You have seen a slowdown in growth in China. Does that worry you, considering Unilever depends on emerging markets for about 60 per cent of its turnover?
Though China is growing slowly, it is still recording seven per cent growth, which anyone in Europe would kill for. Also, don’t forget its base is twice as much as five six years ago; so, what was 20 per cent growth earlier is 10 per cent now. The growth in China is outside cities, but our business was concentrated on big cities. We are making adjustments in inventory and stocks, and have reported slower growth. Our emerging markets are still growing at five-six per cent. So, it gives us a competitive advantage. Over-reporting a slowdown in emerging markets hides the potential of the market for companies such as ours, which can easily live through three or six months of a slow growth cycle. For the past 20 years, emerging markets have grown nine per cent running.
You have also talked about a slowdown in India. Do you see India bucking that now?
The global economy is tougher than what many say it is. The International Monetary Fund (IMF) has predicted growth of three per cent but frankly, their forecasts have come down; there is a feeling we have seen the worst. In India, I see the right mindset; the mood is swinging in favour of India, both within and outside, where there is positive perception of it. Your inflation is down from 10 to five per cent. I don’t think growth has slowed as much as inflation. So, that is not a bad thing. And, IMF has predicted in 2016-17, India will grow faster than China. So, India is better positioned than many others. That is attractive for us. Also, I am involved in issues on a new climate economy. India could grow one per cent faster if it is able to solve the problems of planetary boundaries such as climatic change and water availability.
What’s your strategy for e-commerce in India?
An advantage in big cities in India is products can be delivered within a day, as offering these the next day or the day after isn’t attractive. You can do that in India at a low cost, as there is abundance of labour. In the next few years, our global e-commerce business will approach the size of Hindustan Unilever Ltd (HUL)’s business; so, it won’t be small. However, we believe e-commerce should be done through distributors rather than on one’s own.
How are you tackling the challenge of e-commerce globally and in India?
Access of technology and the fact that 60 per cent of the global population will reside in 600-700 congested cities attracts consumers to a different way of shopping. Three to four years ago, many would have said e-commerce wasn’t for India. But surprisingly, it has grown very fast. Surely, we are going to be there. Of course, if you ask me will the market place change dramatically, my answer is I don’t think so. Will 5-10 per cent of business in big cities shift there? It is possible. We are actively working in the social media space, as those who shop through e-commerce stick to the brand.
A couple of years ago, HUL grew in India through a string of acquisitions. That aggression is missing now. Is it a conscious change in strategy?
In the past five-six years, we have made as many acquisitions globally as we have divested. So, these are balanced out. In India, we have doubled our business in the same period. We believe we have had success in growing organically and creating our own brands. So, increasingly, the options we looked at in the past are becoming unattractive. Also, there aren’t that many companies around and our focus is on adding value and organic growth. It does not mean we will not look at any opportunity.
At a time when ‘Make in India’ is the new mantra, what is HUL’s contribution, especially through your research and development (R&D) centre?
The Indian R&D is interconnected with other centres across the world. But products such as water purifiers, Close Up toothpaste and a salt-and-clove variant of the Pepsodent have been developed here. Also, we are building 30 factories around the world and drawing heavily from the know-how of Indian engineers. And, 98 per cent of the material for products is sourced in India. As we have 40 factories, we are already a ‘Make in India’ company, unlike our competitors.
Globally, food accounts for 40 per cent of your business. But in India, it is just 20 per cent. Is that a concern or a conscious strategy?
The fact is our personal care and home care business has done very well. So, a low share of food is because of the high growth of this business, not for any other reason. So, we are not in a mood to be disappointed. Food is big in Europe and the US because we made an acquisition of Best Foods and expanded its portfolio. Of course, we could have sold potato, sugar and rice in India and increased the foods business, but we were looking at innovation products. India is a very underdeveloped market in foods. What we have done is put all the anchor brands in position and are now concentrating on driving market development. So, in the tea segment, for instance, the focus is on upgrading the business to more premium products — tea bags, etc.
Many analysts say HUL talks about the bottom of the pyramid but is increasingly introducing products in the premium category.
That’s okay; anyone can say what he wants. We sell 30 billion units every year; these go to everyone, including most villages. A total of 98 per cent of households in the country use our brands. Surely, we do not ignore urban India or the middle class; so, we also sell Dove shampoo. But the lower-income group also buys Dove, though they buy sachets. They, too, look for premium products.