Strengths HLL enjoys a formidable distribution network covering over 3400 distributors and 16 million outlets. This helps them maintain heavy volumes, and hence, fill the shelves of most outlets. The new sales organization named 'One HLL' brings "Household and Personal Care" and foods distribution networks together, thereby aligning all the units towards the common goal of achieving success. HLL has been continuously able to grow at a rate more than growth rate for FMCG Sector, thereby reaffirming its future stronghold in Indian market Project Shakti - Rural India is spread across 627,000 villages and possesses a serious distribution challenge for FMCG Cos. HLL has come up with a unique and successful initiative wherein the women from the rural sector market HLL products, and hence, are able to reach the same wavelength as of the common man in village. Apart from product reach, the initiative also creates brand awareness amongst the lower strata of society. This has brought about phenomenal results.
Weaknesses HLL's market dominance, originating from its extensive reach and strong brand presence, allowed it to raise the prices even as raw materials were getting cheaper. Hence, though the volumes decreased, the margins grew, and company was able to earn more profits. But higher margins attracted competition in areas of operations. HLL's strategy remained focused on creating power brands and earning higher margins. It was not left with any other option but to try cutting down the costs in order to protect volumes, if not increase it. HLL's weakness was its inability to transform its strategies at the right time. They continued with the same old strategy which helped them gain profits but was not genuine in this changed environment. HLL's risk aversion and market myopia led to stagnation of business, and ferocity of competition forced it into a defensive mode. Lack of pricing power in core business and absence of growth drivers have put HLL on a deflationary mode. core business and absence of growth drivers have put HLL on a deflationary mode. Opportunities
India is one of the world's largest producer of FMCG goods but its exports are miniscule as compared to production. Though Indian Cos. have been going global, their focus is more towards Asian countries because of the similar preferences. HLL is one of the top companies exporting FMCG goods from India. An expansion of horizons towards more and more countries would help HLL grow its consumer base and henceforth the revenues.
Opportunity in Food Sector - The advent of modern trade has opened up greater opportunities for HLL to diversify its brand and strength its food division. It could look at introducing products from its parents stable like margarines and could also look at expanding its Knorr range of products. Well-placed to take advantage of future FMCG Growth - HLL reach out 80% of 207 million households in the country through various brands. It has a very well-defined product portfolio spread across many product categories. Penetration levels for some major categories like skin-cream (22%), shampoo (38%), toothpaste (48%) and processed foods, continue to remain low offerings but great growth opportunities products.
Threats ITC has reduced its dependence on the cigarettes business Contribution of the core business in revenues has come down from 87% in FY99 to 70% in FY05. Over a period of five years, ITC has extended its presence into areas like foods, retailing, hotels, greetings, agri, paper, etc. These are businesses that can give it growth impetus in the long run. With ITC gaining momentum in each of these businesses, it is turning into a consumer monolith, and hence, the greatest threat to HLL's Business. SSKI India has gone on to say, "We maintain Out performer on ITC with a price target of Rs. 2200, while our Under performer call on HLL remains unaltered (price target of Rs. 160)." SSKI India has gone on to say, "We maintain Out performer on ITC with a price target of Rs. 2200, while our Under performer call on HLL remains unaltered (price target of Rs. 160)."