Strength of India is what the future of Unilever is: Paul Polman
The optimism from Polman, who has been credited with turning around Unilever after taking over in 2009, comes against a backdrop of recovery in India’s consumer demand over the past few quarters.
He was speaking at the final leg of a two-day annual investor conference held in Mumbai. on Monday, Hindustan Unilever, the local unit of the Anglo-Dutch consumer company, announced a deal to merge GlaxoSmithKline with itself in a deal valued at Rs 31,700 crore in an effort to scale its food and beverages business, which accounts for less than a fifth of its sales.
In comparison, parent Unilever gets more than 41% of its revenue from the foods and refreshment business. “Our strength in the emerging markets is one of our competitive advantages and it is no coincidence that we are here in India, nearly at the same time as we are acquiring one of the stronger brands in India, which is Horlicks. The strength of India is basically what the future of Unilever is,” Polman said.
The optimism from Polman, who has been credited with turning around Unilever after taking over in 2009, comes against a backdrop of recovery in India’s consumer demand over the past few quarters. The maker of Knorr soup and Dove shampoo is witnessing year-on-year improvement in several emerging markets, most notably India, where consumption continues to pick up.
HUL, regarded as a proxy for consumer sentiment in the country, has been increasing its sales 10-12% by way of volumes in the past five quarters, faster than the overall industry growth. India is the second-largest market for Unilever after the US, contributing more than 9% to total sales and more than a quarter to its market capitalisation.
Polman, who is due to retire by month end, said HUL’s share price increased 8% every year while the market cap increased two-and- a-half times by an additional $10 billion between 2000 and 2012. “We were happy about that and HUL (was) our best performing subsidiary.
Yet, the reality was we were performing well below the sector. Then you look at the last 10 years, we really started to outperform. The share price increased 26% per annum and the market cap more than tripled to $55 billion. In fact, our business tripled over that period,” said Polman.
For long considered to have the biggest distribution network in the country, HUL has nearly doubled its reach over the past decade, something that analysts have attributed as one of the key reasons for growth. However, Polman doesn’t completely agree.
“Some of you might say that’s the distribution system but if that’s where your thinking stops, you have missed the point. This is an institution where the depth of the sales… or the distribution is a result by itself as a competitive advantage. This is an organisation able to reinvent itself all the time, set the standards of what it means to run responsible businesses in countries like India,” added the 62-year old Dutch executive.