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40YearsAgo...Andnow:HULFrom'intrepreneur'tosubsidiary| BusinessStandardNews

40YearsAgo...Andnow:HULFrom'intrepreneur'tosubsidiary
WhileIndia'slargestFMCGcompanyremainsabreedinggroundformanagerialtalent,theaggressionandindependencethatcharacterisedits
formerchiefscanhardlybeseen
ViveatSusanPinto|MumbaiSeptember24,2014LastUpdatedat00:49IST
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40YearsAgo...andnow:Earningrespectforthecraft
HindustanUnileverLtd
OnBSE 962.357.10(0.73%)
OnNSE 960.558.35(0.86%)
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"It'sbeen10yearssinceyouhavemadeanymeaningfulacquisition.Why?"UnileverchiefexecutivePaulPolmanwasaskedthisquestionduringhisfirsttriptoIndia
afterbeingappointedtheconglomerate'sglobalhead.
PolmanwasmeetingtheIndianmediaforthefirsttime,atabrandnewofficeofsubsidiaryHindustanUnilever(HUL)inAndherihere.HULhadmovedhereafter
47yearsatLeverHouse,thecompany'siconicheadquartersatBackbayReclamation,Churchgate.Itwasahistoricmoment,celebratedwithmuchaplomb.And,
Polmanwasinhighspirits,followingtheinaugurationoftheoffice.Assuch,thejournalist'squestioncaughthimoffguard.Hehadnoanswer.Toanextent,it
reflectedthegrowinggripoftheAngloDutchparentoverthelocalsubsidiaryandthediminutionofHUL'simageinIndia.
Tobesure,HULremainsthecountry'slargestfastmovingconsumergoods(FMCG)companyandthejewelinUnilever'scrown,providingtheworld'ssecond
largestconsumergoodscompanyabouteightpercentofitsannualrevenues.Thiscontributionisexpectedtogrow,asIndia'slongtermconsumptionstoryremains
intact.
Lastyear,inanaffirmationofIndia'sgrowingimportance,UnileverincreaseditsstakeinHULfrom52.5percentto67.3percent,withaRs29,200croreopen
offer,thelargestsuchofferinIndia.WhileUnileverconsolidateditspresencehere,itsholdoverthelocalmanagementwas,inasense,complete.Unilever's
dominationwasinsharpcontrasttothecultureofHUL,knownasHindustanLever,orHLL,till2007,throughthe40yearsofbusinesshistorythisseriescovers.
SinceitsinceptioninNovember1956tothemid1990s,HULhadahistoryofpowerfuland,ascompanyobserverssay"iconic",chairmen,followingthemergerof
threesubsidiariesHindustanVanaspatiManufacturingCompany,LeverBrothersLtdandUnitedTradersLtd.
GiantssuchasPrakashTandon,TThomas,ASGanguly,SMDattaandKBDadisethwereresponsibleforshapingthecompany'sfuture,withentrepreneurial
zealandpassion.LiketheTatasatrapsduringthetimeofJRDTata,thesemendominatedthecorporateworldduringtheirtenures.
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ConsiderPrakashTandon,HUL'sfirstIndianchairman(appointedin1961).Hewasresponsibleforintroducingmanynoteworthypracticessuchasthepopular
managementtraineeprogrammethatensuredthecompanywasabreedinggroundforgoodmanagers.Tothisday,HULretainsthisedge,asaflagbearerof
premiummanagementtalent.
Thecompany'srelentlessfocusonmarketresearch,productdevelopmentandinnovationwasalsoalegacyattributedtoTandon.HepersuadedparentUnileverto
setuparesearchcentrehereinthe1960s.Thisallowedthecompanytodevelopproductslocally,usinglocalingredientsandprocesses,helpingcutcostsand
respondtomarketchallengesquickly.
TThomas,chairmanfrom1973to1980,contributedtobringinganendtothegovernment'spricecontrolofsoapsinthe1970s.Hedidthisbyintroducingamass
marketsoapbrandSaral.Atthattime,India,amongtheworld'slargestimportersofcrudeoil,wasreelingunderglobaloilshocks.Totackletheresultant
inflation,theIndiraGandhigovernmenthadimposedpricecontrolsonmanufacturedproducts,includingsoapsandvanaspati,in1973.Thomas'sresponse,ona
suggestionfromseniorCabinetministerJagjivanRam(forwhichhesoughtapprovalfromGandhi),ensuredHULcutthelossesithadincurredinthefirsthalfof
1974(thefirstlossinthecompany'shistory),bringingitbackonthegrowthpath.
InaspecialissueHULbroughtoutin2008tocelebrateits75thanniversary,Thomaswrote:"Ifpricecontrolhadcontinuedforsomemoretime,HLLwouldhave
sufferedmountinglosses.Inthatcase,evenUnileverwouldhavelostpatienceandconsideredwaysofpullingoutofIndia,asithaddoneinsomeAfrican
countries."
Bythe1990s,HULwaspushinghardonmergersandacquisitions(M&As),ledbySMDatta(199096)and,subsequently,KBDadiseth(19962000).
ExpansionofitscoreFMCGbusinessanddiversificationintonewareassuchascosmetics,foodsandwomen'shygienecharacterisedHUL's'M&Adecade'.
In1994,DattaledthemergerofHUL'skeycompetitor,TataOilMillsCompany,withitself,amovethatgavecorporatewatchersashapeofthingstocome,just
astheIndianmarketwasopenedtoglobalcompetition,followingtheendofthelicenceraj.
JointventureswithUSbasedKimberlyClark(forbabyandwomenhygieneproducts)andTata'sLakme(forcosmetics)followed.
In1993,Unilever'ssecondsubsidiary,BrookeBond,acquiredtheKisanbusiness(jamsandketchup)fromtheUBGroup,andDollopsicecreamfromCadbury's,
markingitsforayintothefoodssegment.In1994,theKwalityicecreambusinesswasacquiredbyBrookeBondandthelattermergedwithLiptonIndiatoform
BrookeBondLiptonIndiaLtd.In1996,DattamergedthiscompanywithHULbyDattatobringallbusinessesunder"oneroof".
KBDadiseth,Datta'ssuccessor,kepttheM&Amomentumgoing,mergingPond'sIndiawithHULin1998,acquiringTata's50percentstakeintheLakmeLever
jointventure,andbuying74percentinModernFoods,thefirstpublicsectorcompanytobedivestedbythegovernment,in2000(theremaining26percentwas
acquiredin2002).
MuchofthisinorganicgrowthwasameansforHULtoacquiremarketshareinanarenathatwasrapidlyturninghypercompetitiveandtousethenewfound
dominationtocutsuppliercostsandholdmargins.
Inthenewmillennium,HULoptedtogoslowontheM&Afront,choosingtobuilditsbusinessorganically.Inpart,thedecisionwasledbyaneedtoconsolidateits
operations,followingthefreneticpacewithwhichithadboughtandmergedcompaniesinthe1990s.Thiswasalsoatimewhencompetitionwithrivalssuchas
Procter&Gamblewasheatingupincategoriessuchasdetergents.
ThusbeganHUL'sfocusoncoreoperations,underchairmanMS'Vindi'Banga(20002005).HefamouslydevisedHUL'spowerbrandsstrategy,whichmeant
focuson35coreproductsacrossdetergents,soaps,personalproductsandpackagedfoods.BrandswithapanIndiaandinternationalappeal(suchasLux,
Lifebuoy,Fair&Lovely,Wheel,Surf,Rin,Knorr,Kissan,Dove,Ponds,Lakme,BrookeBond)gainedfromthisexercise,whileregionalgems(Breeze,Liril,Moti,
Hamam,Rexona,etc)wererelegatedtothebackground.
Withafocusonbiggerandmoreglobalbrands,itwasn'tsurprisingthatHUL'sdependenceonitsparentgrew.Atthesametime,Unileverwasalsobeginningto
takegreaterholdofitsIndianoperations,underwhatitcalledthe'OneUnilever'policythisstrategywouldbeincreasinglydeterminedbytheparent.Thepolicy
alsopavedthewayforthecompany'snamebeingchangedfromHLLtoHULin2007.Inanincreasinglyglobalisedworld,HUL'sseniorexecutivesandmanagers
turnedtotheparentfortechnologicaltransfers,bestpracticesandbrands.WhileproductssuchaswaterpurifierPureitwereIndiancreations,thesewerelargely
fewandfarbetween.Chiefexecutivescameandwent,butdidn'tquitedominatethesceneastheirpredecessorshadfromthe60stothe90s.
Today,HULisonitswaytoincreasingtheroyaltyitpaystoitsparentfrom1.4percent(theratetillJanuarylastyear)to3.15percentofitsturnoverbyMarch
2018.
HUL'sdependenceonUnileverappearscomplete.

AWALKTHROUGHTIME
1956:HindustanLeverLtdisformedfollowingthemergerofHindustanVanaspatiManufacturingCompany,LeverBrothersLtdandUnitedTraders
Incorporated

1961:PrakashTandonappointedaschairmanofHLL,thefirstIndiantobeappointedtotheposition

1963:HLLheadquartersatBackbayReclamation,Mumbai,openedcalledLeverHouse

1975:Tenyearmodernisationplanforsoapsanddetergentplantsputinplace

1982:Governmentallows51percentUnilevershareholdinginHLL

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40YearsAgo...Andnow:HULFrom'intrepreneur'tosubsidiary| BusinessStandardNews

1993:BrookeBondIndiaacquirestheKissanbrandfromUBGroup

1994:TataOilMillsCompanymergeswithHLL

1996:HLLandLakmeLtdform50:50jointventure

1996:BrookeBondLiptonIndiaLtdmergeswithHLL

1998:PondsIndiamergeswithHLL

1998:HLLacquiresLakmeLtd's50percentstake

2000:HLLacquires74percentstakeinModernFoodIndustries

2007:CompanynamechangedtoHindustanUnileverLtd(HUL)

2008:HULcompletes75years
Readmoreon:
Fmcg
|
HindustanUnilever
|
PaulPolman
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LeverBrothers
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UnitedTraders
|
40YearsAgo...AndNow
|
HindustanVanaspatiManufacturingCompany
ReadMore

Aurobindo:Longtermbenefitsoutweighneartermchallenges
Thecompany'sabilitytomanufacturelimitedcompetition,complexproductsfromitsmanufacturingunitboostedprospects
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