CLSA Investors’ Forum23rd September, 2009
Mr Nitin ParanjpeCEO and MD
Hindustan Unilever Limited
This Release / Communication, except for the historical information, may contain statements, including the words or phrases such as ‘expects, anticipates, intends, will, would, undertakes, aims, estimates, contemplates, seeks to, objective, goal, projects, should’ and similar expressions or variations of these expressions or negatives of these terms indicating future performance or results, financial or otherwise, which are forward looking statements. These forward looking statements are based on certain expectations, assumptions, anticipated developments and other factors which are not limited to, risk and uncertainties regarding fluctuations in earnings, market growth, intense competition and the pricing environment in the market, consumption level, ability to maintain and manage key customer relationship and supply chain sources and those factors which may affect our ability to implement business strategies successfully, namely changes in regulatory environments, political instability, change in international oil prices and input costs and new or changed priorities of the trade. The Company, therefore, cannot guarantee that the forward looking statements made herein shall be realized. The Company, based on changes as stated above, may alter, amend, modify or make necessary corrective changes in any manner to any such forward looking statement contained herein or make written or oral forward looking statements as may be required from time to time on the basis of subsequent developments and events. The Company does not undertake any obligation to update forward looking statements that may be made from time to time by or on behalf of the Company to reflect the events or circumstances after the date hereof.
Safe harbour statement
Agenda
Context
Strategy & Execution
Focus & Priorities
Agenda
Context
Strategy & Execution
Focus & Priorities
FMCG consumption growth is intact
Broad based growth across categories and across urban and rural
FMCG Markets
17.615.6
18.420.1
18.3 17.7
8.511.0
16.5
25.022.5
24.2
16.1 14.918.1
20.818.9 18.6
MQ'08 JQ'08 SQ'08 DQ'08 MQ'09 JQ'09
HPC F&B FMCG
FMCG Market sustains growth of over 15% in last 6 quarters
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
MQ'08 JQ'08 SQ'08 DQ'08 MQ'09 JQ'09 Jul'09
Skin CleansingPrice Growth%
… but price element comes down (eg skin cleansing)
Source: AC Nielsen
2009 in perspectiveFMCG market growth sustained, but
frequent price changes, especially in mass segmentdowntrading in certain categoriesdown-stocking in wholesale and organised retail
Appropriate actions taken timelyfocus on consumer value (including competitive pricing) at all timesplaying the full portfolio across categories; relevant innovations launchedcompetitive brand supportincreased execution rigourstep-up in cost efficiency programmes
Impact of actions will be visible over a period of timelinked to pipelinetransition impact on shares in the short term
Source: NCAER
0.6036%20%Piece Work Labour
1.0741%43%Self Employed in Agriculture
1.2512%15%Non AgriculturalSelf Employed
1.502%3%Others
11%
% share of Rural Hholds
1.8020%Regular Salary/ Wages
Earning Weight
% share of Rural Income
Occupation Category
Job Security + 6th Pay Commission
Better Accessibility+40% increase in MSP
NREGA (30% wage increase)
Catering Local Demand
Household incomes will continue to increase
Disposable income rate continues to be high
Traditional savings methods – no erosion of savings
Monsoon and Impact on Rural MarketsMonsoon status c. 20% deficiency;mitigating factors expected to partly offset impact
Changing Income Pattern
The shape of India is changing… from a pyramid to a diamond
2003181 mn households
2013231 mn households
Source : National Council of Agriculture & Economic Research
131
46
3
124
11
96
Affluent
Aspirers
Strivers
AffluentTop End Business
Changing attitudes
Trebling
Credit Culture
B.O.P Opportunity
Aspirers
Strivers
Agenda
Context
Strategy & Execution
Focus & Priorities
Our Vision
To earn the love and respectof India, by making a realdifference to every Indian.
Competitive, Profitable and Sustainable Growth
• Leverage brand portfolio and consumer understanding by
• Straddling the pyramid & deploying full portfolio
• Driving consumption & penetration opportunity
• Winning with consumers, channels, segments/markets of tomorrow
• Build markets and capabilities for the future
• Leverage Unilever scale and know how
• Drive increased execution rigour
• Step-up in cost efficiency initiatives
• Integrate economic, environment & social objectives with business agenda
Our Strategy
Portfolio straddling the pyramid
Affluent
Aspiring
Striving
Strong brands across categories addressing needs of every consumer
CoffeeTeaToothPaste
SkinShampooPersonal Wash
FabricWash
Identifying the opportunity and filling it is important
Source : A.C Nielsen – June Quarter 2009 Value shares
Strong portfolio across categories
65
5.2
42.2
21.8
32.5
45.449.1
56.4
46.3
36.240.1
21.6
11.7
24.1
57.99.811.6
FabricWash
PersonalWash
PacketTea
Skin ShampooDishwash Jams
22.728.0
31.6
49.5
Toothpaste Ketchups
Market Leader Strong No. 2
HUL – Market Share (%) Competition Market Share (%)
CoffeeDeos
Reversing recent share decline: Top Priority
Increasing consumption: Lifebuoy Handwash Programme
• Context• Barriers to Soap Usage very high• Insight : “ Visible clean is safe clean “
• Method• Raise concern on the consequence of
invisible germs
• Challenge• Low literacy, Low reach of conventional
media
Since 2002, the project has touched 50,676 villages and 120 million people.
Campaign Impact•Awareness of germs - 52% to 83%
•Association of germs with disease - 35% to 57%
• Leverage brand portfolio and consumer understanding by
• Straddling the pyramid & deploying full portfolio
• Driving consumption & penetration opportunity
• Winning with consumers, channels, segments/markets of tomorrow
• Build markets and capabilities for the future
• Leverage Unilever scale and know how
• Drive increased execution rigour
• Step-up in cost efficiency initiatives
• Integrate economic, environment & social objectives with business agenda
Our Strategy
Consumers of tomorrow: Dove
3.33.9
4.6 4.95.9
7.1
MQ08 JQ008 SQ08 DQ08 MQ09 JQ09
Launch of Dove Deos
Dove Hair Fall Therapy
All India market share already >1% within 3 months of launch
Dove Shampoo - Rapid Market Share Gain in Urban
BUILDING A $100 MN BRAND
Dove Soaps –continuously gaining shares for last 8 quarters
All India Urban Shares
Consumers of tomorrow:Lipton Tea & Taj Mahal Tea BagsUSP - With goodness of Theanine
DIGITAL
DIRECT CONTACT
• First Tea Brand to use digital to engage with a younger TG
• Facebook application, blogs, IMV, innovations to engage
• Activation in over 250 offices and theanine tea in over 1500+ locations
• EDMs to the 1.9 lac database on progress of puzzle
• Impactful outdoor around offices and at airports
• Clutter breaking print
INNOVATIVE MEDIA
Worlds Largest Jigsaw
Challenge
Relaunch of Taj Tea Bags
•Launch of the Taj MahalCore 10s trial pack & Flavoured tea bags
•New campaign; •Supported with dispenser visibility
In flight activation in Jet Airways
Tea Bag Conversion: Education & Sampling
Personal Wash Hair Care Skin Creams Toothpaste DeodorantMTShares GTShares
Source : A.C Nielsen – June Quarter 2009 Value shares
In aggregate; MT shares > GT shares
Channels of tomorrow: Modern Trade
Segments of tomorrow: Hair Conditioners
18.219.4
22.7
25.628.3
32.442.6%
27.5%
32.4% 31.5% 31.4%
28.4%
10
15
20
25
30
35
MQ'08 JQ'08 SQ'08 DQ'08 MQ'09 JQ'090.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
HUL SharesMarket Growth%
14.40%
18.40%21.10% 23.30%
10.60% 9.40% 9.30%
15.70%
1997 2000 2004 2008
Philippines China
Source: AC Nielsen
Source: Euromonitor
Share of Hair Conditioners in Hair Care
India is still approx 3% only
HUL Shares and Market Growth%
Permanent branding and shelf presence at POS
Sachets to generate trials
Impactful execution across mediums
Conditioners Market in India growing fast
with huge potential
Building new markets: Pure-it
Complete protection …`as safe as boiled water’Meets US EPA standardsWorks without electricity, pressurized piped waterAffordable: Device Rs 2000 ( $40) Germkill Battery Rs 350 ($7)Rs 0.35 per litre ( < 1 $ cent)(incl. initial price)
ProgressVolume market leadership in South India
>700 towns, 20 states covered
Increasing penetration through retail presence in <10 L population towns
More than 400 safe water zones established
Growing consistently @ > 50%
More than 7 million lives protected
Unique
promotional
campaign
Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09
Axe Indexed Sales
Strengthening capabilities:Brilliant Activation
‘Call Me’interactive campaign
Generated over 3 million unique calls
Accelerated
Growth
achieved
after campaign
>2% market share gain in Non Metros
Strengthening capabilities: Out of Home
1.2 million consumer experience moments were created in FH’09
68
40
20
2007 2008 Current
No. of Swirl Parlours
• SWIRL’S - a successful concept in Europe• 68 parlours established across 10 Indian cities
• FRESH : Fresh Ingredients
• CHOICE : Create Your Own
• THEATER & FUN : Specially for You
Various shop and product formats
Power of AnalyticsPower of Power of AnalyticsAnalytics
Power of One Unilever
Power of One Power of One UnileverUnilever
Shopper InsightsShopper Shopper InsightsInsights
PeoplePeoplePeople
iQiQiQ
GTM (R)GTM (R)GTM (R)
Channel ProgramsChannel ProgramsChannel Programs Lean & Agile OrganizationLean & Agile Lean & Agile OrganizationOrganization
GTM (U)GTM (U)GTM (U)
Winning
In MT
Winning
In GT
Strengthening capabilities: Winning at Point of Sale
Creation of Perfect Stores
Mass Customization
Creating a million perfect stores…
• Business insights from execution and sales data to seamlessly support business decisions
• To enable superior execution and planning of events
• Appropriate product assortment to maximize sales
Intelligent Information Systems
Already in pilot…
+
Leveraging Unilever: Global R&D Centres
Bangalore, India
Vlaardingen, NL
Shanghai, China
Port Sunlight, UK
Trumbull, US
Colworth, UK
Fabric Wash, Hair Care, Deos, Oral Care, Surface Cleaners, etc.
Skin Care, Deos, Shampoos, etc.
Beverages, Processed Foods, etc.
Fabric Wash, Beverages, Processed Foods, etc.
Skin Care, Fabric Wash, Beverages, Ice Creams, Processed Foods, Water etc.
Shampoos, Skin Care, Ice Creams, Beverages, Processed Foods, etc.
Unilever Research and Development Strengths
Spray TechnologyDeodorants
StructuredOils and Emulsions
HairTechnology
Skin Mildness and Moisturizing
Product Processinge.g. Ice Cream
Science of Tea
13.2
14
1515.6
16.2 16.3 16.3
Q2 06 Q4 06 Q2 07 Q4 07 Q4 08 Q1 09 Q2 09
• Surf Excel – Nil Mineral Bar
• India’s first detergents bar with no fillers
• Patented technology with Competitive advantage
• High phosphate content for superior lather and excellent cleaning
All India Value Market Share
Leveraging Unilever know how: Surf Excel Bars
Leveraging Unilever know how: Skin CreamsPond’s White Beauty Re-launch with improved formulation
Vaseline Healthy White MS (H&B
Creams)
Rapid Share Gain after Re-launch
Education and sampling
Winner of the Amazing Skin Wall comes on the
FeminaCover
Digital Innovation
Print Innovation –Flicker Book
High Visibility
INSTANT IMPACT ON SALES WITH HIGHER AWARENESS AND TRIAL RATES
10.2
6.6
4.4
0.90.30.2
Jan'09 Feb'09 Mar'09 Apr'09 May'09 Jun'09
10.4
8.57.3
6.16.2
DQ'08 MQ'09 JQ'09 Jun'09 Jul'09
PWB MS (Premium Face Creams)
• Leverage brand portfolio and consumer understanding by
• Straddling the pyramid & deploying full portfolio
• Driving consumption & penetration opportunity
• Winning with consumers, channels, segments/markets of tomorrow
• Build markets and capabilities for the future
• Leverage Unilever scale and know how
• Drive increased execution rigour
• Step-up in cost efficiency initiatives
• Integrate economic, environment & social objectives with business agenda
Our Strategy
Improved Field Execution
Improvement in Field Execution particularly in Rural
0
20
40
60
80
100
120
140
Dec'08 Jun'09 Jul'090
50
100
150
200
250
300
Field Execution Efficiency - All India Field Execution Efficiency - Rural
Indexed Chart (vs Dec 2008)
Field Execution All India
Field Execution Rural
Enhanced Customer Service
Better customer service along with strong cash delivery
0
20
40
60
80
100
120
2008 Jan '09 Feb '09 Mar '09 Jun '0985
90
95
100
105
110
115
Days on Hand (Finished Goods) Customer Order Servicing %
Indexed Chart (vs 2008)
DOH Inventory Order Servicing
Driving cost efficiencies
020406080
100120140160180200
2005 2008
Supply Chain Cost Savings
Tight cost management ensuring continuous reduction of cost base
Indexed Chart (Base=2005)
as % of turnover
(vs 2005)+70 bps
60
65
70
75
80
85
90
95
100
105
2005 2008
Overheads as % of turnover
* excl Water & exceptional items
• Leverage brand portfolio and consumer understanding by
• Straddling the pyramid & deploying full portfolio
• Driving consumption & penetration opportunity
• Winning with consumers, channels, segments/markets of tomorrow
• Build markets and capabilities for the future
• Leverage Unilever scale and know how
• Drive increased execution rigour
• Step-up in cost efficiency initiatives
• Integrate economic, environment & social objectives with business agenda
Our Strategy
People(Social)
1. Health
2. Empowerment
Prosperity(Economic)
1. Enhance livelihoods
Planet(Environment)
1. Water
2. GHGs
Where: Around our units of operation
Who :Brands will lead the effort
How: Through Partnerships
Embedding sustainability
People(Social)
1. Health
2. Empowerment
Prosperity(Economic)
1. Enhance livelihoods
Planet(Environment)
1. Water
2. GHGsPartner DHAN foundation for enhancing livelihood
Sourcing from Primary Growers (initiated Tomato)
Partner with Prathamfor girl child education
LB Swasthya Chetna: 15000 villages in 08
45% water returned to ground
Reduced GHG by 35% (2004 base)
45000 HOURS OF EMPLOYEE VOLUNTEERING !!
Embedding sustainability
Agenda
Context
Strategy & Execution
Focus & Priorities
Key Financials
171824EPS (cents)
$422 Mn
77%
18.8%
15.5%
2008-09**
$350 Mn
121%@
15.4%
13.5%
2007
$332 Mn
83%
Operating cash flow*
Dividend Payout Ratio
16.2%EBIT Growth
10.0%Sales Growth*
2006
* Before restructuring, disposals. Conversion rate $1= INR 48
** Audited results FY 2008-09 for 15 months. Sales and EBIT Growth Nos. are based on JQ’08-MQ’09 vs JQ’07-MQ’08
## EPS and Operating cash flow nos. are for 15 months MQ’08-MQ’09. Dividend Payout Ratio includes Dividend Tax
@ Includes special dividend
2009/10: Focus and PrioritiesEnsure competitiveness across the portfolio, particularly atthe mass end
Continue to invest in emerging categories and segmentsStrengthen/ build Processed Foods, Water and Premium Personal Care
Drive focus and speed alongside leveraging scale
Significantly strengthen Go-to-Market capability
Continued focus on Costs & Cash
Summary
• FMCG market growth continues to be robust
• Our goal remains unchanged• Competitive, Profitable, and Sustainable growth
• Strategy consistent; increased execution rigour
Thank You
CLSA Investors’ Forum23rd September, 2009
Mr Nitin ParanjpeCEO and MD
Hindustan Unilever Limited
Volatility in 2009
Crude Oil (USD Per Barrel)
Source: AC Nielsen
0
20
40
60
80
100
120
140
160
Jan-
07
Mar
-07
May
-07
Jul-0
7
Sep
-07
Nov
-07
Jan-
08
Mar
-08
May
-08
Jul-0
8
Sep
-08
Nov
-08
Jan-
09
Mar
-09
May
-09
Jul-0
9
Sep
-09
0
500
1000
1500
2000
2500
3000
3500
4000
4500
Jan-
07M
ar-0
7M
ay-0
7Ju
l-07
Sep
-07
Nov
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Jan-
08M
ar-0
8M
ay-0
8Ju
l-08
Sep
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Nov
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Jan-
09M
ar-0
9M
ay-0
9Ju
l-09
Sep
-09
Palm Oil (MYR Per Ton)
30.0
32.0
34.0
36.0
38.0
40.0
42.0
44.0
46.0
48.0
Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09
COMMODITY PRICES
CONSUMER PRICES Washing Powders (Market Avg Price Per Kg)
0
200
400
600
800
1000
1200
1400
1600
Jan-
07M
ar-0
7M
ay-0
7Ju
l-07
Sep
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Nov
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Jan-
08M
ar-0
8M
ay-0
8Ju
l-08
Sep
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Nov
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Jan-
09M
ar-0
9M
ay-0
9Ju
l-09
Sep
-09
Benzene (USD Per Ton)
Source: Bloomberg
Mass market Washing Powders witnessed several rounds of price changes in FH’09