Under new Chairman M.S. Banga, Hindustan Lever is incubating a brood of startling plans that could radically change the way the FMCG giant thinks and works. And the new mantra at Lever House is to do all this at Netspeed.

By Sanjoy Narayan & Roshni Jayakar

Dalip Sehgal's colleagues at Hindustan Lever (Lever) jokingly call him Director (New Adventures). But Sehgal, 42, could easily be called that instead of his real designation, Executive Director (New Ventures). In his true-to-Lever style, starkly-furnished fifth floor room at Lever House, there's very little clutter. On his desk there's a PC and a laptop, both switched on. The walls are bare and conspicuously white. Perhaps that helps. For the salt-and-pepper-maned Sehgal's new job is all about serious, uncluttered thinking. Heaps of it, actually. It's here in Sehgal's room that the Rs 10,142-crore FMCG giant is hatching its plans for the future. They are startling plans.

So startling that Leverites in the know, from the new Chairman Manvinder Singh ''Vindi'' Banga to senior managers down the line, are keeping them close to their chests. Take rural micro-banking, for starters. Sehgal is putting in place a pilot-project that could change the way Lever does business in India's rural markets. It's a business model that's innocuously labelled 'rural consumption', but if it works, it could radically change the potential that Lever could tap in India's rural markets. The model aims at stoking consumption through micro-credit to rural consumers.

The logic is simple. Of the six lakh villages in India, Lever's products reach just 70,000. Even among these, there are thousands where 70 per cent of Lever's products aren't consumed, often because retailers don't want to stock them for want of demand. Lever wants to crack that by generating demand. How? By taking a leaf out of the success of the Grameen Bank in Bangladesh. Lever wants to tie-up with institutions like the National Bank for Agricultural & Rural Development (NABARD) and Non-Government Organisations (NGOs) to provide small loans to villagers, who could use part of it to buy Lever's products and sell them in their villages. Says Sehgal: ''It is like replicating, in the rural markets, the Direct-To-Home (DTH) selling that we do for our cosmetics brand like Aviance in urban markets.'' Lever expects the plan to generate double-benefits: alleviate poverty in villages and increase the penetration of its own products.

It's easier said than done. While institutions like NABARD, and several NGOs have expressed interest, tough issues remain to be cracked. Like, how will Lever ensure loan recovery? Or, how will it co-ordinate with NGOs? Or, even, how will it ensure the distribution of products? Sehgal's team is, thus, cautious. First off the block will be a pilot project in Andhra Pradesh and Uttar Pradesh. ''We'll learn from how those fare,'' says Sehgal, with the air of a man raring to throw caution to the winds and take a plunge.

That's uncharacteristic of a company known for its painstaking ground-work and in-depth market research before trying something different. Not for rushing into new territory. But, get ready to meet the new Lever. Cut to the corner-room at Lever House and the mantra is all about moving things at Net speed. And of growing businesses ''across different time horizons.'' Says Banga, 45: ''There has to be a recognition that speed is important. In the past, we tended to act after a lot of research. That's fine. But often, it's better to go to the market when an idea is 90 per cent born and do the rest of the learning in the market. That's a quicker and a surer way to get there rather than trying to aim for total perfection.''

What's the hurry? After all, Lever may be a leviathan, but it can hardly be called slow. Its rapid-fire takeovers through the 1990s, and a slew of launches across all product categories bear ample testimony to that. Then what is it that is making the brass at Lever House antsy about pace? For an answer, look at the market. Last year, Lever's growth rates across several categories slowed down. In personal products, which accounted for 17.40 per cent of its turnover, the growth rate dropped to 15.66 per cent from 30; soaps, detergents and scourers, which form 40.44 per cent of the turnover, grew by less than 11 per cent, and in ice-creams, where the company boasts a 50 per cent marketshare, growth was a mere 10 per cent. But the biggest blow came from beverages, where sales actually slumped by 12.45 per cent. In fact, Lever's topline at Rs 10,142 crore grew by barely 7 per cent.

Part of the problem was beyond its control. Like the 8 per cent excise duty on packaged tea that hit beverages turnover. But elsewhere, Lever faced trouble of a different order. In soaps and detergents, consumers downtraded from premium, high-value products to lower-priced brands even as sniper attacks by competitors like Nirma, which undercut Lever's soap brands, took their toll.

Redefining the markets

Even if these could be dismissed as short-term blips, there were more serious long-term concerns. Like constraints for further volume growth. In categories like personal wash, where Lever has nearly 70 per cent marketshare and a market penetration of more than 90 per cent, it is tough to expect volumes to grow fast. That is precisely why new ventures form the core of Lever's new Millennium Project (Lever's Millennium Project, BT, August 7, 1999). Lever now wants to expand its markets. Says Sehgal: ''To increase our share of the consumer's wallet, we need to look for growth also in new categories.'' Sehgal is spawning a rash of experimental pilot projects. Off the block in Mumbai is the Surf Laundry Service, which provides laundromat-type services to households. Explains Banga: ''Growth is all about mindsets and how you define markets. If instead of the toilet-soap market, you look at the market for bathing, you are talking about an opportunity that is several times bigger.'' Adds Aart C. Weijburg, 50, Director (Detergents): ''In toilet soaps, we have a 90 per cent penetration, but, in India, usage is 0.4 kg per annum against Thailand's 0.6 kg and Brazil's 1.3 kg. So you can grow the market by a factor of three if you reach Brazil's level of usage.''

Not surprising that Banga wants to redefine Lever's markets. Already, besides the laundry services, Lever has extended its cosmetics line Lakme into beauty service salons. More such expansions are on the cards. A sampling: the cold retail chain that Lever has for its Rs 171 crore ice-cream business could be used to stock fresh vegetables; the daily distribution system of its newest acquisition, Modern Foods, could be used to push retail perishables like ready-to-eat chappatis. Says Sehgal: ''We are looking at a host of service areas that have links with our existing businesses.'' His target: new ventures like these should tot up 8-10 per cent of Lever's turnover in the next five years.

Simultaneously, it wants to reach new markets using new channels. Like it has done with its upscale Aviance cosmetic brand, which is sold through a DTH network. There are plans to sell many other products through the DTH route. Recently, Lever launched a dial-in service-Hello Hindustan-which is essentially a consumer helpline but could be converted to a shopping service too. Says Sehgal: ''There are 30 million telephone connections in India and that's a huge potential for marketers.''

Getting the e-advantage

Then there's the Net initiative. As a first step, Lever has put in place a network connecting all its suppliers and has kicked off a pilot project for wiring up its 7,500 distributors. In the second phase, it will attempt the mammoth task of connecting its top retailers. And finally, it wants to use the Net to transact. Lever sees the e-tailing opportunity not only for its own product categories but for a larger universe of products. With its formidable distribution system, which covers nearly two million retail outlets, Lever already has in place the back-end infrastructure that other e-tailers could kill for. Last April, at Lever's annual general meeting, outgoing chairman K.B. Dadiseth said the company was ''uniquely positioned to create India's most widespread, robust, and efficient clicks-and-bricks company''.

Lever's e-gameplan is to build a number of market-leading B2B and B2C businesses in high-potential areas. And, in doing this, it will leverage its strong consumer and supplier relationships and its cache of human talent. Not surprisingly, the new chairman's top priority is motivating Lever's legendary corps of talented managers. ''(My biggest) challenge is ensuring that we continue to have the best people and the most entrepreneurial culture,'' says Banga. To ensure that, Lever has its own internal venture capital fund which will fund ideas generated by its own people. For starters, three ideas-all dot.coms-have been cleared for funding and support. More are on the cards. ''The fund,'' says Banga, ''recognises good ideas, allows a certain amount of investment to develop it, and measures the results.''

Apart from promoting intrapreneurship, Lever has split up its product categories to offer its younger managers greater opportunities to run businesses. Says Prem J. Kamath, 50, Head (Management Resources): ''Now that we have a highly divisionalised structure, the opportunities within the company are immense.'' The Lever board now has executive directors in the late 30s (like Gunender Kapur) and early 40s (Dalip Sehgal). That apart, managers in their 30s are for the first time getting an opportunity to head businesses.

Focusing on food

But Banga's other big challenge is to grow Lever's food business. Currently, branded staple foods, like Kissan Annapoorna atta (wheat flour) and salt, account for a piffling 2.15 per cent of Lever's turnover. But last year they clocked a growth of over 36 per cent. Banga wants to bump the Annapoorna brand up from Rs 233 crore currently to Rs 1,000 crore in three years. This will be the building-block for Lever's food business. Says Gunender Kapur, 39, Executive Director (Foods): ''Historically, several companies and brands have tried to market products that have been transferred from an eating culture that is not similar to India. We will be focused on the centre of the Indian plate, and starting from there, we will get into value-added products.'' So, Lever started with atta, and then progressed to the value-added foods like chappatis, which is in pilot stage.

But Lever's dalliance with ice-creams, despite the fact that the takeover of Kwality gave it a 50 per cent marketshare, has been cheerless. Admits Banga: ''The progress in the ice-cream business has been slow. It is a complex and capital-intensive business, requiring a cold chain from the time of manufacture, through distribution, to the point of sale. That has been a major constraint in growing the market.''

The crux of the problem in the foods business is to convert the Indian consumer from buying commodities to buying brands. And the way Lever is trying to crack that problem is by convincing her that the benefits of buying its brands are superior. Says Kapur: ''Strategically, we are looking at three things: (offering) relevant superior benefits to the customer; leveraging our technology to add value to commodities; and using our supply-chain expertise to keep costs and, therefore, prices affordable.''

But despite the attempt by Leverites keep it low key, the real buzz at Lever House keeps revolving around what Sehgal and his team of young managers are up to in the New Ventures division. Of nearly 200 ideas culled from managers across the company after a rigorous bout of screening, nine new growth engines have been identified as the future thrust areas. And apart from sneak previews like the one on micro-credit, Lever House is keeping its mouth shut. ''There's a lot of excitement about what is happening,'' chuckles Sehgal, ''and even if two out of the nine succeed, they can be big. This is really visionary stuff.'' That's Lever@netspeed speak.

Issue Contents  Write to us   Subscriptions   Syndication 

INDIA TODAY |  INDIA TODAY PLUS | COMPUTERS TODAY
TEENS TODAY | NEWS TODAY | MUSIC TODAY | ART TODAY | CARE TODAY