M.S. Banga, Chairman, HLL: Facing an uphill task

There's this dictum in the rulebook of the Anglo-Dutch foods and consumer products giant, Unilever, that forbids managers anywhere in the world from travelling on highways after 7 pm or once it gets dark, whichever comes first. That's why last fortnight Manvinder Singh Banga, the dapper Chairman of Unilever's Rs 10,668 crore Indian operations, Hindustan Lever Ltd, was keeping an eagle eye on his wristwatch during the bumpy drive in the backseat of a Mitsubishi Lancer from Morena to Rajkot in southern Gujarat. The HLL chief's mission: collect market feedback, and coax dealers to stock his company's myriad products.

Banga did manage to stick to that 'don't-drive-after-dark' deadline last fortnight, but when it comes to his company you have to wonder. For the past two years, has India's premier, savvy and street-smart fast-moving consumer goods (FMCG) marketer been cruising in the dark on a road to nowhere? In this period, growth for HLL's soaps, detergents, tea, personal products and packaged foods slowed down-along with the market-and even dipped into negative territory. From a scorching compounded annual growth of 26 per cent from 1993 to 1999, Lever has lost plenty of steam. Second-rate, single-digit growth isn't something you'd expect from HLL. Certainly not pre-2000.

In Rajkot, Banga tries to find answers to some elusive questions-and the elusive growth. "Which is the best-selling shampoo in your store?" he quizzes a dealer. "Is Vaseline Crack Relief picking up?" flies another query. "And what about Surf's Rs 2 pouch?" Then there's inevitable hardsell. "Why don't you stock Kissan Squash, you know it is the best squash in the country," he urges a gloating proprietor of the brand-new, neatly-laid-out, self-help Shital Supermarket.

Such banter in the marketplace may help HLL build (or should we say rebuild) bridges with shopkeepers across the country. But there's another question that must be keeping the HLL top brass awake at night, and the answer to which may not lie in the market but in your home. "Just why are consumers not buying enough from HLL?" "The biggest concern is that the company is losing marketshare in a stagnant/declining market," says Nirav Sheth, Vice President (Research), SSKI Securities.

Indeed, even till 1995-96 HLL had limited competition to contend with in most categories. Then came the likes of CavinKare (with shampoos), VVF Ltd (soaps), Anchor Health (toothpastes) and Paras Pharma (in skincare), who began chiselling away at Lever's chunky market shares. What's also not helping the HLL cause is that the other big boys-Colgate, Procter & Gamble, Godrej, and Marico-have begun getting their act together and are formidable competitors in crucial categories.

HLL's power-brand strategy announced in January 2001-conceived by Unilever-which called for focusing on a basket of key brands (30 power brands and 10 regional levels) doesn't seem to have helped prop up that topline, either, although it has had a positive impact on profits. "The company was in serious danger of losing even its earnings growth had it not been for the power brands," points out Rajesh Kothari, FMCG analyst with Khandwala Securities.

Tell Banga that the power brand strategy is a failure-as some analysts suggest-and you'd have probably got his goat. "Companies must pace themselves well. I am of the view that our strategy of creating 'fuel for growth' is working," he maintains. But really, it would be uncharitable to heap all of the blame for HLL's no-growth patch on the current chairman. Travel back instead to the early and mid-nineties, when much of HLL's growth was fuelled by acquisitions. To be sure, between 1993 and 1998, the FMCG giant's organic growth was just 14 per cent on an annual compounded basis. Acquisitions-of Tomco, Kwality Ice Cream, Dollops Ice Cream (from Cadbury) and Lakme-and the mergers of all of Unilever's India businesses into HLL (Brooke Bond, Pond's and more recently International Best Foods) accounted for the remaining 12 per cent.

"These businesses needed a little more time to be absorbed in HLL, and of that we had little, what with the scorching pace of acquisitions scripted by the then chairman," says a former senior manager who was in the thick of the HLL merger mania of the nineties. One of the costly legacies of the acquisitions rush was multiple distribution channels leading into rural India, one for soaps and detergents, another for personal products, and yet another for beverages. Not just that, such a product-category-led system meant that rural markets-which account for nearly 45 per cent of HLL's profits-were just the tail of every sales territory rather than its focused head, to be grudgingly serviced. It is only recently that Banga has integrated the entire rural penetration into one, with a separate and dedicated force-regional sales manager downwards-for the rural areas.

Dalip Sehgal, Head (New Ventures), HLL HLL cannot rely too much on its new businesses, even though some of its newer brands are making profits

Another of yesterday's mistakes could have been reacting to price warriors like Nirma, Amul, Fena and CavinKare by launching discount brands or extensions at lower-price points. That worked up to a point. Until the bit players-Kanpur Detergents, makers of Ghadi detergents, VVF, Ayur et al, started doing a "Nirma on Nirma." Lever suddenly realised it couldn't play this bare-bone cost game. "In hindsight, we should have been raising the hurdle instead of getting into playing the game their way, which was on just price," admits a candid Aart C. Weijburg, Director (Detergents), HLL.

"To keep the growth engine chugging, even at single digits, for a company of HLL's size, a good number of product innovations and brand launches were needed regularly. But there were very few," says Jigar Shah, Head of Research at K.R. Choksey. The regional brands, in the meanwhile, took off. Geogi E. Zachariah, Group Product manager of the Rs 100 crore Jo soap brand from Mumbai-based VVF refuses to buy the logic that consumers are gravitating towards lower-priced brands just because of recessionary conditions. "What we are offering the consumer is a product of much better quality at half the price," he volunteers. In HLL's case, meantime, it's difficult to recollect a successful brand launch in the past decade. Be it Aim toothpaste or Le Sancy soap or washing machine detergent Revel, or women's deo Impulse (or the distribution of Unilever's Calvin Klein in India), none of these brands caught the consumer's fancy.

Then there's the dilemma in foods, with Annapurna. HLL got it wrong to begin with by rapidly making inroads into staples in 1995-perhaps too rapidly, given the low-margin, low-differentiation nature of the business. In a bid to convert consumers from loose to packaged atta, Lever spent heavily on advertising, with no attempt to even start creating a value-added processed foods portfolio. The growth in staples did not live up to the investment, and the business is still bleeding though Banga hopes to make it profitable soon. Gunender Kapur, Executive Director (Foods) says profitability in atta is an issue in the North and the East, but "it is our objective to build a profitable foods business."

D. Ravindranath, ED (Beverages), HLL Among the thing HLL plans to try out is a huge out-of-home foray into tea with Lipton parlours

HLL's famed marketing firepower was not enough to make its foray into ice creams a success, either. For five years, Lever crossed swords with Gujarat Co-Operative Milk Marketing Federation (GCMMF). Final result: Amul is King, a battered HLL retreats from the mass market to focus on the top metros (which are more profitable), and that too with only value-added products. "How could they even think all this while of competing with us for the mass-market with just one product (ice-cream) when our production, promotions and distribution costs were spread across the entire dairy line," sniggers R.S. Sodhi, General Manager (Marketing), GCMMF.

If HLL is guilty of not earning enough returns on huge investments in some categories, you can also accuse the marketing behemoth of cold-shouldering sunrise opportunities. Like direct selling, for instance, which has quietly become a Rs 1,600 crore business, a large part of it being personal products with Amway, Oriflame and Avon ruling the roost. HLL, with Aviance, is still knocking at the door.

So what's going to rescue HLL now? Don't rely too much on the new businesses-confectionery, herbals, etailing, etc-though Banga expects them to contribute between Rs 300 crore and Rs 500 crore in five years. Dalip Sehgal, Head (New Ventures), says the Max confectionery brand is already profitable. Creditable indeed, but don't expect its Rs 50 crore revenues for the current year to do much more than tickle the topline. "In the foreseeable future new businesses can't be swing factor for HLL, although they are as important as shampoo seeding way back in 1991-92," points out Sandeep Bhatia, FMCG analyst with UBS Warburg.

Gunender Kapur, ED (Foods), HLL "Profitablity in atta is an issue in the north and the east, but it is our objective to build a profitable foods business"

So it is around HLL's existing businesses that Banga claims that the growth swing will unfold, most likely in 2003's second half. "Well, the market says a soap is a soap and that emerging categories are mobile phones. What about intensity of consumption?," questions Banga. Already the company has put its key soap brands in Lifebuoy, Lux and Liril through the re-launch paces, resulting in at least the market share decline being arrested. "For us, getting soaps and Wheel right was first, and in 2003 we will attack top-end laundry wash in Surf and Rin," says Weijburg.

For the next 6-12 months HLL has lined up its most ambitious foray into processed foods, that includes biscuits, spreads, spices, and cooking aids. As S. Ravindranath, Executive Director (Beverages) reveals, also on the anvil is a huge out-of-home foray into tea with Lipton parlours. HLL will also push ready-to-eat Annapurna chapati through the Modern bread-distribution system. And there will be a renewed focus on low-unit-price packs, even going down to infra-dig 50 paise sachets and a Rs 5 Pond's jar.

The scale of those plans sound intimidating, but competitors these days don't fear the marketing juggernaut so much-maybe not at all. As GCMMF's Sodhi quips: "Well, like in the past, we'll let them create the market. Then we will take away the consumer." For HLL and Banga, it's nearing 7 pm, and getting dark...

WHAT SLOW-DOWN? Slowdown, at least in the FMCG business, seeems to be an HLL affliction. A clutch of homegrown marketers is not just growing at a blistering pace, but taking away share from their larger competitors such as HLL. So just how are they doing it? BT looks inside eight of the newer challengers.

Anchor's Atul Shah: Positioning made all the difference Anchor Health The Vegan Smiles Four years ago, when Atul Shah ventured into the FMCG industry, he was flying in on a brand and a hope. If Shah is all teeth today it's because his flagship Anchor toothpaste is a Rs 150-crore brand with a marketshare of 9.7 per cent-behind Colgate-Palmolive and HLL. What explains the explosive growth? One, the choice of market and positioning. Anchor focused on predominantly vegetarian Gujarat and Rajasthan, and positioned its toothpaste as a vegetarian product. Two, price. A 250-gm pack of Colgate costs Rs 62, while Anchor's 200-gm pack costs Rs 35. Says Shah: "We offer quality at a price that our competitors can never match." He now plans to launch soaps and detergents, and beauty products. -Dipayan Baishya Parakh Foods' Prakash Parakh: Shift to packaged oils helped Parakh Foods Oil Money If you don't live in west India and any of the smaller towns elsewhere, you probably haven't heard of Gemini. But HLL's sure to have heard of it. Launched six years ago, Gemini today is packed out of the largest single-location edible oil factory in India. It claims to have a 12 per cent share of the Rs 4,000 crore edible market, and leads in the western region. Prakash Parakh, the company's MD, expects the 25 per cent rate of growth to continue for the next few years. Parakh has benefitted tremendously from the consumer's shift from loose edible oils to packaged oils. But the shift isn't complete. A good 70 per cent of the market is still for loose oils. Says Parakh: "We believe in reasonable pricing and increasing the reach so as to grow faster." -Shilpa Nayak Jyothi Labs The Bright One This is the company that humbled Reckitt-Benckiser in the fabric whitener business. Jyothi's Ujala apparently controls 75 per cent of the Rs 200-crore market. Says M. P. Ramachandran, its ceo, who thought of Ujala in 1982 while working as an accountant at a chemicals trading firm: "The secret of our success is very systematic marketing on a large-scale basis throughout the country." Last year, Jyothi launched Maxo mosquito repellent, and more recently Exo, a washing bar. Ramachandran's vision, however, is to be a comprehensive FMCG company, a target he plans to achieve over the next few years. -Shilpa Nayak Ghadi detergent: Growing at biggies' expense Kanpur Trading Company The Next Nirma KTC's murli Gyanchandani is another Munusamy. And he is widely seen as the next Karsanbhai Patel of Nirma. Born as a home-delivered brand, Ghadi Detergent, is said to be a Rs 450 crore business, with a strong presence in North. People in the know attribute Gyanchandani's success to clever pricing and attention to quality. At Rs 17 a kilo, Ghadi takes Nirma head on. The second brand Double Dog Detergent sells at Rs 50 per kg and targets premium MNC brands. -Seema Shukla Ozone's S.C. Sehgal: Ayurveda proved a big hit Ozone Ayurvedics Full Marks S.C. Sehgal, a seven-year veteran of Glaxo, had been running a pharma company for nine years before he one day decided to take a trip to New York, London and Paris to search for a new direction for his company. He needn't have bothered, for the answer-as he later realised-was staring him in the face from shop shelves. A growing number of ayurvedic products. That was in 1991. Two years of research later, Sehgal came up with No Marks, which till 1999 was unbranded. Now, his ayurvedic business is set to overtake his Rs 40-crore pharma business. Some savvy advertising-such as advertising on Aaj Tak, the biggest Hindi news channel-has created a hi-profile for the brand, which currently rakes in Rs 4 crore in sales every month. Sehgal already exports to the Middle East and has clearances for Canada. His dream, however, is to see No Marks in the stores he visited in London, New York, and Paris in 1991. -Seema Shukla Kaleeswari: An impressive Southern story Kaleeswari Refinery Tear, Sweat, and Oil G. Munusamy hates the media. That's because he'd rather work than talk about it. Good idea. In fact, so good that it has-in just 30 years-helped him turn from an oil trader to a mini (edible) oil tycoon. His Kaleeswari Refinery, set up in 1995, has gone from 25 tonnes per day (TPD) to 285 TPD today, with an expected turnover of Rs 340 crore this fiscal end. "Our motive was to penetrate the market with attractive pricing and volumes," says General Manager T. S. Sethuramachandran. To cut costs, its Gold Winner brand does not use middlemen in Chennai, but sells directly to stores. But elsewhere in Tamil Nadu, it works through 10 dealers. Munusamy's dream: to make Gold Winner an international brand. -Nitya Varadarajan RDM's D.S. Narang: Herbal products proved a goldmine RDM Traders Slow And Steady A tiff with his boss changed D.S. Narang's life forever. That was the day when he quit being an employee and turned entrepreneur, manufacturing herbal products at his home in Delhi's Patel Nagar. Today, with six plants, 1,500 distributors, and 22 C&F agents, Narang's 10-year-old Ayur herbal brand fetches Rs 100 crore a year. His USP: "I get amala for Rs 10-20 per kg and sell my shampoo for Rs 80, while others sell theirs at Rs 200. How much can you charge for a name?" asks Narang. RDM recently entered south in a bid to enhance its national presence. But the man says he is no hurry. He wants to build brand slowly and steadily. -Seema Shukla Kunvar Ajay Ind's S. Agarwal: Mahatma's blessings? Kunvar Ajay Ind. A Movement What kind of a commodity product rakes in Rs 50 crore in five months? If it's Dandi Namak-at least that's what Suresh Agarwal of Kunvar Ajay Industries would have you believe. Faced with stagnation in the saree business, Agarwal ventured into the FMCG business with an impeccable logic. If HLL could outsource 90 per cent of its products and still become an FMCG behemoth, why couldn't t the others? Agarwal's Kunvar Ajay Foods isn't quite there yet, but he's working on it. He claims his Dandi brand is Rs 125-crore big, despite being priced at par with Tata salt at Rs 7. If price isn't Dandi's plank, what is? Surprise, it's image. It claims to be a triple-refined, free-flowing, pure salt-a message reinforced rather bluntly in its advertising campaigns. In May this year, Kunvar Ajay launched Friendly Wash, and-as per his claims-has already clocked Rs 35 crore in sales. Next on the cards: Atta and shampoo brands. -Dipayan Baishya