How Hindustan Unilever Works | Management Lessons From The CEO Factory

Hindustan Unilever is India's largest FMCG company with a legacy of 80 years and touches the lives of 9 out of 10 Indians. The company is a powerhouse of brands including Dove, Surf Excel, Lifebuoy, Sunsilk, Clinic Plus, Brooke Bond, Close up, Pespsodent to name a few.

Like the consumer that the brand speaks to, HUL has managed to its culture middle-class, meritocratic, and quintessentially Indian. HUL has for a long time been considered a school for CEOs, over 500 CEOs/CXOs around the world are HUL alumnus.

“Almost every major company in India has an HUL man or woman at the top. Among them are Gopal Vittal, CEO of Bharti Airtel; Ignatius Navil Noronha, CEO and MD of DMart; Sanjay-Gupta, country manager of Google India; Raymond Lifestyle CEO Sanjay Behl; Anand Kripalu, MD and CEO of Diageo India; Suresh Narayanan, Nestle India CMD, and many others,” said Mr Sitapati in an interview.

But what makes so many companies want to hire Hindustan Unilever’s managers as CEOs? In the book ‘The CEO Factory’ by Sudhir Sitapati, Executive Director, Foods and Refreshments takes the reader through the answer of this question through systematic detailing of management lessons from Unilever.

The book is divided broadly into 9 parts including Broad Ingredients of HUL’s success, Marketing, Advertising and Media, Product, Pricing, Sales, Cost Management, HR, values of the company. This makes it an MBA course in a single book. While, it is not an easy task to chronicle the truly remarkable lessons from the book, here is a recount of key lessons which stood out and my reflections on the book:

1. Marketing = What the Consumer wants
Marketing is about understanding the unmet needs of the consumer’s and mobilizing the rest of the company in fulfilling it in a profitable manner. Thus, Marketing is that function which is at the heart of the business, as it ‘frames business problems in consumer terms.’

Thus, one of the important skills in marketing is being able to ‘sharply define what the problem is’. The author then discusses the HUL’s way of framing and structuring the problem. He emphasizes that at HUL, marketing is not just a wishy-washy creative role, and is as much science as art.

2. The Insight
A great insight is central to solving not just marketing but any business problem. From what is commonly understood, insight is the consumer truth which unlocks growth opportunities for the brand. In the book, Sitapati mentions that what differentiates Unilever marketing from the rest is the use of insight.

He gives a particular definition of insight as a contradiction which is obvious in hindsight. He gives an example of one of the HUL’s most successful brands, Fair & Lovely, the insight for which was ‘My gene pool is my destiny,’ which in six words captured a large cultural truth about India without even using the word ‘fair’.

3. Fame is More important than Persuasion
This is a lesson in Advertising and media. The author quotes Byron Sharp’s book, 'How Brands Grow’ to explain how purchase in any brand is largely driven by ‘salience’ Salience, which means being remembered. The reason it works is that there is an extreme degree of correlation between Top of Mind Awareness and Purchase Intention.

This explains why fame is important, and advertising and media are two functions of marketing which deliver the brand benefits through creative storytelling, thereby driving the growth of the brand.

4. Why Positioning is Important
To be salient, it is important to form a singular and unique set of associations in the mind of the consumers, which is where positioning comes into play. Positioning is the space that you occupy in the consumer’s mind, it provides clarity and ownership.

However, there is a flip side to this too; as a good position can also limit a brand. This is why Brand Extensions, i.e., using an existing well developed image of a brand to venture into another category aren’t always successful. The difficulty lies in building new associations in the mind of consumers, especially unrelated ones, which might contradict the current one.

Consider the case of Pond's, which is a popular face cream brand, but didn't prove to be quite successful when it launched the toothpaste brand because of the contrary associations in the consumers' mind.

5. Discounting does NOT help recruit new customers
Personally, I found this the most interesting statement in the book as it was contrary to something that seemed too obvious. The author explained that pricing never helps attract new users, since they adopt the brand for its awareness, access, and availability.

Consumers use a brand for quality at a certain price. Price usually has an effect on the amount of consumption. If consumers can't afford it, they might buy or use it infrequently. Lowering of price to attract new customers is a double-edged sword, since if new consumers come in at a low price and you start to gradually take up prices, they leave with the same velocity with which they entered.

Sharp and insightful, I recommend this book strongly to anyone interested in the field of management. It takes the reader through the HUL scheme of things on how to run a business successfully through powerful insights, great anecdotes and effective summaries.