Sanjiv Mehta has been with Unilever for 31 years, ten as the MD and CEO of Hindustan Unilever, taking over in 2013. Mehta leaves behind a rich legacy, with turnover up by 2.3x, operating margins up by three-and-a-half times, market cap up by a factor of six to ₹6.38-lakh crore. Mehta retires at the AGM on June 26, handing over the baton to Rohit Jawa.
Mehta says when people ask him what he’s going to do post-retirement, he laughs and says he’s changing socks, not hanging up his boots. He’s taken up two board appointments — Air-India, where he says there’s much to do to regain lost glory, and on the board of global dairy major, Danone, to keep in tune with global trends. “Right now, I’m in the process of listening to people who come up with various offers,” he says. Excerpts from an interview.
How do you look back on your decade as the HUL chief? What have been the highs and lows?
It has given me a good deal of satisfaction, and to run Hindustan Unilever is a big privilege and honour. I’m also thankful to Unilever for the manner in which they trained me for this job. I have been a CEO for 21 years now; I was a CEO for 11 years before I came into this job.
I first got a job to turn around business in Bangladesh. And then they gave me a highly competitive market, which was as the CEO and Chairman of the Philippines division. Then it was to run the business in North Africa and Middle East. So, whether it was serendipity or there was a very clear sense in the madness, they trained me beautifully before I came into this job. And, HUL has had iconic leaders in Dr Ganguly and Mr Thomas, so stepping into their shoes, it was a big moment. I was out of the country for 21 years but I always remained in touch with India.
So, I had great outside perspective and there were no holy cows for me. I could come and challenge everything. The first six months was fully devoted to understanding the business. And the first big move we did was when I realised that India is such a heterogeneous country. The 20 countries of Middle East-North Africa had more in common than the States of India. That is when we introduced the concept of winning in many Indias (WiMi) which proved to be a source of serious competitive advantage. That was the first big move.
But it was such a big move that one had to first do an experiment in the second half of 2014 in Chennai, where Prabha Narasimhan (now Colgate-Palmolive MD and CEO) was the regional manager. What we did was, we created different strategies for the different States in the South. And in six months time, it was apparent that this was the way to go.
But all this preceded the deep dive analytics that we have now. How did you do it?
When we decided to go down the route of winning in many Indias, it dawned upon us that a brand manager will have to work on 15 strategies instead of one. So, they will be overwhelmed. That’s when the first big digital data analytics project called Live Wire started (in 2015). It was about pulling together disparate information from different sources — retail audit consumer panels, primary and secondary data — and providing information to our employees at a keystroke with the ability to slice and dice. Today, Live Wire is a potent weapon. It has gone through different versions and has been rolled out across Unilever.
Also, with the entry of Jio, the cost of data was coming down. And I could clearly foresee that data and technology will become centre-stage. That’s when we started Reimagine HUL. Initially we started by not having my management committee members on the team. We started by bringing in managers who were tech-savvy, who were believers that digitisation is going to be all-encompassing. And we started random experiments. In a year or two, it reached a stage where we had 80-plus experiments running in the company. We then joined the dots and identified where and what in the value chain we need to do, and formalised the digital council. That was the beginning of the journey.
The HUL of today is significantly different from the HUL of the past. Look at our Shikar app. It has got 1.2 million retailers, the most adopted app in the country today. Our Dapada factory (in Dadra & Nagar Haveli) is the first Lighthouse factory for digital and sustainability accorded by the World Economic Forum and the first such factory in the country. Or you can look at our Chanakya which is our Google, which if you ask questions, Chanakya will tell you what actions you need to take.
And, here’s how winning in many India comes alive. If you take Brooke Bond tea, the same pack depending on where you stay, the blends will be different. If you take Surf Excel, depending on the hardness of the water, the formulation is different. If you take Lux, it will be the same pack, same price, same color but perfumes are different depending on the consumer preference in different parts of the country. We also craft different communication for different parts of the country. And, our strategies are distinct. In south of India, our thrust is on converting users, so our penetration of liquids (detergents) has gone up significantly. In other parts of India, it is about converting people from bars to powders. In some parts of India, it is about converting people from basic powders, too powders which are enzymatic.
Your premiumisation journey is an ongoing one across brands?
We have a very comprehensive market development programme, where we reach 100 million households every year. We go to consumer homes, educate them, make them experience the brands and then after a few months follow it up. Behaviour change is never easy. We have actual feet on the ground, thousands of people who visit homes. It’s a whole ecosystem. I always talk about that we are going to be a business with high tech and high touch both going together
The way it is when if I look at the formula for making a business high performance, first is the total axis of growth and in growth, the first important bit is a mindset. The belief is that you can grow and when the second is you need to have a portfolio which is future fit. So, both organically and inorganically we boosted the portfolio.
Today, there is this market development cell whose turnover is over ₹10,000 crore which didn’t exist 10 years ago and they are all future facing portfolios. Then we have acquired some fabulous brands such as Indulekha. Then we acquired Aditya milk, then we acquired Vwash and then, of course we had the big merger at GSK. Then last fiscal year we bought Oziva and Wellbeing nutrition. We have also ensured that the gaps that existed in our portfolio are plugged. The second dimension is how do you build distinctive capabilities, which are hard to replicate? Where WiMi and Reimagine HUL will be the vision of making HUL the most intelligent consumer goods enterprise.
The third important bit is what I call it the high-performance autonomy, which is ensuring strengthening our employer brand with Employer of Choice across sectors, our performance culture. That has to be extremely strong. Our fetish for execution has to get strengthened. The clarity on strategy across the product portfolio and across consumer clusters has been brought in. So I think across all the three axes, I would look back and applaud the team. They have done an amazing work.
What is happening to the consumption story? Is rural back on track?
With inflation across the board, there were quarters when the net inflation crossed 20 per cent. If you look at the total value growth for a year ending in March, it was eight per cent, while volume growth was on minus four. If you look at urban, it was about 11 per cent value growth, and volume growth was nearly flat. In rural, the value growth was four per cent, while volume growth was minus seven. The good bit, however, is that despite this high inflation, the headline growth was still there even in rural. This implies that even rural consumers spent four per cent more though they did not spend enough to consume the same level of quantity.
Till the March quarter the price growth is tapering off. By the end of the year, I believe, on an average, the price growth in our books will more or less disappear. The real bounce back on volumes will happen when we start reducing the prices, which we’ve started doing in some cases — like in detergent, bars and soaps. And when you start reducing, it’s not a linear equation, that if you reduce it by 10 per cent, your volume will go up by 10 per cent. So, it takes some time as pipeline stocks are also there. I think in another couple of quarters, we should start seeing the volumes moving up.
Are you concerned about the entry of Reliance into the FMCG space because they also have a strong digital footprint and they can mimic your strategy?
The way I look at it, India is not a zero-sum game. Our per capita consumption is $49. The runway to grow is massive here. And it really doesn’t mean that if someone is growing, I have to de-grow. The second, I believe, is that a good competitor always brings out the best in HUL, as we have seen over the years — be it Nirma or Patanjali. From a consumer point of view, competition is good, it gives them the freedom of choice. It helps propel more growth. So yes, they’ll be formidable competitors. But I think we have our own distinct place in the minds and hearts of consumers.