Dubai: From breakfast in the morning to brushing one's teeth before sleep, most consumers these days live on fast-moving consumer goods (FMCG). That's why, despite the economic slowdown, the consumer goods market is still growing — in line with growing demand and changing lifestyles.
"In fact, we touch everyone's lives in some way or the other," said Sanjiv Mehta, chairman of Unilever North Africa Middle East (NAME) — whose regional operation has an annual turnover of $1.4 billion (Dh5.1 billion).
Unilever, a major producer of FMCG products, has invested $50 million over the last few years in expanding its capacity in the region.
Gulf News: How is the FMCG business under the current economic situation? What was the impact of the financial crisis on the industry?
SANJIV MEHTA: Like many other industries the FMCG business has also been [affected] by the financial crisis. However, the impact on the FMCG industry has not been as severe as on some of the other industries. FMCG, relatively speaking, is recession-resistant but not recession-proof.
The rates at which the FMCG market is growing have dropped from the heady days of 2008, especially in the UAE, but the good bit is that most of the categories are still growing, albeit at lower rates.
What about the short to medium term outlook of the FMCG sector? How much is it linked, if at all, to the recovery of the United States?
The FMCG sector is definitely [affected] by consumer confidence, levels of private consumption, [the] growth of [the] population and by the extent of unemployment.
In addition, during times of crisis the consumer draws on pantry stocks and the retailer reduces his inventories thereby exacerbating the problem.
The mitigating factors for our industry, especially in our region, are the young population — the economies are growing and [with that growth comes] the consequent increase in purchasing power.
The other important aspect is that there is tremendous headroom for growth in all our categories from the perspective of bringing in new users, increasing their frequency of consumption and by up trading them to higher order benefits.
We are therefore cautiously optimistic about the growth of our categories in the immediate term. A recovery in the United States, being the largest economy in the world, will definitely have a ripple effect on consumer confidence across the world.
Do you see any immediate challenges — such as shortage of input materials such as food and other — that might affect the FMCG business?
In the last couple of years we have seen tremendous volatility in the commodity markets. This has resulted in huge swings in the prices.
The magnitude of volatility has little to do with the inherent change in demand and more due to speculative actions. The challenge in the near term is to manage the impact of swing in prices rather than an absolute shortage of input materials.
How is Unilever's business globally and in the Middle East and North Africa? Is your business growing in this region?
Globally, Unilever [has been] off to a strong start in 2010. The underlying volumes have grown by 7.6 per cent and the operating margins have increased by 60 basis points despite [an] increase in our advertising and promotion [expenditure].
The D&E (Developing and Emerging) countries have been the growth drivers for Unilever and our business in the Mena region has been no exception.
In this region we have delivered double digit revenue growth for the last several years including the economically testing year of 2009.
Which among your brands are doing the best?
We operate in several categories and have a wide repertoire of brands that straddle the price-benefit pyramid. In several categories we are the undisputed market leader. Even during the tough times we have continued bringing forth innovations to the market and have not resorted to reducing our investments behind our brands.
As an example we launched our Ponds masstige range last year which was an unprecedented success with our consumers. All our categories are growing although at different rates.
What are you doing in order to expand [your] business?
The most exciting part of our business is the favourable demographics & the immense headroom for growth. We are therefore taking several steps to grow & expand our business.
The first being to exploit the opportunities that exist across the Mena region by ensuring that we straddle the price-benefit pyramid effectively by providing consumers with quality products at different price points with varying benefits, and at times via different formats. Another key area of focus for us is Market Development, that is, growing the pie as opposed to simply competing for a share of the pie.
This necessitates influencing changes in consumer behaviour which requires a long-term commitment.
Then of course we regularly innovate by bringing out products which better meet the needs of our consumers. Last, but not the least, is developing our capabilities to improve our speed, response, execution and competitiveness in the market place.
What is your marketing strategy to reach out to the consumers?
Our strategies are tailored to meet the nuances of different categories and the competitive context. Our mission is to help people feel good, look good and get more out of life with our brands.
We do this by providing them [with] quality products which meet their needs at affordable prices and thereby deliver a strong price-value equation. We complement this by ensuring that we build strong brand equities and win consumers loyalty.
Our objective is to occupy the minds and hearts of our consumers. In categories where we are the market leaders we focus on growing the markets and in categories where we are challengers we look at improving our competitive position.
With the population in the UAE remaining static, where do you see growth coming from, if any?
I strongly believe that ‘growth' is an issue of mind set. None of our categories in UAE have reached a stage of maturity in the sense that they cannot grow. In the context of market development let me explain this by taking the example of our tea category which is a universally penetrated category.
First we get growth by making the dual users of tea bags and tea packets consume more of tea bags.
Secondly, we bring new users to drinking green tea which is extremely good for health.
Third, for the youth of the country we have introduced formats like Lipton's 3-in-1 Chai Latte as an alternative to other drinks.
We have been using this approach to grow the category and our business. A similar approach and thinking is adopted for each of our categories.
What are your plans for investing in the region in expanding capacity? If yes, in what areas? Could you kindly elaborate?
Investments in the traditional sense are looked upon as expenditure utilised to build hardware, that is, plant and machinery, buildings, etc, and in say working capital. In today's world and especially in [a] business like ours this is not the full story.
Yes, considering that we have several manufacturing facilities in the region we do spend, annually, millions of dollars on expanding facilities, debottlenecking capacities and on modernisation.
However looking at investments in a holistic sense, we have been making large investments... building our brands, growing our categories by changing consumer behaviour, developing our capabilities in systems, processes, skills and talent and improving our competitiveness in the marketplace.
There is a sizeable labour force in the region. What is your strategy to expand the market in this captive segment who might not be using your products?
Our objective as I stated earlier is to straddle the price-benefit pyramid. We therefore aim to meet the needs of people at different income levels through different brands, varying formats and pack sizes.
It gives us immense joy to see our brands enriching the lives of consumers in every strata of the society. Our marketing does not stop at just introducing brands for our consumers.
We also tailor-make activities linked to our brand, which helps in cementing the relationship with the consumers. As an example we conducted the ‘Lipton Carrom Championship' targeted at the UAE labour force and conducted in several ‘hot tea shops' across the emirates.
It was held under the theme ‘Making Local Heroes'. Over 6,000 people participated in this championship involving hundreds of matches.
A taxi driver became a hero by winning the championship. We also work with certain labour accommodations to distribute, for free, our products to the workers.
How big is the FMCG market in the UAE, GCC and Mena region in US dollar terms?
The FMCG market is pretty big and we do not operate in all the categories. If we consider only the categories in which we operate then the size of the market is estimated as under: UAE, $500 million; GCC, $1.9 billion; and the Mena [region], $3.9 billion.
What is your market share in the FMCG segment, generally in the UAE and Mena region?
We are either market leaders or determined challengers in all our categories. More than two-thirds of our business comes from categories where we are market leaders. We have 38 per cent of the market across [the] Mena region and about a similar share of the market in the UAE.
What is your level of spending in marketing activities?
The marketing spends vary from category to category. There are categories where we spend in high single digit and there are categories where we spend over twenties. Unilever is one of the largest if not the largest TV advertiser in the region.
How big is your operation in the UAE and Mena region?
Our turnover in the region is about $1.4 billion. We have several Unilever factories dotted across the North Africa and Middle East landscape. The production facilities for Home Care are located in Algeria, Morocco, Tunisia, Egypt and Saudi Arabia; for foods in Morocco and Egypt; tea factories in Jebel Ali, Dubai and Egypt, and personal care production facilities are located in Saudi Arabia and Egypt.
In the UAE we produce tea at the plant located in Jebel Ali. Since its inception in 1998, the Lipton Jebel Ali tea factory has grown with regards to both capacity and geographical reach with volume growth having increased from 5,000 tonnes in 1999 to 25,000 tonnes in 2009; an impressive increase.
It is today the second largest Unilever tea factory worldwide and the strategic hub for innovation and development for Unilever's tea production.
It exports tea to over 40 countries. [The] UAE also houses our headquarters for the Mena region.
How many people are working directly and indirectly for Unilever in the UAE and the Mena region?
In terms of direct employment, Unilever employs over 3,000 people in the Mena region, including about 800 people in the UAE.
However if we consider people who earn their livelihood exclusively through Unilever's operations and are engaged either directly or indirectly (for example through our distributors and dedicated suppliers), then it would total up to nearly 10,000 people in the region.
Could you share your growth projections for this year and 2011?
We have delivered double digit growth in the last several years despite the peak and trough in the economy. We have solid ambitions and as I said earlier we remain cautiously optimistic about the near term.
I hope to share with you a good story at the end of this year and for several years to come.
Are you planning to introduce new brands in the region?
Developing and emerging markets are an extremely important contributor towards overall Unilever growth. And within the D&E markets, Unilever Middle East & North Africa is an important geography.
In this region we are therefore constantly scanning the market for untapped opportunities that will allow us to meet the needs of our consumers, and in turn provide growth for us. In 2007-08 we launched Clear shampoo with tremendous success in the region. Last year we launched Ponds masstige range in the GCC.
In line with our ambitions we have several innovation projects in the pipeline but it would not be appropriate to reveal the specifics until final decisions have been taken.
Any thoughts of re-entering the icecream market?
Unilever is the largest ice-cream manufacturer in the world. At an appropriate stage we will evaluate a re-entry.
Wealth of experience
Sanjiv Mehta has been a professional manager for over twenty years. His wealth of managerial experience has been primarily in consumer goods businesses and for the last 18 years with Unilever. Sanjiv has done his Bachelors in Commerce (India), is a chartered accountant (India) and holds an Advance Management Programme qualification (Harvard Business School). He has lived and worked in India, Dubai, Bangladesh and the Philippines.
He began his career with the American Multinational Union Carbide (since merged with Dow Chemicals) and joined Unilever in 1992. With Unilever he has held various positions including chairman and managing director of Unilever Bangladesh (2002-06), chairman and chief executive of Unilever Philippines (2007-08) and currently, chairman of Unilever-North Africa and Middle East (NAME) region based in Dubai.
About Unilever
Unilever is one of the world's leading suppliers of fast moving consumer goods with strong local roots in more than 100 countries. Its portfolio includes some of the world's best known and most loved brands. The portfolio features iconic brands such as: Lipton, Knorr, Dove, Lux, Pond's, Axe, Sunsilk, Vaseline, Rexona and Omo which have today become household names.
With 163,000 employees in 100 countries, it generated annual sales of 40 billion euros (Dh180.1 billion) in 2009.
Unilever North Africa Middle East is one of the region's leading FMCG companies with a turnover of $1.4 billion.
