Bangalore: Unilever Plc, the maker of popular brands such Dove and Lux soaps and Knorr soups, will generate three-quarters of its revenue from developing markets such as India and China by 2020, a top company official said. Emerging markets contribute 55% of the company’s business now.
About 85% of Unilever’s growth comes from emerging markets and “the opportunity to develop these markets is enormous”, chief executive Paul Polman said in a media briefing at subsidiary Hindustan Unilever Ltd’s office in Bangalore.
Polman was in Bangalore to inaugurate Unilever’s global enterprise support and information technology innovation centre that will provide data analysis and other services for the company.
Unilever is building 27-28 factories worldwide and, except one or two, all of them are in developing economies, operations chief Harish Manwani said. “We know how to manage these markets, we talked of shifting resources here, whether it is IT (information technology), or enterprise support, research and development, investing in our brands. So if you add it all up, we’re on the right trajectory,” said Manwani, also chairman of HUL.
Unilever, among the world’s largest consumer goods company along with Switzerland’s Nestlé and US-based Procter and Gamble (P&G), has posted strong results so far this year and outperformed rivals, mainly because it relies relatively less on Europe and the US—both troubled markets now.
Robust growth in Africa and Asia has shielded the Anglo-Dutch Unilever from a slowdown in the developed world.
On the other hand, rivals such as P&G and UK’s Reckitt Benckiser have disappointed investors with lower-than-expected results and have resorted to massive cost cuts due to depressed demand in recession-hit Europe.
“It’s obviously a good long-term strategy as well. If you are going to be the market leader in the fastest-growing places, your business is well-protected from volatility and slowdown in the developed world,” said a Mumbai-based analyst, who asked not to be identified.
Unilever’s emphasis on emerging markets has helped it deal with changing consumption patterns in the developed world. For instance, the Europeans who earlier bought big portions or packets have cut spending and Unilever would’ve lost out if it hadn’t introduced small packet sizes that are popular in countries such as India, Manwani said.
“As there is more economic stress in Europe, some of the learnings that we’ve taken from our emerging markets are working brilliantly for us there. We’re offering some of our best brands at a £1 price point. People still want to buy brands there but we have to make them accessible. If they won’t buy our brands, they’ll buy other brands,” Manwani said.
Unilever gets about one-third of its business from foods and the rest from personal and home care products and beverages. Some large consumer companies such as US-based Kraft Foods have split diverse businesses. Unilever, however, will not separate its businesses, Polman said.
“We could’ve never had the business model that we’re putting out there—the Unilever sustainable living plan—if we didn’t have all the businesses that we have today. An investor that invests in our company buys the totality and they like what they see right now so we don’t see any reason to change that,” Polman said.
Since joining Unilever in 2009, Polman, a former Nestlé chief financial officer and P&G veteran, has pushed Unilever aggressively into sustainable business practices.
The Dutchman wants to double Unilever’s sales while reducing its environmental footprint by half, a target considered unrealistic by some analysts and investors.
Polman is undeterred. He spent much of the interview talking about how the company’s business is inseparable from its sustainability initiatives and how, in fact, this is driven by projects such as “Project Shakti”, through which HUL is enlisting poor people in rural India to directly distribute its products in the hinterland.