatives as per their choice and have brought in positive changes.
So, which CSR initiative of HUL are we going to talk about?
In 2001, HUL launched a rural marketing initiative called Project Shakti to provide livelihood opportunities to rural women.
HUL’s aim was to train & empower rural women to become entrepreneurs and become financially independent.
In a nutshell, this is how the program works:
- HUL selects Shakti entrepreneurs or Shakti Ammas (SA) from villages and trains them on the basics of distribution networks.
- These women are provided with credit facilities, so that they can purchase HUL products at wholesale prices and sell them at retail prices.
In short, rural women become micro entrepreneurs, who use their personal network within their own community/village to improve their lives.
By now, you’d be thinking that all of this sounds great, but how exactly does this help HUL’s business?
How does Project Shakti help HUL’s business?
Let’s try to understand the impact of Project Shakti on HUL’s business through some numbers.
Estimating Project Shakti’s outreach in India
- There are ~6,40,000 villages in India and ~6,00,000 villages are inhabited with a sizable number of people & households.
- Shakti Ammas span across ~50% of villages in India ⇒ HUL is able to reach 6,00,000 x 50% = ~3,00,000 villages.
- Now, ~83.3 crore Indians live in villages.
So, average # of people per village = 833,000,000 / 6,00,000 = 1388 people
- If we assume there are 5 members in every village household on average,
# of households per village = 1388 / 5 = ~275 households
- Assuming Shakti entrepreneurs are able to reach out to 5% to 50% of these households directly,
5% ⇒ 275 x 3,00,000 x 5% = 4,125,000 households reached
50% ⇒ 275 x 3,00,000 x 50% = 41,250,000 households reached
Effectively, HUL is able to reach ~40 lakh to ~4 crore households in India due to Project Shakti.
Average household spend on HUL products
Here, we have picked up a basket of the most common HUL products and applied a conservative estimate on a household’s monthly spend on it.
Net net, we assume that a rural household spends ~INR 400 every month on HUL products.
Revenue impact from Project Shakti
Finally, we estimate the potential revenue HUL can make due to its improved rural outreach from Project Shakti.
Revenue generated by Shakti entrepreneurs across India in a year = Households reached by Project Shakti x Average monthly spend x 12
For ~40 lakh households reached,
Revenue generated = 4,000,000 x 400 x 12 = INR 1920 crores
For ~4 crore households reached,
Revenue generated = 40,000,000 x 400 x 12 = INR 19,200 crores
In essence, HUL is able to generate a revenue of INR 2000 to 20,000 crores due to Project Shakti!
It’s a win-win!
Project Shakti is a boon for rural women. Not only does it give them an opportunity to earn income, but it also gives them access to information and products that they may not otherwise have access to. More importantly, it gives them a sense of pride and accomplishment as micro entrepreneurs.
For HUL, it’s a great way to reach its rural customers, who may not have access to traditional channels like shops or TV advertising. It also provides HUL with a way to connect with rural communities and buildd goodwill. In fact, HUL has built a low-cost distribution network in rural areas using Project Shakti.
It’s amazing to see how a conglomerate turned a mandatory CSR activity into a great business model with immense social impact!