Hindustan Lever Ltd, India's largest consumer goods company, on Thursday announced it would replicate the organisational structure of its Anglo-Dutch parent Unilever by splitting its fast-moving consumer goods businesses into two separate divisions: home and personal care, and foods.
The home and personal care division will integrate the soaps and detergents and personal products businesses. Arun Adhikari, managing director, home and personal care, will head this division.
The foods division will integrate the beverages, foods, ice-creams and confectionery businesses. It will be headed by S Ravindranath, managing director.
Both the managing directors and M K Sharma, vice-chairman, will report to HLL Chairman M S Banga, who has been made non-executive chairman with additional responsibility as business group president of Unilever's $6 billion home and personal care business in Asia from July 1.
Asia is Unilever's biggest home and personal care market, accounting for about 27 per cent of its $22-billion-plus revenue.
Sharma has been made chairman of a newly created national management structure to oversee HLL's day-to-day functioning in Banga's absence.
In other changes on the HLL board, Aart C Weijburg, director (detergents), has resigned. He is returning to Unilever after five years. Guneder Kapur, executive director (beverages), too is moving to an international assignment with Unilever. Gurdeep Singh, director (HR, technology, corporate affairs), has stepped down from the board following his retirement.
However, A S Abhiraman, executive director (research), JH Mehta, executive director (ice-creams), and D Sundaram, director (finance), will continue to be on the board of the company.
Unilever restructured its business by splitting the group's activities into two divisions -- home and personal care, and foods -- in August 2000. The difference between the organisational structures of Unilever and HLL now is that while the Anglo-Dutch giant has two chairmen, its Indian arm has one.
"The national management structure will have responsibility for HLL's performance and results and overall coordination of the divisional structure and corporate functions," an HLL press release said.
Sharma, Adhikari, Ravindranath and D Sundaram, director in charge of finance, mergers and acquisitions, investor relations and infotech, will constitute the apex national management tier of the company.
Going by HLL's December 2003 balance sheet, the home and personal care division will account for about 68-70 per cent of the company's turnover while the foods division's contribution will be about 22 per cent.
In December 2003, the turnover of the home and personal care business was Rs 6,933 crore (Rs 69.33 billion) and the turnover of the foods business was Rs 1,880 crore (Rs 18.80 billion).
"The new structure will simplify the organisation and speed up the decision-making process. We will be able to sharply focus on brands and categories. Besides, it will reduce overhead costs and the money from this will be invested in brands," a senior HLL executive said.
The new ventures and the non-FMCG businesses of HLL -- plantations and speciality exports -- will continue to be headed by three executive directors. They are Dalip Sehgal (new ventures), Satish Dhall (plantations) and Anoop Mathur (technology and speciality exports). These three EDs will report to vice-chairman Sharma who will now also be responsible for human resources, marketing services, corporate affairs, corporate communications, technology, and legal and secretarial matters.
This is the second restructuring of HLL's businesses during the four-year Banga regime. Earlier, in line with Unilever's power brand strategy, HLL pruned its brand portfolio from 110 to 30.
The HLL scrip today lost 1 per cent to close at Rs 150.65 on the Bombay Stock Exchange. Said an analyst at a leading broking firm, "This is essentially an alignment with the parent. It will simplify processes but may not lead to significant cost savings."
Another FMCG industry tracker added: "The changes will be more qualitative than quantitative. The reorganisation will not have any impact on the businesses and financials."
The new structure at HLL was also in sync with those of most multinationals operating in India, management consultants said.
"Many multinationals have a managing director or a country head, but all the profit centre heads report to their respective regional counterparts situated in Singapore or Europe. It all depends where the business head is sitting," adds a consultant at a leading firm.