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FADING OF A PIONEER - Hindustan Lever Ltd is unlikely to regain its old iconic status

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By S.L. Rao The author is former director-general, National Council for Applied Economic Research
  • Published 5.11.07

In 1888, Lever Brothers, England exported the first crates of Sunlight soap bars to India, followed by other now famous brands — Lifebuoy, Pears, Lux and Vim. Hindustan Vanaspati Manufacturing Company set up in 1931 was the first Lever Company in India, followed by a soap company, Lever Brothers, and a toilet (skin) preparations company, United Traders Limited. They merged to form Hindustan Lever Ltd in 1956.

I joined HLL 50 years ago; I stayed for over 12 years. My understanding of India and of management is founded on my work experiences there. Many Indian managers like me went from a first career in HLL to head major companies in India and elsewhere, or to other careers. Like them I too look back with nostalgia at those stimulating years and the company environment that was demanding but friendly and considerate.

The company introduced concepts in management and particularly marketing. Many of HLL’s practices are the texts used by others in very different businesses such as industrial products, services and consumer products. Practices such as appointing redistribution stockists in every market to feed smaller or more remote customers in the absence of the salesman, a permanent journey plan for salesmen giving them the order in which each would visit towns, the number of days to spend in each, the mode of travel, a regular journey cycle so that customers would know when the salesmen would visit next, a ‘clean draft’ system of paying bills by customers in places where there was no bank were some of these.

The cardboard light delivery that was developed to replace the heavy wood box (when rail was the principal freight mover) and is now ubiquitous in Indian packaging, road transport delivery replacing rail, sales propaganda and cinema vans to develop markets in small towns and villages; the brand marketing strategy, the advertising agency brief and other documentation that detailed the marketing and advertising strategies for each product, marketing research on consumers, products and advertising, setting up the first consumer panels, introducing new products regularly, product management were only some innovations that HLL brought to India, now taken for granted by most companies and management schools.

The company was the first to use applied economic research to understand the economic and social environment and make its plans for the future. For example, a comparative study of Bhakra and Nangal villages as the dam was being constructed gave HLL an understanding of the changes in consumption and living habits that would accompany the building of the dam as against the lack of change even in neighbouring villages like Nangal.

Among foreign companies, HLL was alone in systematically preparing itself for an independent India. A unique management training scheme gave Levers a regular crop of young men (and later also women) trained in the HLL way. HLL got its first Indian chief executive officer when Prakash Tandon became chairman in 1960, followed by a succession of Indian CEOs, until the present one, who is not Indian. HLL, unlike in the Indian public sector, also gave long tenures of five to seven years to its CEOs. They could review and, if necessary, modify their strategies. Talent was developed, mentored, and groomed for higher responsibility, giving HLL some of the best managers in India.

When the Indian economy began to open in 1991, HLL was one of the few ready to take early advantage. It had a list of acquisitions. From Unilever it got control over Lipton and then Brooke Bond, got Ponds in 1986 and the Corn Products Company when Unilever bought them. Acquisitions included the Tata Oil Mills Company, Lakmé, Brooke Bond, Kissan, Kwality Ice Cream, and Modern Bread among others. HLL divested itself of vanaspati, chemicals, fragrances and animal feeds businesses. Some it had got into in the days of command and control when diversification was the only route for expansion.

Except for Lakmé, HLL was unable to integrate many of these acquisitions. Famous Tata brands like Hamam, Nahan and 501, are much less visible. Brooke Bond and Lipton, then the largest packet tea brands in India, now lag behind Tata and Tetley. Kissan, the dominant brand in canned jams, bottled squashes, juices and sauces, is no longer so; and Rex from Corn Products has all but disappeared. Kwality Ice Cream that gave HLL an overwhelming market share has lost share. Modern Bread, the earliest of the national bread brands, fulfilling Jawaharlal Nehru’s vision of making wheat popular in India, is said to be up for sale.

HLL introduced most Indians who could not afford ghee to vanaspati and also to margarine made out of vegetable oils as acceptable substitutes for ghee and butter. HLL was unique in foods marketing in India in the days when there was no mass media advertising of the kind that we have today. Managers like Tandon innovated methods of making Dalda a household name in urban and rural Indian households, it became a generic for all vanaspati brands. Tandon and Maurice Zinkin, a former I.C.S. officer, brought in an anthropologist, Evelyn Wood. He incorporated Dalda in the Rajasthani pichwai that storytellers had used for centuries to tell stories from the Ramayan. They went from market to market enthralling rural audiences with their stories while weaving Dalda into them. HLL has now sold the brand, closed its dehydrated vegetables and foods business (brand name HIMA), and sharply reduced its milk products business. HLL may be a good personal products marketer but has shown little capability in managing and marketing food products. In recent years, many smaller companies have become very big in food products. Companies like ITC, which had no background in food products, have entered it successfully.

In the years when government policies dominated Indian businesses, Lever under Tandon persuaded the government — what no other foreign company was able to do — not to dilute its foreign equity. HLL demonstrated its contribution to Indian development by entering agri-businesses (Hima vegetables, Anik milk products, and the then existing Dalda) introducing scientific agricultural practices. HLL invested in setting up the first research centre of international quality in India, employing Indian scientists. This research centre has made significant contributions to developing new products and processes, reducing costs and also helping Unilever.

HLL was an exciting company that every bright graduate wanted to join even in preference to government service. It was only half facetiously described as the Lever Business School (before the Indian institutes of management came into existence) and its managers are everywhere. In 1963, HLL moved into a magnificent new building in Bombay’s Backbay Reclamation. Tandon paid Husain Rs 50,000 to install two ceramic murals, over 20 feet in height, in front, probably the only building to boast of such murals by Husain, and priceless by today’s market values. The building is said to be for sale.

Today HLL is just another large company. Without its iconic dimensions, its cultural differences from other multinational and even Indian companies, and the unostentatious lifestyles of its managers, it is like any other large company. It is no longer the most preferred company for managers and investors. Its managers are still in demand but so are those of many other companies. More light-footed companies (Dabur, Marico, Godrej), have overtaken its products. HLL stock has suffered from a comparatively lacklustre performance despite its stock split. Many other Indian and foreign companies have declined (Mafatlal, Sarabhai, ICI). All of them suffered from hubris, complacency and loss of vision. But none of them was as admired and as iconic as Lever. It might be too late for HLL (now Hindustan Unilever Limited or HUL). As another overseas company, it might not regain its once iconic status as the most admired company.