The Hindu Business Line : Unilever sharpens focus on India, other emerging markets

Enormous potential seen: Patrick Cescau (left), Group CEO, Unilever, and Mr Harish Manwani, President, Asia, Unilever and Non-Executive Chairman, Hindustan Unilever Ltd, at a press meet in Mumbai on Saturday. -

Our Bureau

Mumbai, March 15 Unilever Plc expects India’s share in its turnover to go up from the current six per cent in the next two years, as the global consumer goods maker sharpens its focus on developing and emerging markets.

Mr Patrick Cescau, Unilever’s Group Chief Executive, who is on a visit to India to review the operations of Hindustan Unilever Ltd, said the developing and emerging markets, including India, currently contribute 44 per cent of its turnover. This is expected to go up to 50 per cent in the next couple of years, he told a select group of press persons.

“Two and a half years ago, D&E markets accounted for 37 per cent of our turnover and today it is 44 per cent. Our aim is to increase this contribution to 50 per cent by 2010,” Mr Cescau said.

“I don’t want to tell what exactly is the growth I am expecting from India. But you can get a sense of the number… if India would repeat its 2007 performance for the next three-four years, it would basically add another €600 million to Unilever’s internal growth… now you can compute.”

Demand strength

These markets would continue to experience good growth due to the domestic demand and economic strengths of these regions. Also, the changing trade flow and trade pattern are making these regions less dependent on the US and developed markets than they used to be, he said.

Unilever sees enormous potential in these countries in view of the low level of consumption and penetration in some of its categories.

“This does not mean we will neglect the other markets. Our strategy is to decide where to play and how to play,” he said.

Asia and Africa together contributed to 29 per cent of Unilever’s 2007 turnover of $55 billion, while Americas contributed 33 per cent and Europe 38 per cent. HUL notched up a turnover of $3,473 million in 2007.

Mr Cescau indicated that Unilever may have to further increase prices this year in the wake of the “unprecedented” hike in raw material costs.

“Last year (2007) we experienced an increase of 220 basis points in prices of raw materials. I am afraid that we see no signs of a slowdown in input costs. This year (2008) the increase may be at the level of 300 basis points,” he pointed out.

The company’s strategy to grapple with the input cost rise involves increase in productivity, better buying efficiencies, innovations, price increases and cost reduction. “Just to give you one number, last year we were able to save €1 billion in costs, which was in excess of the increase in costs of raw materials,” he pointed out.

On margins, Mr Cescau said the underlying operating margin in 2007 had been at a level of 14.5 per cent and the target was to take it beyond the 15 per cent mark by 2010, with innovation being the key driver.

This is also expected to be achieved through productivity improvement at all levels.

No big-ticket buys

Unilever will not be making any big-ticket acquisitions, such as the ones done by its arch competitor P&G (which acquired the Gillette brand) as part of its growth strategy. Instead, it will continue with small to medium acquisitions, while at the same time selectively increasing its market share across certain geographies.

“We are very big. Being even bigger does not mean being better. I am not tempted to make big acquisitions because returns on such acquisitions were not impressive over the past two years. So, being big is important — we are big. But you don’t need to be super big to be competitive,” Mr Cescau said.

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