It is becoming customary for Unilever Chief Executive Paul Polman to descend on India. And every time he is here — this is his fourth visit in two years — he finds the environment exciting. “More people are coming out of poverty. The market is developing here. I am excited,” he told a section of reporters at the headquarters of the company’s Indian subsidiary, Hindustan Unilever Ltd (HUL), in suburban Mumbai.
India will be key to the euro44.3-billion ($50 billion) company’s strategy of doubling its turnover in 10 years, so it is not without reason that Polman is excited about India. “India is the second-most populous country after China, and a bulk of our consumers are here. Volume growth here has been good. Sixty per cent of our business is the growing market share. And above all, we are innovating at every step,” Polman said.
HUL closed the quarter ending December 31, with 13 per cent growth in volume. This was the fourth consecutive quarter of volume growth. The growth in the September quarter was 14 per cent, and 11 per cent each in the June and March quarters.
Despite the pressure on margins on account of commodity inflation, Polman remains confident that the Indian business would grow. “I have no doubt in my mind it won’t,” he said. “Yes, the next six months will be challenging on the inflation front. But I would like to separate that from long-term growth.”
He said emerging markets hold the key to Unilever’s growth plans, as 53 per cent of its turnover comes from these markets. “We will have to stop using the term emerging. These are growth markets,” he said. “Growth in developed markets is difficult. So, companies are increasingly turning to emerging markets. The only challenge is the low rate of market development here. But with increased competition, markets here will develop.”
The Unilever CEO also said emerging markets were fast becoming the region where new ideas germinated. “We are already seeing a situation where some key initiatives are happening here.”
A case in point is Pureit. Currently, the water purifier, developed and launched by HUL in 2008, reaches 4.5 million homes in India. “It will continue to reach more households as consumers realise the need for safe drinking water,” Polman said. “But the key point is that we are taking the learnings derived here to other markets. We are rapidly looking to roll out Pureit in markets such as Indonesia, China Vietnam and Brazil.”
Almost 75 per cent of Unilever’s businesses from emerging markets comes from its household and personal care portfolio. Foods contribute 25 per cent only. Polman says with market development and greater penetration of packaged foods, he sees the skew changing to about 70:30 in a few years. “The penetration of packaged foods in India is just about 4-5 per cent. The cooking environment here is complex. I don’t deny the importance of foods in our business. But to be able to double the business, foods would have to grow at 50 per cent per annum,” he said.
Development of the market would drive Unilever’s strategy in India and other emerging markets, Polman said. “While we are open to acquisitions, in emerging markets, we would rather grow our brands, and introduce new products. That would be key,” he said.
In the last three years, HUL has introduced new products from its international portfolio including Sure anti-perspirant in 2010, Cif surface cleaner in 2009, and Comfort fabric conditioner in 2008. This year, plans are afoot to introduce products from recent acquisitions Alberto-Culver and Sara Lee.
