HLL embeds executives with Wal-Mart Stores’ US operations

HLL embeds executives with Wal-Mart Stores’ US operations
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First Published: Thu, Feb 22 2007. 12 53 AM IST
Updated: Thu, Feb 22 2007. 12 54 AM IST
Organized retailers like Big Bazaar and Spencer’s are set to get even more pampered by India’s largest consumer staples manufacturer, Hindustan Lever.
In addition to setting up a separate division to service such retailers, cut out intermediaries and supply brands at lower costs, the Indian arm of $50 billion (Rs2,20,000 crore) global giant Unilever has sent some of its key executives to the US operations of Wal-mart, the world’s largest retailer.
This is ahead of the retailer’s India launch via its joint venture with Bharti in December 2007.
“Our share in modern trade channels exceeded those in merchandise trade in seven of nine categories that (market research agency) AC Nielsen studied. Modern trade is a huge opportunity that plays to our strengths and we have sent some of our executives to retailers in UK and Rotterdam as well, to understand this channel better,” said Doug Baillie, CEO, Hindustan Lever.
Nearly a third of all consumer products sold in organized retail are from large consumer companies rather than unbranded products, says a retail industry executive.
The executives implanted in Wal-Mart are learning to manage the way goods are supplied to stores and synchronise this with consumer demand at the outlets and customer service.
India’s $8-9 billion organized retail industry, is growing at a rapid pace of 30-35% per annum and currently forms only 3% of India’s retail business. The organized retail segment is witnessing the entry of Wal-mart, Reliance Industries and the Aditya Birla Group in addition to Pantaloon’s, K.Raheja group, RPG Group who are all busy expanding stores nationwide as they attempt to establish themselves in a market that’s estimated to be worth $60-70 billion by 2011-12.
In addition to seconding executives to work with retailers overseas, Hindustan Lever, will also get to India, expatriates who have experience working with large retailers overseas. “We want to be ready when the retail boom happens,” said D. Sundaram, director finance, at HLL.
Raman Mangalorkar, who heads the retail practice at AT Kearney, a management consulting company says, “Over the medium term, consumer products companies will find margins getting squeezed because of organized players. The challenge for them is to fill up increased shelf space, service the supply chain better and to share the customer relationship with the retailer.”
The global leaders in the consumer staples business like Unilever and arch-rival Procter & Gamble have had a love-hate relationship with discount retailers like Wal-Mart, Carrefour and the like who use their bargaining power to beat down prices. Despite that, retail chains then introduce their own cut-price versions of these mass-produced products.
One of the most crucial things for Indian consumer companies to learn, is the cross-docking system, which large retailers use to stock their shelves, said Gibson Vedamani, who is the chief executive of the Retailers Association of India.
Large international retailers own, or control distribution centres where consumer companies would send in supplies of products, which are then unloaded and sent, in required quantities across stores.
Such a system in currently spotty in India, as supplies arrive directly to the store, in three wheelers, rather than large refrigerated trucks increasing the loading time and affecting the quality of the produce transported, says a retail industry executive.
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First Published: Thu, Feb 22 2007. 12 53 AM IST
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