just-food.com often carries news of Unilever’s activities in India, but many of us are ignorant of the scope of the Anglo-Dutch giant’s involvement in this massive emerging market. just-food.com commissioned local food industry analyst Debasish Ganguly to find out more. How has Unilever’s Indian operation evolved? Who does it partner with? Where will it go next?
The first Unilever product arrived in india in 1888, when Sunlight soap was introduced through imports. Lifebuoy was introduced in 1895 and other famous brands like Pears, Lux and Vim followed. Vanaspati (vegetable oil) was launched in 1918 and the famous Dalda brand came to market in 1937.
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In 1931, Unilever set up its first Indian subsidiary, Hindustan Vanaspati Manufacturing, followed by Lever Brothers India Ltd (1933) and United Traders Ltd (1935). These three companies merged in July 1956 to form Hindustan Levers Ltd. In November 1956, HLL offered 10% of its equity to the Indian public and so became the first foreign subsidiary to do so. Unilever, which gradually divested its stake in HLL, now holds 51% equity in the company. The rest of the share holding is distributed among about 430,000 individual shareholders and financial institutions.
Distribution & products
HLL’s products are manufactured across the country and are distributed through a distribution network of 7500 stockists. HLL markets about 110 brands (with 95O different packs), most of which have become household names in the country. HLL’s 110 brands is a contribution of its key products namely Soaps and Detergents, Personal products, Beverages, Foods, Ice cream, Chemicals and others.
Foods, beverages & ice-creams
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By GlobalDataThe Foods and Beverages business of HLL has come a long way since the late 19th century with a major series of mergers, acquisitions and alliances during the 1990s. In 1992, the erstwhile Brooke Bond acquired Kothari General Foods, with significant interests in instant coffee. In 1993, it acquired the Kissan business from the UB group and the Dollops Ice-cream business from Cadbury India. As a measure of backward integration, Tea Estates and Doom Dooma, two plantation companies of Unilever, were merged with Brooke Bond.
Further in July 1993, Brooke Bond India and Lipton India merged to form Brooke Bond Lipton India Ltd. (BBLIL), enabling greater focus and ensuring synergy in the traditional beverages business. 1994 witnessed BBLIL launching the Wall’s range of frozen desserts. By the year end, the company entered into a strategic alliance with Kwality Icecream Group and in 1995 it further acquired 100% control of the marketing and distribution rights to MilkFood % ice cream. The same year, the company also bought from Pepsi Foods its tomato processing assets at Zahura (Punjab).
Foods and Beverage business continues to be the thrust segment and is considered the key growth driver for the next few years. The company’s current Food and Beverage business consists of Five master brands- ‘Brooke Bond’ and ‘Lipton’ for tea and coffee, ‘Kissan’ for tomato-based products, jams and squashes, ‘Kissan Annapurna‘ for branded staples and ‘Kwality-Wall’s’ for Ice cream.
Beverages
HLL is the world’s largest tea marketer. HLL’s tea portfolio includes brands like Red Label, Taaza, A1, 3Roses, Super Dust, Top Star and Ruby Dust. HLL also markets Yellow Label and Green Label teas. The company recently launched ‘New Lipton Taaza-FX Tazgi’ dust tea.
The coffee business, comprising of ‘Bru‘ instant coffee and Deluxe Green Label Roast and Grand Coffee, is market leader in India. ‘Bru Expresso‘, an innovative coffee pre-mix, which delivers a creamy, frothy coffee cup, was also launched last year. In order to strengthen its share in the premium segment of R&G coffee market, a new product, Brooke Bond Green Label Classic, was also launched recently.
Culinary products and everyday foods
The Kissan range of culinary products comprises of jams, squashes, tomato ketchup, sauces, puree, and cooking pastes. The business is by contract farming in Punjab and Karnataka. The company has also recently come out with sachet packs for jams and squashes to target new users.
The recently introduced everyday foods like wheat flour and edible salt, under the Kissan Annapurna brand name, have met with remarkable success. The company claims the innovative offerings are changing consumer habits into using processed, hygienic, healthy and convenient products.
Ice cream
Ice cream, the Kwality-Walls range comprises Ice cream brands like the ‘Max‘ range for children, ‘Cornetto‘ and ‘Feast‘ targeted at teenagers and young adults. HLL also caters to the ‘take-home’ segment with ‘Soft and Creamy’ Ice-cream. The company is currently also test-marketing in Mumbai some of the world’s most popular ice-creams and desserts from the Unilever portfolio – including Magnum, the world’s largest selling ice-cream, as wells as Viennetta and Super Cornetto.
Sales breakdown and growth
In 2000, beverages contributed about 13.4% of total sales followed by foods at 8% and ice cream at 1.5%.
Sales of beverages moved up by 5% despite commodity prices, reversing the decline of the last two years. Premium brands of tea grew by 15%. Lipton Ice-tea was test marketed with encouraging response and Red Label, an old brand was relaunched. Coffee registered a volume growth of 7%. For branded staple foods, growth momentum continues. This segment grew by 26%, which is led by innovation and focused marketing activities. Salt gained 2% market share following which a low sodium granulate salt was launched.
Overall ice cream sales were flat due to product rationalisation to improve viability. Launch of softies and focus on Parlours delivered strong volume growth of 10.2%. HLL is continuing its groundwork in developing the supply chain which has improved gross margins and reduced cash losses. The Culinary products category returns to growth path led by the tomato operations at 20%, this is due to the relaunch of ketchup and introduction of new variants Tangy Ketchup and Chilli sauce. Jams and Squashes are being relaunched on a fortification platform.
The Institutional business in foods and beverages, the Lever Food Service, also has significant presence with tea and coffee, the Masterline range of bakery fats and Dimpy’s Food Service comprising of tomato puree, paste and sauces. A test bakery of international standards has been set up by HLL, which offers specialised services to bakers and confectioners across the country through training, demonstration, recipe guideline and other such activities
Mergers & acquisitions
In the recent past HLL has taken two bold steps. January 2000, in a bid, the government decided to give 74% equity in State- owned Modern Foods Industries Ltd. to HLL, thereby kick-starting the first major strategic sale of government equity in a public sector undertaking to a private sector. The awarding bid constituted HLL’s first foray into bread-making, which is a strategic extension of its wheat business. The acquisition of Modern Foods has provided HLL the control over 14 bread making units and a distribution network with 22 franchise units.
In another category HLL bought an 83.6% stake in International best Foods. This adds the Knorr brands of soups and stocks to the culinary portfolio. The amalgamation took place in January, 2001.
More acquisitions in food business are likely. HLL is rumored to be seriously eyeing Parle Biscuit, (India’s largest biscuit-producing company and 100% longest biscuit producing company in the country) and 100% fruit juice brand “Real” from Dabur.
New ventures
In May, 2001, HLL ventured into an altogether different field by making its foray into the Indian confectionery market, which is worth Rs20bn. It is currently test marketing its hard boiled sweets in Tamil Nadu under the ‘MAX’ brand name. ‘MAX’ is also among the three most popular brands, which HLL has in Kwality-Wall’s Ice cream portfolio.
Disposals
The dairy business consisting of the milk procurement facilities at the Etah Milk Powder manufacturing facility along with brand “Anik” was divested in 1999 to Nutricia India, the Indian subsidiary of Dutch group Nutricia.
Financials
HLL recorded a profit after tax of Rs316.94 crore (US$67.4bn) in the quarter ended 31 March, 2001 a 20.7% increase on the previous year.
By Debasish Ganguly, just-food.com correspondent
