HLL: Revving up to go global
Until now, Indians by and large, have gone on to head top international companies only on the basis of their performance in a foreign land -- Rajat Gupta, Jim Wadia and Rana Talwar are just a few examples. Even the billionaire entrepreneurs in information technology -- and they are too numerous to list -- made it big in the land of opportunity: the United States of America.
Very few Indians have been recognised for their performance in India and never in the consumer products business. It has always been fields like international finance, science or information technology which have seen Indians shine.
That is, until last week, when Unilever Plc, the world's largest FMCG conglomerate, announced that Keki Dadiseth will take over its home and personal care division. With his elevation, another glass ceiling has broken. The HPC division accounts for over half of Unilever's global turnover, which makes Dadiseth among the three most powerful people in the company.
That is not all. Dadiseth earned the post after he had authored a major re-organisation of Unilever -- his first assignment on taking over as a Unilever director in February.
His elevation as Unilever director, barely a couple of years into his term as Hindustan Lever's chairman, was in recognition of the massive restructuring of Indian business which he spearheaded, first as finance director and later as chairman. It allowed HLL to make full use of the opportunities created by liberalisation to consolidate and expand its business through a series of mergers and acquisitions. Next on the agenda was the Millennium Plan, a prestigious project aimed at restructuring and transforming the business so that it helped retain talent and find new growth opportunities.
For M S 'Vindi' Banga who succeeded Dadiseth and is HLL's youngest chairman yet, it is indeed a tough act to follow. Banga has been always been rated among HLL's brightest executives, but the pressure is still enormous.
So what are HLL's priorities under Vindi Banga's stewardship? At one level, it is to implement the Millennium Plan and continue what Dadiseth started -- this includes keeping the door to his office always open and returning all calls within 24 hours. One of Banga's goals is to drastically cut the time taken to make decisions. His way of doing this is to minimise discussions and to eliminate presentations. As he put it -- "I don't want to hear about problems. If the people on the job think there is a problem, then I am willing to accept that. What I need is solutions." So people have been told to cut out presentations and to simply tell the chairman what they would like done and what they hope to achieve.
In terms of the business, he has three focus areas -- expanding HLL's existing markets, strengthening its connection with the consumers and finally leveraging information technology to improve operational efficiency and margins -- said Banga, in a wide ranging interview with this writer.
"It is rubbish to say that our soaps and detergent business are mature and have little growth potential," he says. HLL today controls 70 per cent of the existing soap and detergent market, but as Banga points out, the market itself can be expanded several times over. In his reckoning, an average Indian has approximately 500 baths a year, and if he uses around 4 to 5 gm of soap every time, the market for soaps alone should be at least seven times the existing market.
The problem is that people do not use soap every time -- first, because of the cost factor and second, because a lot of people bathe outdoors -- at the village pond, river etc where using a cake of soap can be a messy business. "The challenge," says Banga, "is to find a product which meets consumer requirements and is affordable". What is true for soap, is also true for all of HLL's other businesses and market expansion will be at the top of the list.
Banga's second priority is to build and strengthen the company's connection with its consumers to a level that does not exist today. This includes, setting up call centres with toll-free numbers where consumer can get information, offer suggestions or even complain about products. A pilot call centre project is being tested out at HLL's research centre in Bangalore. At present, it handles issues relating to soaps and detergents, but this will soon expand nationwide. Apart from the better connection to consumers, HLL expects this to generate valuable feedback to help design products tailored accurately to market needs.
The third priority -- which is to use the Internet and information technology -- will probably have the most immediate impact on HLL's bottom line. Banga believes IT can be used to improve inventory management with substantial gains and a 50 per cent reduction in costs. It will increase sales and make the supply chain more efficient through a seamless flow of information.
"At any point of time, I have 1,000 trucks on the roads distributing our products. Imagine the control we will have over the supply chain, if we can track exactly where these trucks are anytime and use the information to cut inventories," he says.
Finally, the loss-making Modern Foods, which HLL took over a few months ago, has become a much-watched experiment in the divestment process, creating some pressure to make its turnaround successful. The process of integrating Modern's public sector attitude with that of the MNC is now on and Banga is fairly satisfied with the result. Production volumes are already up substantially. HLL expects to end the year with a 40 per cent volume growth and increased market presence in the bread business. Over the years, Modern will drive HLL's plans in the wheat chain starting with ready-to-eat chapatis being the first product to roll out.
Clearly, Banga is determined to keep up or even better the pace of growth at Hindustan Lever. At this rate, it would not be long before HLL is the first global MNC with the biggest market in India. After over 40 years of socialism and nearly two decades of anti-MNC regulatory bias, Unilever's Indian business could end up being the centre of the conglomerate's global business.