With sales growth in developed markets slowing down, more and more companies will shift their innovation capabilities to growth markets like India and China, according to Paul Polman, chief executive officer of Anglo-Dutch consumer products maker Unilever.
Polman, who is on a four-day visit to India, said in Mumbai today that Indian subsidiary Hindustan Unilever Ltd - the fastest-growing among the entities that form part of the €44 billion company - will be the lynchpin of the strategy to achieve the group's overarching objective of doubling revenues by 2020.
"The Indian entity has turned out its best results in the past 30 years," he said, adding that it would probably continue to grow much faster than the group itself.
As a result, Hindustan Unilever will need to metaphorically spawn a clone that will be as big as itself in the next few years - he didn't spell out the timeline - if the global parent hopes to double its size in the next 10 years.
"In the next 10 years, the global entity will grow its revenues by the same magnitude that it took 125 years to achieve," said Polman, who was poached from Nestle just over two years ago to revive the fortunes of a giant that had started to flounder against niftier rivals.
The turnaround has started to show, with Unilever's overall volumes surging 5.8 per cent in 2010 against 2.3 per cent in the previous year. The emerging markets - which Polman calls the "growth markets" - already account for 53 per cent of Unilever's total business.
The Unilever boss is also paring costs across the organisation, which sells its products to over 2 billion consumers in 180 nations. It's already started to pay off: in 2010, Unilever delivered savings of €1.4 billion. "This year we expect savings of €1 billion," he added.
Polman seems to have seen off the worst of the economic crisis and is now ready to ratchet up growth without worrying too much about the sharp surge in food prices.
"I wouldn't worry about the commodity price surge for the next six months. But, after that, I would like to see the dust settle down. A 2-3 per cent food price rise is something that we are comfortable with because that means the farmer is going to get a decent price for his produce. But I do worry about the uncertain spikes in food prices," he added.
Polman is also aggressively pushing a new agenda at Unilever with the sustainability living plan, which seeks to balance the compulsions of growth with the responsibility of protecting the environment.
The plan has three objectives: first, slash the environmental impact of Unilever's products by half by reducing carbon emissions; second, ensure the group only sources sustainable agriculture supplies; and third, improve the health of a billion people worldwide.
"We have to take up the responsibility because the governments around the world have clearly failed to deliver on environmental goals," he added.
The plan will be implemented across all brands and will also cover countries such as India.
Unilever - which has 12 €1-billion brands, including Axe, Dove, Knorr, Lux and Lipton - has an environmental imprint for every single brand within its portfolio.
"We have built a database. There's a baseline for each brand and we are looking to trim the environmental impact of every one of them," added Harish Manwani, HUL chairman and Unilever's president for Asia, Africa and Central & Eastern Europe.
However, Polman felt that there was little merit in the Indian government's proposal to legislate that firms spend at least 2 per cent of their net profit on corporate social responsibility (CSR) projects. "CSR has to be embedded in the company and its products. It has to be built into the business model," he said.
