How HUL Got Its Mojo Back

How HUL Got Its Mojo Back

Chairman and MD Sanjiv Mehta seeks to reinvent HUL as a future-ready corporation that can juggle heterogeneous markets successfully.

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Ajita Shashidhar
  • Jul 23, 2018,
  • Updated Jul 27, 2018 10:26 PM IST

Sanjiv Mehta, Chairman and Managing Director of the Rs35,218 crore Hindustan Unilever Limited (HUL), has been a Unilever globe trotter and trouble shooter for the past 25 years. He started his stint with the FMCG multinational as part of the team setting up the business from scratch in Dubai, had stints as chairman of Unilever Bangladesh (which was in the throes of an anti-MNC sentiment), in Africa and again as chairman of Unilever operations in the Middle East (right in the middle of Arab Spring), with postings at the London headquarters in between.

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In 2013, Unilever offered Mehta the chance to take over as CEO and managing director of HUL (in July 2018, he took over as chairman after Harish Manwani retired). It was not just a reward posting to his home country towards the end of a long and illustrious career. Unilever was probably looking at Mehta applying some of the unconventional and contrarian thinking he is known for in the Unilever network. (During Arab Spring, he told his Egypt country head to dramatically increase spending on marketing and distribution even as rivals were slowing down. Unilever gained massively as things settled down. In fact, it continued growing at double digits even during the peak of the trouble).

HUL was not really in trouble when he took over. You can't call an FMCG leader that clocked revenues of Rs28,019 crore and net profits of Rs4,799 crore in trouble. But there was a feeling that HUL needed to do something different. It was not reacting quickly to smaller, nimbler rivals like Patanjali which were popping up. It was not rolling out new products or hitting new markets rapidly enough. E-commerce was taking off in a big way but HUL had not taken advantage of the new retail channel. It had perhaps become too big to be as innovative as smaller competitors. It needed a reinvention. On top of it, the country's overall economic growth had slowed, and that affected most FMCG players - especially big, organised ones as consumers in rural areas traded down to buy from smaller, unorganised rivals who were selling cheaply.

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Srinivas Phatak Chief Financial Officer

Even before he landed in Mumbai to take charge, Mehta had decided what he needed to know about HUL operations - he sent a small mail to the senior team in India asking for only a set of specific numbers and information, not big presentations, about their businesses. He already had a couple of insights about how to remake the business. First, as he loves to point out - India has more markets than either Africa or the Middle East, even though he was dealing with different countries there and different states here. Second, you could not compete with smaller, local rivals with the centralised structure that HUL had.

Over the past four years, Mehta has rolled out two unique strategies (which needed creating new reporting and management structures called Winning in Many Indias and the Country Category Business Teams), used artificial intelligence and technology to better predict product movements and stocking requirements, started an e-commerce initiative, cut product development time, and created a localisation strategy that would see multiple product variants aimed at local tastes.

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He says in India, coffee and tea tastes change in every state. The Bru that Karnataka likes is not the coffee that people in Tamil Nadu like. (However, HUL has still not introduced Mehta's favourite tea blend - which he makes by mixing Yellow Label sold by Lipton Kenya with Taj Mahal from HUL India). In between, he had to deal with the rise of Patanjali, the bolt from the blue demonetisation, two years of drought which brought rural consumption to a standstill, and the rollout of GST.

The results of his changes are beginning to show. For the past three quarters, HUL has been showing double digit volume growth. More importantly, EBIDTA margins have shot up from 15 per cent in fiscal 2012 to 21 per cent in fiscal 2018. The stock markets have applauded - since Mehta took over, the HUL stock price has shot up from Rs619.30 (Oct 1, 2013) to Rs1,648.1 (July 19, 2018), while market capitalisation has grown from Rs1,33,927.9 crore to Rs3,56,753.30 crore, an over 150 per cent rise. (In comparison, the broad FMCG index has grown only 65.5 per cent). After 13 years, HUL's market capitalisation has overtaken ITCs (Rs 3,33,457.39 crore).

As Mehta and HUL executives love to point out, while everyone was applauding Patanjali for growing rapidly to revenues of Rs10,635 crore in six years, HUL had quietly added Rs13,000 crore of incremental revenues during the same period.

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Former Godrej Consumer Products MD, A. Mahendran attributes Mehta's unconventional thinking and drive to win to his chartered accountant brains. "Most CAs who lead businesses have brought in unconventional winning ideas. Former HUL chairman Keki Dadiseth was a CA and his era saw spectacular growth." (Mehta says with a deadpan face that if he were not a CA, he would have probably been a truck driver. It was a profession that fascinated him, and he actually learnt truck driving with its double declutching while doing his articleship).

Though Mehta refuses to admit the exponential growth of Patanjali and other other start-ups had a huge role in HUL's reinvention, his strategies are a clear reflection of the realisation that HUL had to change in order to grow.

Sanjiv Mehta, Chairman and Managing Director of the Rs35,218 crore Hindustan Unilever Limited (HUL), has been a Unilever globe trotter and trouble shooter for the past 25 years. He started his stint with the FMCG multinational as part of the team setting up the business from scratch in Dubai, had stints as chairman of Unilever Bangladesh (which was in the throes of an anti-MNC sentiment), in Africa and again as chairman of Unilever operations in the Middle East (right in the middle of Arab Spring), with postings at the London headquarters in between.

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In 2013, Unilever offered Mehta the chance to take over as CEO and managing director of HUL (in July 2018, he took over as chairman after Harish Manwani retired). It was not just a reward posting to his home country towards the end of a long and illustrious career. Unilever was probably looking at Mehta applying some of the unconventional and contrarian thinking he is known for in the Unilever network. (During Arab Spring, he told his Egypt country head to dramatically increase spending on marketing and distribution even as rivals were slowing down. Unilever gained massively as things settled down. In fact, it continued growing at double digits even during the peak of the trouble).

HUL was not really in trouble when he took over. You can't call an FMCG leader that clocked revenues of Rs28,019 crore and net profits of Rs4,799 crore in trouble. But there was a feeling that HUL needed to do something different. It was not reacting quickly to smaller, nimbler rivals like Patanjali which were popping up. It was not rolling out new products or hitting new markets rapidly enough. E-commerce was taking off in a big way but HUL had not taken advantage of the new retail channel. It had perhaps become too big to be as innovative as smaller competitors. It needed a reinvention. On top of it, the country's overall economic growth had slowed, and that affected most FMCG players - especially big, organised ones as consumers in rural areas traded down to buy from smaller, unorganised rivals who were selling cheaply.

Advertisement
Srinivas Phatak Chief Financial Officer

Even before he landed in Mumbai to take charge, Mehta had decided what he needed to know about HUL operations - he sent a small mail to the senior team in India asking for only a set of specific numbers and information, not big presentations, about their businesses. He already had a couple of insights about how to remake the business. First, as he loves to point out - India has more markets than either Africa or the Middle East, even though he was dealing with different countries there and different states here. Second, you could not compete with smaller, local rivals with the centralised structure that HUL had.

Over the past four years, Mehta has rolled out two unique strategies (which needed creating new reporting and management structures called Winning in Many Indias and the Country Category Business Teams), used artificial intelligence and technology to better predict product movements and stocking requirements, started an e-commerce initiative, cut product development time, and created a localisation strategy that would see multiple product variants aimed at local tastes.

Advertisement

He says in India, coffee and tea tastes change in every state. The Bru that Karnataka likes is not the coffee that people in Tamil Nadu like. (However, HUL has still not introduced Mehta's favourite tea blend - which he makes by mixing Yellow Label sold by Lipton Kenya with Taj Mahal from HUL India). In between, he had to deal with the rise of Patanjali, the bolt from the blue demonetisation, two years of drought which brought rural consumption to a standstill, and the rollout of GST.

The results of his changes are beginning to show. For the past three quarters, HUL has been showing double digit volume growth. More importantly, EBIDTA margins have shot up from 15 per cent in fiscal 2012 to 21 per cent in fiscal 2018. The stock markets have applauded - since Mehta took over, the HUL stock price has shot up from Rs619.30 (Oct 1, 2013) to Rs1,648.1 (July 19, 2018), while market capitalisation has grown from Rs1,33,927.9 crore to Rs3,56,753.30 crore, an over 150 per cent rise. (In comparison, the broad FMCG index has grown only 65.5 per cent). After 13 years, HUL's market capitalisation has overtaken ITCs (Rs 3,33,457.39 crore).

As Mehta and HUL executives love to point out, while everyone was applauding Patanjali for growing rapidly to revenues of Rs10,635 crore in six years, HUL had quietly added Rs13,000 crore of incremental revenues during the same period.

Advertisement

Former Godrej Consumer Products MD, A. Mahendran attributes Mehta's unconventional thinking and drive to win to his chartered accountant brains. "Most CAs who lead businesses have brought in unconventional winning ideas. Former HUL chairman Keki Dadiseth was a CA and his era saw spectacular growth." (Mehta says with a deadpan face that if he were not a CA, he would have probably been a truck driver. It was a profession that fascinated him, and he actually learnt truck driving with its double declutching while doing his articleship).

Though Mehta refuses to admit the exponential growth of Patanjali and other other start-ups had a huge role in HUL's reinvention, his strategies are a clear reflection of the realisation that HUL had to change in order to grow.

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