Hindustan Unilever Ltd Essay
Hindustan Unilever Ltd
Hindustan Unilever Limited, a fast moving consumer goods company, manufactures and sells home care, personal care, and food products in India and internationally. The company offers soaps, detergent bars, detergent powders, detergent liquids, scourers, etc.; and personal products, such as oral care, skin care, and hair care products, as well as deodorants, talcum powders, color cosmetic products, and Ayush health care and personal care products and services. It also offers packaged foods, such as atta, salt, bread, etc.; ice creams and frozen desserts; culinary products comprising tomato based products, fruit based products, soups, etc.; and beverages, including tea and coffee. In addition, the company exports marine and leather products, as well as offers chemicals; Pureit in-home water purifiers; and salon services.
It offers food products primarily under the Annapurna, Brooke Bond 3 Roses, Annapurna, Brooke Bond Red Label, Brooke Bond Taaza, Brooke Bond Taj Mahal, Bru, Kissan, Knorr, Kwality Wall’s, Lipton, Magic, Magnum, and Modern brand names; personal care products under the Aviance, Axe, Breeze, Clear, Clinic Plus, Closeup, Dove, ELLE 18, Fair & Lovely, Hamam, Lakme, Lifebuoy, Liril 2000, Lux, Pears, Pepsodent, Pond’s, Rexona, Sure, Sunsilk, TRESemmé, and Vaseline brand names; and home care products under the Active Wheel, Cif, Comfort Fabric Conditioner, Domex, Rin, Sunlight, Surf Excel, and Vim brand names. The company was formerly known as Hindustan Lever Limited and changed its name to Hindustan Unilever Limited in May 2007. Hindustan Unilever Limited was founded in 1931 and is based in Mumbai, India. As of July 4, 2013, Hindustan Unilever Ltd. operates as a subsidiary of Unilever plc.
Many challenges for HUL’s new boss
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Sanjiv Mehta has cut himself an unusual career for a chartered accountant. Rather than move up the echelons of finance management, he was part of crisis management at his first employer, and then the commercial head of home and personal care products and, lately, chairman of MENA (Middle East and North Africa) for Unilever, the second-largest fast-moving consumer goods (FMCG) company in the world.
As he takes over as chief executive at Unilever’s India arm, and the country’s largest FMCG company, Hindustan Unilever (HUL), on Tuesday, he will be the first to not have had a stint in Indian business before doing so.
The current slowdown has not spared FMCG companies and though fortified on the back of an open offer and a reinforced supply chain, HUL has challenges of its own to battle. If not for these, all Mehta had to do was ensure continuity to ride out the gloom. However, he will now have to iron out creases at one of its bread and butter segments, skincare, at a time when HUL’s top brass’ drive on premiumisation is seeing resistance due to sobering consumer sentiment.
The company is different from the HUL in April 2008, when predecessor Nitin Paranjpe had taken over as CEO. Paranjpe, who joins the Unilever Leadership Executive, took on the role of president, home care, moved up the ranks in laundry and home care and then personal care, right from being an area sales manager to being the executive director. He took the company out of the woods during the previous slowdown that India had faced.
Jyothy Laboratories’ joint managing director, Ullas Kamath, says: “Nitin breathed new life into HUL by doing away with power brands, increasing rural and semi-urban reach and, most important, building a team that worked hard, stayed together in the past five years. I wish Sanjiv all the best; he should strive to not undo what has been done so far.”
Another industry peer points to the internal changes under Paranjpe’s watch and what Mehta would do well to preserve: “He brought Leena Nair on board and rehauled the human resources at HUL, with a young team which was answerable for bringing about results and members rotated every three years for a rounded experience. Various programmes also led to low-cost production and an extensive distribution in the hinterlands. It is like HUL is now on auto-pilot and process-driven in a way that people are more aware of the company than the man behind it, which is the mark of a leader.”
Observers are perhaps worried about the new CEO’s rallying skills because Paranjpe did it very well. One of Paranjpe’s peers and batchmates says, “HUL will have to be mindful of the drain of human capital to other organisations. ITC is also of a similar size but it does not suffer as much. Paranjpe knew the system and got the top people on his side. He was quiet. Rather than be visible outside like Banga (CEO before him), he was visible inside the organisation and, hence, could influence top guys more.”
Mehta has not worked with the Indian team so far but taking over without rocking the boat at this time will be crucial. So far, in various interviews, he has spoken about empowering people and developing them.
Nirmal Jain, chairman, India Infoline (IIFL), says: “Mehta will have to reinforce the strategy so far, so that the morale of his team remains high. He is from an emerging markets background, so he will understand the focus on market share, volume growth and spends on brands.”
One of Paranjpe’s peers and batchmates says, “Mehta might need to reassure shareholders on not losing margins. He would have to think of ways in absorbing the pressure on volume growth in these times. One of these could be telling them that HUL would take a hit on volume but maintain margins since it can afford to do so.”
IIFL’s Jain wants Mehta to focus on innovation and relaunches. Nikhil Vora, managing director at IDFC, says: “Paranjpe has been able to restrict market share losses and even grow in some categories. But the biggest challenge remains the absence of a funnel of new products, especially because its core categories are only expected to grow weaker.”
Jain says going into a service-led business of water purifiers rather than sell bottled water amounts to HUL playing in a niche category, whereas it is better geared to succeed in mass segments.
The clamour for innovation can also be linked to how one of HUL’s erstwhile blockbusters has run into trouble of late. Fair and Lovely, a Rs 1,500-crore brand in personal care, a segment that contributes nearly 30 per cent to HUL’s revenue, is in a category (fairness) which is not growing. “It shows a consumer disconnect with the brand,” says Vora.
Food remains a challenge. Analysts like Vora point to a lack of investment in the category. “It has been historically coy with introducing innovation in snacks, foods and dairy. These are categories in which its competition has been active with innovation. It needs to get into these categories to stay formidable in the years to come.”
In his Bangladesh stint, Mehta was known to take risks and alter the operating style to turn around a troubled loss-making business, in two and a half years. He is also aware of the cultures in Southeast Asia and West Asia. In his first job with Union Carbide, he was part of the crisis management team after the Bhopal gas tragedy in 1984 and remained till 1992 before joining Unilever in Dubai. Nitin Mathur, consumer research analyst with Espirito Santo Securities, says: “North Africa due to its proximity with markets in Europe has about 80-90 per cent media penetration and a greater presence of modern trade than India.” While Bangladesh and West Asia not only boast of Indian expats but also media habits that are similar to India.
Mehta’s succeeding Paranjpe is reminiscent of the latter’s ascension in the downturn of 2008. However, at that time the FMCG sector was not hit and 2010-11 saw a boom. Will Mehta’s emerging market exposure stand him in good stead now?