DBNamasteIndiaConference2005 tcm114-136538

Deutsche Banks Namaste India Conference
Mumbai, 22nd Feb 2005
Deutsche Banks Namaste India Conference, Mumbai
22nd February , 2005
Contents
Overview The India Opportunity FMCG markets & Strategy (00-03) Current Market Context Growth Agenda
Contents
HLL - Indias Largest FMCG Company

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36,300 employees 1,350 managers 2,000+ suppliers & associates 80 company factories 45 C&FAs 7,000 Stockists Direct Coverage - 1 Mn outlets
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Financial Overview
Mn $ Turnover Operating Profit Operating Margin % Net Profit (bei) EPS Surplus Cash Generated Market Capitalisation 2,268 360 15.9% 275 13c 265 7,300
Personal Products 25% Beverages 12% Exports 12% Ice Creams 1% Foods 3% Others 3% Soaps & Detergents 44%
* Figures based on FY2004 Audited Results ++ Market Capitalization as on 17th Feb05
HLL - Indias Largest FMCG Company
100
Trailing 4 Quarters Sales Index : HLLs Sales = 100
24
23
16
12
10
9 GSK
HLL
Nirma Nestle Britannia Dabur Colgate Marico Tata Tea P&G (FMCG)
GCPL Gillette
*Estimated
Leadership across categories

Category HLL Market Share (%) 38 57 57 60 49 61 30 79 HLL Market Share (%) #2 Market Share (%) 17 10 11 7 20 14 20 5 #1 Market Share (%) 47 61 43
Fabric Wash Personal Wash Dishwash
Market Leader
Skin Hair Wash Talcum Powder Packet Tea Jams
Strong No. 2
Toothpaste Instant Coffee Ketchups
33 38 29
Source : A.C Neilsen - ORG Marg FY04 Value shares
HLL Shareholding Pattern

Individuals 19.9%
Domestic FIs 14.8% FIIs 13.7%
Unilever 51.6%
HLL Equity Capital - 50 Mn $ Market Capitalisation - 7,300 Mn $

As on 31st Dec04
Contents
Economic Outlook
2001-02 Agriculture Industry Services GDP 6.5 3.3 6.8 5.8 2002-03 (5.2) 6.2 7.1 4.0 2003-04 (AE)* 9.1 6.7 8.7 8.2 2004-05 (E)* 1.1 6.8 8.0 6.2
* CMIE Estimates
Growth%
Positives Strong GDP Growth High Forex Reserves Growing Exports Focus on Rural & Infrastructure
Concerns Oil Prices Inflation Fiscal Deficit Agricultural Growth

The India Opportunity
More than 1 Billion Consumers

Growing Disposable Income Young Population: 45% less than 20 years* Growing aspirations fuelled by media Low levels of
Penetration Per Capita Consumption

* Source : Statistical Outline of India (2002-03)
Opportunity to Drive Penetration

Category Urban Penetration (%) 69.8 36.6 40.1 66.0 54.6 12.5 Rural Penetration (%) 32.3 19.8 16.3 36.8 11.5 0.7 Total Penetration (%) 43.5 24.7 23.3 45.1 24.4 4.2
Toothpaste Skin Hair Wash Talcum Powder Dishwash Ketchup
Source : Indian Readership Survey 2002
Opportunity to grow consumption

Per Capita Consumption (US $ )
Fabric Wash Toothpastes Shampoos China Indonesia Thailand India 1.7 2.0 4.7 1.2 0.8 1.1 3.0 0.4 1.1 1.2 3.7 0.6
Source : Euromonitor
Growing Prosperity
Consuming Class Households to Treble
2003
3
Nos Indicate Mn Households
2013
11
Very Rich Consuming 46 Class
124
74
Climbers
79
33
Aspirants
9
Income Range per HH Income Class Very Rich Consuming Class Climbers Aspirants Destitutes HH (US$ p.a) >4,675 975-4675 475-975 350-475 <350
24
Destitutes
181
Source : NCAER; HLL Research
Total
231
Contents
Overview The India Opportunity FMCG markets & Strategy (00-03) Current Market Context Looking ahead
HLL : Three Pronged Strategy

2000+
Grow through focus on POWER BRANDS Rationalization completed from 110 to 35 power brands 1300 Bps improvement in foods gross margins
Improve profitability of Foods
Secure future of Non - Core businesses
Portfolio focused: Share of Non FMCG down from 24% to 8% of sales (Value delivered 84 Mn$)
Profitable Growth Through Focus Deutsche Banks Namaste India Conference, Mumbai 22nd February , 2005
FMCG Markets
Slowdown in growth & then 2 years of decline
FMCG Market (HLL Categories) Growth%
6.7 3.4
'02 '00 '01 -1.1
'03
-2.5
'00 HPC F&B 7.6 1.9
'01 3.0 4.6
'02 0.3 -6.9
'03 -1.3 -7.8
Source : AC Nielsen ORG Marg Retail Audit
Challenges Stagnation due to discontinuities
Choice explosion (Durables, Services, Entertainment)
Interest rate reduction (Easy Credit)
Price Led Local Competition International companies seeking market position Driving Penetration & Consumption
Contents
FMCG Markets
2004 - Revival after 2 years of decline
FMCG Market (HLL Categories) Growth% 2.0 0.8 '02 '03 Q1'04 Q2'04 -1.1 -2.5 -2.8
2004
6.1
Q3'04
Q4'04
HPC F&B
'02 0.3 -6.9
'03 -1.3 -7.8
Q1'04 -3.8 0.6
Q2'04 0.8 1.0
Q3'04 2.9 -1.6
Q4'04 7.0 2.7
Source : AC Nielsen ORG Marg Retail Audit
10
MQ 2004
Steps
Drive growth agenda Take competitive challenges head on Financial commitment for long term value
Current Market Context
Pricing
Actions
Laundry : Price Reduction Shampoos: Value Improvement & Lower Price Points Toothpaste: Value Corrections & SKU rationalization
11
Pricing Actions in 2004

Price reductions
Laundry
26%
20%
Price reduction (Bottles) & Value improvement (Sachets)

Shampoo
20%
16%
30%
Pricing Laundry : Price Reduction Shampoos: Value Improvement & Lower Price Points Toothpaste: Value Corrections & SKU rationalization
Actions
Investments behind brands

Innovations Quality Higher A&P
12
Investments behind Brands

Innovation & Superior quality
Family - safe from germs
Petalsoft
Quick wash - 50% Water & effort saving
No mud
Rin Advance
Perfect Radiance
5 in 1 hair health benefits
Total Care
Whiter teeth
Fresher breath
Investments behind Brands

Step up in HPC A&P Spends
132
100
A&P Spends HPC (April - Dec) 2003
A&P Spends HPC (April - Dec) 2004
13
Pricing Laundry : Price Reduction Shampoos: Value Improvement & Lower Price Points Toothpaste: Value Corrections & SKU rationalization Investments behind brands Innovations Quality Higher A&P Corrective actions in processed foods
Actions
Processed Foods
Corrective actions Phased stock reduction Withdrawl of 03 innovation Defocus of Atta in unviable geographies Sales decline of 26% arising from above actions Market shares held / improved
Value Shares Jams Ketchup Salt MQ ' 04 78.8 29 15.4 JQ ' 04 78.7 27.8 15.2 SQ ' 04 79.5 29.9 16.1 DQ ' 04 78.4 30.3 15.7
Restructuring completed, category portfolio focused for growth

Deutsche Banks Namaste India Conference, Mumbai 22nd February , 2005
14
Current Performance
HPC- Growth
5.9 4.8 2.7 3.4
4.9
-0.5 JQ'04
SQ'04 Sales Growth% Volume Growth
DQ'04
Current Performance
Fabric Wash
Actions taken
Volume Growth% 9.2
4.7 5.9 8.2
Price reduction Additional investment

in quality
MQ'04
JQ'04
SQ'04
DQ'04
Value Growth%
2.9 MQ'04 -0.9 -4.8 JQ'04 SQ'04
8.8
Higher A & P spends Brand repositioning
DQ'04
15
Current Performance
Fabric Wash
Actions taken
Volume Shares
26.4 24.9 25.3 25.5
Price reduction Additional investment

in quality
MQ'04
JQ'04
SQ'04
DQ'04
Value Shares
37.6 38.0 37.7 37.9
Higher A & P spends Brand repositioning
MQ'04
JQ'04
SQ'04
DQ'04
Current Performance
Shampoo
Actions taken
Volume 42.5 Growth%
42.9 28.8
Price reduction - bottles Value Improvement - Sachets Innovations Sunsilk Clinic Plus CAC
1.6 MQ'04 JQ'04 SQ'04 DQ'04
Volume Shares
51.7 48.9 49.4 51.6
Higher A & P spends
MQ'04
JQ'04
SQ'04
DQ'04
16
2004 - Financial Highlights
Continuing sales flat HPC
Foods
HPC grows 6% in Volumes; growth across categories Pricing actions lead to 2% value growth Value growth momentum picking up Volume market shares gains in Laundry and Shampoo Strong growth in BrookeBond, Lipton and Instant Coffee BrookeBond, Decline by 7% impacted largely due to planned
discontinuation; stock reduction and one- offs one-offs
2004 - Financial Highlights
Operating Profits (PBIT) declines 29%

Competitive strategy in Laundry & Hair Additional A&P spends in HPC Higher foods losses
17
2005 - Scenario
High input cost escalation particularly in chemicals & packaging
materials impacting laundry most
Aggressive cost savings and judicious price increases to partly offset
cost pressures
High brand building investments will continue Deutsche Banks Namaste India Conference, Mumbai 22nd February , 2005
Key agenda will continue to be Topline Growth
18
Contents
Driving the growth agenda Delivering Consumer Value
Brand Relevance
Superior Quality
Strategic Pricing
Ten Point Program to provide fuel Deutsche Banks Namaste India Conference, Mumbai 22nd February , 2005
19
Strategic Pricing
Rs 5 &2 Rs 10 Rs 2
Rs 4
Rs 5 Rs 5 Rs 10 Rs 20 Rs 40
Rs 5
Rs.5
Rs 25
Rs 2, Rs 4.50
Rs 5
Rs 5 Rs.1.50 Rs.1 Rs.5 Rs 0.50
Increasing Accessibility : Lower price points Driving Affordability : Strategic Price Reductions
Technology Focus
India is a base for
1 out of 4 Unilever Global Research Centers
5 Global Innovation Centers >100 Scientists
20
Winning the customer & channel focus
Customer focussed sales organisation Diamond model Developing new channels Rural marketing Direct selling Out of home Service centers
Concern approach to modern trade and rural distribution Category specific approach to general trade
Developing new channels

Rural Marketing - Project Shakti
Challenges in Rural Markets Accessibility
Viability Media Dark
Rural selling through SHGs

Benefits Improving product reach Facilitating Brand-Communication Extended into 12 major states Over 50,000 villages covered - Touching 70 mn rural lives Plans to cover 1,00,000 villages - Touching 100 mn rural lives.
21
Developing new channels

Direct Selling
Product Range
Lever home range Male grooming Oral Care Ayurveda Personal Wash Foods
Reach - 1400 towns (Largest in India) Consultant base - 330,000
In Summary
Big Opportunity to grow Penetration & Consumption
Strong brands : Rationalization completed Delivering Consumer Value
Brand relevance; Strategic Pricing; Quality
Innovation / Activation - supported by new organisation New sales organisation
Strong Capabilities of HLL
Powerful Brands; Robust Business Capabilities; Management Talent
22


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Deutsche Banks Namaste India Conference

Mumbai, 22nd Feb 2005

Deutsche Banks Namaste India Conference, Mumbai

22nd February , 2005

Deutsche Banks Namaste India Conference, Mumbai

22nd February , 2005

Deutsche Banks Namaste India Conference, Mumbai

22nd February , 2005

HLL - Indias Largest FMCG Company

Deutsche Banks Namaste India Conference, Mumbai

22nd February , 2005

* Figures based on FY2004 Audited Results ++ Market Capitalization as on 17th Feb05

Deutsche Banks Namaste India Conference, Mumbai

22nd February , 2005

HLL - Indias Largest FMCG Company

Trailing 4 Quarters Sales Index : HLLs Sales = 100

Deutsche Banks Namaste India Conference, Mumbai

22nd February , 2005

Leadership across categories

Fabric Wash Personal Wash Dishwash

Skin Hair Wash Talcum Powder Packet Tea Jams

Toothpaste Instant Coffee Ketchups

Source : A.C Neilsen - ORG Marg FY04 Value shares

Deutsche Banks Namaste India Conference, Mumbai

22nd February , 2005

HLL Shareholding Pattern

Domestic FIs 14.8% FIIs 13.7%

HLL Equity Capital - 50 Mn $ Market Capitalisation - 7,300 Mn $

Deutsche Banks Namaste India Conference, Mumbai

22nd February , 2005

Deutsche Banks Namaste India Conference, Mumbai

22nd February , 2005

Concerns Oil Prices Inflation Fiscal Deficit Agricultural Growth

Deutsche Banks Namaste India Conference, Mumbai

The India Opportunity

More than 1 Billion Consumers

Penetration Per Capita Consumption

Deutsche Banks Namaste India Conference, Mumbai

22nd February , 2005

Opportunity to Drive Penetration

Toothpaste Skin Hair Wash Talcum Powder Dishwash Ketchup

Source : Indian Readership Survey 2002

Deutsche Banks Namaste India Conference, Mumbai

22nd February , 2005

Opportunity to grow consumption

Deutsche Banks Namaste India Conference, Mumbai

22nd February , 2005

Nos Indicate Mn Households

Very Rich Consuming 46 Class

Deutsche Banks Namaste India Conference, Mumbai

22nd February , 2005

Deutsche Banks Namaste India Conference, Mumbai

22nd February , 2005

HLL : Three Pronged Strategy

Improve profitability of Foods

Secure future of Non - Core businesses

'02 '00 '01 -1.1

'00 HPC F&B 7.6 1.9

'01 3.0 4.6

'02 0.3 -6.9

'03 -1.3 -7.8

Source : AC Nielsen ORG Marg Retail Audit