INDIA’S THE growth engine

Unilever, Philips, Nestle, PepsiCo, Coke, GM, VW & Microsoft bet big on country

John Sarkar & Mansi Tiwari NEW DELHI

A FEW weeks ago, a senior Hindustan Unilever (HUL) executive sat hunched over his computer screen, poring over an e-mail from Paul Polman, CEO of consumer goods major Unilever. "None of us should underestimate how tough the next year will be," Polman had written. "We need to think growth in everything we do," he urged. And if the HUL executive is to be believed, Polman's words weren't exactly generalisations.
    Developing markets, a major chunk of which is India, make up almost half of Unilever's group sales. And hit by the global economic recession, demand for consumer goods in the US and European markets are unlikely to bounce back anytime soon. The same applies to other sectors as well. Consider this: In the appliance category, industry estimates revealed that the US market has declined by around 25-30% and demand has also fallen by 20-35% in main European markets. As a result, most companies — from auto makers to shampoo sellers — are resorting to scrapping targets and cutting costs. For instance, South Korean consumer durable firm LG Electronics has recently proposed to cut costs by $2.2 billion globally. And Unilever just scrapped its targets. Big decisions these, but where do they lead the MNCs?
    India is the likely answer. And here's why: Both Polman and LG's CEO Nam Yong told reporters recently that despite the slowdown their developing markets are still growing. And closer home if hints from these MNCs are anything to go by, the domestic market still offers plenty of opportunities. Moon B Shin, LG Electronics India's MD said: "Compared to other markets India is not much affected by recession and its projected growth rate is quite positive. India is a very strategic market for
    LG globally and I personally believe that if a company is strong in India and is a market leader, it will be able to do well globally as well because India is a mix of various countries due to its diversity." And Shin, who expects a growth of 15% this year, isn't the only one to believe that India can deliver. Senior officials in MNCs such as, Philips Electronics, Nestle, PepsiCo, The Coca-Cola Company, Wrigley, General Motors, Volkswagen, Microsoft, Perot Systems, Nokia, Dell and Samsung are also on the believer's list.
    Murali Sivaraman, CEO & MD of Philips India, told SundayET that he has been briefed by his Netherlands-based headquarters to drive growth for his company. "My brief is to drive growth, quarter by quarter," Sivaraman emphasised.
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WE will be hiring more people and branching out into new areas soon." Similarly, a senior official with confectionery firm Wrigley India held up Sivaraman's point. "This is among the top four focus countries for Wrigley," he said. "The companies that have been in India for a long time are now looking at this market to drive growth for the parent. And this is not because India is a stable economy, but because other economies are not doing well."
    So how important is India for these MNCs? Says Rajan Anandan, MD, Microsoft India: "The economy has a healthier outlook in India than in many economies around the world — as segments like the public sector and telecom continue growing, as do areas like education. And given that India is key to Microsoft both from a talent and market perspective, the company will continue to invest in long-term growth and innovation in the country."
    Talking about investments, here is a quick glimpse: Chicago-based Wrigley plans to invest close to Rs 200 crore in the Indian market in the coming year. Nestle has plans of investing close to Rs 600 crore in another 2-3 years.
    PepsiCo on the other hand plans to invest a much larger Rs 2,500 crore over the next three years. Even consumer durable firm Samsung is ready with Rs 100 cr this year with close competitor LG planning an infusion of Rs 200 crore.
    And even in the automobile sector, certain MNCs are busy ramping up operations here while Detroit and the rest of the world bleed. "Carmakers such as Hyundai, Volkswagen (VW), General Motors (GM) and Fiat are likely to up the ante in India," says Ian Fletcher, a UK-based auto analyst with IHS Global Insight.
    "Many global automakers still have a largely limited exposure to the Indian vehicle market, so there are still chances for them to grab market share from more established local competitors," he adds. General Motors, for instance, is looking to launch a cheaper model than its current popular Spark model. It is also not hesitating to invest, which will eventually see it turn its operations in to an engine and transmission hub for the Asian region. When contacted Karl Slym, president & MD of GM India agreed. "We are ramping up assertively and all our plans for India such as, opening new plants and launch of new models are on track," said Slym.
    Fletcher also forecasts that Korean carmaker Hyundai will benefit locally and in the export market from the i20 as it has done with the i10 already. And that due to some automakers toning down their planned investments (Nissan/Renault), or pushing their completion dates further into the future (Toyota, Honda) — auto firms such as, Volkswagen (which should be opening its new plant in the next few months) and Fiat (which has also ratcheted up its investment with Tata) will get room to find their feet as they expand their own market share in the country.
    And the others are not too badly off either. Sample this: Muhtar Kent, the president & CEO of cola major Coca-Cola Company, wants India to be one of the top five markets for his company. Close competitor PepsiCo is pushing its local arm to triple its business here in the next five years. Points out a PepsiCo India official: "A testimony to India's growing significance is the recent visit by the 26-member PepsiCo executive committee to India. And our recent elevation to a 'region' status also shows the increasing importance of the India business in the global context."
    Sameer Garde, country GM, Dell India has no qualms in saying that India is among the most important commitments for the PC maker. Says Garde, "India has been among the fastest growing Dell markets. We believe that the next one billion users to come online will mainly be from the emerging countries such as China and India. Dell has more employees in India than any other location outside of the US. We have seen tremendous growth here and will continue with significant initiatives."
    And Garde is bang on target, feels Anurag Jain, MD for APAC, Perot Systems, a US-based IT solutions provider. "The financial epicenter of the world is moving eastward," he says. "There has been approximately 50-60% jump in the Indian revenues."
    And this is just the tip of the iceberg, feel experts. And who better to sum it up than Unilever's Polman, who says that in 20 years' time the BRIC countries along with Mexico, Indonesia and Turkey will constitute a population of 6 billion plus — equal to today's global population, with most likely a significantly higher level of wealth. Well, now with all these plans on the anvil, the slowdown doesn't seem all that slow anymore, does it?

We need to think growth in everything we do. None of us should underestimate how tough next year will be
Paul Polman,
CEO, Unilever

We are ramping up our operations assertively and all our plans for India are right on track
Karl Slym,
President & MD, GM India

My brief is to drive growth quarter by quarter. We'll be hiring more people & branching out into new areas
M Sivaraman,
CEO & MD, Philips India

Compared to other mkts, India is not much affected by recession & its projected growth rate is positive
Moon B Shin,
MD, LG India

We want India to be one of the top five markets for our company in the future
Muhtar Kent,
President & CEO, Coca-Cola Co