Why HUL’s rural distribution network is a win-win for all

Last year, when most of the industries took a major hit due to the pandemic, the logistics industry spread its network in rural India to utilise the rising demand coming from rural India to make a comeback. 

Hindustan Unilever (HUL) also fully leveraged its rural network during the trying time to minimise the effect of the pandemic. 

Project Shakti, a rural distribution network of HUL, that was catering to the company’s rural network before the pandemic has rescued its supply chain during the pandemic. 

Project Shakti, which was set up to enhance livelihoods and build opportunities for women micro-entrepreneurs, is a win-win distribution network. While it is encouraging women from rural India to transform into entrepreneurs, it is also helping the FMCG giant maintain a seamless network in every nook and corner of the country and drive efficiency and growth. 

With its network, HUL now covers half the villages in rural India, as compared to only 25% four years ago.

Even during the pandemic, it was the efforts put in by the women entrepreneurs in stepping up the physical reach of products to rural households which helped these markets remain somewhat resilient as compared to urban.

Also Read: Need to strengthen Rural Supply Chain grows as demand soars for FMCG brands

HUL executive director (sales & customer development) Srinandan Sundaram said, “Shakti has got the scale and is now part of our mainstream business. During Covid, this channel led the growth for us. There were enough instances of Shakti entrepreneurs travelling to distributors to pick up stocks and come back to distribute to the households in their vicinity. This dramatically stepped-up physical reach of our products, making them available to possibly the most vulnerable sections of society.”

Sundaram said Shakti’s contribution to the turnover has moved up and it’s now sizeable. “We grew faster in rural areas as the Shakti channel significantly outgrew overall HUL’s growth,” he said, without revealing the exact numbers.

Interestingly, HUL which initially started Shakti as a CSR activity in 2019-20 spent INR 53 crore on the network. 

While 2020 was a tough year for almost all businesses and individuals in terms of their incomes and salaries, the women entrepreneurs of Shakti reportedly said they have earned better last year than in 2019.

 The reverse migration during the pandemic also helped rural markets grow ahead of urban areas. As for Shakti, according to HUL, the all-India average income grew 1.3 times between 2016 and 2020.

Apart from HUL, many other FMCG companies have seen the potential in expanding their rural distribution network in India and are chalking out strategies to increase rural penetration and are designing products specifically for these markets. 

As per reports, Procter & Gamble India is investing in increasing its reach in media-dark rural areas. It is looking at stores in these regions as media vehicles to enhance visibility. Recently, Nestle India has also said that it wants to reach around 1.2 lakh villages over the next few years.

With more and more demand coming from rural India, more companies are likely to expand their supply chain networks, which will result in both the development of rural India as well as efficiency in supply chains across the nation. 

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