Unilever pursues growth, expansion in its food business

Unilever pursues growth, expansion in its food business

Consumer goods company PT Unilever Indonesia Tbk., subsidiary
of the London- and Rotterdam-based Unilever, is well known for
its strong brands in personal care and household care products.
Unilever has been operating in Indonesia for 80 years, and it is
now expanding its food business in the country.

The Jakarta Post's Zakki P. Hakim spoke with president
director Maurits Lalisang, who succeeded Nihal Vijaya Devadas
Kaviratne in January, on the company's business strategy,
particularly in regards its food business.
Following is an excerpt from the interview:

Question: Now that Unilever has a new CEO, will there be any
change in its strategy?

Answer: As in cooking, one chef might differ from another in
how much salt or sugar they use, even though they both prepare
the same dish.

At Unilever, the main strategies are first, developing our
people; second, developing our brands into powerful ones; and
third, maintaining our focus on consumers and customers.

So there will be no change in terms of strategy, as we always
focus on these three.

Human resources development is a very high concern. We groom
people, because our two main assets are our people and brands. If
I had to choose between the two, I would say our main priority is
the people, as we can develop powerful brands naturally if we
have good people.

In regards brand development, we do not aim to have a great
number of small brands. We are now aiming to develop only a few
brands that have the potential to become powerful brands. About
five years ago, we had up to 65 brands, and now we have reduced
them to only 33. This way, we can concentrate on our strongest
brands.

To develop strong brands, we have three strategies: First,
establishing citadels, or core brands. Take, for example, our
strong, mature Lifebuoy (soap) brand. We are now expanding on the
brand by launching liquid soaps and shampoos.

Second, (developing) growth engine brands -- that is, those
that have not yet become a citadel, but have a huge potential to
do so. These brands require us to focus on distribution and
advertising. Here, we have our food business, which is showing
solid growth.

Third, (nurturing) infant brands, or those brands that we are
still developing. For example, our newly bought Taro snack brand
or Kimberley Clark's toilet paper and tissue brands and the
Domestos Nomos mosquito coil. Naturally, we use a different
approach in developing these brands.

We strive for operational excellence: managing our operation
so as to achieve and maintain cost effectiveness, improving
customer services and operational infrastructure so it can
accommodate the company's future growth.

Our people, brands, operational excellence -- these are the
focuses of our business strategy. In addition, we also push for
growth through acquisitions -- we search for businesses that are
in line with our strategy.

That is our overall strategy. So you can see there is no
significant change, but like I said -- maybe more salt here and
there.
Last year, your predecessor Nihal Kaviratne said that in five
years, your food business will be as large as your business in
household and personal care products. Are you still pursuing that
target?

There is no change in our strategy. Unilever Indonesia has two
powerful legs, namely personal care, including toiletries such as
Pond's, Pepsodent, Sunsilk and Clear, and household care like
Rinso, Surf, Lux and Lifebuoy. Both are domestically established.
In the long run, however, we should not have only two legs, but
have another leg for strengthening. Therefore, the strategy Pak
Nihal explained last year is still applicable today.

Globally, Unilever's food business makes up about 60 percent
of its total business. I believe last year, Pak Nihal told you
that in Indonesia, our food business contributed about 15 percent
(of revenue), but now it is close to 18 percent. We aim to turn
this into 25 percent of our total business by 2010. It is a big
challenge, considering that the other two legs will keep growing.
How do you plan to achieve that 25 percent target?

Well, so far, we are very happy to see that food business has
recorded fantastic growth. To achieve the target, besides
encouraging natural growth through our branding strategy, we will
also look around for possibilities to acquire or work with
businesses that fit our strategy.
Considering the local food industry, how do you compete with
other food businesses such as Indofood, which is a dominant
player in the domestic food industry, and the Wings Group, which
is expanding rapidly. Unilever once launched an instant noodle
brand, Me & Mie, which did not succeed.

We don't see noodles as a core business, and believe that the
food business is not only about noodles. The food industry and
its market is far greater than just toiletries. There are still
many opportunities besides instant noodles.

You have snacks and beverages, for example, and numerous other
categories that could be expanded. Moreover, we have the
technology, so we believe we can achieve our expansion target for
the food business.

You have the technology, so naturally, you need expertise. Do
you recruit people from your competitors?

We have a high standard of ethics. We would not recruit from
our direct competitors, especially Wings, Procter & Gamble and
Indofood.

Of your new brands, it seems that Kecap Bango outshines the
others?

We are all very happy with this particular joint venture
decision we made in 2001. We are happy with the progress, because
this is the foundation for strengthening our food business. Kecap
Bango showed a high, double-digit growth last year, high enough
to become a concern for our competitors.

We use black soy beans, which makes our product taste stand
out from our competitors'. We are proud of this product, as we
are helping farmers at the same time. Black soy bean only grows
in Indonesia, and there is not much supply in the market.

Therefore, to ensure supply, we are assisting those farmers
who grow this commodity. We established a collaboration with some
300 farmers covering 80 hectares with a production volume of 85
tons last year. We now work with 800 farmers over 140 hectares,
and they have produced 150 tons since January.

This is part of our social commitment, and we look forward to
seeing the farmers' welfare improve along with Kecap Bango's
growth.