Unilever chief fails to see what really ails Hindustan Unilever
Debashis Basu  and  Pallabika Ganguly 01 April 2010

The Unilever CEO believes that HUL is still the lion in several categories. He is living in his own world. Over the past decade, HUL has repeatedly tried and failed in a large number of new businesses, which makes it look like an also-ran

A few days back, the chief executive officer of Unilever, Paul Polman, visited India and talked about the growth plans of Hindustan Unilever (HUL). The most surprising fact was he said that product innovation is the key growth factor for HUL and that it would double its turnover.

Fortunately, while Mr Polman has clearly articulated his target, he has refrained from specifying by when this target would be reached. This is because the CEO was really talking through his hat when he was talking about doubling the turnover.

Take a look at what the performance of HUL has been over the past decade, when the Indian market has conferred huge profits to Indian companies and multinationals. Its net sales in 1999 were Rs10,142 crore. By 2005, it was still around Rs10,982.35 crore and last year it reported net sales of Rs20,623 crore. In effect, HUL took a whole decade to double its turnover—a compounded annual growth rate (CAGR) of 7% in a country where inflation is at least 7% on an average and is sometimes in double digits. Inflation-adjusted HUL has not grown at all. Of course, HUL has demerged divisions and that is why net sales have been down, but it has also acquired businesses during this period

Now, take a look at what a company like Nestle has done over this period. Its net sales in 1999 were Rs1,543.90 crore. This jumped to Rs Rs5,149 crore in 2009—a CAGR of 13%.

There is something so fundamentally wrong with the business of HUL that the Unilever CEO should be talking about a drastic strategy of energising growth and not vaguely dreaming of doubling turnover. After all, successive Unilever chiefs and heads of HUL have talked about various initiatives that have sounded as clever as its advertising—without delivering much to either the topline or bottomline. For instance, a few years back, we suddenly heard that HUL had restructured its portfolio into “power brands” without the slighest of understanding that it was really selling commodity products.

If it tried to raise its prices even the slighest, these “power brands” would be out of the market because Indian products from Godrej, Emami, Jyothi Laboratories and Dabur were snapping at its heels.

The fact is, unlike almost all multinational companies, HUL is living in a world of its own. For instance, what explains its tired effort at producing ever more brand extensions? HUL thinks that consumers would be happily buying another round of soaps and shampoos centered around Dove— Dry Therapy Shampoo, Dove Daily Therapy Shampoo, Dove Hair Fall Therapy Shampoo, etc. backed by an advertising blitzkrieg. Consumers are simply put off and tired.

If the Unilever CEO believes that HUL is still the lion in several categories (as he said in an interview), he is living in his own world. The fact is, over the past decade, HUL has repeatedly tried and failed in a large number of new businesses, which makes it look like an also-ran. Whether in personal care, home care products or food brands, HUL has only a string of failures to show. In 2001, it took over Modern Bread from the government and had aggressive plans to grow this business by creating a variety of baked products around flour from biscuits to spagetti. Over the years, nothing happened. Similar is the scenario with with its Annapurna Atta, which has failed to lead HUL into other successful categories.

The company tried to push its bread and atta together in the year 2002 by launching ‘branded Modern atta bread’ but this was not what the consumers wanted. During the past decade, HUL also forayed into the beauty and skincare segment using the ayurvedic platform. In last eight years, the Ayush brand has only meant large losses. Consumers’ recall of this brand is extremely poor, forget about break even. The company itself doesn’t know when this segment will be profitable.

The fact is, HUL now singularly lacks execution capability. It is still playing the 70s and 80s script of brand extensions and big nationwide ad spend. It spent Rs9,125 crore over six years from 2003—just to stay where it was. This strategy worked when Doordarshan was the only visual medium and competition was non-existent. The world has changed but HUL has not. It is not going to be easy at all to wrest back the initiative. In a highly competitive market, HUL has turned out to be slothful and unimaginative.

2 years ago
The topman at helm of affairs should review his failures and shortcomings. He must understand that it is him for such a downward journey since his start as head. Buruacracy and red tapisism hurdles must be eliminated. Work culture with focussed goals for 5/10 years corporate plans must be made and translate into actual results. Last three years performance is far from satisfaction and investors are crossing their fingers for good future orientation and enriched top and bottom lines. The CEO must be a man of action and can not left it to his team alone. He may have these reforms at the earliest. It is still not loosing it's good name but no guarantee for long unless some actions are taken immediately. Also, the small dents with local distributors be shorted out.
S.Kumar Jha
1 decade ago
I quite aggree with the tone of overconfidence,perceived above.
Days of facial artifacts are long over.Consumer no more is loyal to any brand any more. They try every thing that comes their way but rarely fall for or date with any and desert completely. sales number is only an illusive indicator of tapping greater vergin areas in this vast country.
infact growth in margins will be the actual performance indicator.
to me innovation is not adequately focused.perceptions are gathered with photochromatic lense on, which adds judge mental errors for self , competitors potential strategy and consumers changed characteristics and in turn drifts the trajectory of response and actions widely.
above all the people steering the
show, shall have to be provided with the cutting edge of the time,since employees approach have also changed globally and you are no exception.
aggree they were and still are a lion in own den but have been giving space to others to acquire dimensions to challenge the sr lion in every segment.
symptom is more dangerous than tremors now.
23.06.2010 ET brand equity participation reflects misconception about positioning ,where consumer acceptance or divorce is merit based ,now and.
product acceptability are based on added constituents and is triggered by the option and awareness.
fast food, slow/inadequate supply and dull response indicates that there is strong gap between consumer needs, gathered market intelligence and courage to face and communicate facts upfront per say within your fourwalls.
our anlysis 'hind side of the down swinger' is a revelation for business and administrative roles in US and Europe and one must take lessons out of it.
as per organizational behavior,this is many a times evident in companies, who enjoyed almost monopoly and now per force face the storm.
respect consumers supremacy and their options to counter the adverse effects expressway.
dents for change are not evident over months as selling and correction is quite difficult and needs a hardnut mentor and equally sensitized management will.
co. needs to work across the board to provide oxygen,clear blocked passage of acceptability and idea exchange irrespective of whether it is an old guard or the fresh reinforcement-remix/blend wont work as toxics will spoil the change environment instead.
our organisation can work on men and methods to organise behavioral and attitudinal improvement through a painless journey and then to vitalize the cooling heels.since we have track record of developing 'world champions' within our own committed capacity..
make no mistake-feel proud of past-but costs of inadequacy in action is killing , which is showing now.
initiate and come out of it,because we are your consumer cum well wisher too. we respect your privacy and right positioning you deserve the most.
in anticipation of good and great days ahead.regards
s.kumar jha chairman fme-intl
1 decade ago
Shows extreme signs of immaturity. The guy who wrote this should have been anti HUL. One should always get the correct picture on sales,growths and market shares before writing.
Looks like this guy wants to Tarnish the image of HUL. There will always be ups and downs in market and consumer behaviour. HUL is continuously driving to satisfy the consumer needs along with its growth.
k srinivasan
1 decade ago
Its a bullshit facts given here, Check AC Neilson market share figures across categories to find where all HUL leads before writing these stupid stories. Yes HUL is ever Lion as the CEO quotes and will work hard to retain the status and gain back whereever lost the shares
Alec Lever
1 decade ago
Slothful? Not HUL, only the journalistic effort in this ill-judged piece of yesterday's news. Check the companies' web sites Investor Presentations and use accurate sales numbers.

HUL has a dominant Lion's share of nine 'real world' categories. Its CAGR is 11.2% 2005-8 after a flat start to the decade.

Dove Hair care was launched in May '07 and is now #1 in Modern Trade driving rapid growth in Conditioners with a 25% share. Consumers are 'put off and tired'? HUL lacks execution skills?

I used to work for HUL which, like Nestle, is an excellent outfit. However, no business is beyond reproach - Nestles' fastest growing element is staff costs- but please don't undermine enterprise and MoneyLife's credibility with gossipy tabloid standards.

1 decade ago
A very incisive analysis. Probably HUL, got engagged in culture of too much bureacracy and compartmentalization, stiffling its innovation DNA.
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