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MARCH 13, 2005
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F&B Mythbusting
Just what is happening in India's booming food and beverages (F&B) business space? One helluva lot, according to Sujit Das Munshi, ED, ACNielsen South Asia. Log on for an exclusive column by him that doesn't just look at 'share-of-appetite' trends that F&B professionals cannot afford to miss, but also junks some preconceptions of the Indian palate.


McSwoop
McDonald's, with a new CEO back at heaquarters, is lowering a price bait to lure the budget-conscious Indian on-the-move bite-grabber. This fits into a broader strategy of multiplying customers that includes reaching out to McSceptics.

More Net Specials
Business Today,  February 27, 2005
 
 
STRATEGY
Banga's Big Bang
If the HLL Chairman has been rewarded with an elevation to the Unilever Executive, it's because he's followed the Anglo-Dutch parent's strategy to a T. That it hasn't yet worked for HLL doesn't matter really. It hasn't for Unilever, either.
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
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?

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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