Need MGNREGA-like scheme for urban poor: HUL chief

Mumbai: Hindustan Unilever (HUL’s) chairman & MD Sanjiv Mehta pulled a rabbit out of the hat last week, when the company delivered a strong Q3 performance in unprecedented times. Will there be an encore given that rural markets have slowed down and high inflation continues to bite? In an exclusive interview with TOI, Mehta speaks about how HUL is navigating the choppy external environment, while also developing in-house new age business endeavours. His Budget wish: An MGNREGA equivalent for the urban poor. Excerpts:

Unilever is planning to recast its structure. What does this mean for HUL?

Organisations keep evolving with the changing times, like organisms. The consumer trends are changing, the channels are reshaping and the competitive context is changing. In this respect, the premise around which Unilever is working on the new structures is — how do you make the company much more agile than what it is today, enhance category focus, and strengthen accountability.

Last year, you had said that you want volume-led growth with healthy margins. Should HUL be more discreet in taking grammage reductions in small packs?

When things are normal, when there are placid waters, you look at volume growth very closely. Around 65-70% of our topline growth consists of volume growth. That’s the reason we have always talked about volume-led profitable growth. But when there is hyperinflation, you can’t stick to the same metric.

There are two important imperatives — to ensure consumers remain with you and to protect your business model. We play the portfolio as we have brands and pack sizes at different price points, offering varied benefits. Our intent is that even if a consumer chooses to change a brand it should remain within Unilever’s portfolio of brands. When it comes to price increases the first port of call is looking at all lines of P&L (profit & loss), optimise the costs and only then in a calibrated manner we look at price increases.

We also look at the strength of our brands to carry price increase and also endeavour to protect the packs with low price points. It’s not an easy game but at HUL, we always play the game for the long term. We would never do things at the cost of the long-term health of our business.

Inflation and Covid would have been especially harsh on smaller and local players in FMCG. Has that share of the market shifted to HUL?

There has been more formalisation of the economy. With challenges like the pandemic and the high inflation, the companies that survive and thrive are those that are much more agile, and adapt faster to the changing circumstances.

It’s not come to our attention that some players who were big in certain pockets, have closed shop. There are numerous players operating in every district. They would, of course, be stressed. But our performance is not just good compared to the average of the market. Our share gains have been extremely good and in most categories they are top of the league and even when compared to our big competitors.

How are you competing with the D2C startups?

The headroom to grow in India is massive. It is not a zero-sum game. We see these as opportunities and that’s the reason we set up our own premium business unit whose whole mandate is digital-first brands. We have put in our best entrepreneurial people to focus on it and start growing. For us, digital is something that is going to impact the whole value chain. And it is for this reason why we started the ‘Reimagine HUL’ agenda 5-6 years back. Over 15% of our demand is now captured digitally, which is indicative of the focus that we have brought in. We have seen great success and 15% of our Rs 50,000-crore business is a pretty substantive business compared to any other digital-first brand.

Channel reshaping or e-commerce is not going to go away. We are extremely cognizant of that. That was the reason why we started building our muscle in this arena. I don’t mind if we are not the first to a trend every time. It’s okay to be a second or a third to a trend but we could still be better and win in the long run.

How is your premium beauty business doing?

They are doing reasonably well and are meeting the yardstick that we had set for the first year. The intention was to create a unit with an entrepreneurial mindset, bring in the right talent and let them blossom amid a large company. They get all the resources they want and they even have a different remuneration system. If it works, we will be able to extend it to other parts of the businesses as well. They are going to be pioneers in many different ways.

What are your Budget expectations?

The government could look at extending the outlay on MGNREGA till the economy fully recovers and the rural markets and the rural consumption goes back to its normal beat. However, in the last two years since the pandemic, very little has been done for the urban poor. During the pandemic, restaurants, hotels and tourism have been impacted in a big way. We have been talking to the government that we need to look at a MGNREGA equivalent for the urban poor. The same can be customised to the urban needs.

According to a Sebi requirement, the CMD post will have to be split. What’s the status of that?

According to Sebi’s directive, we have to implement it before April 1, and HUL will always comply with the law of the land.