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.