A year into his tenure as CEO of Hindustan Unilever, Sanjiv Mehta has made his most significant move yet. Convinced new consumers can be found in heaps in the mosaic that is the Indian market, Mehta is giving his managers a new structure to go find it. In challenging HUL managers, he’s taking forward the process of embracing the market his predecessor Nitin Paranjpe began.
When Sanjiv Mehta moved to Mumbai last October to take charge of Hindustan Unilever, India’s largest FMCG company, it had been 21 years since he last worked in the country. Yet, the son of an RBI accountant who grew up in Mumbai intuitively describes this melting pot of India as “home” and himself as a “Mumbaikar”. “When I reach the turn around the museum at Colaba, the years go by in a roll,” he says. “Mumbai has been my home for so many years. My mother lives in Colaba.”
Still, for Mehta, returning to India with some sense of permanence, and travelling across it, has been about renewing old attachments and finding new ones. That question of identity — just what is India, especially as a consumer — lies at the heart of the change Mehta is trying to sell to his own managers, many of whom have built Hindustan Unilever into a Rs 29,233 crore company and who, at various points in time, have shrugged to say there’s little room for this giant to grow in the India they know. It’s a notion Mehta is challenging.
“None of the categories in which we operate are saturated. Not even soaps and detergents, which are highly penetrated categories,” says Mehta. “If the per-capita consumption in fabric conditioner was to increase to the same level as Vietnam, the market in India for fabric conditioners would be 40X larger.” Mehta is laying down the marker in the inimitable way that has come to define the 55-year-old a leader: firm without being rude, purposeful rather than preachy, looking ahead and not back. The admittance that HUL could have done better on the growth front is implicit in his argument, but is subdued in its expression. The expression, instead, is all about structure.
That structure is formally named ‘winning in many Indias’, or WIMI, and it was rolled out on September 21. In his one year at HUL, which he will complete this October 10, this is Mehta’s most significant move.
Previously, HUL made sales via a structure that broke up India into four regions. As part of WIMI, a fifth region has been added. More importantly, sales will now be flanked — and fed — by consumer insights from a parallel geographical structure that carves out India into 14 parts. The philosophy is to change HUL’s responsiveness from a place of being largely homogenous (seeing India as a few big markets) to a place that is a lot more heterogeneous (seeing India as a mosaic of markets). The idea is identify sales gaps and market-creation opportunities — of which, Mehta believes there are ample, even for a large company like HUL — and to infuse it with a growth mindset again.
It’s the classic HUL leadership template, quips a former senior company official, and every new CEO does this. “Everyone has to justify changes,” he says, on the condition of anonymity. “Undeniably this focus will help… but HUL has been around for 70-80 years. What new findings are there that they haven’t yet discovered in India?” He believes that no what matter what HUL does, it will struggle to fend off the scatter of regional players.
CK Ranganathan, founder-chairman of CavinKare, a South India-based competitor, is more circumspect in his assessment. “They seem to be focussing in small parts through smaller structures and sharper teams,” says Ranganathan, whose company owns brands such as Nyle, Chik and Fairever. “That will help them win in various smaller markets. One of course needs to wait to see how effective that is.”
Mehta could not wait. He began his homework on India between his appointment as the new HUL chief and his actual move from Dubai, where he was handling 20 emerging markets for parent Unilever as its chairman, North Africa and Middle East. “I had sent a note to my management-committee members, seeking detailed insights and information into their part of the business,” he recounts. “And when I moved here, I did the deep-pe sessions and met a large cross-section of people, from managers in my team in groups and inpidually to consumers for feedback about my business.”
When he did move here, the Indian economy was facing economic headwinds. HUL had used price hikes and cost control to not only protect its operating margins, but even grow them. The issue was growth. For the year ended December 2013, its sales grew a lame 8%.
Mehta began incrementally: for example, renovating and innovating in several big brands, including Pond’s men range of personal care products, Tresemme hair care and Magnum ice-creams. Meanwhile, economic sentiment improved. At 13%, HUL’s revenue growth in the April to June quarter was the its highest in five quarters.
At 21%, its operating profit growth was its highest in eight years. In the last three months, the HUL stock has gained 20%, against 9% posted by the BSE FMCG Index.
In the background of all this, a pilot was underway at HUL to gauge whether, and by how much, the company’s formidable sales and marketing machinery was missing. The pilot was in HUL’s South India sales branch, which was broken into two consumer clusters: TAP (Tamil Nadu and Andhra Pradesh) and KK (Karnataka and Kerala).
From the pilot emerged instances where HUL had under-assessed market size and under-sold its products. One of those instance was of Wheel, HUL’s mass-market washing-powder brand, being absent in a small town in South India because its official did not see it as a market. The consumer insights team, however, discovered that a local player — with a product inferior to, and costlier than, Wheel — was building scale. HUL introduced Wheel, and it’s now overtaken that local brand and is number two in that market.
It became apparent from the pilots to Mehta that, as an organisation, HUL was not peeling the layers deep down in the market as well as it is capable of. Its officials were seeing India as a certain number of parts, but Mehta wanted them to slice and dice it in many, many more ways — to pry open, what he describes as, “many small Indias”. That’s the big idea the 14 consumer clusters will try to service. The 14 new positions of cluster heads will be filled internally.
“We are empowering our younger managers with challenging roles,” says Mehta. The company declined to share the geographical boundaries of the clusters or the identities of the cluster heads. Mehta is empowering these 14 consumer clusters to change the direction of operations. So, a cluster head can take an insight from her market — say, why Wheel should be launched there — to the sales, planning and category heads, make a case to roll it out, and reorganise planning and supply chain to that end.
“This is very clearly the result of extreme aggression shown by smaller players across categories and across markets,” says an FMCG analyst at a foreign brokerage, not wanting to be named. “This is an initiative HUL should have taken a couple of years back as the country’s largest marketer.” There is a view that Mehta, with his commercial background, is focussed on controlling costs. “That was an uninformed view,” he says. “My educational background is that of a chartered accountant, but I am running a marketing organisation. My focus, therefore, will be on brands and our people. Having said that, productivity and efficiency too are essential as they provide fuel for growth.”
By essentially demanding a greater market orientation, Mehta is looking to take forward the philosophical shifts in HUL his predecessor Nitin Paranjpe embarked on, with a fair degree of success. Paranjpe pushed managers into the field and made them listen more to consumers. He wanted an HUL that was less complacent and more humble in the marketplace. One of his initiatives was ‘Mission Bush Fire, which required about 4,000 HUL managers to engage directly with customers. Another was ‘POPeye’, which called on HUL employees across departments to flag off product shortage in any store.
In an internal email to employees, Mehta is believed to have urged employees to continue with both. The way Mehta has envisaged the consumer clusters, execution of the market plan can feed off a pet concept of Paranjpe: micro-marketing, where the marketing team, once it identifies a smaller market for a brand, goes all out in activation and advertising promotion of a brand.
Under Mehta, HUL is also doing a rethink on marketing, allocating more to non-TV spends and mobile. “About 25% of our spend will be on non-TV mediums like digital, mobile, print, outdoors and wall paintings,” he says. Amin Babwani, a former senior sales and marketing official at HUL and now an independent consultant, likes the concept of these consumer clusters.
Asserting it is a continuity of the geographical emphasis HUL has consistently aimed for, he says: “With these clusters, focus is more accentuated and there is greater accountability since it is now enshrined in the structure.” Some observers feel a new structure is great, but the challenge posed by regional players goes deeper than that, and national players don’t understand that. “The issue is with their (HUL’s) portfolio,” says a leading brand expert on the condition of anonymity.
“Some of their brands do not have a relevant proposition in the local markets and this is a typical MNC problem.” Vimal Pande, CEO of Vi-John Group, which owns the Vi-John brand of personal care and grooming products, says regional players are striking better partnerships in the marketplace.
“Retailers and wholesalers are very happy with our proposition, which ensures they make reasonably good margins,” he says. “Ours is not a push-down (approach), and laying down of terms and conditions that larger players tend to do.” Mehta points out that the bottom-of-thepyramid has halved in size, drifting into HUL territory. “We want HUL to be futureready to tap into this opportunity,” says Mehta. And the consumer clusters are being positioned to play a pivotal role in that architecture.
(With inputs from Kiran Kabtta Somvanshi)