HUL sets sights on doubling business

HUL sets sights on doubling business
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First Published: Tue, Mar 30 2010. 12 30 AM IST

New strategy: A file photo of Unilever chief executive officer Paul Polman. He said market development across the income pyramid would be the main driver of Hindustan Unilever’s growth. Abhijit Bhatle
New strategy: A file photo of Unilever chief executive officer Paul Polman. He said market development across the income pyramid would be the main driver of Hindustan Unilever’s growth. Abhijit Bhatle
Updated: Tue, Mar 30 2010. 09 29 AM IST
Mumbai: Hindustan Unilever Ltd (HUL) will look beyond its current bruising battles for market share and focus on doubling the business, the chairman of its parent said on Monday.
Unilever Plc chief executive officer Paul Polman also had some barbed comments to make about “an American competitor” that has “lowered product quality” to grab consumers.
New strategy: A file photo of Unilever chief executive officer Paul Polman. He said market development across the income pyramid would be the main driver of Hindustan Unilever’s growth. Abhijit Bhatlekar / Mint
HUL is currently in the middle of a protracted battle with arch global rival Procter and Gamble Co. (P&G) that has ended up in the courts. The two consumer companies have cut prices in a bid to win customers, a move that analysts believe will inevitably squeeze their profit margins.
Polman was speaking to reporters at the spanking new HUL office block in Andheri, north Mumbai.
“Seventy five per cent of our categories are growing market share while in one of our categories, our international competitor is losing share,” said Polman, replying to a question about HUL losing market share in key categories in recent quarters.
Polman was on a three-day visit to Mumbai, during which he visited consumers along with HUL non-executive chairman Harish Manwani, and HUL managing director and CEO Nitin Paranjpe. They visited a middle-class family in Vile Parle as well as a Star Bazaar outlet on Sunday.
“The lady of the house uses Sunsilk shampoo twice a week and her husband does not use it at all. Getting her to use the shampoo thrice a week means a 50% growth in volumes for us. It’s a no-brainer. Do we focus on our competitor or on our consumers?” asked Manwani.
Polman used this example to argue that market development across the income pyramid would be the main driver of HUL’s growth in the coming years. He used a mountaineering analogy to explain why he is not worried about what he sees as temporary bumps along the way. “I like to climb mountains. You cannot climb smooth surfaces. Every mountain has bumps.”
Analysts believe that HUL does face an uphill task in its quest for profitable growth in India.
HUL “needs to do more in India. The company has 40-45% market share in the categories it plays in. Protecting such large market shares is difficult. They need more growth levers. The company has to grow its existing categories and develop new categories. It has been found wanting on both these fronts,” said Nikhil Vora, managing director, IDFC SSKI Ltd, a brokerage.
Polman said Unilever was leveraging its global network through the exchange of ideas and expertise. Products developed in India such as Pureit water purifiers have been taken to other markets such as China, Indonesia and Brazil while the new range of Sunsilk shampoos developed abroad have been brought into the Indian market. Paranjpe added that Unilever sent global experts from other markets to help HUL develop capabilities to deal with modern retail chains.
Polman refuted some of the criticism levelled against Unilever on the lack of new products in its portfolio. “They (retailers) are complaining that the new offering of soupy noodles marketed in the South is moving too fast from the shelves.” He added that half of HUL’s portfolio “did not look like this a year ago”.
“They cannot keep it on their shelves,” he said in jest, and added that the challenge for Paranjpe would be meet demand for products such as the new line of noodles.
Polman was also upbeat about the performance of the Unilever stock. His tenure has seen the stock gaining 45% as the market acknowledged it as the “fastest growing consumer goods firm”. He added that its international competitor, a reference to P&G again, was 6% down during the same period. “If I were an Indian investor, I’ll be hugely excited”.
The Unilever CEO also stressed that HUL’s 75-year track record in India gives it a deep understanding of the Indian market, “unlike some competitors who are waking up now saying that India is important,” he said, taking another dig at P&G. “We have been here for 75 years and I am not concerned about three months or six months,” he said, reiterating his intention to focus on long-term business development.
Separately, HUL informed the stock exchanges that it was divesting its shareholding in Capgemini Business Services (India) Ltd, a business outsourcing firm where it had a 49% stake and an option to exit by March. The value of the sale was not disclosed.
satish.j@livemint.com
Sapna Agarwal contributed to this story.
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First Published: Tue, Mar 30 2010. 12 30 AM IST