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HLL's Banga: The reward for performance
has come, but he will have to show the elusive growth after
the 'refitting' journey |
Congratulations, Sir, on your elevation to the
Unilever Executive Team... Er, sir, even as almost every other player
in the FMCG industry has registered growth, Hindustan Lever's topline
is flat yet again...
These
aren't the exact words of one of the many sagely-faced analysts
congregated at the Ball Room of Mumbai's Taj Mahal Hotel last fortnight,
but that compliment-fronted pithy comment pretty much sums up the
paradox reverberating in the heads of the equity researchers (and
journos) gathered to face the 2004 results of fast-moving consumer
goods (fmcg) goliath Hindustan Lever Ltd. (HLL) for 2004. For four
years now, HLL's topline has stagnated. For 2004, profits are down
32 per cent, and value market shares in some crucial categories
like toilet soaps, detergent cakes, washing powder and shampoos
have slipped a notch or two over the past couple of years. Manvinder
Singh Banga, who took over as HLL Chairman in 2000, is now headed
to the Unilever headquarters come April, where, as President of
the Euro 42-billion (Rs 2,39,400-crore) FMCG giant's food business,
he will be a key mover on the newly-formed eight-member Executive
Team.
THE PATH TO GROWTH STRATEGY HASN'T WORKED WELL
FOR UNILEVER AND HLL... |
» Against
targeted 5-6 per cent growth, Unilever grew just 0.9 per cent
in 2004 and 3.6 per cent in 2000-04
» HLL's
topline has stagnated in the 2001-04 period, shareholder wealth
has been eroded, and for 2004 profits are down 32 per cent
» Like Unilever
(which rationalised its brand portfolio from 1,600 to 400 brand
names), HLL, too, has been putting all its might behind its
power brands, but growth hasn't been uniform
» Unilever
feels it got boxed in by too many targets and, like HLL, has
not been able to extract the full potential of its portfolio
and has been plagued by inconsistent execution.... |
...WHICH IS WHY UNILEVER IS TRYING SOMETHING
ELSE... |
»
A Group CEO leading a single top Executive Team-into which Foods
and HPC are integrated-will, hopes Unilever, result in single-point
responsibility, faster decision making, clear accountability
for delivery, and leadership close to the consumer
» Sustain
aggressive pricing, and higher advertising and promotion spend,
which will call for accelerating savings to fund the additional
investment
» Use the
entire portfolio of brands to cover different price positions
and different consumer segments |
...BUT HLL IS SADDLED WITH WOES OF ITS OWN... |
»
FMCG markets have revived after a two-year downturn, but topline
growth is still proving elusive
» The new
engines of growth aren't yet firing, with the confectionery
foray and the Ayush brand (in general trade) not taking off
» Growth-as
well as innovation-in the core brands is happening only in pockets;
if a Lifebuoy shows growth, a Lux doesn't |
...ALTHOUGH THE MANAGEMENT IS UPBEAT THAT
HLL IS NOW POISED TO GROW |
»
The FMCG markets in which HLL operates grew by 6.1 per cent
in the last quarter of 2004
» The "refitting
journey" is over, and HLL's brands are stronger today in
terms of relevance and value. This will result first in volume
growth, then value growth, and eventually profits
» GDP growth
of 6-7 per cent will result in a growth in disposable incomes
of 10-11 per cent, which will benefit HLL's power brands. The
opportunity for growth is huge as personal wash usage is still
a fraction of China's, and only 1 per cent of foods in India
are packaged |
This isn't the first time that Unilever has
showered such seemingly over-abundant benevolence on Banga, who
has had his hands full attempting to cajole a lumbering HLL to grow.
Last April, the Chairman of the Indian subsidiary was elevated as
head of the Asian Home & Personal Care (HPC) business, worth
all of $6.1 billion (Rs 26,840 crore).
So, despite HLL's prolonged woes, why has Unilever
rewarded Banga with such a plum posting? The answer: Performance.
Sounds absurd? Well, read on. True, Banga and his team have been
unable to wring uniform growth out of HLL's considerable operations,
but as far as Unilever Group CEO Patrick Cescau is concerned, the
Indian Chairman performed the role that was expected of him to a
T over the past five years. As a part of the 'Path to Growth' exercise
announced at the turn of the century by former Chairman Niall FitzGerald,
Unilever has rationalised its brand portfolio from 1,600 to 400
brand names. HLL, too, religiously followed that path, whittling
down the basket from 110 to some 35 power brands. Not just that,
Banga divested eight either low-margin or non-FMCG businesses, making
HLL a focussed FMCG player like never before. "It's been a
refitting journey. The company is significantly refitted now, the
brands are stronger, and HLL is now poised for topline and market
share growth," is how Banga put it last fortnight.
If you thought Unilever could fault Banga for
HLL's dry spell, it can't, simply because the Anglo-Dutch behemoth
itself isn't looking too good on the growth parameter. As against
the targeted figure of 5-6 per cent, Unilever's leading brand growth
stood at 3.6 per cent in the 2000-04 period, and at just 0.9 per
cent last year, prompting Cescau to acknowledge (at the Unilever
results presentation) that "Path to Growth" did not "deliver
the step change because Unilever did not play its portfolio to its
full potential".
It is Banga's single-minded fixation on focus
that might have persuaded the Unilever board that he's the right
man for the job. Cescau has acknowledged that the Anglo-Dutch consumer
goods giant is not sufficiently focussed on getting products "on
the shopping list, and on to the supermarket shelves... I have visited
a number of Unilever's customers in recent months. The feedback
I invariably get during these visits is: We are good, but not always
as single-minded as we could be in pursuit of growth".
FAST-MOVING MANAGERS |
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Unilever's Manwani: From Lever
to Unilever, it's been a smooth journey |
The crowning glory for Unilever's
India subsidiary is doubtless its uncanny ability to provide
the parent with blue-blooded talent, which is deployed in virtually
every global base where Unilever flaunts its banner. Vindi Banga,
Harish Manwani and the recently retired K.B. Dadiseth may be
the most prominent and high profile names to have made it big
on Unilever's global stage, but they aren't the only ones. At
last count, there were some 95 managers who, after varying stints
at the Indian operations, moved out to greener Unilever pastures.
For example, there's Vivek Rampal, a former HLL head of skin
care who has now taken on regional responsibilities as Category
Chairman for Skin Care, Asia. Another name that comes to mind
is that of Gunendar Kapur, head of HLL's foods business till
last year, now Vice Chairman & CEO, Unilever Nigeria. Then
there's Anand Kripalu, Managing Director, Unilever, East Africa,
a former HLL General Sales Manager. A regional break-up reveals
that the UK has absorbed the maximum number of HLL managers,
all of 19, followed by Singapore with 12-which isn't surprising,
considering the new-found regional focus for brand strategy
and innovation-the Netherlands with nine and the us with seven.
Of course, it's usually a longish journey before any Unilever
honcho gets the big cheese. Banga, for instance, since joining
the company in 1977, did stints as Soaps & Detergents
Category Leader for Central Asia and the Middle East (in 1995),
and took charge as Senior VP for Hair & Oral Care, based
in the UK (before becoming HLL Chairman). What next, you may
well wonder-an Indian Unilever Group Chief Executive (or whatever
he is known by then) perhaps? Current Chief Patrick Cescau
is 56, and Banga and Manwani are just 50 and 51, respectively.
The burning question for the time being, though, is: Who will
succeed Banga as HLL Chairman?
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Of course, HLL by no means can enter the case
study books as a driver of growth that, at best, has been in pockets-very
few of them. Ditto with innovation. Lifebuoy is one of the few examples
of innovation-led growth. In the midst of a continuous decline for
five-six years, HLL made a drastic, non-incremental change to revive
the brand after 107 years: The perfume was changed, it was now a
toilet soap (as against carbolic), and the colour and shape were
tinkered around with. And guess what: Since its relaunch in 2002,
Lifebuoy has reversed its declining trend, posting double-digit
growth for the third year running.
Perhaps Banga's success with such winning brands
(Wheel and Fair & Lovely are two others that come to mind) has
been noticed, against a larger backdrop of flat sales and share
erosion. After all, Unilever for its part doesn't have too many
silver linings to view, either: Europe, which accounts for over
40 per cent of sales, declined by nearly 3 per cent. North America
and Asia did manage to show some growth (not much, though, at 1.5
per cent and 1.4 per cent, respectively), and Latin America saved
the day with a 7 per cent sales growth. These figures could well
explain why Banga and Harish Manwani-President (Home and Personal
Care, HPC), North America, and, before that, President, HPC, Latin
America-got a call up to the Executive. Of course Banga's elevation
will appear more convincing once the much-promised growth in the
HLL topline and in market shares begin to show.
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