Paul Polman will never forget his first visit to India—he got away with his life last November in the terrorist attack on the Taj Mahal Hotel in Mumbai. Gunmen had stormed the place when he was at a farewell dinner for his predecessor Patrick Cescau. In his second visit to the country soon after taking charge, Mr Polman said such incidents make one stronger to face life’s difficult moments. The first “outsider” CEO of the Anglo-Dutch FMCG (fast-moving consumer goods) giant is putting that strong will to good use at a time when the gods are not smiling much upon Unilever, including its Indian subsidiary Hindustan Unilever (HUL). India’s largest FMCG giant has been losing market share steadily (during April-May 2009, it lost value market share across product categories by up to 6 per cent). So, there is a new corporate jargon for Unilever across markets—Mr Polman has formulated a 30-day plan for each product innovation or attempt at troubleshooting. The new CEO is bound to look at the progress at his Indian unit closely as, despite its troubles, HUL remains a crown jewel in the Unilever group’s businesses in developing markets, which account for over a half of Unilever’s revenues.
The problem is that the crown jewel has lost some of its sparkle in recent years, and analysts blame a mixture of management short-sightedness and the rapidly changing Indian market for the decline. The parent company wanted to focus on boosting margins, which meant cutting smaller brands and merging regional offerings into “national” brands. The Indian team followed suit by cutting the number of brands from 110 to just 35. The strategy made sense at that point as it helped HUL focus on fewer brands, but the timing was wrong. The move backfired in the Indian context, as it coincided with the economic downturn and helped its low-cost, nimble-footed competitors grab the bottom end of the market vacated by the FMCG giant. So, even as the premium brands didn’t move off the shelves fast enough, the mass-market brands suffered due to the loss of management focus or interest.
To its credit, HUL is fighting back and doing three key things. The first is winning the market state by state, even districts. The new distribution strategy will give it an opportunity to play out its full portfolio of brands as consumers have been down-trading to smaller, regional brands. So, the company is now strengthening regional brands like Hamam in Tamil Nadu, Rexona in Andhra Pradesh and Karnataka, Breeze in the Hindi belt and Sunlight in Kerala and West Bengal.
Second, it is playing the pricing game—the company has already reduced the price of several products and brought down the cycle time. What this translates into is a more flexible supply chain at the back end, consolidation of distributors, reduction of inventories at distributor points, more frequent despatches and, therefore, greater speed at the front end.
Third, it is sharpening its focus on what it calls Return on Marketing Investment. This is a crucial area as HUL has increased its advertising spends by over 20 per cent.
What this means is that much of Mr Polman’s 30-day plan has already been implemented by HUL, though the new slogan may well prompt the HUL management to look at the strategy afresh. The biggest dent in HUL’s image in recent days has been the reactive nature of its strategies. It wasn’t long back that the company was also known as the thought leader in the FMCG industry. But that is perhaps beyond Mr Polman’s 30-day plan.
