Reviving Hindustan Lever Limited

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Case Details:

Case Code : BSTR206
Case Length : 19 Pages
Pages Period : 1998-2006
Organization : HLL
Pub Date : 2006
Teaching Note :Not Available
Countries : India
Industry : FMCG

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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The Problems

HLL's problems began in the late 1990s. Since 1999, the company's revenues had been stagnant, at about Rs 100 billion, though profits had been increasing (except in 2004 when the company's profits plunged). In May 2000, MS Banga (Banga) took over as the Chairman of HLL. Banga aimed at bringing in a 'margin-based approach' for HLL.

He pruned HLL's brand portfolio from 110 to 35. Through its power brand strategy, HLL wanted to limit wasteful ad spend on non-core brands and focus on a few top selling brands. HLL repositioned many of these power brands and accompanied this by aggressive advertising campaigns. Initially, this strategy worked.

Profit margins went up from almost 16% to nearly 22%, although sales figures dropped marginally.

However, by 2003, this strategy started creating problems for HLL. Increasing competition in the market resulted in HLL's high priced products losing customer loyalty...

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HLL's Revival Efforts

In order to revive its business and financial performance, HLL undertook several new initiatives. HLL increased the ad spend on power brands by almost 30%. The company reduced prices of products like shampoos. It also started venturing into new areas like herbal products and water purifiers and refocused on its food business.

Revamping Power Brands

With Manwani coming to the helm, HLL decided to revamp some of its power brands such as Liril soap, Rin detergent powder, Lifebuoy soap, Close-up and Pepsodent toothpastes. Some of these re-launches had begun towards the end of Banga's tenure. By continuing the trend of rejuvenating its power brands, Manwani hoped to rake in profits along with volume and revenue growth.

This decision was taken as most of these brands had been in the Indian market for long, and Manwani was hopeful that adding new variants to these popular brands would arouse customer curiosity and also provide better choice within the HLL product range itself...

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