March 1, 1999
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HINDUSTAN LEVER LIMITED Size Does Matter A creative approach to marketing helps the company log a record net profit even during a recession. By Robin Abreu
The fast response to the needs of the market has paid rich dividends. HLL finished 1998 with a gross turnover of Rs 10,215.24 crore (up 22.4 per cent from Rs 8,342.75 crore the previous year) and a net profit of Rs 837.44 crore (an increase of 44.32 per cent from Rs 580.25 crore). In the process it became the second private sector company in India after Reliance Industries Limited to cross the Rs 10,000 crore mark. It also made it to the Financial Times' hallowed list of the top 500 companies in the world. The going has not been easy though. After a flurry of mergers and acquisitions over the past few years, the company was bursting at the seams with employees. But Chairman Keki B. Dadiseth and his team have managed to bring about some semblance of order in the leviathan through a massive restructuring of the organisation. The stupendous growth in net profit comes at a time when the country is reeling under a recession and companies have been badly bruised by weak demand. What has helped HLL is its colossal portfolio that straddles soaps, detergents, shampoos, hair oils, personal-care products, hygiene products, toothpastes and toothbrushes, ice creams, jams, ketchups, processed foods, flour, coffee, tea and vanaspati, among others. Also, it has products for all segments: from the super-premium right down to the mass market. "HLL products span the opportunity spectrum," says Dadiseth (see interview). Last year, the company introduced nearly 40 new products in the Indian market and innovated roughly another 40 existing ones. Having such a vast portfolio ensures that even if one category slows down, others continue to contribute to the company's growth. For instance, while the ice creams business was a drag on the company's resources, sales of soaps and detergents clocked a modest growth -- from Rs 3,360 crore in 1997 to Rs 3,565 crore in 1998. But sales of the more lucrative personal-care products zoomed from Rs 884 crore to Rs 1,526 crore. "Even in soaps, though the growth has not been too fast, its dominance of the market is bringing in a lot of money," points out Atul Rastogi, analyst with UTI Securities. Indeed, with a 62.7 per cent marketshare in toilet soaps, HLL is the undisputed leader in that category. As it is in jams (66.7 per cent), shampoos (63 per cent), skin-care products (61.5 per cent), detergent powders (37.8 per cent), detergent bars (45.4 per cent) and ketchups (42.1 per cent). Besides, it is a major player in vanaspati, tea and coffee. This apart, the company is feared as one of the most aggressive marketers in India. Early last year, it began Operation Streamline to strengthen its distribution in the rural markets. The first step was to reduce the dependence of village stockists on their urban counterparts by taking products right up to their doorsteps. Within one year, Operation Streamline has helped double HLL's distribution reach from 50,000 villages to one lakh villages. "HLL's distribution network is its backbone because it has allowed the company to gain dominance in many segments," explains Gul Tekchandani, chief operating officer, Sun F&C Asset Management Company. The rural market, in fact, is the new thrust area for HLL. With agricultural growth looking up and a bumper crop in the offing, rural demand is expected to go up in the coming months. The company is therefore gearing up to corner a large slice of the rural pie. Last month it launched Operation Bharat, a marketing gimmick that aims to sell hampers priced at Rs 15 containing various HLL products to 22 million households across 22 states. "Compared to 1998, I am more hopeful of the rural market this year. To meet this rise in demand we will have appropriate products," says Dadiseth. However, not everyone is impressed by the growth logged by HLL. Some critics say that the growth figures of last year look impressive because of the merger of Ponds' (India) Limited with HLL in January 1998. They feel that Ponds' amalgamation has put the sheen on HLL's bottom line. Others contend that the company is bound to slip into complacency soon. The first may be partly true, but the second charge holds little water. Complacent is hardly the adjective to describe a company that has moved from strength to strength year after year. Already it has drawn up plans to take the battle to the rival camp by overtaking the market-leader, Colgate-Palmolive, in oral-care products within five years. Also in the pipeline is a foray into direct marketing. HLL will hawk the Aviance range of premium cosmetics and personal-care products from Unilever, its foreign parent, much like the way Amway, Oriflame and Tupperware are pushing their products in the country. The company is also planning to get into e-commerce to tap the vast business opportunities unfolding on the Internet. Cocksure, yes. Ambitious, maybe. Complacent, most certainly no. |
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When
floods cut off north-eastern India from the rest of the country last year, Operation Rhino
ensured that essential items reached the region by air. Only this was no military exercise
but a marketing ploy by fast-moving-consumer-goods giant Hindustan Lever Limited (HLL) and
the Boeing-737 chartered for the job ferried "essential items" like soaps,
shampoos and detergents. The airlifting of the merchandise ensured that HLL products were
in shop shelves in the North-east during the busy Puja season even as its rivals struggled
to reach the market in time. 
