Mumbai: For over two years, India’s largest consumer packaged goods company by revenue Hindustan Unilever Ltd (HUL) has been recording close to double-digit volume growth, primarily on the back of the many re-launches that helped it revamp its portfolio, coupled with the extended reach of its rural distribution. The maker of Rin and Surf detergents, Lux and Lifebuoy soaps and Kissan tomato ketchup is keen on maintaining the rate of new launches and innovations, and further expanding its reach into India’s hinterland as it looks for growth in a slowing economy. Despite concerns about a weak monsoon affecting consumer demand in the short- and medium-term, Nitin Paranjpe, Hindustan Unilever’s managing director and chief executive officer, said in an interview that he is optimistic that the Indian opportunity remains intact. Edited excerpts:
With Indian economic growth slowing and deficient rainfall, is it possible to sustain near double-digit volume growth?
Despite comments of what is happening in the short term, to me the India opportunity remains intact. There may be periods which might have issues to do with inflation and concern regarding monsoon. These are real issues and we have to deal with those. However, that does not take away from the underlying opportunity that India offers. In the next five years and beyond, consumption will continue to be a significant driver of growth.
Cautious optimism: Paranjpe says that one has to be vigilant and watchful about future events but consumption is likely to continue as a significant driver of growth for the firm. Photo: Abhijit Bhatlekar/Mint
A lot has been said about the monsoon and I don’t need to add my comments to it. A poor monsoon is not good for India and it is not good for the economy. Therefore, it is not good for anyone. As far as we are concerned, thus far, we have not seen any slowdown in our rural business.
But rural consumption could slow down and impact your business in the coming months...
In theory, it is right. But I can’t predict the future at this stage. We just have to be vigilant and watchful. The fact that we have a portfolio that straddles the pyramid leaves us in a better position than many others.
How do you compare the current situation to what happened in the consumer packaged space in 2004-05 or 2009 when there was less rainfall and high volatility in commodities?
I don’t want to compare these periods because there are so many different factors that are involved and we are still in the midst of the monsoon—the monsoon season is not over. Let’s not talk as if it is all over at this stage. Let’s wait and watch. Deficient monsoon does have an impact. It is not good for the country. We must all be careful and vigilant. Within that, a company like HUL is relatively better placed because we have a portfolio that straddles the pyramid.
What about volatility? How big a challenge is that in your business?
It is a significant challenge. We have seen what it can do. I guess that’s why this term called the VUCA world has been coined. It stands for volatile, uncertain, complex and ambiguous. Increasingly, people are talking about the future that we see as living in a VUCA world. This VUCA world is here to stay for a while; it’s not about one failed monsoon.
You started on this journey of preparing for the VUCA world after the high volatility swings in 2008 and early 2009. Can you tell us about the savings made?
Suffice it to say that they have played a very significant role. We have ploughed the savings back in our products and in our business.
In fiscal year 2012, growth was driven equally by volume and price increases. Going forward, what will drive growth?
Difficult to say. But what I would say is that anyone who can do the arithmetic knows that the pricing we took last year would get into the base once you annualize it. Unless fresh pricing is considered, some of that will go off. I don’t worry too much about that because we are in a VUCA world.
In the past, you have had strategies such as “power brands” and “regional jewels” that laid an emphasis on certain brands important for growth during that particular phase. What is the strategy now?
Power brand, regional brand, local brand—I don’t look at these classifications. If you use a brand, it’s a power brand for you, isn’t it?
It’s not about a global or local brand. It’s about the role of the brand in the consumer’s life and there are many different segments present here. Even though we are a multinational, we think locally but act globally. What this means is that we think like the local consumer and see what will delight and satisfy him. Act global means that to serve the needs of this local consumer, get the best available solution and that can be from anywhere, doesn’t matter.
But locally, inflation is affecting the Indian consumer. How does HUL address this concern?
We will think local. Yes, we are aware of the context that we find ourselves in. We recognize that we are in a challenging period. So far we have not seen an impact either in rural or urban but we have to be vigilant. We have to be tough on costs to serve our consumers and customers. As the costs increase, we don’t pass on all costs to our consumers that is not responsible. We want to see how we can reduce the burden on our consumer to the extent possible. If anything. our obsession and focus on non value-adding costs will only grow.
Therefore we will always make sure that the price increases that we take will be less than the cost increases which are taking place. This is our way of being responsible to the consumer.
How are you addressing the “premiumization” trend?
We are putting a little more emphasis on addressing the more premium and affluent consumer who is aware, is a global traveller and seeks the best of solutions.
This category of consumers was negligible 10 years ago but the number today is sizeable. Therefore, our portfolio and offerings have to start mirroring them. You would have noticed that over the last few years, we have systematically gone and introduced offerings at the top end and driven premiumization of our portfolio.
What does this mean?
It means we need to keep pace with the changing consumer. We need to be more externally oriented than internally oriented. As such the innovation intensity will continue to remain as high as we had in the coming years because the consumer is changing. The proportion of our business that we have got from the top end, middle and the bottom end will undergo a change because it will start mirroring and reflecting the changed consumer demographics. If there is a larger proportion of more affluent consumers out there, our portfolio will reflect it.
How future ready is your portfolio now?
We have started on the journey. We have called out a few categories, identified a few geographies and we have called out a few channels of the future.