Wed, 23 Jun 2010
From:
By Jeroen Molenaar
June 23 (Bloomberg) -- Unilever plans to boost the amount it spends building factories in Indonesia over the next two to three years as it adds products to fend off Procter & Gamble Co. in the world’s fourth-most-populous country.

Expenditure will “significantly increase” to about 200 million euros ($242 million), Jan Zijderveld, head of Unilever’s southeast Asian unit, said in an interview. A personal-care factory in Indonesia is among four to five plants that the maker of Dove soap aims to open in southeast Asia this year, he said.

“We’re growing fast in this part of the world,” Zijderveld said by telephone from Singapore. “Part of the challenge is to cope with this growth.”

Unilever, the world’s second-largest maker of consumer products, gets about 50 percent of its 39.8 billion euros of annual revenue from emerging markets. With P&G cutting prices in countries including China and India, the London-and Rotterdam- based company is relying on new versions of products such as a Citra body cream soap bar to keep sales growing.

“Developing markets give Unilever an edge,” said Martin Deboo, an analyst at Investec Securities in London. “If as a company you’re exposed to high growth markets, your growth is higher. That’s just simple arithmetic.”

According to a June 9 report from the World Bank, economies in developing nations will grow as much as 6.2 percent annually from 2010 to 2012, almost three times faster than high-income countries. Growth in the East Asia and Pacific region will be 8.7 percent this year and 7.8 percent in 2011, the report said.

Price Cuts

“The world is not flat,” Zijderveld said. “It’s sloping towards Asia, so many competitors are also seeing this and coming here and doubling down.”

In India, Unilever’s home and personal-care sales rose 5.5 percent in the first quarter, lagging behind the 18 percent growth in food revenue. The maker of Rin washing powder was forced to lower prices to counter price cuts on P&G’s Tide Naturals detergent. P&G, which started selling its Tide brand in the country 41 years after Unilever introduced Rin, reported a 30 percent increase in Tide shipments in that quarter.

“In tough economic times you have to be even more in touch with your consumer and understand what they want and need,” Deb Henretta, P&G’s group president for Asia, said by email.

Pricing isn’t confined to India and has been spreading to other countries in the region, particularly in Unilever’s laundry and hair categories, according to Zijderveld.

“We will not walk away from a fight,” the executive said. “But it’s one of the weapons that we have in our arsenal and it’s not the healthiest weapon. The name of the game is to grow these markets.”

New Products

Zijderveld, who joined Unilever in 1988 and has worked in Europe and the Middle East, sends sales representatives to visit 1 million shops in his region every week to market new products from Omo detergents in Vietnam to Lifebuoy soap in Australia. Unilever gets a growing proportion of its 4 billion euros of sales in southeast Asia, Australia and New Zealand from new introductions or renewed versions of brands, he said.

Three months after P&G introduced an Old Spice deodorant stick in Indonesia, Unilever responded with a new format of its Rexona deodorant lotion and stick, Zijderveld said.

Increased competition in southeast Asia is causing Unilever to react faster to customer needs. An anti-bacterial version of Surf washing powder was introduced in the Philippines this year, only five months after Zijderveld walked the slums of Manila and noticed some consumers were using anti-bacterial soap. Such a process used to take as long as two years, he said.

Key Difference’

“Speed is a key difference between the developing world and the developed world,” Zijderveld said. “We build a factory in Indonesia in seven months. Everything is fast here.”

Helped by the introduction of products such as Pepsodent toothpaste in the Philippines, sales growth in Unilever’s Asia, Africa and central and eastern European division has accelerated for three consecutive quarters and rose 7.6 percent, excluding acquisitions and currency swings, in the first quarter.

Yet Unilever has also cut prices in that division for two straight quarters and may lower them another 2.5 percent in this quarter, according to a Bloomberg survey of three analysts.

“The challenge for them is to continue to compete to preserve volume growth,” said Pierre Tegner, an analyst at Oddo & Cie. in Paris. “That’s key for them.”



News Search/Filter
Transaction Rates
24 Nov 17
Buy
Sell
BTC1
108,609,249
108,609,249
Taxation Exchange Rates
31 Aug 16 - 06 Sep 16
USD 1
13,232.00
AUD 1
10,043.30
CAD 1
10,213.70
DKK 1
1,999.40
HKD 1
1,706.22
MYR 1
3,283.28
NZD 1
9,623.63
NOK 1
1,605.23
GBP 1
17,433.70
SGD 1
9,757.68
SEK 1
1,569.45
CHF 1
13,631.10
JPY 100
13,101.00
MMK 1
11.01
INR 1
197.29
KWD 1
43,920.70
PKR 1
126.23
PHP 1
285.00
SAR 1
3,528.53
LKR 1
91.12
THB 1
382.08
BND 1
9,756.53
EUR 1
14,885.50
CNY 1
1,987.61

Okusi Associates: Indonesian Business & Management Services