Farewell to high growth

Two years ago, Manvinder Singh Banga, Chairman, Hindustan Lever Ltd (HLL, now Hindustan Unilever Ltd, or HUL) was called up to the newlyconstituted Unilever Executive (UEX), to head its foods business. That was the time Unilever had adopted a new structure—a single top Executive team, into which the foods and the Home and Personal Care (HPC) portfolios were integrated (earlier they were separate divisions). That restructuring had its reasons: Unilever wasn’t meeting its growth targets and, in 2004, the top line crawled by just 0.9 per cent as against the targeted 5-6 per cent. Back home, HLL, too, was in the dumps, with the company unable to show growth between 2001-04. The shuffle at the top was an attempt to kick-start growth in all international markets that matter, by combining HLL’s global scale with its regional might.

Two years later, that restructuring appears to have paid dividends. Unilever is back on the growth path in style, notching up a 5.5 per cent climb in the top line. In India, the turnaround has been even more impressive, with HUL showing double-digit growth for the third year in a row in 2007. And—what do you know—if an attempt at a turnaround was a reason to shuffle the top team two years ago, achieving that turnaround also appears to be a good reason to move the head honchos about. Last fortnight, HUL announced that Douglas Baillie, who had taken over as Managing Director and CEO in March 2006, would now take over as Unilever’s President for Western Europe, and will be on the UEX. Replacing him as CEO will be Nitin Paranjpe (44), currently Executive Director, HPC, HUL. Meantime, Harish Manwani, Chairman, HUL and President, Asia-Africa, will also take charge of Central and Eastern Europe; that’s a new region that has been carved out as a part of the Anglo-Dutch consumer care giant’s sharp focus on developing and emerging (D&E) markets.

The obvious question, of course, is: Why is Unilever disturbing a structure that seems to be working so well? Baillie, it would appear, has done well to keep the growth fires burning at HUL; why then kick him upstairs at this juncture, and so soon? The answer: The Baillie shuffle is only a continuation of the One Unilever strategy flagged off two years ago—of simplifying the organisation into three broad regions (Asia-Africa, Europe and the Americas) and two categories (foods and HPC) and leveraging Unilever’s scale in every market it operates. As Manwani puts it: “It’s about achieving strategic clarity: We had to be clear about the markets we will play in for big gains, and the ones that we won’t.”

By bringing Central and Eastern Europe (CEE) into the D&E realm, Unilever has set a common agenda for these markets—which are the growth drivers of the future. Currently, D&E markets make up for 44 per cent of Unilever’s global business, and with the CEE region now a part of that block, that figure should go up to 50 per cent.

That, however, may still not explain why Baillie moves from a high-growth D&E market (India) to a decidedly non-D&E market (Western Europe). Manwani prefers to look at the robust succession plan at HUL, which paves the way for a 20-year-old HUL hand to take over at the top. Baillie for his part did his bit by sustaining the growth momentum. New CEO Paranjpe has a still more challenging task: To keep gaining market shares in crucial categories (soaps, toothpastes, shampoo, skin), and to keep margins high in an environment of cutthroat competition, higher advertising and promotional expenses and soaring input costs.