Star product from India is talent: Unilever CEO
Soon after taking over as Unilever’s CEO in January 2019, Alan Jope was quoted as saying, “Principles are only principles if they cost you something.”
This was in the context of Unilever’s thrust on sustainability. Today, as Unilever faces criticism for not entirely pulling out of Russia, following the attack on Ukraine, Jope believes not abandoning the company’s employees there is the most principled position for Unilever to adopt. “Dare I say, many companies have announced their intention to leave Russia without the faintest plan,” Jope told TOI in an exclusive interaction.
Jope, who’s on a three-day visit to India — Unilever’s second-largest market — interacted with people at the Dharavi Suvidha centre and conducted market visits to general trade outlets in Goregaon East in Mumbai. Jope’s visit comes soon after its Indian subsidiary Hindustan Unilever (HUL) reported its financial numbers, which exceeded market expectations.
The global consumer products major has now prioritised India, along with the US and China, with plans to provide higher resource allocations. The three countries contribute one-third to Unilever’s 52-billion-euro revenues and more than 50% to its growth.
What’s the overall strategy adopted by Unilever after the GSK deal fell through?
There are five elements to it. We’re going to invest in our biggest and best brands. Second is we’re going to over-resource India, America and China. Third is we’re going to win in e-commerce, because we think that’s a secular trend across countries. Fourth, we’re going to continue to put sustainability at the heart of our business model. And finally, we will implement the new organisation change to make it a simple, lean, fast-moving category expert company.
Unilever has said it will over-resource India, US and China. Please elaborate…
Where we have to deploy centres of excellence, where we have to build capability, we’re going to do it first and foremost in the US, India and China. As we deploy Unilever’s capital for acquisitions, first call will be for the US, India and China. As we look to develop and grow talent with moves overseas, priority will go to the US, India and China. There are a lot of ways in which one can demonstrate with action the commitment to these markets. These three markets form a third of our revenues and they contribute more than 50% of Unilever’s growth. They’ll become half of our business probably at some point.
A decade ago, we were told developing & emerging (D&E) markets would form 75% of Unilever’s turnover by 2020…
It now represents 60%. We prefer to think of them as the growth markets of the future and we have called out three countries that have the overarching priority for Unilever right now, which is the US, India, and China. We have made a lot of investments in the US over the last few years on our particular acquisition agenda, building up our functional nutrition business and our luxury beauty business, though the biggest acquisition that Unilever has done in years is Horlicks in India.
So would inorganic growth be the strategy for India as well?
Well, first priority is organic growth. There is plenty of organic growth to be had in this market through per capita consumption, penetration, premiumisation. However, where we see acquisition opportunities that fit our strategy, where we can create value for our shareholders, and when the timing is right, we’re happy to invest in inorganic growth as well.
Can you tell us about some of the star products and initiatives from India that you believe have great potential?
The biggest star products that come out of India is our talent factory and we continue to enjoy the benefit of Indian leaders coming in to the rest of Unilever. Our business in India is reinventing itself as a digital company in quite an extraordinary way. That will benefit the rest of Unilever. The third area which is particularly important at the moment is when the world is in inflationary times, the ability to offer extremely low-unit cost products with a healthy margin is very important. And there’s nowhere better at doing that in Unilever than here in India. HUL remains probably the jewel in Unilever’s crown — a business that is performing in top line, bottom line and market cap. It’s great to see the continuity and depth of talent that we have.
What’s been your approach to managing inflation?
We look for efficiencies in areas where we can take out costs in the business because the last thing we want to do is pass on price to our consumers. However, in these times pricing is inevitable and we will lead on pricing, where we have brand strength and the category strength to do that. In that regard, that is all designed to protect our ability to invest in our brands. We are prepared to sacrifice some margin for the long-term health of the business.
On criticism that Unilever didn’t entirely exit Russia…
We have four factories and 3,000 people in the country. The actions we’ve taken so far are — we will not export from Russia, we will not import products into Russia, we will not be paying a penny more of Unilever’s capital into the country — and that’s actually the most important action, and we will not extract any profits from Russia nor will we spend money on advertising media. It’s in the public domain that the Russian authorities have given us three options.
The first option is to remain and operate on a reduced capacity, which is what we’re going to do and it will be in a reduced capacity. The second option is to hand the business over to a Russian partner — the assets and the intangible assets, the brands — and let them run it. And the third is any form of abandonment would expose our people in Russia to criminal prosecution, and the assets will be seized by the state. I’m not going to put our leadership team in Russia — I’m not going to expose them — to that third option of abandonment.
Why would I give an enormous asset base to the Russian authorities to run, contribute to the economy and probably start exporting our brands — that would be very unprincipled. That would be fuelling the Russian economy. And that middle ground, frankly, runs the risk of transferring the business to a Russian who becomes a new oligarch in the country. So, restricting the business we think is the most principled in terms of putting pressure on the Russian economy and looking after our people.
Dare I say, many companies have announced their intention to leave Russia without the faintest plan.
I hope that the business can continue to employ and provide employment for our people for quite some time. But I am fearful that it will just sort of taper off. At some point, you’re fearful that the business could end up shrinking to the point that domestically it becomes hard to pay our people salaries, buy raw materials, etc. But I still think as tough as it is, that’s the most principled position to adopt.
How do you see this impacting the world of trade?
Global trade has been good for the world. It has lifted hundreds of millions of people out of poverty. Capitalism is not perfect and we are opposed to any retreat to nationalism that we see. We’re not going to be out there engaging in party politics. But our view is that a globally networked supply chain is a robust supply chain and so far all through Covid, and through this conflict, our supply chain has held up magnificently. We can hardly give an example of where we’ve run out of a material and it’s precisely because it’s got points of redundancy and backups. Though, we are a pretty local for local business — a majority of what Unilever sells around the world is made in or near the country.
Some shareholders don’t seem to be pleased with Unilever’s conscious capitalism…
They’re entitled to their opinion. We are not an NGO. We’re a business. And our job is to create value for our shareholders. And the reason we embraced sustainability is because we believe it makes us a stronger business. Our brands are more relevant when they offer products and propositions that contribute to the environment and society. And our sustainable living brands are growing much faster than the rest of our portfolio.
Sustainability helps us take cost out — in fact, 1.2 billion euros of cost removed through sustainable sourcing. It helps reduce a risk in the business. A planet under water or on fire is not a great place to be selling soap. Most importantly, it is a magnet for talent. Think about your friends, your family and they really don’t want to work for a company that has dodgy practices on sustainability, environment, social practices.
And so we are unbowed in our commitment to Unilever setting the base on sustainability as a driver of business performance, not on an end in itself. And the vast majority of our shareholders are the wind in our sails. They’re encouraging us.