 "Paul Polman")
Unilever reported its slowest quarterly sales growth in four years for the three months ended September but that hasn’t dampened the spirits of its chief executive officer, Paul Polman.
The 57-year-old Dutchman, who took charge of the $68-billion (or Rs 4.2 lakh crore) company in 2009, says the pressure points in emerging markets such as India are few. "We have been successful in this market. And, we remain confident and positive about India. We will accelerate our investments here in category and market development and find opportunities to grow," the CEO of the world's second largest consumer products company said here on Thursday, at a select media briefing at the Andheri headquarters of its Indian subsidiary, Hindustan Unilever.
"We have taken cognisance of the fact that the markets have slowed here. But India is still more stable than it was 20 years ago when it comes to doing business," he said about the consumer goods market, which according to industry estimates is nearly Rs 2 lakh crore in size. For the September quarter, this market’s overall growth over a year was pegged at 10-11 per cent, lower than the 13-14 per cent it saw in previous quarters.
HUL reported net sales growth of nearly 10 per cent to Rs 6,747 crore, while net profit was up 13.2 per cent to Rs 914 crore. Analysts were expecting worse after Unilever's poor results last week, perhaps another reason for Polman's optimism.
Strategy
The erstwhile Procter & Gamble and Nestle hand says the company has devised some strategies to ensure it can continue to deliver consistent and sustainable growth in these challenging times. "The world is volatile. It is interdependent. While 70 per cent of the agenda for our business has not changed, we are renewing 30 per cent of the portfolio here. At the same time, we are getting sharper on costs. We have to be modest and agile. HUL can benefit from the global scale that Unilever brings. This process has begun.”
Elaborating: “We have centralised our R&D (research & development) and manufacturing. We have introduced global categories that can be leveraged anywhere. In India, where rural is growing faster than urban, we have doubled our rural coverage in the past few years. We are increasingly exporting ideas from here to markets abroad. Like we did with Pureit (HUL’s water purifier brand), now available in seven-eight markets outside of India, such as Indonesia, China, Mexico, the African continent, etc. What we now have is a model of interdependence."
Growth formula
Pureit was completely developed in India and rolled out commercially in 2006; it is now a $100 million (Rs 620 crore) brand. Polman says he sees Pureit growing rapidly, as the product increasingly addresses the need for safe and cleaning drinking water in emerging markets.
"I have reiterated this earlier and say it again, that when your business objectives and goals are aligned to a social purpose, you will grow faster. HUL's Shakti-Amma programme, for instance, is being exported to other markets because we see sense and purpose in doing so. The scale and success of the programme to help women in rural areas find an alternate source of livelihood and income by distributing our products has buoyed us. Lifebuoy's school contact programme in India is another example, where we encourage children to adopt clean habits such as washing their hands regularly. This is how you create an opportunity for your brand and your business. I say this again, that brands must have a social purpose if they have to survive in today's world."
Other issues
While comfortable with the 67 per cent stake that Unilever managed to get following the Rs 29,200-crore buyback of shares in July, Polman declined to indicate whether there were plans for a follow-on issue.
"We made an offer. We got 67 per cent. And, we are happy about it. HUL is a very attractive stock in India. I understand it is among the top five picks here," he said.
On the prickly issue of royalty, Polman said the company needed to be consistent everywhere; hence, the measure to increase it in markets such as India. "We adjusted our rate of royalty in India and other markets such as Indonesia because we needed to be consistent in the markets we operate. There is no big deal about it.”
HUL's board had approved a royalty of 3.15 per cent of turnover from February 2013 from the earlier 1.4 per cent. This would be done in a phased manner till March 2018. Proxy advisory firms that advise institutional investors had questioned the move, saying it would enrich Unilever disproportionately and harm domestic investors.
