FMCG sector witnesses growth in business and profitability: CEO Unilever

Despite of all challenges and tough business environment, the sector of FMCG ( Fast- Moving Consumers’ Good) witnessed tremendous growth in their sales and revenues, showing real efforts of workforce to tap the potential of local market.

This was stated by Ehsan Malik, CEO and Chairman, Unilever Pakistan while speaking at MARCON 2012 titled ‘New Trends & Insights in creating & sustaining Competitive Advantage’ held recently in Karachi.

Pakistan’s GDP growth has been the lowest and inflation amongst the highest in the region during last five years. Tax-to- GDP ratio declined, government borrowing shot up, investment in the social sector – education and health was low. Besides, the law and order conditions deteriorated and there is persistent and growing energy deficit.

Notwithstanding adverse operating conditions, if it is looked at the published results of Nestle, Colgate Palmolive, Engro Foods and Unilever, it is clear that businesses have not only recorded strong year-on-year growth but most have also improved profitability.

Unilever has been present in Pakistan since 1948 and gained a large consumers base and product portfolios. What we are today, just five years later, we will be more than two and half times the size. Other businesses I mentioned have a shorter history and some operate in emerging categories but the common factor for success of the consumer products industry is the power of branding.

He mentioned that the ability to differentiate, provide consistent quality and good consumer value, earn a reasonable margin and reinvest in growth. “There are excellent examples of brands fighting back and overcoming the heat of unfair competition.”

Despite smuggling and counterfeiting in Tea, Lipton was the fastest growing and most profitable tea brand in Pakistan in 2011. Unilever Pakistan broke the record in Unilever (which operates in 90 countries) for the highest number of brand launches in a single year.

The improved segmentation, premiumisation, reaching out to more consumers in more categories and relentlessly driving out costs that don’t add to consumer value are some of the factors for our success. Of course none of this would be possible without attracting, developing and retaining the best talent. We also switched from a cheque writing mode of CSR to Unilever Sustainable Living Plan – USLP.

·         Lifebuoy reaches out to thousands of children through its handwashing campaign, raising standards of hygiene on the Healthy Hoga Pakistan theme;

·         Lux promotes film, fashion, TV and music through the iconic Lux Style Awards, now in the eleventh year. Lux as a result is as much about glamour as soap;

 ·         Sunsilk partners PFDC in the fashion weeks, supporting textiles, the backbone of Pakistan’s exports;

 ·         Surf  has helped rebuild schools damaged in the recent floods

Together these win hearts, minds and share of wallet. One of the core focuses of Unilever’s marketing strategy comes from remembering that we are selling products and brands to improve people’s lives. We want to create brands that people love and can’t live without. We also want to correct the balance between logic and science on the one hand and magic and art on the other. It’s about making the experience a little magical. People want brands to stand for more than just a product, they want a human idea that they can believe in. And through social media they want to co-create brands.

There are excellent examples of how other businesses in Pakistan are overcoming adversity and thriving. But in celebrating success we must not give the impression that we are happy with the status quo on smuggling, counterfeiting, tax evasion or the narrow tax base, he said.

Leaving aside our interest as business or even the government’s from a revenue perspective, we must not abandon consumers to counterfeiters, smugglers and adulterators. Consumers deserve safe and healthy products at a lower cost. They deserve a fair deal. With added scale that level playing field would bring, our cost of serving the people of Pakistan would decline as should prices.

He pointed out the impotance of consumers in the business growth, saying “consumers are and should be at the heart of our business.”

Beset by smuggling, counterfeiting, piracy, tax evasion and competition from unscrupulous players who contravene health, safety and environmental standards, the formal sector operates in a very unlevel playing field. Take Tea for example. Half the tea consumed in Pakistan is smuggled because high taxes provide an attractive, over Rs. 110,000 a ton incentive to evade. Tea, the drink of the masses is taxed at the same percentage as high octane fuel consumed by luxury vehicles, Malik added.

CEO Unilever said that consumers in Pakistan pay 50% more for tea compared to their Indian neighbours because of half amount goes to taxes. In India, Tea is recognized as an essential item of Food and VAT of 4% is levied against 16% GST on top of import duty in Pakistan.

Over ninety percent of milk sold in this country is untaxed, as are most unpacked and unbranded commodities, he said. Products sold in an open form are particularly prone to adulteration. For example, dyed wood shavings, saw dust, pigeons blood and many other harmful substances are used to adulterate tea – most of the smuggled tea is sold in an unpackaged form.

We have entire markets like the Shah Alam market in Lahore and Jodia Bazar in Karachi, that brazenly sell smuggled and counterfeit products. Elsewhere shops are full of smuggled toiletries and cosmetics because import duties provide incentive to evade.

Then we have anomalies created by archaic tax laws, laws that are well past their shelf life. For example, excise duty was levied two decades ago on shampoos and creams because they were then regarded as luxury items.  This continues today. Consequently, the per capita consumption of these, now essential personal care items, is one of the lowest in Asia. We are taxing people who want to look and feel good.