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September 2017 Cover Story

Published on: 2017-09-14 13:37:55     446 times read    0  Comments
25 Years of Unilever Nepal : Charting New Heights in FMCG

The last 25 years have not only seen Unilever becoming a major force in the Nepali manufacturing sector, it is also winning accolades for its contributions and efforts to make the lives of the general people better. 

--BY NIKEETA GAUTAM

It’s been a glorious 25 years of Unilever in Nepal. Unilever Nepal Limited (UNL) has seen several ups and downs in this journey, ultimately establishing itself as perhaps the largest FMCG manufacturer in the country. Profitability along with positive impact on society and the environment has been at the core of the business model of UNL. 

“Our brands continue to drive our purpose of making sustainable living a common place. Through our brands spanning Home Care, Personal Care and Foods and Refreshments categories, we endeavour to meet the evolving consumer needs and remain relevant in the changing times,” says Suyash Chauhan, Managing Director of UNL. With a corporate market share of 60 per cent, UNL is the largest producer of consumer goods in Nepal in personal care and home care categories. UNL has also been a witness to the transformation that Nepal has gone through as a country and has been there with the consumers through the thick and thin over these 25 years.

The beginning
UNL is a Nepali Anglo-Dutch Indian company which started its journey as Nepal Lever Limited, setting up a factory in Makwanpur district with an initial investment of Rs 70.37 million. The factory started with the production of detergents, cleaning powders, toothpaste and toilet soaps. The manufacturing activity of UNL commenced with the commercial production of Wheel washing powder in one kg packaging in February 1994. The company began exporting its products from 1995 and started to earn profits from the third year of production. 

But the exports gradually decreased from the early 2000 and stopped completely in 2004. It was due to the removal of the quota-free export system for companies in Nepal by India. “We faced a lot of challenges with the end of the export opportunities. We then explored the option to expand our market across Nepal and that was when the company changed its name to Unilever Nepal Limited. After years of dedication for growth in Nepal, now it seems that the slowdown in export was a blessing in disguise,” says Chauhan. According to him, it made UNL focus more on the Nepali market. In its 25 years of journey, UNL has experienced and learned from the highs and lows of the country, emerging as a major player of the country's manufacturing sector. 

Successful market expansion
UNL maintains a large product portfolio in personal care and home care segments with products ranging from toothpaste to dish washing soaps. Globally famous Lifebuoy, Liril, Close-Up, Sunsilk, Lux, Fair & Lovely, Dove, Wheel, Ariel, Surf and many other brands of the company have become household names in Nepal as well. The market penetration of UNL is signified by the fact that the brands of the company are found across the country. From big supermarkets and convenience stores in big cities to small shops in the remote areas, the products of UNL are easily available throughout the country. The company has even reached the upper hills of Humla, Kalikot and Jajarkot districts. Meanwhile, UNL has been packaging and marketing products in such a way that the products are affordable to consumers of all income groups. For example, it has been producing daily essentials such as toothpaste, shampoo, detergent powder and other items in small packaging also to facilitate consumers from low income groups to buy the products.

Effective distribution system
UNL’s parent company Hindustan Unilever Limited has been operating in India since 1956 and the brands were accessed to Nepal since then through imports. But with the commencement of operations of UNL, the company began to establish an effective distribution network to supply the products in the domestic market. 

The domestic distribution was both costly and challenging for the company initially because of the poor road infrastructure and connectivity. “So, we worked closely with our distributors, sub-stockists and retailers to provide better services to the consumers,” says Chauhan. The company in 1999-2000 began new initiatives to increase the rural reach through its trading partners including suppliers, processors, carrying and forwarding agents, redistribution stockists, rural distributors, transporters, wholesalers and retailers.  According to Chauhan, UNL directly serves all but two districts though its distributors and sub-stockists. “All in all, between the company, distributors, sub-stockists, “Hamri Didis” and logistics partners, UNL ensures that the consumers are able to find the products that they want in the nearest grocery store everywhere and also provides direct and indirect employment to 25,000 people,” he notes. With this commitment of providing better services to consumers, the company has been producing and distributing world-class products to Nepali consumers in an easy and economically affordable manner. 

Consumer and distributor centric programmes
UNL specializes in organising different types of consumer-, distributor- and retailer-centric programmes.  It has been running various such programmes, unlike any other manufacturing company in Nepal. The consumer-centric programmes of the FMCG major are aimed at raising awareness among Nepali consumers in terms of quality and proper use of the products. 

“Our products are more about developing right habits among the consumers. Making the consumers conscious about their personal hygiene and giving them the right value by continuing to specialise in all the categories of personal hygiene is the pillar of our growth," shares Chauhan. 

It is also organising trade loyalty programmes and trainings for distributors and retailers. For instance, the Perfect Store programme which has been running for the past few years aims at bringing excellence in execution at the point of purchase. Another initiative, the Shopper Delight programme has been going on for the last three years. The initiative forms part of UNL’s Joint Business Planning to promote performance culture in the distributor sales team. The company seeks to enhance the depth of market coverage of distributors by training them and the sales team to penetrate all types of market categories.  

Outsourcing of manufacturing 
UNL is the first company in Nepal to start outsourcing (ancillarisation) of manufacturing activities. It was in 1999 when the company outsourced the production of detergents to the National Soaps Industries. The decision to outsource entire detergent powder products came as part of its long-term manufacturing strategy in a bid to focus on the production of high value products. 

Later that year, the production of detergent bars and packing of blended tea was also outsourced to local producers. “More than outsourcing for UNL, it has been about building capability in local entrepreneurs so that domestic manufacturing gets a boost. It also helps create a sustainable ecosystem in which local production can flourish in Nepal,” says Chauhan, adding, “Over the years, we have invested in building up the capabilities of our 3P partners. It has been proven that we can indeed manufacture world class products in Nepal in factories managed by local entrepreneurs.”

People management
“Great brands and great people are our biggest assets,” says Chauhan. The employee management in UNL is driven by the concept that sustainable and profitable growth can be achieved only in an organisation which focuses on performance-culture and where employees are engaged and empowered to be the best they can be. “Success in the future will depend on being lean, agile and competitive in a resource-challenged world. We are working towards creating a simpler, diverse and agile organisation that will help us move faster, innovate better and leverage our global scale," mentions Chauhan.

Presently, UNL has 250 staffers and among them 95 per cent are Nepali citizens. UNL has been continuously adapting new working environment to accommodate the new generation of staffers. “Millennials are joining the workforce and we are gradually upgrading the company according to their attitude towards work,” says Chauhan. He views the level of respect in workplace, besides good remunerations, as the major factor to keep staffers rooted in the office. 

The UNL management wisely evaluates the performance of individual employees. The company not only takes its staffers as its assets but also makes them believe that they are valuable for the organisation. “People feel proud to be associated with Unilever, and this makes UNL a well managed and wonderful company,” states Chauhan.

Employee well-being is of utmost importance at UNL. "We focus on the four aspects of well-being—physical, mental, emotional and purposeful. Several initiatives have been taken over the last year to communicate the importance of and provide support systems to enhance employee well-being," says Chauhan.

Being part of a global corporation, UNL’s staffers have access to many cutting-edge work practices. The company has an efficient succession planning that forms an integral part of its HR processes to select best people for the organisation. “We are currently in the process of digitizing most of our work processes. It includes setting up a HRI system to track end-to-end performance of employees,” Chauhan informs. According to him, UNL has plans to connect its distribution partners to new technology and systems so that the whole group of distributors and their staffs have access to the company’s standardization drive. The company selects people who are dynamic and aspire for global careers. “We closely observe their attitude towards learning and see how their career will shape up,” he says, adding, “The training period of the selected people is the most important phase for us and also for them to understand the company and get shaped up to build their future with UNL.” Usually, Unilever Nepal prefers to hire people on the basis of their willingness to explore themselves and gain expertise rather than for the specialization they already have.  “We look for people who do not want to spend their whole life in Kathmandu but are willing to move to various remote districts of Nepal and show their expertise there,” shares Chauhan. 

Decentralized decision making has been among the core components of UNL’s corporate culture. The company has achieved true sense of decentralization in decision making by engaging managers at various levels and not confining it to a few top executives. 

UNL has a good experience in hiring graduates from different business schools who work as trainees. “Students just receive theoretical knowledge in the academic classes. However, they are required to go to rural areas, engage with consumers and handle distributors to gradually become all-round professionals when they work here as trainees,” mentions Chauhan. He gladly says that UNL is an employer of choice not just for college graduates, but also for every aspiring jobseeker. The company recently received 1,800 applicants for 30 workwomen trainees in Makawanpur which shows the attraction of jobseekers towards UNL. 

Tackling labour issues
Keeping employees satisfied has been central to the human resource management of UNL. 

It endeavours always to keep its staffers happy and content. However, the company on different occasions has faced labour related problems at its factory in Makawanpur that have resulted in industrial strikes and disturbances severely hampering production and distribution activities. The latest such disturbance happened in August 2016 when worker unions forcefully ceased factory operations for about a month. Manufacturing and distribution activities resumed in September after the company’s management reached an agreement with the representatives of the unions to end the lockout.

Despite problems like these, Chauhan observes that some positive developments have started happening in order to resolve labour related issues. “The majority of Nepali workers do not favour industrial disturbances and it is only the five percent of the people who run the protests,” he says adding that the attitude of these five percent has been the main challenge for employers at present. 

“Ultimately, any company is about employees, brands, stakeholders and society. And, in a big company like ours, the management is also run by the employees. Keeping all these things in mind, we hold constructive dialogues with the employees about the problems and possible solution on a regular basis,” he mentions, “At UNL, we discourage power distance and encourage people to speak up in case of any problem.”  The dialogues and feedbacks are usually constructive in UNL, according to Chauhan. He claims that in most of the cases of disturbances, it is basically due to the attitude of the workers who are habituated to ‘revolutionise’ everything instead of being collaborative. 

Chauhan believes that the recently amended Labour Act can solve the labour related issues. “However, this will happen only when the law will be properly implemented,” he says. “The generation is changing and now we have to realize that we need to make the Nepali economy competitive. So, when we take the business well, this will impact the economy and will definitely change the whole scenario of the country gradually,” he adds. 

Venturing into new FMCG categories
Globally, Unilever manufactures and markets products in four major FMCG categories, namely Personal Care, Home Care, Foods and Refreshment.  UNL, meanwhile, is engaged in producing products in personal care and home care segments. Now it is planning to add foods and refreshment products in its portfolio while also adding new products in the existing categories. “UNL has been continuously increasing its current portfolio in personal care and home care categories with new brands and offerings,” says Chauhan. He informs that UNL will also start expansion in foods and refreshment categories when the time fits with local production.  

Unilever has been in business since the 1880s. Its unique heritage shapes the way the company does business today. In the 1890s, William Hesketh Lever, founder of Lever Bros, wrote down his ideas for Sunlight Soap – his revolutionary new product that helped popularise cleanliness and hygiene in Victorian England. It was 'to make cleanliness commonplace; to lessen work for women; to foster health and contribute to personal attractiveness, that life may be more enjoyable and rewarding for the people who use our products'. This was long before the phrase 'corporate mission' had been invented, but these ideas have stayed at the heart of the company's business. Unilever has a simple but clear purpose – to make sustainable living commonplace. “We believe this is the best long-term way for our business to grow. Our distinct purpose and our operational expertise across our business model will help realise our vision of accelerating growth in the business, while reducing our environmental footprint and increasing our positive social impact,” concludes Chauhan.

The Business Model of USLP
According to Chauhan, UNL’s sustainable business model drives growth that is consistent by reducing risks, is more competitive through inspiring innovations, is more profitable by reducing costs and is more responsible – leading to enhanced trust in the products. He states that further binding the category strategies together are the company’s compass pillars which define how Unilever wins with consumers. They are: 
• Winning with brands and innovation 
• Winning in the marketplace 
• Winning through continuous improvement 
• Winning with people
 
Underpinning the compass is the Unilever Sustainable Living Plan (USLP) which is the foundation of the company’s business. “By delivering social and environmental benefits throughout our business, we drive our growth, which in turn drives our ability to improve the lives and opportunities of people, everywhere,” explains Chauhan. USLP has three big goals globally: 
(i) To help more than one billion people improve their health and well-being by 2020
(ii) To halve the environmental impact of the company’s products across the value chain by 2030
(iii) To enhance the livelihoods of millions as Unilever grows its business by 2020 
 
To achieve these goals, Unilever has integrated the USLP into its business model. 
 
Driven by these goals, UNL currently has various initiatives for health and hygiene, enhancing livelihood and environmental protection which is well incorporated in its purpose “Swastha Nepal, Saxchyam Nepal, Hamro Nepal” and Unilever is counting every second to make USLP more feasible in Nepal. Within the purpose, the company has encompassed various projects that are aimed at earning love and respect of Nepalis by making a real difference to every Nepali.
 
The company altogether has five major social initiatives. Among them, the following are brand-led activities:
• Lifebuoy - Help A Child Reach 5 
• Pepsodent- Oral Hygiene
• Clinic Plus- Encouraging Girl Child Talent
• Fair & Lovely Foundation- Enhancing Women Livelihood
• Consumer awareness programmes
 
UNL has been maintaining an impactful brand presence in Nepal by promoting healthy living and positive social changes with its product use. For instance, UNL has reached out to around 10 per cent of the population of Nepal with the handwash behaviour change programme. “This campaign was not only about informing the people about methods to wash hands but also about changing people’s habit,” shares Chauhan. In this regard, the 'Help A Child Reach 5' programme aims to change the hygiene behaviour of Nepalis through hand-washing with Lifebuoy soap that can reduce diarrhoea which is considered as the biggest threat to the life of children under five. 
 
Hamri Didi: The Hamri Didi programme is aimed at empowering women through entrepreneurship opportunities. Launched in 2015, the Hamri Didi project has been running in the mid- and far-western Nepal with an aim to enable women to set up small businesses. UNL has partnered with the UK Aid funded RAP3 CONNECT and Prabhu Bank to invest in training and mentoring of women entrepreneurs. It has also appointed local dealers who will supply goods to “Hamri Didis” (our sisters) in the remote areas. 
 
In this mentoring programme, the selected women and their supervisors walk door-to-door and market-to-market to educate people about Unilever products. The women in the ”Hamri Didi” project also acquire this knowledge in classroom training and are guided through on-the-job training also to know different business approaches. “This innovative model is paving the way to economic independence for hundreds of rural women living in the remote parts of Nepal. Over the period of three years, 600 high potential women have been selected by the RAP3 CONNECT under the Hamri Didis programme,” shares Chauhan. 
 
Likewise, UNL has other programmes such as the Clinic Plus Healthy Hair Contest to empower girls and women and sell its products at the same time. Besides these campaigns, the company has been constantly working to increase women participation in its workforce. 
 
Hamro Ramro Pasal: It is a part of the sustainability programme of UNL through which the company partners with its retailers to help them serve their customers better. Under this, UNL focuses on enhancing consumer experience at the retailer point for its healthy growth. According to Chauhan, more than 3,500 retail outlets have been already enrolled in the programme since last April. “The outlets are being regularly serviced and provided with guidance in visibility and layout for a better consumer buying experience,” he says.
 
Project Prabhat: UNL also has community engagement programmes in areas adjacent to its manufacturing units.  Project Prabhat is one such initiative under which the company is actively engaged in community development at Basamadi, Makwanpur where its factory is situated.
 
“Our first priority is to work for enhancing health and nutrition. Our second priority is to reduce the environmental impact and third is to work towards raising the livelihood of people,” says Chauhan. According to him, Unilever runs different social campaigns not out of compassion but for the well-being of society and growth of business. “Sustainable living is the Unilever way of working. Our business model drives growth that is consistent, profitable, competitive and responsible. Hence for the last seven years, Unilever Sustainable Living Plan (USLP) is at the core of everything we do,” he mentions.
 
In recent years, the company’s focus is on conservation of water by sustainable utilisation of resources to tackle the global water scarcity. UNL like its parent HUL is betting big on sustainability and continuously working for giving back to society and the environment. UNL has been honored with Environmental Friendly Factory Award in 2074 BS for its environment protection initiatives.

 

Making Shareholders Richer 

UNL is a blue chip company in the Nepali stock market that pays highest dividend to its shareholders. It is the only blue chip company in manufacturing and production category listed at NEPSE. The five year distribution of the company’s dividend indicates the trend of the growth of the value of UNL’s stocks. From FY2011/12 to FY2015/16, the company has distributed per share dividend of Rs 590, Rs 680, Rs 760, Rs 990 and Rs 1,020 respectively. “We have observed a competitive growth throughout the 25 years of operations in Nepal. The growth has been consistent from FY 2005/06 to FY 2015/16,” says Chauhan. According to him, the company’s annual sales grew from Rs 1.4 billion to Rs 3.9 billion in this period.  

The company has 920,700 listed shares with the market capitalisation of Rs 27,574,965,000. UNL’s parent company Hindustan Unilever Limited holds 80 percent of the shares while the remaining 20 percent or 184,180 units are owned by Nepali investors. As per the financial report of the third quarter of FY2016/17, UNL’s earning per share (EPS) is Rs 348 and net worth per share is Rs 2,479.

 


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