Unilever Nepal Limited (UNL), a part of the global multinational corporation Unilever has been present in Nepal for 28 years. Through its manufacturing unit in Hetauda, the fast-moving consumer goods (FMCG) company produces soaps, detergents, shampoos, skin care products, toothpastes, cosmetics, and tea. Many see UNL’s presence, performance, and profitability over the course of two and a half decades as a testimony to the tremendous opportunities that Nepal's manufacturing sector holds for foreign investors. The company has been delivering strong and impressive business growth almost since its establishment. UNL is one of the highest dividends yielding stocks listed in the Nepal Stock Exchange (NEPSE). However, its performance also got hit by the pandemic as reflected in its financial figures for the fiscal year 2019/20.
Amlan Mukherjee, managing director and CEO of UNL, in a conversation with Sagar Ghimire of New Business Age talked about how the company has been navigating through the ongoing Covid-19 pandemic, some of the challenges faced on operations, their plans for growth and profitability and their long-term Commitment to Nepal society and the environment, among several other topics. Excerpts:
Unilever’s revenue, net profit and dividend have declined significantly in the last fiscal year. Is it just because of Covid-19? How is the performance now?
We at UNL have been used to consistent level of high performance over last several years. Our business performance in the Fiscal Year 2019/20 was below par in comparison. The pre-Covid Period performance was in line with our expectations however the Covid-19 Pandemic, like the rest of the world caught us completely off guard. As Nepal went under lockdowns, there was definitely a big impact on the business. During this period, our factory was closed, and our elaborate distribution and supply chain networks were disrupted. For the first few months however, our urgent priority was Safety of our people and the larger society and most of our efforts went towards those.
After the initial few months, we gradually resumed our activities with the highest of safety and hygiene protocols. Demand for a part of our portfolio which was Covid-relevant resumed quickly and we were able to distribute them as best as we could, given then situation. This includes hygiene products like Lifebuoy soaps, Rin and Wheel detergent powders and Vim utensil cleaning products. If you see the results of the 3rd quarter of 2020/21, Unilever's business has recovered extremely well. We have registered almost a 58 percent top-line growth. The effects and disruptions caused by the Covid-19 pandemic are far from over and seem to be getting worse. But we, at UNL have learnt how to operate well in a safe and effective manner, especially in comparison to the first few months.
As handwashing and hygiene became key tools to prevent Covid-19, did it help in boosting demand for some of your products, particularly personal hygiene products like soap?
You are right, we have seen a significant increase in consumption in products which help keep people safe from the virus. Our global brand Lifebuoy, led by its soap bars and is proven 99.9 percent effective against coronavirus, has done very well across the world. In Nepal, Lifebuoy is one of the biggest selling and most trusted hygiene brands in the country. Providing a regular supply of Lifebuoy soaps during the pandemic to ensure the safety of people was not just a matter of business but our duty to the society and we are happy to have played our part.
How is Unilever Nepal responding to Covid-19?
The first wave has taught all of us very valuable lessons. We--not just Unilever but the country of Nepal—had to learn how to cope with a tough situation that is not going away soon. As a result, we were much better prepared during the second wave. Many of our products are daily essentials for health and hygiene of our consumers and we at UNL had a clear mission of best serving our consumers especially during their times of most urgent need.
Firstly, our urgent priority was safety of our employees. We have been operating under most stringent of safety protocols and have made all required infrastructure arrangements. We have procured medical equipment, appointed new doctors, even bought new ambulances. Many of our employees have now been partly vaccinated and we have covered all our employees under medical insurance. This readiness to combat the pandemic helped to create a lot of trust amongst our employees and helped us on our mission in a big way.
And we have learnt to work much smarter. As the lockdowns may be a part of our lives for some time, we have readjusted our production and distribution schedules in a way that allows our operation to continue.
The government has also shown an extremely positive approach during this time. We received good help and guidance from local authorities. The well thought lockdown rules with appropriate windows for the business to operate helped the cause. With our readiness and good planning on the part of the government, we have faced the second wave of the pandemic significantly better than that of the first wave last year.
Lastly, I believe that UNL as a responsible corporate citizen has duty towards the larger Nepal society, especially during this unprecedented crisis. We have worked with several of our sister Unilever companies across the world and have been able to import and donate key medical equipment, including approximately 130 Concentrators. We also funded an initiative to set-up an Oxygen concentrator plant in Hetauda. Apart from this, we have worked with Ministry of health and UNICEF over the last several months to run Public Service Awareness Campaigns to help spread the right information and behaviors regarding the pandemic.
With our strong brands, our readiness and the government’s way of handling the situation, the future seems much more encouraging.
Unilever Nepal has been present in Nepal for 28 years and it is said that almost every household uses one or another product of your company in the country. How has the journey been like so far?
We started our operation almost 28 years ago. And we started small. In this entire period, we have extended our presence in multiple categories in Nepal. This has happened because we have always had a huge confidence and a positive outlook towards our operations in this country. We have faced many challenges, but which business doesn’t, and I believe it is part of the game.
We have grown our business over last almost three decades and we have developed several brands of trust and choice for generations for Nepali consumers. This we have been able to do by providing some of the best quality products and production technology in Nepal
Last but not the least, we have seen the attachment and trust of our employees towards this organisation. There are many employees in our factory who have been working with us since the first day of our operation, many of our distributors have been associated with us for generations. Unilever is the most trusted employer brand in campuses now for the fourth year in run. Our organization has become, perhaps, one of the most aspirational organization for local consumers as well as the people who want to be associated with us. Overall, it has been a very fulfilling journey, and we have a very positive outlook towards our operation in Nepal. Our commitment to this country has been to grow the business sustainably for not only shareholders but also for our consumers by giving them the best quality products in the future.
Foreign investors seem to be shying away from making investments in the manufacturing sector in Nepal. As the Managing Director of the multinational company which has been maintaining impressive growth since its establishment, what message do you have for them?
Overall, we are extremely positive about our operation in this country. If you look at the last seven or eight years, there have been two major incidents in Nepal. One is the earthquakes in 2015 and another is the pandemic now. Barring the periods during these two incidents, Nepal’s GDP has grown at a consistent rate of 7 to 8 percent which is comparable to other South Asian countries. In some cases, Nepal’s growth rate is even better. If you look at Nepal’s per capita income, it has consistently grown. Even during the pandemic, remittances to Nepal did not go down. Keeping all those things into consideration, it gives us a huge confidence about the business potential in Nepal.
We have been here in Nepal for the last 28 years and as one of the largest global multinational companies, we are extremely buoyant about Nepal and our operations in Nepal. We have a long-term commitment in the country. We will operate and grow sustainably in Nepal and take care of our shareholders’ interests by doing strong business with a robust topline and bottom-line growth. There is nothing insurmountable or that cannot be sorted out through discussion with authorities. If I was an ambassador of Nepal to the rest of the world, I would say to other manufacturing companies: “Come, invest and manufacture here”. We have full confidence that the recent initiative of the government in terms of ‘Make in Nepal’ will make manufacturing in Nepal much more attractive.
What are some of the major policy challenges that foreign investors, particularly in the manufacturing sector face in Nepal?
There are some areas that may need some interventions. So, I would not characterize them as challenges. Let me give you some examples. When a core industry is operating in a particular geography, there are ancillary industries which need to operate to help the core industry to flourish. If we are producing soaps or shampoos, packaging materials should be ideally procured locally. Unilever has very strict standards in terms of its packaging materials. So, such small and medium industries should be encouraged not only for Unilever, but also for other manufacturers to set shop and play complimentary role.
The second point is about some of the specialized raw materials that we import. It is necessary to enable us to import those raw materials at a competitive price. Otherwise, we are unable to pass on the benefit to the consumers. We are engaging with the government towards this end.
Third is about the recent development on clean feed policy. Unilever is one of the largest advertisers in Nepali television channels and other communication mediums. We support the government initiative. We will implement it in absolute spirit. While this is the right step, this initiative also needs engagement. As an international organisation whose brands operate in 196 countries, communication on our global brands must be consistent across different geographies. So, we need help from the government to make this clean feed policy much more implementable for multinational companies like ours who would like to bring in best-in-class global advertising in Nepal.
One of the problems that major global brands are facing is counterfeiting of products. How serious is this issue in Nepal?
There is a tendency of exporting suboptimal products or products with small shelf lives or old products to other countries. We see this in Nepal as well. There are enough stringent laws to stop it. What is required is very, very strong implementation of those laws. Import of any product should be under the strict supervision of the government to ensure proper quality and the consumer’s safety. Anything which has questionable quality, be it counterfeit products or expired products, it should not be allowed to be sold. We sincerely seek the government's help in implementing these rules and regulations.
The company was facing a labor unrest in 2016. It seems the management-labor relationship is cordial now.
The management-employee relationship should be based on unflinching faith and trust in each other. There can be disagreements and they should be handled objectively. We are partners and the idea is to always create a win-win situation. This is the principle in which my leadership team has operated for the last one and a half years. What we have seen today is that the Unilever Nepal factory is one of the top five best performing Unilever factories in South Asia.
Our union leaders stand by our side every time we go out and try to help the society. Even during the worst periods of the pandemic, they kept their trust in us for their safety and wellbeing and helped us with our mission of serving our consumers. We recently signed a long-term agreement, creating a win-win situation for both the organization and the workers. We have an ideal industrial relationship which should help us run this business in a very healthy way in the years to come.
I give all credit to the union leaders, factory workers and the local government body for the help in reaching this win-win situation.
After becoming one of the major exporters, Unilever abandoned exports and focused on the domestic market. Do you have any plans to resume exports?
Our operation has a single manufacturing unit in Nepal. We have seen huge prospects here and we are making all plans to ensure that we are fit to grow in future in Nepal. Currently, our entire priority is to grow the business within Nepal and are not looking at exports.
Do you have any plans to increase capital investment or introduce any new products?
When I say we have very positive outlook about the business in Nepal, we need to walk the talk. For Unilever, there is nothing more important than product quality and range that we provide our consumers. For us to do that, we have decided to invest a large sum of money in our factory in Hetauda to modernize our equipment and machinery and create an efficient production line which allows us to bring new innovations from across the world. This will start from August 2021 and take us few months to complete. Our Hetauda factory is already one of the state-of-the-art facilities in Nepal. And we are investing an unprecedented amount of money and resources in this front to make our factory operation modern, effective, and efficient.
Unilever has also been supporting various social causes. Can you please briefly share with us your CSR initiatives?
In Unilever globally, we operate on the basis of our Compass Strategy which defines the importance of ‘Purpose’ in our way of doing business and we embed ‘Purpose’ into every part of our company. We believe that people with purpose thrive, brands with purpose grows and companies with purpose last. And the purpose for Unilever to make sustainable living commonplace.
How we have been doing this in Unilever Nepal, let me explain through some examples.
We have imported 130 best quality oxygen concentrators and handed them over to the government and Nepal Army to take care of the people who need medical oxygen during the pandemic. We have also contributed towards creating a modern oxygen plant in Hetauda District Hospital. Beyond that, we have contributed our products to different forums and organizations during this pandemic. We have not accepted any financial benefit extended by the government during the pandemic. We believe that it is better used to help the people of Nepal who are in real need. We always stand by the people and the country where we belong.
As we believe that what is good for Nepal is also good for us, we must be an integral part of the culture and the environment here. One of the biggest problems that we face today is environmental degradation, most notably through rampant use and disposal of plastics. For that we need to move towards a circular economy. The quantity of plastics which we put in the environment through packaging materials needs to be either reduced or recycled. We should be able to collect those plastics and packaging materials back from the environment. This year, we aim to collect back at least 20 percent of plastics that goes out along with our products from the environment and recycle them in Nepal.
Towards this, we collaborated with the Nepal Army, to clean up Mount Dhaulagiri. They collected about five tonnes of solid waste while cleaning up the revered Mount Dhaulagiri. That solid waste has been recycled or composted after segregation processes. You will see more and more such initiatives for environment and societal benefit.
On behalf of Unilever Nepal, I will again reaffirm our philosophy of ‘What is Good for Nepal is Good for Unilever Nepal’ and we will stay committed to a better future for everyone.