Reviving Hindustan Lever Limited
|
Case Code: BSTR206 Case Length: 19 Pages Period: 1998-2006 Pub Date: 2006 Teaching Note: Not Available |
Price: Rs.400 Organization: HLL Industry: FMCG Countries: India Themes: - |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
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...
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...
Exploring New Businesses/Marketing Channels
Besides improving its core businesses, HLL started to venture into new areas such as the ayurveda/herbal market, water purification systems, and into new channels of marketing such as the direct selling model (through Hindustan Lever Networks) and Sangam Direct (dial-in services for groceries in Mumbai). In June 2002, HLL introduced Lever Ayush ayurvedic health and beauty care products. The purity of the ingredients used in the products was endorsed by the renowned Arya Vaidya Pharmacy of Coimbatore...
Focus on Food Business
Globally, most of Unilever's revenues came from its food business. In India, however, more than two-thirds of HLL's revenues came from its home and personal care business. Two successive CEOs - Banga and Manwani - wanted to increase the company's revenues from the food business in line with the trend in the parent company. In his outgoing speech, Banga said, "Historically, our foods business was fragmented and lacked scale. It was often commoditized with low margins. We recognized that changing food habits would require considerable investment, which the current business simply could not afford. Therefore we divested the non-value added parts, like vanaspati...
Changes at the Top
Banga was promoted and made President of Unilever's global food business. Manwani became Chairman of HLL in June 2005. During Banga's tenure, HLL went through several ups and downs. The slowdown of the FMCG sector in India due to the monsoon failure affected HLL's businesses. During this time, several small players made inroads into the rural FMCG market...
The Challenges Ahead
A few industry analysts were not impressed by HLL's moves. They pointed out that HLL had divested some of its power brands like Nihar, A1 and Dalda which had high potential. With the revival and growth of the Indian economy, there would be all-round growth in the FMCG sector and HLL would not be able to reap the full benefits of this growth, they opined. Others felt that Baillie's leadership would be crucial in ensuring the success of the company's revival strategies. They also opined that managing HLL would be tough for Baillie. First, he would have to boost the morale of HLL's employees which had fallen owing to the poor performance of the company over the last seven years...
Exhibits
Exhibit I: HLL Stock Performance
Exhibit II: FMCG Industry in India
Exhibit III: HLN Products and Prices
Exhibit IV: HLL - Revenues Contribution of Different Categories (%)
Buy this case study (Please select any one of the payment options)
| Price: Rs.400 |
Price: Rs.400 | PayPal (9 USD) |
