 "Sanjiv Mehta")
It has been a year since Sanjiv Mehta took over as managing director and chief executive of Hindustan Unilever Ltd (HUL), India's largest fast-moving consumer goods (FMCG) company. Slowly, but steadily, he has been bringing about a change in the company's strategy, breaking down HUL's markets into homogenous clusters and focusing more on non-traditional media and new channels such as e-commerce. In a media interaction, Mehta highlights his priorities. Edited excerpts:
How do you assess HUL's earnings for the September quarter?
If I were to give you a context of the overall market, the volume growth is negative and the value growth is under four per cent. If I look at the overall market numbers on a quarter-on-quarter basis, it seems to have stabilised, improved a bit, though the (volume) growth is still negative. We have outpaced the market, with 10 per cent growth in net sales. If you adjust for excise, the growth in net sales is 11 per cent, which is ahead of the market. If I look at rural growth, it has been better for us than for the market, on an average. It (rural growth) has been more than 11 per cent. How will the markets pan out? The conditions are still very tough. We do not know when the real turnaround will happen. It is too early to say what the impact of the monsoon will be on rural markets. We will have to wait for the quarter to end to know how the (FMCG) market will shape up on that front.
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If it is a question of hope, we remain hopeful. But as far as the quarter under review is concerned, we haven't seen an uplift in urban areas. Has it stabilised? I would say it hasn't deteriorated to the levels we saw in the previous quarter. We are still not seeing an upturn in urban areas.
Is the decline in ad spends in the second quarter due to a shift in focus to non-traditional media? These aren't as expensive as traditional media.
The move towards non-traditional media is a conscious choice to shift our spends to vehicles other than television. But that (non-traditional media) is still accounted for under ASP (advertising and sales promotion expenditure). To answer your question, I don't think the decline is on account of the shift to non-traditional media. We decided to cut our expenditure during the quarter. That was the cause for the decline. But I don't think it affected our competitive abilities.
What is your expenditure on traditional and non-traditional media?
Broadly, a fourth of our expenditure is in the non-television space. The rest is accounted for by traditional media.
What is the cluster-market focus you have introduced at HUL?
India is not a homogenous market. In different markets across the country, categories are at different stages of evolution. Our framework has changed; we are looking at 14 consumer clusters, which translate into five geographical regions --- north, south, east, west and central. The central region will include Madhya Pradesh, Bihar and Uttar Pradesh, which are homogenous in terms of media and product penetration. Similarly, you have Mumbai-Pune in the west or the Delhi National Capital region in the north. We will plan and execute our go-to-market strategy, based on these consumer clusters. The objective is to make the organisation future-ready.
What is the progress on the reorganisation of your product portfolio? Stock-keeping units (SKUs) were to be phased out. What happened?
When you bring in innovation, you invariably bring in SKUs. A time comes when you have to sit back and take a hard look at your non-performing SKUs. To simplify your portfolio, you cull these SKUs. This is an iterative process, not a one-off. This year, we had taken on a big exercise to cull non-performing SKUs. And, we are tracking well against the objective we had set; we will cull 25-30 per cent of the SKUs by the end of this year. This is across product categories.
What is your e-commerce strategy and how do you propose to leverage it in India?
Globally, we recognise e-commerce as a big transformation in the marketplace. Therefore, we know we have to create capabilities within the organisation to be able to use e-commerce as an important channel. Our philosophy is we must remain absolutely strong and lean in the channels of today. Also, we need to ensure we are leading in the channels of tomorrow. What we have done is created a global team dedicated to e-commerce. We are seeing how we can bring best practices across our key markets, including India. Instead of managing e-commerce market-by-market, we are taking a global approach and seeing if there are common themes across different markets. We are also talking to our lead partners (e-retailers). Here, the key metric is to have a fair share in each channel of distribution---whether modern or general trade or e-commerce.
