18th June 2010, www.lbr.lk, By Shamindra Kulamannage
Unilever Sri Lanka is a marketing prodigy. Its brands dominate many aspects of daily life in Sri Lana from the soap we use to the products used to clean our homes and the food we eat.
The firm says its revenue has grown 200 percent from nine years ago. It’s achieved this growth during a period of upheaval both in the economy and in the retail trade in Sri Lanka – with the emergence of supermarkets.
These were some of the discussion points when LBR’s Shamindra Kulamannage met Unilever Sri Lanka Chairman Amal Cabraal.
Shamindra started by asking how the Unilever business fared last year
A: Unilever and I believe most other FMCG companies had an excellent year last year. Speaking of Unilever per say we had probably one of our best years, both from growth of our top line, growth of profitability as well as our competitive growth. We actually enhanced our market position and the best part of it was the top line growth was under pinned largely by the volume growth. However 2008 was actually a very difficult year for volumes because consumer goods prices went up dramatically. As a result consumers held back on volumes. But in 2009 we were able to regain and restore the significant volume growth.
LBR: How does Unilever Sri Lanka perceive modern trade? And looking at next three to five years what do you think modern trade will do the business you are in?
A: Well... modern trade brings very different challenges and with that very different opportunities. In Sri Lanka modern trade is still at an infant stage. That is, if you take a three year average, modern trade has grown probably over 20 to 30 percent. That is significant growth and today it accounts for close to 10 percent of retail trade. That would differ from category to category on some categories it would be as high as 40 or 50 percent. But if you average it out, in our business, it is roughly 10 percent and it is growing even faster this year as we speak. We see 20 to 30 percent growth.
We always had a intermediate person between the shopper or customer or the consumer. That was our grocer. Whereas in modern trade we are interacting directly with the shopper who also happens to most often be the consumer. So that brings a different set of challenges.
But I’d rather talk of the different opportunities. So we have a huge opportunity to interact one to one with our shopper and consumer which we didn’t have previously.
LBR: Modern trade, I suppose, is fairly game changing to what you were doing five years ago. Like you said you have opportunities but also challenges because the supermarket chains can be very powerful. Your position with them can determine your brand's success. For instance on certain categories as much as 40 percent of sales take place though supermarkets. How are you dealing with these challenges?
A: How we are dealing is based on simple promise of a mutual links that lead us to joint actions. As much as we require the supermarket chains to sell our products consumers’ also demand the brands we supply.
There is a symbiotic relationship between the supermarket chains and us. If we want to have mutually successful businesses there is space for both to succeed provided we join hands because we both have one person in mind. That is the shopper.
We have a mutual customer at the end of the chain. So as long as we both put the ultimate customer or consumer at the prime position then I think most of this so called challenges can be turned in to an opportunity.
LBR: Another aspect of modern trade or supermarket retailing that we are seeing is this emerging of ‘private brands’ or brands that supermarket chains themselves introduce. These are generally lower priced than perhaps what you are selling. How do you meet the challenge of that?
A: Of course price is a key element of any decision. A laundry soap or for that matter a product like a face cream or a food product for example; what consumers ultimately look for is value.
Price is one element of that value chain. So in to that goes the quality, in to that goes the whole promise, the image and all that. So the only brand which provides many of those is attractive. Our job is to be able to compete with those labels and offer consumers even greater value through our brands.
Now ‘own label’ is relatively a new phenomenon for Sri Lanka with modern trade. But if you look at developed countries where modern trade has existed for years, still the market leaders of branded goods are companies like Unilever and so on.
Companies like us have to compete with price and with quality and promise the wider mix.
LBR: In the last few years we have clearly seen Unilever also introducing its premium brands to Sri Lanka. We have Dove and extensions of brands like Lux with liquid soap and Vim etc. What has your experience been with premium brands so far?
A: Let’s step back for a bit.
At the root of our existence is growth. If a company stops growing then the future is not that rosy. How does one drive growth in a business? You can continue to drive volumes but in a limited population. I mean Sri Lanka as a market compared to other Asian neighbors and so on, is small. We have a 20 million population as opposed to Pakistan which has 180 million, Bangladesh at 160 million and of course India where there is over a billion people. So in this limited market we also see volume growth to be bit difficult if we stay in the same range of products because consumption reaches optimum levels. That means Sri Lanka is also in a higher level at economic prosperity.
LBR: Like you said 2008 was perhaps a tough year for you and this is the time that many of your premium brands came out. What was the experience like launching premium brands during a downturn?
A: Firstly I think you have to take the long term view. I think that is where all starts.
People can see that we are a leading FMCG company. We have 26 very strong brands. In fact 12 of them were selected in Sri Lanka’s 100 top brands. That did not happen by accident. That comes with 75 years of investment.
In the early 60’s when Astra margarine was introduced, selling 100 packs of it was a huge challenge. Today it’s a very big brand. So first, it’s a long term view. They may not necessarily give you the best return today but if you keep investments behind those brands and you have got a good marketing mix behind it, the rewards will come.
One of Unilever’s global ambitions is to double its business over the next 10 years but at the same time manage its environmental impact. Even Sri Lanka has a role to play and in setting up our next factory we will take all these in to account.
LBR: Doubling your global business in ten years surely is ambitious. But sitting here in Sri Lanka you must be aiming higher?
A: Of course we are aiming higher. We want to do it in half that time. We want to double the business in five years and this is not a frivolous ambition. When we get our numbers this year, we would have doubled our business over the last five years and we have doubled our business in the four years prior to that.
We would have, by the end of this year, doubled our business twice over. Given that track record and given that Sri Lanka is on the threshold of prosperity we believe that we can double our business and in other words Unilever here will want to grow twice as fast.
Unilever Sri Lanka Fact Sheet