Unilever Empowers Bottom of the Pyramid Entrepreneurs with Project Shakti

by Trefis Team
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After replicating Hindustan Unilever’s successful 10-year old Indian Project Shakti in Indonesia, Bangladesh, Sri Lanka and Vietnam, Unilever (NYSE:UL) is now extending this model to the African markets starting with Nigeria and Kenya. Project Shakti is Unilever’s direct-to-consumer business model to target the low income households in the rural regions of various emerging economies. This lower income segment in developing nations are often called Bottom of the Pyramid and Unilever along with Procter & Gamble (NYSE:PG) have successfully developed products, marketing and distribution strategies. Project Shakti is a program that partners with local governments, banks and NGOs to empower local entrepreneurs to serve as direct-to-consumer distribution channels. This successful model is now being expanded to other markets.

We value Unilever with a $31 Trefis price estimate of its stock, which is a slight discount to its current market price.

Hindustan Unilever’s Success in India

More than 12% of the world’s population lives in Indian villages. Hindustan Unilever’s Shakti Entrepreneurial Program supports women led rural micro-enterprises to set up small businesses as direct-to-consumer retailers for Unilever’s products. The successful scheme has equipped women with business skills and a source of income at the same time creating a new distribution channel for Unilever products in the rural areas.

According to a Harvard Business Review article, by 2009 the program had more than 45,000 entrepreneurs covering approximately 135,000 villages across 15 Indian states. By 2010, the Shakti network reached over 600 million consumers.

With the help of micro-credit, the Shakti project is an example of a low cost business model that has helped firms such as Unilever expand its product base to a larger population of masses. As a result of this initiative , nearly 50% of Hindustan Unilever’s revenues come from rural areas.

Bottom of the Pyramid: Fresh growth avenues post saturation of urban markets

The business model seeks to deepen its product sales penetration in the less tapped rural markets. With gradually improving per-capita incomes, rural communities are providing fresh growth avenues for leading consumer goods companies in the emerging markets. These growth markets already contribute around half the revenues for major global FMCG companies. As urban markets get more saturated and consumer spending slows in the developed parts of the world, FMCG companies are keenly focusing on improving the distribution channels and sales in these upcoming rural markets.

Project Shakti reaches Africa

The project is being customized and adapted in several South-East Asian, African and Latin American markets like Bangladesh, Sri Lanka and Vietnam. In Bangladesh and Sri Lanka, it is being promoted as project Joyeeta and Saubaghya respectively.

Unilever has recently introduced the direct-to-consumer business model in the rural markets of Nigeria and Kenya. The project still faces implementation challenges of providing micro-finance, recruitment and physical accessibility to remote rural markets.

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