New Delhi: India is best placed for growth among emerging markets, said Paul Polman, chief executive officer (CEO) of Unilever Plc. “In India, there is positive news. I have seen the mood swing enormously in India, and outside of India towards India in terms of positive perception of the country. Interestingly, your inflation rates have come down from 10% to about 5%."
The CEO of the Anglo-Dutch consumer packaged goods company was in India to meet Prime Minister Narendra Modi and to attend a conference on climate change in New Delhi. Hindustan Unilever Ltd (HUL), the Indian unit of Unilever, is the country’s largest packaged goods company and the maker of brands such as Lifebuoy, Lux, Surf and Kissan.
Polman sees a natural connection between the ambitious programmes of the new government in India—smart cities, Clean India, Make in India and clean energy—and his company’s interests in growth as well as larger objectives such as health, hygiene, and sustainability.
Polman said he is talking to the government to explain his company’s current projects through which it reached 125 million more Indians over the last five years. “We wanted to see how we can work together with his (Modi’s) programmes, which are very much in line with our business strategy. Together, we can scale that to 200 million people by 2019."
Since 2010, the company has touched 60 million people for its hand washing programming through its soap brand Lifebuoy and 55 million people through its water purifier brand Pureit. “We also plan to build 100,000 toilets," Polman added.
A proponent of responsible business and sustainable sourcing, Polman is the chairman of the World Business Council for Sustainable Development and recently served on the High Level Panel of Eminent Persons looking at Post 2015 Development Agenda on the invitation of the UN secretary general.
In a discussion with reporters in New Delhi, Polman said the Indian subsidiary of Unilever has outpaced the parent in terms of growth. Hindustan Unilever doubled its India business over the last six years even as its parent Unilever Plc grew 30%, he explained. India is better placed than most emerging markets in terms of growth, he said.
As for the developed markets, Polman sees a long road to recovery.
“I have been saying this quite consistently..., that Europe is in for a long and slow recovery. Growth on the global level as the International Monetary Fund has reported, has definitely slowed down."
IMF has also predicted that in 2016-17, India will grow faster than China. “Now that’s very attractive for anybody...," he said, adding that if India were to tackle issues of climate change and lack of water, it could grow faster by a percentage point. Polman is part of a project called New Climate Economy, under the aegis of the Global Commission on the Economy and Climate that, according to its website, “provides independent and authoritative evidence on the relationship between actions, which can strengthen economic performance and those which reduce the risk of dangerous climate change". The commission itself is a grouping of business executives and politicians (including some former heads of state and finance ministers) that seeks to understand the economic impact of climate change.
“It is a crucial year for India as climate change negotiations are happening which will be finalized in December in Paris. And at the same time, sustainable development talks are going on," Polman said.
Emerging markets account for 60% of Unilever’s revenue. Despite the slowdown in China, the growth rate of 7% in that country is the kind of number that people in Europe would kill for, he joked.
The company’s emerging market business, Polman said, would still grow at 7% for the entire year.
India, according to Polman, isn’t just a market. Some of the low-cost manufacturing know-how the company has acquired in India is being exported to other markets, he said. “Indian engineers are currently building Unilever’s factories around the world. That’s another example where India plays a key role. We are, as a company, 98% sourced in India, we export from India. We are very much a Make in India company unlike some of our competitors."
Unlike the rest of the world where food accounts for 40-45% of Unilever’s revenue, in India it does just 20%. Still, the business is growing in the double digits, he added.
Growth is also coming from the e-commerce segment, especially in large cities such as Mumbai, he said.
“Just like the modern trade or the traditional channel, we have to look at e-commerce as an emerging channel. Has it totally changed the market? I don’t think so. Will it be 5-10% in the big cities? It is absolutely possible," he said.
Hindustan Unilever has to be part of the e-commerce channel in India, he said.
The Indian company was among the earliest to pilot a e-commerce storefront.
“In the next few years, I expect my global e-commerce business certainly to approach the size of our total HUL business," Polman said. However, he is not keen to launch his own e-commerce portal. “The distribution side, in its broader sense, is best done by distributors, we do not see ourselves competing, which makes us a very attractive partner for retailers because we work with them to optimize their systems and shopper journey and we focus on brands and bringing innovations."
Shares of HUL have risen 59.8% over in the year to 3 February. BSE’s benchmark Sensex has gained 43.5% in the same period.
“Even globally our share prices are at an all-time high, up 40% versus over a year ago. You talk about the value creation of €50-60 billion in a short period of time. And we are doing this while moving all of our production to sustainable sourcing, moving all our energy usage to green energy and while implementing the highest social standards in our value chain with our responsible sourcing code," Polman said.
A 19 January report in Mint said that HUL December quarter earnings disappointed investors. The company reported weak earnings and sales growth, which was below analysts’ expectations, as consumers continued to hold back on their small and discretionary spends. Net profit after adjustments grew just 0.06% to ₹ 955.32 crore from ₹ 954.74 crore a year ago.