By Kala VijayaRaghavan & Sagar Malviya
The company he heads is coming off its worst financial year. Yet, an unfazed Shantanu Khosla wants to look back longer at how Procter & Gamble’s Indian operations have come along in its 24 years in the country, creating spaces for itself while going head on against the might of fellow multinational offsprings like Hindustan Unilever and Colgate-Palmolive.
Just as well for him, for Mr Khosla has been at the helm of P&G India for the last 11 of those 24 years. Seen through the prism of P&G’s global template, Mr Khosla’s tenure, since 2002, is standard stuff. Seen through the prism of what’s happening in his neighbourhood, Mr Khosla is an outliver.
Hindustan Unilever-P&G’s rival number one in india and against whom it is measured the most-has seen a change of guard four times since 2002.
As has Colgate-Palmolive. As has Nestle. “The comparison (with HUL) pleases me because I know we are winning,” says Mr Khosla, managing director of the operation that posted combined revenues of Rs 7,561 crore in 2012-13. “In every category we have competed with HUL, we have grown. Ten to eleven years back, they were 20 times our size; today, they are three to four times.” And then, he fires a salvo. “Reliance has grown faster than HUL in the same period. So, is there a comparison?” But growth is one thing, profitable growth another. P&G’s speedy expansion has come at the cost of margins, especially in the last three years, when the quantum of losses posted by it- Rs 1,167 crore-wiped off all the profits it had made till then.
A lament among industry observers is it’s not clear what P&G wants to do in emerging markets like India. They say its growth could have been faster given its parent’s size and product portfolio, its board of directors in India is aging, and is low on ideas and risk appetite, its strategy to opt for fewer stockists is puzzling. “P&G’s strength is top-end, high margin,” says Amin Babwani, a former senior sales and marketing official at HUL and now an independent consultant. “Hence, even if they become big, say, in the mid-priced detergent segment with the success of Tide, it will not meet their margin aspiration. It should leverage its global portfolio and quickly launch some of its big global brands in India.”
P&G is upping the stakes in India. Its US parent has invested about Rs 2,000 crore in the last two years in its Indian arm to ramp up production and distribution, especially in relation to, who else, HUL. What makes that narrative more interesting is that, on October 1, HUL completed one of its regular successions, with Sanjiv Mehta stepping into the rather big shoes left behind by Nitin Paranjpe.
Barely half a km away in Mumbai, at P&G, the footprints, as far as one can see, are those of only the indefatigable Mr Khosla. “Shantanu is like Sachin Tendulkar in the P&G system,” quips a senior company official, not wanting to be named.
The Man
The 53-year-old Mr Khosla says this is where he wants to be. “I love the job, I am learning everyday,” says the 53-year-old. “The consumer base in India is still underserved. And we have this young talent and leadership pipeline the P&G system consistently works on.”
Mr Khosla heads all three P&G companies in India. There’s P&G Hygiene and Health Care (which makes Whisper and Vicks), Procter & Gamble Home Products (Ariel and Tide) and Gillette India (shaving products of the same name). Mr Khosla became a part of P&G when the Cincinnati-based company acquired Richardson Hindustan in 1985, in 1985. After leading several business units for it around the globe, he took charge of India in 2002.
In 11 years under Mr Khosla, P&G’s revenues have multiplied about six times at Rs 7,561 crore. That’s faster than Colgate-Palmolive, Nestle and HUL, though the last name on the list has a significantly larger base. Personally, for Mr Khosla, it’s an unusually long stay in a Gen Y environment, where boards and CEOs are getting younger.
“There is nothing unusual about it in the P&G system,” he says. “Over its 175 years of existence, P&G has had only 10-11 CEOs.” In India, before him came Gurcharan Das, David Thomas and Helmut Meixner.
According to a senior company official, who did not want to be named, Mr Khosla has been refusing global positions that come with promotions. At present, in P&G’s global hierarchy, Mr Khosla is a vice-president. He reportedly has clout and commands respect for his leadership skills. “He could have been president-level talent any day, but he has chosen to be in India by choice,” says this official. In P&G, the president is a notch below chairman & CEO position.
Declining to answer questions about global roles and older boards, Mr Khosla insists leadership development and succession planning is core to P&G’s culture. “I know who my successor will be as, with all positions within the P&G system,” he says. “Nothing happens by chance here. These are all pre-planned career decisions done with what is good for business and what is good for the employee. I am no exception.”
The Company
Departures from that template happen, even at the highest level. This March, the US parent brought AG Lafley-credited with the $57 billion acquisition of Gillette in 2005 and all of 66 years-out of retirement to be its chairman and CEO and revive growth. On a visit to India three months later, Mr Lafley admitted that P&G in India had fared better in categories where established FMCG was not strong, like women care, baby care, hair care and skin care.
Part of the reason, he said, was because HUL had a headstart and FMCG talent. “It wasn’t until we were there for a decade or two that we began to hire some really good people out of universities, and we did acquire some good people with Richardson-Vicks and Gillette and other acquisitions,” he said in July. “But it is very hard when you haven’t been there for 100 years and you don’t have the reputation of HUL to hire the best.”
Gautam Duggad, FMCG analyst at Motilal Oswal Securities, a brokerage, says comparing P&G with HUL is unfair. “Both have different histories,” he says. “HUL is a 100-year plus organization in India compared with P&G’s 20-odd years, of which, it has been aggressive only for the last 10 years.”
Mr Duggad feels P&G is putting many pieces in place. “The losses are not worrying. It is the result of its investments in critical areas,” he says. “It is focused on long-term growth. Now, it is investing in critical areas: brands, distribution and infrastructure. For FMCG companies, management roles have marginal impact.
Once the critical parameters are addressed, it is on auto pilot.” Ashok Chhabra, former P&G general counsel for Asia-Pacific & Australia says the company is guided by the consumer, not the competitor. “And Shantanu is driven by data and facts,” he adds. “He understands issues on the ground and is an excellent leader to guide P&G.” Mr Khosla says he maintains a 9 to 6, clear every mail in less than a minute, schedule. Mr Khosla, who is fond of gadgets and cars, meets as many colleagues he can, often seeking them out.
“We have an open office, flexible work hours and are more virtual,” he says. Independent marketing consultant Kamini Banga gives a thumbs up to Mr Khosla. “A new entrant combating a large entrenched player is no mean feat, and what is essential is continuity and stability,” she says. “And if things are working well, it would hardly be prudent to bring change at the top and experiment with new strategies. As a challenger, Shantanu has brought stability and continuity while putting it squarely on the path to growth.”
Source:The Economic Times
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