Wednesday, September 2, 2009
Recession helps consumer goods firms: Unilever CEO
Paul Polman says money is freed up from big-ticket spending; dismisses competition from organized retail
Mumbai: Paul Polman is unlikely to ever forget his first visit to India as group chief executive officer of Unilever Plc. About four months ago, on 26/11, Polman and the top brass of Unilever and Hindustan Unilever Ltd (HUL) were at the Taj Mahal hotel in Mumbai, when their dinner meeting was rudely interrupted by terrorists.
Unfinished business: Unilever Group chief executive officer Paul Polman. Abhijit Bhatlekar / Mint
Back for a second visit, Polman told reporters on Friday at Lever House, the headquarters of the consumer goods firm’s Indian subsidiary, that his primary reason to revisit the city was to “finish a meal”.
“It was absolutely important to meet the heroes at the Taj Mahal and express our gratitude,” he said more seriously.
Polman’s two-day visit packed a schedule that included visits to a cancer hospital, a few shopping malls and meeting consumers from “different economic classes”. Polman addressed the media, flanked by Harish Manwani, president (Asia Africa) and a member of the Unilever board, and Nitin Paranjpe, CEO of HUL. The press briefing was followed by a town hall meeting with HUL employees.
Polman said the recession could help firms such as Unilever. “Consumers postpone buying cars, televisions and that frees up a lot of money to spend on everyday needs. We don’t see personal care or food markets go down substantially,” said Polman, the only lateral hire for the top job in Unilever in many years. Before joining Unilever, Polman spent 26 years at arch rival Procter and Gamble (P&G) and two years in Nestle SA.
“We are fortunate, that India, Indonesia and South Africa are growing at 5-6%,” he said, adding that when he set a target on how HUL could double its turnover, the company’s executives had appeared unfazed. “Obviously the population helps,” he quipped. “We are in an industry that drives the economy. We put a little bit of powder in a box and a little bit of liquid in a bottle and we sell it to improve the lives of people a little bit more.”
Unilever is also getting nimbler as it launches products simultaneously in several markets. For instance, its deodorant Axe Chocolate was launched in 52 countries simultaneously.
But the company’s foods business has been a laggard in India. It accounts for roughly half of Unilever’s worldwide business, but in India, it remains a small part of HUL’s overall business. Paranjpe admitted that there is work to be done. “Food as a packaged food category is less than 5% of the total market.”
Paranjpe said the food category would be a tactical play in the short-term, and that the company was focused on getting its brands to “win the end game”.
Polman is unfazed by the recent trend of organized retailers promoting private labels to compete against the mega brands of consumer product firms. “They don’t exist as a value proposition,” said Polman, adding that while companies such as Unilever keep innovating their products, private labels are not very innovative.
Polman implied that a company such as Unilever is more focused than retailers: Unilever, he said, is present in 11 product categories unlike retailers such as Wal-Mart that dabble in at least 100,000 categories. In response to a mischievous question on whether he would borrow best practices from Unilever’s arch rival P&G, Polman, with his tongue firmly in cheek, said customer practices of Japanese car maker Toyota and supply chain principles of Fedex, the global logistics firm, may be a better choice.
Like all major corporations, Unilever, said Polman, is now focusing on cash flows. The company has also stopped issuing earnings guidance to investors and analysts. It has also appointed global procurement officers to buy inputs at the best rates from any part of the world. “We’ll save on costs and invest that money in our brands,” said Polman.