HINDUSTAN UNILEVER MULLS OVER E-GROCERY MARKET OPTION

1. Submitted By: Group 12
HINDUSTAN UNILEVER MULLS
OVER E-GROCERY MARKET OPTION
Retail Marketing: Term 6
Aravind Kadakethu – UM16073
Deepak Mohanty – UM16080
Sanjay Romero D Sami - UM16107
Saptarshi Dhar – UM16110
Swagat ku Nayak – UM16114
Kumar Aditya – UM16121

2. FMCG sector in India
Fast moving consumer goods (FMCG) is the
4th largest sector in the Indian economy.
There are three main segments in the sector –
food and beverages which accounts for 19 per
cent of the sector, healthcare which accounts
for 31 per cent and household and personal
care which accounts for the remaining 50 per
cent.
The FMCG sector has grown from US$ 31.6
billion in 2011 to US$ 49 billion in 2016. The
sector is further expected to grow at a
Compound Annual Growth Rate (CAGR) of
20.6 per cent to reach US$ 103.7 billion by
2020.
Accounting for a revenue share of around 60
per cent, rural segment is the largest
contributor to the overall revenue generated
by the FMCG sector in India and recorded a
market size of around US$ 29.4 billion in
2016 and is expected to grow to US$ 220
billion in 2025. Demand for quality goods
and services have been going up in rural areas
of India, on the back of improved distribution
channels of manufacturing and FMCG
companies. Semi-urban and urban segments
accounted for a revenue share of 40 per cent
in the overall revenues recorded by FMCG
sector in India.
FMCG Companies are looking to invest in
energy efficient plants to benefit the society
and lower costs in the long term.
Growing awareness, easier access, and
changing lifestyles are the key growth drivers
for the consumer market. The focus on
agriculture, MSMEs, education, healthcare,
infrastructure and employment under the
Union Budget 2018-19 is expected to directly
impact the FMCG sector. These initiatives
are expected to increase the disposable
income in the hands of the common people,
especially in the rural area, which will be
beneficial for the sector.
E-Commerce in India
The e-commerce has transformed the way
business is done in India. The Indian e-
commerce market is expected to grow to US$
200 billion by 2026 from US$ 38.5 billion as
of 2017. The value of e-commerce market is
expected to cross US$ 50 billion by 2018.
Much growth of the industry has been
triggered by increasing internet and
smartphone penetration. The ongoing digital
transformation in the country is expected to
increase India’s total internet user base to 829
million by 2021 (59 per cent of total
population), from 373 million (28 per cent of
population) in 2016, while total number of
networked devices in the country are
expected to grow to two billion by 2021, from
1.4 billion in 2016.
Market Size
Total online spending, inclusive of domestic
and cross border shopping, is expected to
increase by 31 per cent year-on-year to Rs
8.76 trillion (US$ 135.8 billion) by 2018.
Cross border shopping by Indians touched Rs
58,370 crore (US$ 9.1 billion) in 2016, and is
expected to by 85 per cent year-on-year in
2017. The top 3 countries preferred by
Indians for cross-border shopping in 2016
were USA (14%), UK (6%) and China (5%).
The Indian consumer internet market is
expected to grow by 44 per cent year-on-year
to touch US$ 65 billion in 2017, up from US$
45 billion in 2016. Online travel agents
account for the largest market share (70 per
cent) in the internet consumer market, while
the remaining 30 per cent is occupied by

3. horizontal e-tailing, fashion, furniture,
grocery, hotel, food tech, cab aggregators,
education technology, and alternative lending
among others.
The internet industry in India is likely to
double to reach US$ 250 billion by 2020,
growing to 7.5 per cent of Gross Domestic
Product (GDP), with the number of mobile
internet users growing to about 650 million
and that of high-speed internet users reaching
550 million.5 About 70 per cent of the total
automobile sales in India, worth US$ 40
billion, are expected to be digitally
influenced by 2020 as against US$ 18 billion
in 2016.
Investments/ Developments
Some of the major developments in the
Indian e-commerce sector are as follows:
• Amazon invested Rs 6,200 crore (US$ 1
billion) in e-commerce arm in India
during calendar year 2017.
• Venture Capital (VC)-backed firms in
India raised a record US$ 9.6 billion of
fresh capital between January-
September 2017, which is more than
twice the amount of capital raised
during the same period in the previous
year.
• Blackbuck, an online freight aggregator
operated by Zinka Logistics Solutions Pvt
Ltd, has raised Rs 50 crore (US$ 7.68
million) in venture debt from InnoVen
Capital.
• BankBazaar, a financial marketplace
start-up in India, raised US$ 30 million in
a funding round led by Experian Plc, a
credit rating agency based in UK, taking
the company's total funding to US$ 110
million.
• Gozefo.com, a Bengaluru based used
furniture and appliances platform, has
raised Rs 60 crore (US$ 9 million) in
Series B funding from Sequoia Capital
India, Helion Venture Partners and
Beenext Pte. Ltd.
Government initiatives
Since 2014, the Government of India has
announced various initiatives namely, Digital
India, Make in India, Start-up India, Skill
India and Innovation Fund. The timely and
effective implementation of such programs
will likely support the e-commerce growth in
the country. Some of the major initiatives
taken by the government to promote the e-
commerce sector in India are as follows:
• Reserve Bank of India (RBI) has decided
to allow "inter-operability" among
Prepaid Payment Instruments (PPIs)
such as digital wallets, prepaid cash
coupons and prepaid telephone top-up
cards.
• Finance Minister Mr Arun Jaitley has
proposed various measures to quicken
India's transition to a cashless economy,
including a ban on cash transactions
over Rs 300,000 (US$ 4,655.1), tax
incentives for creation of a cashless
infrastructure, promoting greater usage
of non-cash modes of payments, and
making Aadhaar-based payments more
widespread.
Road Ahead
The e-commerce industry been directly
impacting the micro, small & medium
enterprises (MSME) in India by providing
means of financing, technology and training
and has a favourable cascading effect on
other industries as well. The total size of e-
Commerce industry (only B2C e-tail) in India
is expected to reach US$ 101.9 billion by
2020.
Technology enabled innovations like digital
payments, hyper-local logistics, analytics
driven customer engagement and digital

4. advertisements will likely support the growth
in the sector. With the increase in the number
of electronic payment gateways and mobile
wallets, it is expected that by the year 2020,
cashless transaction will constitute 55 per
cent of the online sales. The growth in e-
commerce sector will also boost
employment, increase revenues from export,
increase tax collection by ex-chequers, and
provide better products and services to
customers in the long-term.
HUL- Company Overview
Hindustan Unilever Limited (HUL) is an
Indian consumer goods company based in
Mumbai, Maharashtra. It is a subsidiary of
Unilever, a British-Dutch company. HUL's
products include foods, beverages, cleaning
agents, personal care products and water
purifiers.
HUL was established in 1933 as Lever
Brothers and, in 1956, became known as
Hindustan Lever Limited, as a result of a
merger among Lever Brothers, Hindustan
Vanaspati Mfg. Co. Ltd. and United Traders
Ltd. It employs over 16,000 workers, while it
also indirectly helping to facilitate the
employment of over 65,000 people. The
company was renamed in June 2007 as
"Hindustan Unilever Limited".
It is a household name with over 35 brands in
20 categories of everyday products. 18 of its
brands feature in Nielsen Corporations list of
100 most trusted brands.
E-Grocery in India
Market size of grocery retail in 2014 was
around 160 billion USD. Grocery had a
massive share of country’s total retail sector
– 67%. Organized food and grocery business
was growing at a rate of approximately 30 %
per year. Online retail in grocery was a very
small part of it, but was expected to reach
around 17 billion USD in 2018. With the
growth in Internet users, E-Grocery portals
were began popping up and were expected to
rise.
Some E-Grocery Companies currently in
operation are:
• Grofers
• BigBasket
• Aaramshop
• Localbanya.com
• ZopNow
• Big Bazar Direct
Evolving Preferences of Indian Consumers
The rapid change in usage of internet for
online transactions across the country proved
to be a barrier for brick and mortar retailers
and as a result e-grocery platform presented a
better alternative.
Causes of change in Buying habits
• Rising Incomes
• A younger population
• More working women
• An expanding retail sector
• Steady urbanization
• Rise in number of online transaction
because of deeper internet penetration
Projections for the future
• Change from supplier oriented to
customer-oriented system: Indian

5. Economy growth of 8% with
economy stimulating reforms leading
to greater purchasing power and
availability of a wider array of
products for the consumers
• Increase in mobile internet users: 213
million mobile internet users with 53
million rural and remaining urban
users. As a result, e-commerce was
able to take advantage of India’s tech-
savvy consumers.
• Quality of urbanization: With very
little time for socializing and
spending time with family,
convenient and free home delivery
became a key driver behind online
shopping
Advantages of e-Grocery
• Offered a much wider range of
choices and delivery of products at
consumer’s preferred time
• With the facility of saving items/lists,
the routine purchasing process
became simple and easy
• Providing good service to consumers
resulted in repeat purchases which
helped companies to overcome their
customer acquisition cost easily
Challenges to E-Grocery
• The process involved managing
variety of inventories with diverse
storage requirements, cold storage
and maintenance of quality for
perishable products. As a result, the
overall cost of the product and the
risks associated with it increased
exponentially
• Different regions in India had
different consumer preferences. As a
result, e-grocery failed to offer a
tactile experience to the consumers
because of complex supply chain
issues
• The value-to-weight ratio of grocery
products is high, so it is financially
unviable to courier products from one
city to another. As a result, the
expansion of business involved
setting up a completely new operation
for local supply chain
• Since warehouses, inventory and
logistics also had to be operated on
local basis to maintain fresh produce,
most food and grocery products
worked on single digit margins
• Most of the Indian consumers were
still concerned about the security of
financial information while
transacting online. Also, the quality
and speed of internet connections
were highly variable in India. As a
result, a positive shopping experience
was not possible for majority of
consumers.
Should HUL Enter e-
Grocery?
Market Conditions/ consumer behavior
• Growing Indian economy with
increasing disposable income of the
people.
• Indian consumers have evolved with
technology and lifestyle changes and
have become more demanding and
value conscious
• Deeper internet penetration -> rise in
number of online transactions -
>increase in number of people
shopping online.
• Will satisfy the needs of time-starved
consumers

6. • Online retail is expected to grow
faster and reach US$17 billion by
2020
Internal Factors/strengths
• Wide distribution network- > to cater
to local demands (in case it adopts
warehouse model).
• Strong brand value of HUL.
• Can utilize economies of scope.
• Being a big player can afford to have
narrow margins to attract consumers
who are price sensitive thereby
increasing its market share.
• Large cash reserves to spend on
technology, infrastructure etc.
Conclusion
HUL has the capability to pull off this
expansion project, given the reputation its
brands enjoy among consumers, the wide
distribution network & huge cash reserves.
The market sector is certainly one for the
future, where the initial adaption may seem
to be less, but will surely show huge growth
in the coming years, given the shift in the
lifestyle of people in urban India. Thus, in
conclusion, HUL should enter the market &
utilize it while it is still in its early stages.