Hindustan Lever Limited - Company Profile, Information, Business Description, History, Background Information on Hindustan Lever Limited

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History of Hindustan Lever Limited

Hindustan Lever Limited (HLL) is India's leading consumer goods supplier, with a focus on the Fast-Moving Consumer Goods (FMCG) category that includes detergents, soap, shampoo, deodorant, toothpaste, and other personal care items, and cosmetics. HLL's personal care brands include soap brands such as Lux, Lifebuoy, Liril, Breeze, Dove, Pear's, and Rexona; shampoos and hair coloring brands including Sunsilk Naturals and Clinic; skin care brands Fair & Lovely and Pond's; and oral care brands Pepsodent and Close-Up. The company's cosmetic line is led by the Lakme brand; HLL also produces a line of Ayurvedic personal and healthcare items under the Ayush brand. In addition to the FMCG segment, HLL has developed a line of food items, primarily under the Kissan and Knorr Annapurna brands, as well as the ice cream brand Kwality Wall's. In the early 2000s, HLL also acquired baked goods producer Modern Food Industries. In addition to its domestic brand family, HLL sells bulk foods, including maize, rice, salt, and atta. HLL is also an active exporter, shipping its FMCG and food brands, as well as rice; marine products including surimi, shrimp, crabsticks, and others; and castor oil. HLL has completed a restructuring of its business in the first half of the 2000s, streamlining its brand portfolio, from 110 brands to 35 "power" brands, while exiting a number of businesses, such as teas (sold to the Woodbriar Group in 2006) and specialty chemicals. HLL maintains a strong manufacturing presence in India, with some 80 factories located throughout the country; the company also subcontracts to more than 150 third-party producers. HLL is itself a subsidiary of Unilever, which controls 51.55 percent of the group. HLL is listed on the Mumbai Stock Exchange.

Indian Manufacturing Base Starting in 1931

England's Lever Brothers began importing their Sunlight brand soap into India in the late 1880s. By 1895, Lever had introduced another of its brands, Lifebuoy, which became the company's longest-running successful brand in India. Other Lever brands followed into the beginning of the next century, including the Lux soap flake brand in 1905; and scouring powder Vim as well as soap brand Vinolia in 1913. Lever Brothers, by then well into an international expansion that would see the company become one of the world's top multinationals, also acquired and introduced a number of other brands into the Indian market, including Pear's soap, in 1917. By 1930, Lever Brothers, which also had entered areas such as food production, including edible oils and margarine, had merged with The Netherlands' Margarine Unie, forming Unilever.

Unilever's Indian sales were based on imports into the early 1930s. The company had begun planning, however, to establish a manufacturing presence in the Indian subcontinent as early as 1923. The company began talks with the British and Indian authorities, and finally received permission to build its first factory in 1931. In that year, the company incorporated a new subsidiary, Hindustan Vanaspati Manufacturing Company, to produce edible oils. That company opened a production facility in Sewri in 1932.

Two years later, the company added another subsidiary, Lever Brothers India Limited, for the production of soap, and began construction of a factory next to its Vanaspati facility. That company launched production of Sunlight-branded soap at a factory in Bombay in 1934. In that year, as well, the company took over production at the Calcutta factory of another company, Northwest Soap, where it began producing the Lever brand family. That factory, known as the Garden Reach factory, added production of a line of personal care products in 1943.

In 1935, Unilever added a third subsidiary in India, United Traders Limited. This unit was created to provide marketing support for the company's other operations, tailoring the group's sales to the specifics of the Indian population. Through the 1940s, Unilever's Indian unit began extending its sales network throughout India, building up its own sales team, and adding sales offices in Mumbai, Chennai, Calcutta, Karachi, and elsewhere.

The transition of Unilever's multiple businesses to the single Hindustan Lever Limited began in the 1940s. In 1944, the three Indian companies were reorganized under a unified management. Nonetheless, the companies retained separate sales and marketing businesses. In the meantime, the company had launched an effort to transition the company from one led almost entirely by foreign and, in large part, European management, to one staffed primarily by Indians. This effort began in 1942, when the company began training Indians for its junior and then senior management positions. By 1951, the company appointed an Indian, Prakash Tandon, to the managing director's position. Tandon led the merger of the three Indian subsidiaries into a single entity, Hindustan Lever Limited (HLL), in 1956. By the end of the decade, Tandon had taken over the chairman's position as well. By then, nearly all of the group's management positions were filled by Indians. HLL was then taken public, as Unilever reduced its stake in the company in favor of domestic shareholders. By 1980, Unilever's stake in HLL had dropped to less than 52 percent.

National Consumer Goods Giant in the Second Half of the 20th Century

HLL already produced a wide range of consumer goods for the Indian market by the early 1960s. In 1962, the company launched its own export operations as well, in a move made in part to bring foreign exchange capital into the struggling Indian economy. HLL's exports reflected the company's own multifaceted operations. In addition to producing and supplying raw materials and finished products, including a number of specialty chemicals and tea, in the support of the international Unilever brand family, HLL also developed a bulk goods export business. For this the company focused on Indian-specific goods, such as castor oil, Basmati rice, and a variety of marine products, including shrimp and surimi.

HLL set up a new headquarters in Mumbai in 1963. The following year, the company entered the dairy industry, establishing its Etah dairy and launching the Anik brand of ghee (a prepared butter product used in Indian cooking). The company also began producing animal feed that year. Meanwhile, HLL launched a new shampoo, Sunsilk, for the Indian market. By the end of the decade, HLL had launched a number of other successful brands, including Signal toothpaste, Taj Mahal tea, Bru coffee, and Clinic shampoo, launched in 1971. By then, the company had firmly established itself as the leading producer of so-called "fast-moving consumer goods."

Part of the company's success came from its highly active sales network. A significant proportion of India's population, which would top one billion before the dawn of the 21st century, still lived in rural regions and in extreme poverty. For much of this population, personal care products remained luxury items. Yet the company recognized the importance of building its brands in this region as well, and as such the company developed a vast sales network. Much of this network was based on an army of independent, direct sales agents, who hawked the company's products in the country's more than 150,000 villages.

Into the 1970s, HLL also began diversifying beyond its consumer goods operations. The company opened the Hindustan Lever Research Center, in Mumbai, in 1967. This led the group to begin producing fine chemicals in 1969. By 1971, the company had received permission from Unilever to enter the production of industrial chemicals. The company began construction of a pilot plant for this operation in Taloja in 1974. This unit was completed in 1976. In that year, HLL launched the construction of a larger chemicals complex, at Haldia. That facility began producing sodium tripolyphosphate in 1979. The production of these chemicals enabled HLL to begin producing synthetic detergents at Jammu in 1977.

Through the 1980s, HLL continued to develop its businesses. In 1986, the company set up an agri-products business, based in Hyderabad, which began producing hybrid seeds that year. HLL also added a new soap production facility in Khamgaon, and a personal products factory in Yavatmal that year.

HLL's growth had nonetheless been limited by restrictions put into place by the Indian government's quasi-socialist economic policies. In 1991, however, in the face of a major economic crisis, the government was forced to liberalize the country's economy. This opened up a new era of opportunity for HLL.

Power Brand Focus into the 21st Century

A major step forward for the group came in 1993, when the company acquired its leading rival, Tata Oil Mills. By then, HLL also had met with success in the detergents category, with the launch of its Surf Ultra brand. This brand targeted the country's middle class, which, with the liberalization of the country's economy, was also becoming one of the fastest growing segments of India's population. In a further move to target this population, the company launched a new, high-end detergent brand, Surf Excel, in 1996.

By the mid-1990s, HLL's revenues had topped $540 million. The company also had launched its first foreign subsidiary, establishing Nepal Lever Limited. That unit began producing soaps and detergents and other products within the HLL brand family, both for the Indian and Nepal market, as well as for the larger export market.

HLL also began developing a series of joint venture partnerships in the 1990s. In 1995, the company teamed up with Tata, this time forming a 50-50 joint venture with Tata's Lakme cosmetics group. HLL bought the Lakme brand family just three years later, taking full control of Lakme Lever. By then, the company also had formed a joint venture with Kimberly-Clark, which began marketing the Huggies diaper and Kotex sanitary pad brands in India.

HLL also deepened its food brands during the 1990s and into the 2000s. The company acquired Kwality and Milkfood, which included the Kwality Wall's ice cream brand. In 2000, HLL marked the beginning of a new era in India's economy, when it acquired 74 percent of Modern Food Industries Limited. A major baked goods business in India, Modern Food had previously been owned by the Indian government, and marked HLL's extension into an entirely new product category. HLL subsequently acquired full control of Modern Food in 2002.

The first half of the 2000s nonetheless represented a difficult period for the company, which was faced with an economic slowdown in its core Indian markets. At the same time, HLL underwent a dramatic restructuring as part of the parent company's global "power brand" strategy. The company began streamlining its brand portfolio, which had grown to some 110 brands by the beginning of the decade, cutting that number back to just 35 brands by mid-decade. As part of this refocus, HLL also began selling off its noncore operations, including its chemicals businesses. That process was completed in large part with the sell-off of the last of HLL's tea plantation and production units, Tea Estates India, which was sold to a subsidiary of the Woodbriar Group in 2006.

By then, HLL appeared to have once again moved into a growth phase, posting revenue gains of 9 percent, and net profit growth of some 23 percent, over the previous year. HLL also prepared to enter a new management era; in 2006, the company appointed Douglas Baillie, who previously headed Unilever's operations in Africa, as the company's CEO. That appointment placed a non-Indian at the head of the company for the first time in more than 40 years. HLL appeared certain to clean up in India's consumer goods market for decades to come.

Principal Subsidiaries

Bon Limited; Daverashola Tea Company Limited; Hindlever Trust Limited; Indexport Limited; Indigo Lever Shared Services Limited; International Fisheries Limited; KICM (Madras) Limited; Kimberly-Clark Lever Private Limited (50%); Lever India Exports Limited; Levers Associated Trust Limited; Levindra Trust Limited; Lipton India Exports Limited; Merryweather Food Products Limited; Modern Food and Nutrition Industries Limited; Modern Food Industries (India) Limited; Nepal Lever Limited (Nepal) (80%); Ponds Exports Limited; Quest International India Limited (49%); Thiashola Tea Company Limited; TOC Disinfectants Limited.

Principal Competitors

Nirma Ltd.; Jocil Ltd.; Nahar Industrial Enterprises Ltd.; Shrihari Laboratories P Ltd.; Ruchi Infrastructure Ltd.; Procter & Gamble Hygiene and Healthcare Ltd.; Amrit Banaspati Company Ltd.; Henkel SPIC India Ltd.; K S Oils Ltd.; Ultramarine and Pigments Ltd.; Vashisti Detergents Ltd.


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