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LEVER Has Chairman Vindi Banga brought it back on track? Just when everyone was busy writing off HLL as a low-growth company, it has surprised the market with a 7 per cent sales growth. A look at the story behind the numbers. By Brian Carvalho
The year may not be over yet, but if the progress made by the power-brand basket of the Indian subsidiary, the Rs 11,764.31-crore Hindustan Lever Ltd (HLL), is any indication, Chairman Manvinder Singh Banga and his core team could well be in the running for those glittering trophies. In markets that have stagnated, and some segments in which there has even been negative growth, HLL has been able to hold its own by backing key brands with all its financial and managerial might. Sales growth of the power brands was up by close to 5 per cent in the first half and leapfrogged into double digits (10.5 per cent) in the third quarter, even as key industry categories like personal wash, laundry wash and tea posted negative growth. It's still early to say whether HLL's power brand strategy will prove a long-term success, but as the Chairman points out: ''We're on the right track, if you look at the growth of our power brands against the backdrop of the growth in the categories in which they operate. All our brand health indicators are getting stronger.''
The performance in the soaps and detergents business, which contributes 80 per cent to HLL's sales, is indicative of the progress made so far. In the Rs 3,203-crore toilet soaps market, where the industry has recorded a 7.5 per cent decline so far this year, Lever has been able to maintain its market share at last year's levels of 60 per cent. This has been on the back of a 60 per cent growth (so far this year) of Breeze, a 1 per cent growth of Lifebuoy in the third quarter (after six quarters of declining volumes), and a close to 4 per cent uptrend in Lux. The figures may not be the most impressive, but the good news for HLL is that it has been able to buck the industry trend. In laundry wash too, Aart Weijburg, Director (Detergents), expects to end the year with a 0.5-1 per cent gain this year, up from 39 per cent last year to 40 per cent in an industry that was flat in the first two quarters and which slumped by 3 per cent in the third quarter. Weijburg reveals that Wheel has been able to regain the leadership status it had lost to Nirma last year, by registering double-digit growth through the year. Not just that, Rin has jumped to No. 2 position, and together Wheel and Rin bar now command a 25 per cent share in the detergents market. Serious Competition Ahead That's not bad for a company that's not just been grappling with a sluggish market but losing market share to rivals like Colgate, Procter Gamble and Godrej as well as low-cost players like Nirma and CavinKare in recent years. Nirma, for instance, was largely responsible for eating into the 70 per cent of the soaps market that Lever once commanded and the declining volumes of the cash cow, Lifebuoy. In toothpastes, Colgate finally woke up last year to stall the strides being made by Close Up and Pepsodent. And in skin care, CavinKare, Godrej and Paras were threatening to put a halt to the supremacy HLL enjoyed in this high-margin business. This was reflected in the dramatic 7 per cent dip in growth in 1999 and the virtually stagnant top line in 2000.
The power brand strategy may have thrown up encouraging results, but if HLL is honing its gameplan, its competitors aren't just looking on. Colgate, with its high-decibel 'Talk to Me' campaign, is determined to increase its lead in toothpastes. For the first time, HLL is facing serious MNC competition in detergents, in the guise of P&G, which has aggressively cut prices of Tide. In another declining category, tea, Tata Tea is set to attack the premium segment, which is currently dominated by Lever's Taj. And in ice-creams, where HLL is still coming to terms with the distribution challenges, there's Amul to contend with, which derives plenty of advantages thanks to its cost advantages and non-profit policy. And in foods, more than branded competition, HLL finds itself competing against the very raw materials that go into products, be it wheat grain or oil sold loose, or tomatoes, which obviously are much more cost-competitive. The New Buzzword Banga sums up his counterthrust in one word: focus. That indeed is the buzzword that reverberates amidst the old-world confines of Hindustan Lever House in Mumbai's financial district. And it's with focus as the central theme that HLL expects to continue ride on the growth of the power brands, improve profitability, and sustain it over the long term. ''We have to focus on those brands with the maximum potential, size, and competitive strength. Our advertising and promotional expenditure, brand support and people time have to be realigned to focus on 30 instead of 110,'' says Banga. To be sure, advertising expenditure increased by 30 per cent in the third quarter, and HLL has spent Rs 70 crore on product upgradation, which is reflected in the relaunch of the soaps & detergents and toothpaste brands. The packaging, fragrance, fat content and lathering abilities of Lux have been improved, and ingredients like honey and almond oil added. Lifebuoy, at the carbolic end, has been repositioned as a health product, which also paves the way for the brand to be extended into broader health applications. The 30 brands aren't cast in stone, but the basket will constantly evolve. In the personal products category, which currently boasts nine power brands-Fair & Lovely, Clinic, Sunsilk, Lakmé, Ponds, Pears, Nihar, Close Up, Pepsodent-four more are lined up as potential power brands. These are Vaseline, Rexona (deodorant), Axe and Lux (liquid). Then there are also 11 regional jewels like Rexona (soap) and Hamam, which HLL is sticking with because of the loyalty they enjoy in certain markets.
Focus at HLL also means putting more people behind the vital brands, and breaking down the categories into 'mini-businesses'; the three major categories have been broken up into 9-10 mini-businesses. Soaps & detergents, for instance, has three prongs: personal wash, fabric wash and mass markets, into which the lower-priced brands like Wheel, 501, ok, and Lifebuoy have been put. If HLL is going to focus on just 30-40 core brands, that doesn't mean that the rest will be junked. Sure, there will be some that will be milked and gradually phased out. In personal products, 10 brands with no long-term future have been identified, and in foods, much of the International Bestfoods portfolio (Rex, Brown & Polson, Tarla Dalal) will be pruned. The exception is Knorr-a $2.5 billion-plus global brand-which has been given power-brand status. Yet, in those brands that have critical mass and synergies with the core brand, an attempt will be made to migrate their consumers to the power brand basket. The migration process is still at an early stage, and a beginning has been made with Coco Care hair oil being devolved into Nihar. Similarly, Ala fabric whitener is being migrated into Rin (in three stages) as is the 501 bar into Rin bar. The umbrella branding strategy of the group will also call for extensions, but not before the strength of the core brand is ensured. In skincare, for instance, Fair & Lovely is growing by 9 per cent, and the HLL top brass is convinced that the health of the brand has improved. That explains the decision to extend it into soap. Similarly, Close Up has been extended to Close Up Whitening, and Lakme into services in the guise of Lakme Beauty Salons. Fair & Lovely may also be a soap now, but the core proposition of the brand -fairness-remains the same. ''By launching a soap, we are giving more consumers an opportunity to experience the brand,'' explains Arun Adhikari, Executive Director (Personal Products). Indeed, increasing consumption is one of the key focus areas for HLL, particularly in markets that are close to saturation. Take shampoos, a category in which urban penetration is close to 70 per cent, where Clinic and Sunsilk have been launched in 8-ml bubblepacks. The objective? To woo one-time users (of sachets) to graduate towards larger packs, which are still not as large enough as the regular ones. All the same, Banga isn't convinced that the shampoo market is saturated. For, if you look at this category as a part of the larger segment of hair washes, penetration is just around 10 per cent. The trick then is to get more people who use soap to wash their hair to use shampoo. Simultaneously, HLL has grabbed the opportunity for a hair and body soap by launching one as a part of the Breeze range. Meantime, HLL's new ventures are taking shape, probably not as fast as some analysts would have expected. As part of Project Millennium, Lever had identified eight new forays, of which only one-confectionery-has taken off nationally. ''We can move at lightening speed only in those businesses that we understand. In the new areas, plenty of care and caution have to be exercised, since we have to develop new competencies here,'' says Banga. 1 2 |
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On
12 February, 2002, the $ 43-billion Unilever will play host to an awards
ceremony-the Path To Growth Awards. Those who wish to take home a trophy
will have to demonstrate how they successfully implemented the company's
now-famous path-to-growth strategy, which calls for concentrating
innovation and development on a portfolio of core brands. The two
co-chairmen of the Anglo-Dutch foods, and home & personal care giant-Antony
Burgmans and Niall FitzGerald-will announce the winners at the OBJ (Unilever-speak
for its annual review meeting, which for some reason apparently stands for
Oh Be Joyful), which will be held on February 12, either in London or
Rotterdam. The trophies will be handed out at subsequent cascade meetings
in the 14 days after the OBJ by one of the Unilever chairmen at one of the
group's regional bases.
