HUL may shed up to 15% jobs as Unilever restructures: report

07 Apr 2017


Hindustan Unilever (HUL), India's largest consumer goods company, is expected to shed jobs as it recombines its food and refreshment divisions following a decision by its Anglo-Dutch parent Unilever Plc.

While the extent of job losses will be known by the end of April, reports quoting HUL officials said the company's plans to reduce costs across markets could result in job cuts between 10 per cent and 15 per cent (or 1,800 to 2,700 employees).

Hindustan Unilever Ltd (HUL) employs 18,000 people across factories and offices in India, including over 1,500 managers, as per figures provided in its 2015-16 annual report.

HUL may recombine its food and refreshment divisions following a decision by parent Unilever Plc, which could result in layoffs and reduction in new hiring.

The exercise is part of a business review that parent Unilever announced on Thursday, which includes:

  • Combining foods and refreshment into one organisation, unlocking future growth and faster margin progression;
  • Active portfolio management, including a decision to exit spreads and a review of dual-headed legal structure with the objective of simplification and flexibility;
  • Establishing a net debt / EBITDA target of 2x and launching a share buy-back of €5 billion this year; and
  • Raising dividend by 12 per cent, reflecting increased confidence in the outlook for profit growth and cash generation.

''The review that the board has undertaken has been detailed and comprehensive. It has confirmed that our model of long-term shareholder value creation has been successful and remains as valid as ever. The actions we are now going to take are fully supported by the board,'' Unilever stated in a release.

Global CEO Paul Polman committed to the board his strategy to cut costs sharply to protect profitability as it aims to prove that it can deliver growth following its rejection of a takeover attempt by rival Kraft Heinz for £115 billion in February.

"Unilever is conducting a comprehensive review of options available to accelerate delivery of value for the benefit of their shareholders," an HUL spokesperson said. "The results of the review are expected later this month."

Unilever's Indian operations will be less affected compared to units elsewhere as the restructuring will have a sharper effect in their operations, say analysts.

Unilever says it simply cannot remain unaffected by the changing global business dynamics and needs to remain a leaner organisation by exiting some businesses and finding greater synergies among remaining ones.

In February, Unilever had rejected a takeover approach by Kraft Heinz (See: Kraft calls off Unilever bid amid mutual praise), putting both consumer-goods giants under heightened pressure to make bold moves to accelerate growth, The Wall Street Journal had then said in a report had split its food and refreshment divisions into two separate units in June last year. The company brought in Sudhir Sitapati, formerly regional category vice-president for HUL's refreshments division in South Asia and Africa, to head the refreshments division. Gitu Verma, who was formerly managing both the divisions, took over the foods business, which includes brands such as Kissan and Knorr. HUL's beverage business includes tea brands like Lipton, Taj Mahal, Red Label and coffee brand Bru.

The Indian unit has been increasingly adopting global strategies and initiatives in recent years. The move to separate the foods and refreshments was also a part of the firm getting aligned with the parent.

Globally, foods and refreshments account for nearly half of Unilever's overall revenue, whereas in India, they account for less than a fifth.

The food and beverages opportunity in India is huge. The size of the market, including alcohol and tobacco, in 2015 was $100 billion, one-eighth of China's $796 billion; per capita spending on packaged food was just $32, less than one-fifth of China's $176 and just 3 per cent of the US's $1,135, according to a June report by Goldman Sachs (Asia) Llc.

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