Hindustan Unilever has embarked on a new journey, on the path of sustainable living. In an interview with CNBC-TV18's Executive Editor Shereen Bhan, Harish Manwani, President, Asia Africa of Unilever, and non-executive Chairman of HUL, threw light on the company's sustainable living plan and spoke on the road ahead for consumer confidence.
Hindustan Unilever has embarked on a new journey, on the path of sustainable living. As part of Sustainable Living Plan, the FMCG major has chalked out a 10-year roadmap to halve its environmental impact in the form of reducing water usage and greenhouse gas emissions by 2020.
The company, whose products touch the lives of 2 billion consumers around the world every day, in addition targets to source all its agricultural supplies including palm oil and tea from sustainable sources.
Through product innovation, for example, Surf Excel Quick Wash it aims to save millions of litres of water in India. The product has been formulated to save two buckets of water everyday every time someone washes their clothes making it greatly convenient for people to save water in water-deficient areas and generally around the country.
In an interview with CNBC-TV18's Executive Editor Shereen Bhan, Harish Manwani, President, Asia Africa of Unilever, and non-executive Chairman of HUL, threw light on the company's sustainable living plan and spoke on the road ahead for consumer confidence.
Below is a verbatim transcript. Also watch the accompanying video.
Q: Before I talk to you about the Unilever report for sustainability in that sense, let me ask you a quick question in terms of confidence. Consumer confidence has returned to India, we have seen in the last few quarters, consumer confidence increasing, it is reflected in your numbers as we saw a good set of numbers for you for this quarter. What is the sense that you are getting about the road ahead in terms of consumer confidence?
A: Obviously the markets are slowing down a bit but they are still growing. If you look at the longer-term view of India, there is absolutely no question that we should be seeing some good growth coming here longer-term. It is difficult to predict what is going to happen exactly in the next six months or the next one year, but we remain very optimistic about the future if you take it in the longer context.
Q: What do you attribute this short-term slowdown to and when you talk about a long-term picture, what is the sort of time horizon that you are looking at and what kind of growth can we expect?
A: I think the question is when we talk about slowdown, meaning, the markets were growing very fast. The markets are still growing. The question is it is not growing at the rate at which they were growing. But we are still in growth markets.
So I think the way to look at it is that going forward the consumer confidence is not shaken or anything. So in developing countries we have to be a little cautious about not interpreting 1% drop or 2% drop as suddenly something dramatically changing.
But the fact of the matter is that we cannot expect this as a similar growth rates every quarter, every year and so on and so forth. We have a good monsoon, rural demand again picks up, inflation comes under control. Then of course we can be seeing again a different set of growth numbers.
Q: How much of this is attributable to competitive pressures in that sense, the kind of slowdown that you are seeing at this point of time and how do you see the competitive landscape evolving?
A: Firstly, markets growth have nothing to do with competitive pressures. If anything market should grow and gets most stimulated if you have more competitive activity. So from that point of view, competitive activity is a good thing for the markets, it is not a bad thing.
From our point of view, where we lead many markets, market development is a very core activity. So there is a lot of activity system supporting the fact that markets will continue to grow and importantly between market leaders like us, leading market development and competition, you will see there is a lot of activity around stimulating the market. wouldn’t worry about that at all.
Q: I want to talk to you about the sustainable living plan that has been put out by Unilever. You have a sustainability report that you have put out annually, how different is this from that sustainability report and why did you feel the need to put this out?
A: This is firstly a very comprehensive approach in terms of what we intend doing between now and 2020. If I can give you just a rundown of where it is different.
Firstly I think what it does is it decouples business growth from environmental impact. What are we trying to do here? We are trying to say that the biggest leverage we provide is that 2 billion consumers across the world in 170 countries use our brands everyday.
If we can make our consumers take some small actions, which individually maybe a small action but collectively can make a big difference.
Let me tell you what I mean. If you take for example what we are doing on Surf Excel Quick Wash in India where the product has been formulated to save two buckets of water everyday. Every time you wash your clothes, you save two buckets of water. It is greatly convenient in water stressed areas and generally I would say in the country, but importantly now multiply these two buckets of savings with the millions of consumers who are using our brands and see the impact it can make.
The other very important element of this which is distinctive I believe in the way we are doing it is we are talking about our sustainability plan which impacts us in every single 170 of our countries. So the distinctive feature of the Unilever sustainability plan that we are unveiling is the fact that it is going to actually cover all the countries in which we operate, the 170 countries in which our products get sold, 100 countries in which we operate and indeed all our brands. That is number one.
The second and I think that is an exciting feature of this, we are talking about making sure that we reduce our impact across the value chain or across the lifecycle. What does that mean? From the time we buy the raw materials, to the time we convert it in our factories, to the time we distribute it, to the time it gets consumed and disposed, we want to make sure that it is an end-to-end approach to reducing our environmental impact across the lifecycle of our operation or of our brands.
A quarter of the other environmental impact is at the supply end, raw materials by the way we buy 7.5 million tonne of agricultural produce every year. What we really want to do is make sure going forward by 2020 that 100% of our raw materials are sourced from sustainable sources.
A couple of years ago for example, we initiated and proactively announced that we are going to source all our palm oil – we are one of the largest powers of palm oil from sustainable sources. We did it and quite a few people are now, quite a few competitors and others and peers are following, which is good. So we had begun to take the steps already and now we are saying, by 2020, 100% is going to come from sustainable sources.
The impact we make in our factories when we manufacture products is small as compared to the entire value chain. Having said that, in the last 15 years, we have managed to reduce the water that we use by over 60%, the waste that we produce by 70% and the energy by 40%. So across the value chain now we are committing that we will halve the environmental impact of Unilever by 2020. That is what we are trying to do.
HUL stock price
On August 22, 2014, Hindustan Unilever closed at Rs 734.60, up Rs 7.45, or 1.02 percent. The 52-week high of the share was Rs 738.65 and the 52-week low was Rs 536.00.
The company's trailing 12-month (TTM) EPS was at Rs 18.05 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 40.7. The latest book value of the company is Rs 15.15 per share. At current value, the price-to-book value of the company is 48.49.
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