The Unilever CEO believes that HUL is still the lion in several categories. He is living in his own world. Over the past decade, HUL has repeatedly tried and failed in a large number of new businesses, which makes it look like an also-ran
A few days back, the chief executive officer of Unilever, Paul Polman, visited India and talked about the growth plans of Hindustan Unilever (HUL). The most surprising fact was he said that product innovation is the key growth factor for HUL and that it would double its turnover.
Fortunately, while Mr Polman has clearly articulated his target, he has refrained from specifying by when this target would be reached. This is because the CEO was really talking through his hat when he was talking about doubling the turnover.
Take a look at what the performance of HUL has been over the past decade, when the Indian market has conferred huge profits to Indian companies and multinationals. Its net sales in 1999 were Rs10,142 crore. By 2005, it was still around Rs10,982.35 crore and last year it reported net sales of Rs20,623 crore. In effect, HUL took a whole decade to double its turnover—a compounded annual growth rate (CAGR) of 7% in a country where inflation is at least 7% on an average and is sometimes in double digits. Inflation-adjusted HUL has not grown at all. Of course, HUL has demerged divisions and that is why net sales have been down, but it has also acquired businesses during this period
Now, take a look at what a company like Nestle has done over this period. Its net sales in 1999 were Rs1,543.90 crore. This jumped to Rs Rs5,149 crore in 2009—a CAGR of 13%.
There is something so fundamentally wrong with the business of HUL that the Unilever CEO should be talking about a drastic strategy of energising growth and not vaguely dreaming of doubling turnover. After all, successive Unilever chiefs and heads of HUL have talked about various initiatives that have sounded as clever as its advertising—without delivering much to either the topline or bottomline. For instance, a few years back, we suddenly heard that HUL had restructured its portfolio into “power brands” without the slighest of understanding that it was really selling commodity products.
If it tried to raise its prices even the slighest, these “power brands” would be out of the market because Indian products from Godrej, Emami, Jyothi Laboratories and Dabur were snapping at its heels.
The fact is, unlike almost all multinational companies, HUL is living in a world of its own. For instance, what explains its tired effort at producing ever more brand extensions? HUL thinks that consumers would be happily buying another round of soaps and shampoos centered around Dove— Dry Therapy Shampoo, Dove Daily Therapy Shampoo, Dove Hair Fall Therapy Shampoo, etc. backed by an advertising blitzkrieg. Consumers are simply put off and tired.
If the Unilever CEO believes that HUL is still the lion in several categories (as he said in an interview), he is living in his own world. The fact is, over the past decade, HUL has repeatedly tried and failed in a large number of new businesses, which makes it look like an also-ran. Whether in personal care, home care products or food brands, HUL has only a string of failures to show. In 2001, it took over Modern Bread from the government and had aggressive plans to grow this business by creating a variety of baked products around flour from biscuits to spagetti. Over the years, nothing happened. Similar is the scenario with with its Annapurna Atta, which has failed to lead HUL into other successful categories.
The company tried to push its bread and atta together in the year 2002 by launching ‘branded Modern atta bread’ but this was not what the consumers wanted. During the past decade, HUL also forayed into the beauty and skincare segment using the ayurvedic platform. In last eight years, the Ayush brand has only meant large losses. Consumers’ recall of this brand is extremely poor, forget about break even. The company itself doesn’t know when this segment will be profitable.
The fact is, HUL now singularly lacks execution capability. It is still playing the 70s and 80s script of brand extensions and big nationwide ad spend. It spent Rs9,125 crore over six years from 2003—just to stay where it was. This strategy worked when Doordarshan was the only visual medium and competition was non-existent. The world has changed but HUL has not. It is not going to be easy at all to wrest back the initiative. In a highly competitive market, HUL has turned out to be slothful and unimaginative.
Fixed deposit holders should watch out. Banks may be snatching a part of the principal under the garb of deducting tax at source
Would you think twice before investing in a fixed deposit? The obvious answer would be a resounding ‘no’. But what if a bank is nibbling away at your principal in the name of deducting tax at source on your interest earnings?
It is unthinkable, right? Not quite. It appears that banks have found a way to tamper with the principal of your fixed deposits too. Here is the case of a senior colleague at Moneylife.
One fine day, she suddenly discovered that her fixed deposit of Rs50,000 in HDFC Bank was appearing in the statement as Rs49,934. Assuming it was a mistake, she wrote to the bank and was in for a shock.
She was told that while the bank has a policy of not recovering tax until the interest accrued crosses the taxable threshold of Rs10,000, in her case, this threshold was crossed when the interest on the FD of Rs1,028 was credited to her account. Her total interest was Rs10,607 which meant that the bank had to deduct tax at 10.2% on Rs10,607 which came to Rs1,081. The figure fell short after adjusting the entire interest of Rs1,028. So the bank coolly decided to dip into her principal, knowing fully well that it has no right to do so. Simply put, this means that the bank is eating into the savings and eating up the principal under the garb of collecting advance tax.
This was done despite the fact that she has a savings account with the bank. Neither was her savings account used to cover the amount nor was she asked to deposit the amount. The bank made no attempts whatsoever to inform her of their intentions to adjust her principal.
What is even more alarming is that this lady is a ‘privileged customer’ of HDFC Bank. If priority customers are at the receiving end of such shocking practices, one can only imagine the plight of ordinary customers.
Banks can only deduct tax on the interest amount and have no business deducting from the principal. When asked why the bank lopped off the principal, a bank executive gave this breezy reply: "There is an old CBDT (Central Board of Direct Taxes) clarification on this issue, but irrespective of the clarification, this (recovery from principal) is the option which has the least issues. Hence (the) Bank has, as a policy, decided on recovering from principal if the interest is not sufficient.”
We have learnt to our utter horror that, indeed, under a CBDT circular, banks have been asked to deduct tax in advance per quarter on accrual basis. This is outrageous, considering that most of these deposits are fully tax-paid savings.
This issue has been raised before the Reserve Bank of India, which has sought comments from HDFC Bank.
Fixed deposits are the only investment avenue people don’t think twice about before investing. They are considered to be the safest form of investment that at least ensures that your tax-paid principal amount, usually your hard-earned savings or retirement kitty, is safe. That may no longer hold true.
Another senior citizen had a similar complaint about his cumulative FD. In his case, Bank of India deducted TDS amounting to Rs16,000 from the maturity value of his deposit. He was also not sent a TDS certificate. “First, they don’t inform people beforehand and start deducting TDS from day one. Most nationalised banks and even some private banks don’t send TDS certificate home.
For senior citizens, this is a big hassle. This is a huge lacuna which needs to be addressed,” he said. Commenting on this issue, Sheilu Sreenivasan, founder, Dignity Foundation said, “A fixed deposit is the most popular vehicle of investment among senior citizens. They trust FDs like no other instrument. This is absolute loot.”
VG Patel, trustee, Consumer Education and Research Centre (CERC) said, “No one should touch my deposit without prior intimation and authorisation. It is my savings and I put it in a bank for safe keeping. We take one step forward and two backwards in the process of freeing us from the clutches of ancient and arrogant rules, procedures and the civil servants.”
What’s in a name, asks the adage. But domain names have a lot riding on them, and cyber-squatting does not seem to be dying down
Cyber-squatting, or the usurping of domain names not claimed by reputed companies, has plagued a number of organisations—both domestic and international—in the past.
Cyber-squatting is an illegal activity of buying and officially recording an address on the Internet—which is the name of an existing company or a well-known person—with the intention of selling it to the owner in order to make money.
Reputed brands like the British Broadcasting Corporation (BBC) have had to go all the way to the United Nations body World Intellectual Property Organisation (WIPO) to win the rights to the use of URL bbcnews.com—way back in 2000—when that site was being squatted upon by US-based Data Art Corporation. The BBC subsequently won the case. This is but one example of a number of cases where cyber-squatters have been evicted, when they were found to be encroaching upon famous brand entities.
India has had its own share of cases of cyber-squatting. In September 2009, WIPO ruled in favour of Tata Sons which made Gurgaon-based travel portal MakeMyTrip to transfer the domain oktatabyebye.com to Tata Sons. Again in October 2009, Kotak Mahindra Bank won a cyber-squatting case at the WIPO against a South Korean, who was using the name ‘Kotak’ in an Internet domain.
The cases of cyber-squatting are not just limited to companies; NDTV anchor Barkha Dutt has had to grapple with a case of cyber-squatting too. In 2009, Ms Dutt filed a complaint that a Hyderabad-based cyber-squatter—easyticket—had been using a domain name ‘barkhadutt.com’, which was registered on 8 January 2007.
The latest case is of Panasonic India’s travails. The Indian domain name of Panasonic, www.panasonic.in, has been registered in the name of a certain ‘James Bond’, a resident of Taiwan. With Kochhar & Co’s intellectual property partner, Rodney Ryder, Panasonic approached the arbitral tribunal at the ‘.IN Registry’.
The .IN Registry is a non-profit company created by the National Internet eXchange of India (NIXI) in a move to evict cyber-squatters from using domain names for personal or commercial purposes. It is also responsible for the implementation of the various policies of the department of information technology of the Indian government.
Allegations by trademark holders of various cyber-squatting cases continued to rise in 2008, with a record 2,329 complaints filed under the Uniform Domain Name Dispute Resolution Policy (UDRP), representing an 8% increase over 2007. UDRP is a quick and cost-effective dispute resolution procedure administered by the WIPO Arbitration and Mediation Centre.
The reason most cyber-squatters do what they do, is because they can get money from the celebrity or company for giving up the domain name. The George W Bush Library Foundation was forced to cough up $35,000 for retrieving its domain name. A small internet company had bought www.georgewbushlibrary.com for less than $10 and then subsequently sold it back it to the library.
“People cyber-squat because they try to get hold of domains that other persons or companies want, with the intent of selling it to that organisation or person at a premium,” a top IT expert said.
Now squatters are trying to pull off another stunt. They have now started typo-squatting. Here they register a domain name that is very similar to the original one. If a surfer makes a typing mistake, he’ll enter a fake domain.