Before taking over Unilever’s global foods division in 2005, Manvinder Singh “Vindi” Banga spent four years running Hindustan Lever. He talks to Gita Piramal about changing culture and, along the way, dealing with adverse market conditions, flat sales and a drop in market capitalisation.
Anointed leaders rarely take up their post wanting to transform the company they head. Typically all they desire is to make a few significant changes. Moreover, in India, and in the private sector, for the chief executive of a company to have been with the company almost his entire working life is common. And because he has been familiar with the company for a decade or more, the itch to immediately institute changes is powerful. Ironically, at the time they design their strategies, few have an inkling of the full impact of their plans. They know the changes they want to make, and become absorbed in the detail. They certainly don't suspect that these changes will have a permanent impact on the company's culture. On the contrary, most chief executives love the existing culture – it is the reason they stay in the company for years, dedicate their careers to it, share their lives with other managers in the company. Yet, business history shows that leaders who succeed in making the changes they want to make, inevitably end up transforming the company and its culture.
This a truth borne out more than once in Hindustan Lever Limited (HLL), a company that has produced several great leaders and has a history of transformations. It is a company that has stood the test of time and has undergone many changes in its bid to succeed in different market conditions. In the 1960s, for example, HLL evolved its financial structure to reflect the aspirations of local shareholders. In the 1970s it entered non-core businesses and exports because that was the direction of government policy. In the 1980s, it faced the test of low cost competition for the first time and devised strategies accordingly. And at the turn of this century, it faced the crisis of declining markets in a new liberalised India.
For Vindi Banga, who in 2000 took over HLL's chairmanship from Keki Dadiseth, the timing could not have been less fortuitous. The healthy growth of the Indian economy slid into a period of mediocre monsoons, recession in the rural economy, and sharply reduced consumer spending across the country.
“It was a sharply changed market context with an abrupt stagnation of growth rates,” agrees Banga, “these were some of the biggest challenges that we faced in India. Through the 1990s consumer markets grew at about 15 per cent per annum. So we had a real tailwind behind us. But almost abruptly and amazingly, the growth rates stalled and became negative in terms of value.” According to Banga, these shifts occurred because consumers started to down trade and use a mixture of premium and popular products. “This put pressure on our growth because down trading largely impacts premium producers. The major reason for this drastic change in the market context was the easy accessibility of consumer finance due to the sharp drop in interest rates. Consumers started earmarking a major percentage of their income on aspirational life-style durables and reduced their spending on our kind of consumer products. This crisis of declining markets was something that Hindustan Lever had not faced before. Hence the company had to refit itself to be able to grow and remain successful even in that context.”