By Saabira Chaudhuri
Unilever PLC has leaned on developing countries to power its
sales growth, but the pandemic has roiled its biggest such market
-- India -- propelling the company to change how it manufactures,
prices and distributes its products there.
India accounts for about 9% of Unilever's global sales and is
its second-largest market after the U.S. The owner of Dove soap,
Ben & Jerry's ice cream and Axe deodorant describes the country
as a crown jewel, boasting that its cleaning sprays, teas and other
household staples are found in nine out of 10 households. Covid-19,
though, is racing through India with the country on track to
surpass the U.S. as having the most infections globally.
Government restrictions to curb the virus's spread have
disrupted Unilever's large supply chain, making it harder for the
company to find ingredients and operate its factories, and for
Indians to visit stores and pay for household essentials. To keep
selling, Unilever is studying official data on the infection rate
to plan shipments, training retailers on social distancing and
borrowing trucks from rivals.
Operating in emerging markets brings risks but also hundreds of
millions of potential new customers. Unilever has long leaned on
those countries to help offset sluggish sales in the West but the
pandemic is wreaking havoc on many of those same places. In the
first half of this year, Unilever's emerging market sales
contracted by 1.9% -- the lowest level on record and down from
growth of 5.3% last year.
Other companies are also facing headwinds in poorer countries
where especially strict lockdowns have forced a pullback in
consumer spending as daily wages dry up.
Smirnoff-owner Diageo PLC has written down the value of its
operations in parts of Africa, Kleenex maker Kimberly Clark Corp.
blamed Latin America for dragging down its quarterly results, and
Procter & Gamble Co. said its baby-care business was hit by
lower consumption in emerging markets.
"The disease progression is a worry," Unilever Chief Executive
Alan Jope said about India earlier this month. "It is the only
major country where we're still seeing exponential growth in
Unilever's India executives said they were caught off guard at
how quickly Covid-19 spread. After it hit Wuhan, they focused on
mitigating the disruption in ingredients sourced from China rather
than planning for how it might affect India. "That was our entire
focus," Unilever's India head Sanjiv Mehta said in an interview.
"We never thought it could spread across the world in such a short
When India ordered the world's largest lockdown in March,
confining 1.3 billion people to their homes with just four hours
notice, Unilever had to close 29 of its 31 factories. Its India
sales declined by 9% in the first quarter, the steepest on
"The country ground to a complete standstill," Mr. Jope told
investors after restrictions were enforced. "India is a big deal
for us right now."
India's reliance on informal laborers, who returned to their
villages after businesses shut, has created problems.
"Even where we could manufacture, getting trucks was difficult
because many were stranded on highways and the drivers weren't
available," Mr. Mehta said. A 28-year company veteran who led
Unilever's North Africa and Middle East business through the Arab
Spring and second Gulf War, Mr. Mehta says Covid-19 presents his
biggest challenge yet.
The company borrowed trucks from Coca-Cola Co., packing drivers
a lunch of rice and lentils as roadside eateries were closed. It
rolled out health insurance for its distributors and applied for
stickers for truck windshields to show vehicles had permission to
carry goods. Unilever set up a team to help suppliers secure the
paperwork needed to reopen after its hand-sanitizer factory
couldn't get bottles and caps, while a laundry-powder plant
reopened but struggled for industrial-grade salt when its supplier
Unilever used idle school buses to transport workers to its
factories and introduced longer shifts to minimize changeovers. It
checked workers' temperatures and developed an app that triggered
an alarm if they got too close to each other.
Despite such efforts, a rise in infections in North India was
linked to a Unilever factory employing nearly 2,500 people.
Unilever's India management is the subject of a police
investigation -- facing potential jail time -- after being accused
of violating government guidelines for allowing workers who had
traveled to return to work without quarantining. The company says
the workers violated its protocols by failing to report their trip
and attending large social gatherings.
Another challenge: Most Indians buy groceries from small
mom-and-pop stores, often just 100 square feet. "India is a very,
very difficult market to achieve social distancing," said Prasun
Basu, who works on consumer insights for Nielsen. Indian stores
were closed for much of the spring, Nielsen said.
To help small stores reopen, Unilever sent salespeople to train
retailers on distancing and hygiene. It also launched an app for
store owners to order online rather than from its traveling sales
staff, who traditionally served some 2.5 million stores throughout
the country. And it has even started listing its creams, soaps and
other brands on food-delivery apps.
Unilever's sales in India dropped sharply in the second quarter,
and executives expect more trouble ahead as the economy worsens.
The country's gross domestic product plunged 23.9% in the three
months to June -- the first contraction on record.
While national restrictions have eased, India has instituted
local lockdowns, often at short notice, as cases spike. Unilever
says this is pressuring its operations.
To pre-empt product shortages, the company has charged a team
with analyzing government infection data to get ahead of potential
restrictions. "Once we identify a zone as high risk, we ensure
inventory needed is shipped in advance," said Willem Uijen,
Unilever's supply-chain chief in India.
Like other companies, Unilever has cut hundreds of product lines
to produce more of those in demand. The company says 20% of the
eliminated products won't return. As India's economy weakens, it is
preparing for consumers to shift to cheaper products, and has
reduced the price of some sanitizers, soaps and cleaners by
Unilever is also battling increased competition from Reckitt
Benckiser Group PLC, whose Dettol soap overtook Lifebuoy as India's
No. 1 soap brand for the first time. Unilever has sued its rival,
alleging Dettol advertising undermined Lifebuoy. A Reckitt
spokeswoman declined to comment citing ongoing litigation.
Despite the challenges, Unilever says it is winning market share
across the majority of its categories in India and thinks the
country will continue to drive growth in the long term. It is
donating ventilators and testing kits to the government, as well as
millions of dollars worth of products like sanitizer and food to
hospitals, police and low-income families.
"We come from a very simple agenda, which is what's good for
India is good for Unilever," Mr. Mehta said.
--Rajesh Roy contributed to this article.
Write to Saabira Chaudhuri at email@example.com
(END) Dow Jones Newswires
September 28, 2020 07:14 ET (11:14 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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