As Rohit Jawa moves to head the India business HUL’s gain could be Unilever’s loss

Rohit Jawa has been with HUL for 35 years. (Image credit: Rohit Jawa/LinkedIn)

By naming Rohit Jawa as the next chief executive officer (CEO) of its Indian subsidiary, Unilever has reposed its faith in a succession process that has worked well for many decades.

Jawa joined Hindustan Unilever Ltd (HUL) very early in his career, worked his way through significant stints in Unilever’s global operations, before being sent back to head the India business, which accounts for 11 percent of the UK-based multinational corporation’s global sales, but is its biggest market by volume.

It is a career path that parallels almost entirely that of the man he will replace, Sanjiv Mehta, though the latter joined Unilever only midway into his career.

But in moving to India at a time when the global business is facing serious headwinds, Jawa may be leaving behind an unfinished agenda.

When he took on the job of Chief of Transformation for the consumer goods conglomerate in London, Unilever was in the midst of a painful transition and certainly in need of a transformation.

Unilever's revenues over the last five years have been trending down and post an ultimately stymied takeover bid by Kraft Heinz in 2017, it has taken the heat from activist investors like Trian Partners.

Despite aggressive attempts at debt reduction and share buybacks, its stock price has been trending at around $50 to $60 since 2017, much to the dismay of its shareholders.

As one London-based fund manager, Terry Smith of Fundsmith Equity Fund, wrote in his letter to investors in January 2022, “Unilever seems to be labouring under the weight of a management which is obsessed with publicly displaying its sustainability credentials at the expense of focusing on the fundamentals of the business.”

It was evident then that Unilever’s key stakeholders were crying out for change, and Jawa, a 35-year veteran of the company who had turned things around in challenging markets like China and Philippines, was tasked with leading the transformation.

That was just a year ago. Since then, things have gotten even more complex at the consumer goods major.

A leadership change is currently on at Unilever with Hein Schumacher named this January to succeed Alan Jope as CEO after investor criticism following a bungled attempt at buying GSK's consumer healthcare business made his exit inevitable.

Simultaneously, Unilever has also been trying to trim its product portfolio ― last July it sold its tea business which had been struggling for growth, and three months ago there were reports it was considering selling some of its ice cream businesses ― in pursuit of opportunities with higher growth potential.

Clearly, as leader of the transformation plan, Jawa’s job was far from done.

Yet, a year into a mission-critical function at the mother ship, he is being sent to head the India business which, barring some seasonal hiccups, has been purring like a satiated cat.

Just how well HUL is doing is chronicled perfectly in Mehta’s parting note shared on LinkedIn: “During my time here, HUL has added Є4 billion (Rs 32,000 crore) to its turnover, increasing it by 2.3X. We improved our EBITDA margin by 860 bps and EBITDA by 3.5X in the last 10 years. The market capitalisation increased by 5X to over $70 billion, which is more than the market cap of many global FMCG companies.” To put that last bit in perspective, Unilever has a market cap of $123.53 billion.

That’s come about thanks to the kind of razor-sharp focus on margins which the parent could do with. In that quest, Mehta was ruthless, eliminating anything that he reckoned was a drag on profits. Just last month the Indian company sold its atta brand Annapurna and salt brand Captain Cook, since both products had failed to deliver over many years.

At the same time, even as Unilever grappled with the consequences of its aborted bid to acquire GSK's consumer healthcare business, HUL quietly added GSK Consumer’s brands, including Horlicks, Boost, Viva and Maltova to its portfolio.

Into this oasis of calm comes Jawa leaving behind a sandstorm that will test the company’s new global boss, Hein Schumacher.