The Telegraph
Since 1st March, 1999
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Lever turns to parent in slump

Mumbai, July 20: Hindustan Lever (HLL), faced with one of its slowest growth phases ever, is counting on parent Lever to bridge the widening chasm between what it actually sells and what it needs to, as an FMCG major.

Unilever buys Rs 800 crore worth of goods from Hind Lever, but that number will balloon more than five times in the near future, say sources. They expect the company to become a major outsourcing hub for its parent, which could take its purchases to Rs 5000 crore over the next three to four years. That would be almost half of Hindustan Leverís current sales of Rs 10,000 crore.

HLL officials, working on results that are due in the next few days, refused comment on a possible ram-up in exports to Uniliver, but analysts were upbeat. ďIt makes sense,Ē says Richard DíSouza of Sunidhi Consultancy Services. The move, he says, will benefit both companies as the Indian subsidiary tries to accelerate its sales growth while its parent looks at ways to cut costs through outsourcing.

Already, Hind Lever is exporting tea bags to Singapore, Australia, Japan and the US. Its personal products are being sold in West Asia, Far East and African countries. One of them, Pears, is marketed globally.

It is also looking at rice, castor and marine exports, which have increased 15 per cent. This is higher than the sales growth in the local market.

The new strategy comes at a time when Hindustan Lever is being given a hot chase by smaller players selling cheaper fares. The low-priced competition has forced a price reduction in several categories. It has started offering best-sellers ó Surf Excel, Close-up, Pepsodent toothpaste and Sunsilk shampoo ó cheaper.

The FMCG market has seen smaller and regional consumer companies sniping at the heels of bigger, more established companies in the past five years. A recent Goldman Sachs report cited several instances where the small, but nimble competitors, have gnawed away at market-shares of multinationals.

One of them is Anchor, which has annualised monthly revenues equal to 40 per cent of HLLís oral care portfolio. This, in just five years of making tooth-pastes.

Cavinkareís Chik shampoo trails market-leader Clinic by only about 2 per cent in market-share by volume. Chikís share has climbed to 22.6 per cent from 7 per cent in 1998.

The sale of Godrej Number One, a soap brand that rivals those of HLL, grew 75-80 per cent to Rs 120 crore in 2002. Ghari, a regional detergent brand, has achieved sales equal to 28 per cent of HLLís detergent portfolio. Much of the progress came in the past three to five years.

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