In 2017, Unilever Nepal Limited (UNL) is celebrating its silver jubilee. How do you evaluate Unilever’s presence in Nepal?
Unilever Nepal Limited is a Nepali, Anglo-Dutch, Indian company. This is the only company in the world to have this lineage. It is one of the few foreign FMCG companies manufacturing consumer products in Nepal. UNL has matured and grown with Nepal in the last 25 years. It has witnessed the transformation Nepal has gone through as a country. And, UNL has been there with its consumers through thick and thin over the last two and half decades.
What major milestones and accomplishments over this period for UNL would you like to highlight? What are the things UNL could not accomplish despite its best efforts?
UNL today is one of the largest local manufacturing companies in Nepal. It is the market leader in all the categories it operates in and has a corporate market share of over 60 percent. UNL is the producer of world class international quality brands such as Dove, Sunsilk, Fair & Lovely, Lux etc. It is the highest dividend paying company in the category and its shares are priced the highest in the stock market. In terms of employment, UNL is an employer of choice not just for college graduates but for everyone. For instance, for 30 workwomen trainees in Hetauda, we received around 1,800 applications!
Similarly, over the course of four years our hand wash behaviour change programme called “School of 5” has been able to reach out to 10 percent of the population. We have been reaching out all across Nepal through our products for daily use. Nonetheless, UNL has also met with various hindrances along its way. Labour issues, for example, have been a constant problem for the company in the last 25 years disrupting factory operations numerous times.
Started as a manufacturer of a few items such as detergent powder and toilet soap in Nepal, UNL now is the largest player in the country’s FMCG market. What factors do you think are behind this expansion?
We have the vision to grow our business whilst decoupling our environmental footprint from the company’s growth and to increase our positive social impact. UNL’s purpose is “To earn the love and respect of Nepal by making a real difference to every Nepali”. With this purpose engraved in everything we do, it has helped us to become well accepted by Nepali consumers. Like in other countries, consumers have a huge amount of trust in Unilever brands. The brands of Unilever are synonymous with quality and provide confidence to consumers regarding the delivery commitment stated by the company. Overall, UNL’s commitment towards Nepal and Nepalis has been the key to its success.
UNL is considered among the companies having the best distribution channels in Nepal. How have you created this smooth supply chain?
Making products available to all at arm’s length is a key task for us. There are also various challenges to overcome while serving Nepali consumers better. With a dispersed population, poor infrastructure in connectivity, distribution is both costly as well as challenging in Nepal. In this situation, UNL works closely with its distributors, sub-stockists and retailers to provide better services to consumers. We directly service all but two districts though our distributors and sub-stockists. All in all, between the company, distributors, sub-stockists, “Hamri Didis” and logistics partners, UNL provides employment directly or indirectly to 25,000 people who in turn ensure that the consumers are able to find the products that they want in the nearest grocery store everywhere.
Outsourcing of manufacturing was an idea first introduced in Nepal by UNL. How was this concept of outsourcing factory activities realised by UNL?
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. 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. Hence, UNL’s model has been to be rooted in the local community and culture and to build capabilities providing sustenance and to enhance livelihoods.
How do you evaluate the growth of your company?
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. Annual sales grew from Rs 1.4 billion to Rs 3.9 billion in the period. The company in the period of FY 2005/06 to FY 2015/16 saw a profitable growth in terms of value of the dividend. Dividend per share of UNL was Rs 250 in FY 2005/06 which increased to Rs 1,020 per share in FY 2015/16 (face value Rs 100).
We have always pursued responsible growth for our company. The company has received multiple government and non-government recognitions. Some of these include:
• FNCCI Service Excellence Award
• Highest Tax Payer for FY 2067/2068
• Highest Tax payer for FY 2068/2069
• Highest Tax Payer FY 2071/2072
• Environment Friendly Factory Award 2074
• Best Presented Accounts and Corporate Governance Discloser Awards 2009
• NewBiz Best Managed Joint Venture Company Award 2013
• Frost and Sullivan Manufacturing Company of the Year 2016
UNL has largely focused on the production and marketing of personal and homecare products. What new product categories is the company looking to get into in the upcoming days?
Globally, Unilever produces products in four categories- Personal Care, Home Care, Foods, Refreshment. UNL has been continuously increasing its current portfolio in personal care and home care categories with new brands and offerings. Beside this, UNL will also start expansion in foods and refreshment categories when the time fits with local production.
What changes in behaviour of Nepali consumers have you observed over the years? What factors do you think contribute to the changes?
FMCG categories in Nepal are underdeveloped both from penetration and consumption perspectives. Nepal has one of the lowest per capita category consumptions even in the South Asia region. With the average population age under 25 years, Nepal is one of the world’s youngest nations today. This consumer class is far more global in outlook and is connected to the world at large while retaining its Nepali cultural roots. An increasing young and aware population, working women, remittance income and urbanisation are the major factors that we expect will increase the pace of adoption of FMCG categories and will also build new consumption patterns.
How do you view the growth of the Nepali FMCG sector at present?
Apart from UNL, Nepali FMCG sector is a mixture of importers and unorganised players who mostly infringe the IPRs and also don’t comply with local rules in letter or spirit. To accelerate the FMCG sector’s growth, Nepal requires big investments in local manufacturing, marketing, capability of people and distribution infrastructure. As the market leader, we welcome more local manufacturing as well as marketing as these will increase the adoption of FMCGs exponentially.
What specific difficulties are MNCs and FMCG producers such as UNL facing in Nepal?
Poor infrastructure has been the major problem for us. Lack of roads, transportation, electricity, internet connectivity along with inaccurate maps slows our pace. Similarly, complex and often contradictory rules and regulations create difficulties for us. Similarly, the grey market and rampant availability of fake products also pose a threat to us. Likewise, unfair market competition and IPR infringements also hinder our growth.
What policies would you like to seek for the sound growth of the FMCG sector and manufacturing sector?
There should be a concessional rate of import duty on raw materials used in direct manufacturing of products. Import duty on raw materials should be less than the import duty on finished goods. Similarly, necessary amendments in the existing Intellectual Property law will provide more protection in terms of taking stringent action against those who are dealing in counterfeit products. There should be necessary frisking at the customs points to seize illegal imports and counterfeit products. Likewise, FMCG companies with foreign investments should be allowed to import and trade products from their parent, group and associate companies.
How are the sales of ‘grey’ products affecting the business of your company?
When it comes to the sale of illicit products, there are two types that have been affecting our business. First are the counterfeit and fake products that enter Nepal mostly through the Nepal-India open borders. Second is the illegal import of genuine Unilever products from other countries. This is a bigger issue not only for us but also for the country because those who are involved and dealing in the ‘grey’ market are openly playing with the health and well-being of consumers. Such people also evade taxes. To address this issue, we are continuously engaged with authorities at customs and the Department of Industry (DoI) and have been creating awareness on the protection of Intellectual Property Rights through workshops.
How and in what way are your social initiatives giving back to society?
Sustainable living is the Unilever way of working. Our business model drives growth that is consistent, profitable, competitive and responsible. This is why we have created the Unilever Sustainable Living Plan (USLP), and seven years on it is still core to everything we do. USLP has three goals: First, by 2020, we will help more than 1 billion people across the world to take action to improve their health and well-being. Second, by 2030, our goal is to halve the environmental (carbon) footprint of producing and using of our products as we grow our business and third, by 2020, we will enhance the livelihood of millions of people as we grow our business.
Driven by these goals, UNL has started various initiatives in health and hygiene, enhancing livelihood and environmental protection which is well incorporated in our purpose “Swastha Nepal, Saxchyam Nepal, Hamro Nepal”.
Altogether, we have five major social initiatives. There are Brand Led Activities which include, Lifebuoy - Help A Child Reach 5, Pepsodent- Oral Hygiene, Clinic Plus- Encouraging Girl Child Talent, Fair & Lovely Foundation- Enhancing Women Livelihood, Consumer awareness programmes. Second is our Hamri Didi- Women Empowerment Through Opportunity. Third is our More Women Participation in Workforce. Fourth is our Hamro Ramro Pasal- Enhancing consumer experience for customer’s growth. Fifth is Project Prabhat: Community involvement in area we operate (Basamadi).
How is the “Hamri Didis” programme progressing?
UNL has successfully piloted the Hamri Didis programme in the western part of Nepal. UNL is now investing in the training and mentoring of women entrepreneurs and has appointed local dealers who will supply goods to Hamri Didis in the remote areas. We have partnered with the UK Aid funded RAP3 CONNECT and Prabhu Bank for the Hamri Didi project. This innovative model of collaboration between a donor programme and the private sector 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. They have been trained and appointed by UNL as rural sales agents in the Mid and Far-west regions of Nepal.
UNL is also engaged in consumer awareness programmes. For example, how is the “Hamro Ramro Pasal Abhiyan” doing?
Hamro Ramro Pasal is part of our sustainability programme through which we partner with our retailers to help them so that they can serve their consumers better. More than 3,500 retail outlets have already enrolled in the programme that started in April. The outlets are being regularly serviced and provided with guidance in visibility and layout for a better consumer buying experience.