Image: Vikas Khot
HUL’s non-executive chairman Harish Manwani has turned the company around with his focus on direct distribution coverage
An energetic and fit Harish Manwani walks into the boardroom at Hindustan Unilever’s (HUL) Andheri headquarters with a smile on his face. It’s a gloomy day, typical of a Mumbai monsoon, but Manwani has enough reason for cheer. Over the last five years, HUL has once again regained its mojo: Its topline has grown 58 percent to Rs 28,019 crore, and profits are up 75 percent to Rs 3,867 crore. The company has become an ideal proxy for the rapid growth that defines India’s consumer class. As one fund manager puts it, “HUL is the best play on India’s consumer story.”
It’s not something that has come easily to the company. Observers remember the early 2000s when both HUL’s sales and profits were flat. The company’s rise to a place where consistent growth is now considered a given has been no mean task.
India is a key battleground for FMCG companies who are fighting a war that will only intensify in the years to come. Chief rival Procter & Gamble has a clear lead in China, and Unilever is pulling out all stops to ensure it maintains its advantage in India. In May 2013, it announced a $5.4 billion buyback of up to 75 percent of its shares to increase its stake in its Indian arm, HUL.
Leading the charge is 61-year-old Manwani who, as chief operating officer of Unilever and non-executive chairman of HUL, has broad oversight of the company he joined as a management trainee in 1976.
For instance, in 2010, Manwani announced that HUL would treble its direct distribution coverage. It was—as Forbes India wrote in its October 2010 issue—a move that “set the cat among the pigeons”. Something so ambitious had never been attempted before. Four years on, the rollout is complete and it remains an edge that sets HUL apart from its competitors.
Manwani attributes this to an inversion of the typical multinational mantra—think global, act local. At Unilever, they think local, but act global. “It is important to have a point of view on consumer trends and insights. There is no right or wrong answer. It is just a point of view,” he declares.
Manwani has mapped out three strategies to ensure HUL’s continued success.
Digitisation will play a key role in how the company reaches consumers and the way it does business. Over the last three years, HUL has been steadily rewiring itself to make sure it doesn’t get left behind in the new world. To see this through, Manwani has got himself a mentor: A 30-year-old employee who spends time with him every month, showing him how to navigate and monetise the social media terrain.
While Manwani has yet to start a Twitter account, HUL can boast that all its employees are digitally savvy. In 2012, it launched a one-year digital certification programme for every employee. “No marketer can be a marketer unless he/she is curious and constantly learning. That is a marketer’s license to operate,” says Manwani who is fascinated by how quickly this change took place. “Some brands like Axe in some of the key countries are marketed primarily through digital (media).”
Working on an ad campaign with Apple or Google (which includes YouTube)—and Unilever works with them globally—is very different from the print approach. And while both continue to have relevance today, the digital medium will occupy a position of pre-eminence in future. This is something that’s never far from Manwani’s mind, and HUL has been using the digital medium effectively.
It helps that many of Unilever’s international campaigns have enjoyed huge success on social media. In April 2013, Dove’s short film Real Beauty Sketches—produced as part of a global digital marketing campaign for the Dove range of personal care products—became an internet meme overnight. The film went viral instantly; in four days, the three-minute version was downloaded 7.5 million times from YouTube.
According to Manwani, HUL can go and buy all the advertising it wants in the digital space, but there is no success if the brand doesn’t resonate on social media. Making the company’s marketers understand this in double-quick time is the key. “We constantly talk about paid media and earned media. In the new world, earned media will be more important than paid media,” he says.
But while digital advertising is here to stay, Manwani has noticed a key difference in the developing world from where Unilever derives 58 percent of its sales. In countries like India, Indonesia and Brazil, the driving medium is mobile. Two billion consumers in the developing world are connected to cellphones, and reaching them is vital. In India, too, HUL uses mobile marketing to create more brand awareness. “When I started in 1976, we used to take cinema vans in media-dark areas. Today technology allows us to do the same thing using a missed call,” he says.
HUL’s ‘Kan Khajura Tesan’ campaign, for instance, allows consumers to give a missed call and get a chance to listen to 15 minutes of Bollywood hits interspersed with advertisements for its brands. The campaign was a hit with people in media-dark rural India, especially in Bihar, Uttar Pradesh and Jharkhand. It was the talk of the advertising world and won three gold medals at Cannes this year.
This aggressive digitisation has made it possible for HUL to reach a larger number of consumers in India’s hinterland. While trebling direct coverage in rural India, it made extensive use of digital maps to reach the last mile. These maps are now being used in a similar project at Unilever’s Thailand subsidiary.
All of Unilever’s efforts will come to nought if business is not done in a manner that is sustainable to the community and the environment. This has been one of Manwani’s and his boss, Unilever CEO Paul Polman’s, pet themes. They believe that in the years to come, sustainability will become a key differentiator for businesses. To wit, the company has rolled out the Unilever Sustainable Living Plan that aims to do business in a sustainable manner in a whole host of areas. For instance, all the tomatoes procured in India for HUL’s Kissan ketchup are taken from sustainable sources. It is the same for palm oil, a key ingredient in soaps and detergents.
Last October, I had travelled to Nashik in Maharashtra to see how the company sourced its tomatoes locally. (HUL had won the Conscious Capitalist Award at the 2013 Forbes India Leadership Awards for this initiative.) The company helps tomato farmers procure seeds and fertilisers, and assures a minimum purchase price. The farmers have seen yields go up and enjoy a more consistent demand for their produce. Urbanisation
While HUL has targeted rural consumers by expanding distribution and nurturing rural sales people—shaktimans, as the company calls them—it is the urban consumer who will occupy a large slice of the ever-growing pie. This, according to Manwani, is a distinct opportunity, one that needs a different set of skills.
In his last annual general meeting address, he spoke about how a decreasing set of low-income consumers will result in a fundamental shift in the way the company thinks. “For people who were looking at the world 20 years ago, there was a huge opportunity at the bottom of the pyramid. That opportunity still exists, but the interesting thing is that now there are many other tiers of opportunity that have emerged,” Manwani says. “One of the biggest trends is that the developing world consumers are, generally speaking, moving up the socio-economic ladder and there is an enormous migration taking place into the middle class.”
As part of its sustainable living plan, HUL helps tomato farmers procure seeds and fertilisers, and assures them a minimum purchase price
Unilever estimates that the world’s top 400 cities will account for 50 percent of global GDP in the years to come. Reaching consumers in these urban agglomerations will mean that the company will have to adapt. Already in the West, rising fuel prices has resulted in consumers becoming less keen to drive out to suburban big-box stores. As smaller stores in the city step in to fill the gap, companies need to rejig their distribution capabilities. Instead of making large deliveries to big retailers, there are an increasing number of smaller stores that they need to identify and supply to.
And then there’s ecommerce that is attracting consumers in droves. “Here we need to account for regional variations in models. For instance, in the US, consumers prefer home deliveries while in France store pick-ups are common,” says Manwani. Unilever is spending time and effort to understand these trends. But for now, HUL will work with retailers to strengthen the presence of its basket of goods rather than enter the ecommerce space.
For a company which straddles a multitude of brands—grooming and skincare products (Lifebuoy, Pears and Dove to name a few), food brands (Lipton, Kissan and Knorr, among others)—there is no one-size-fits-all solution. But there’s ‘premiumisation’—nudging consumers to use more expensive brands from the basket of products available. A rival company had once shown this reporter a presentation that explained how moving a consumer from Pears to Dove results in the doubling of profit. Margins on Dove are better and the soap wears seven times faster than Pears making consumers replace it more frequently. Now multiply that by 400 million consumers and the opportunity for growth is mindboggling.
Middle-income consumers also mean that Unilever has to move towards what Manwani calls “the seamless convergence of the ‘like’ and ‘buy’ button”. That promises to be among the most challenging tasks for HUL and consumer companies in general. Most are still working on it and it is far too early to say if someone has figured it out. Here, once again, the digital terrain—where middle-income consumers are most active—is a gamechanger. At present, liking a product does not take one to a buy page. “You have to give them the opportunity to move from the ‘like’ to the ‘buy’ button seamlessly,” he says.
Success begets success, and Manwani is confident that there’s only direction for HUL to go—upwards, leaving its competitors behind. As we wind down our one compact hour, I ask him how being a manager has changed in the 38 years that he’s been at the company. While the form may have changed, the substance remains the same, he says.
“It’s all about giving consumers what they want. I’m out on the road three weeks a month visiting markets and customers,” he says. And it’s not hard to believe him when he says, “We want our managers to be as comfortable in the rural markets of India as they are in the corridors of Unilever House in London.”
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(This story appears in the 05 September, 2014 issue of Forbes India. To visit our Archives, click here.)