Multinational fast moving consumer goods marketer Unilever forecasts its emerging brands growth will outpace its dominant ones by up to three times as increasing wealth leads to higher consumption and changes in lifestyle.

Food enhancing brand Knorr, moisturizer Vasline and high end tea bag brand Lipton are expected to grow the fastest according to Asanga Ranasinghe, the marketing Director at the Anglo-Dutch multinational which markets 26 FMCG brands in Sri Lanka.

“We expect a good 20-30 percent revenue growth from the small brands because they are growing much faster in terms of a percentage growth than the big brands,” said Ranasinghe who is the topmost executive in charge of Unilever’s 26 brands which make up the nine types products it markets.

Unilever refers to its smaller brands as the ‘emerging stars’ in the Sri Lankan market.

“We don’t expect the small brands to be as big as the big brands very quickly but we want them to contribute to our growth journey,” says Ranasighe.

Some of them he says are already big stars in overseas markets.

“Knorr is internationally Unilever’s number one brand. In Sri Lanka it is a very small brand, a flavor enhancer; now it has gone in to soups and noodles. In Philippines Knorr is by far the number one brand,” he said.

Lipton, a high end tea brand marketed by Unilever, is facing tough competition in Sri Lanka where it estimates there are 400 other players.

“Branded tea is under threat form cheap unbranded tea. The challenge is to safeguard our dominance,” says Ranasinghe.

Because these brands require high investment their contribution to the firm’s bottom line is lower.

“Profit from the small brands is actually very small because you have to invest a lot more in to them to build equity, awareness, recognition and recall. However they are for the future of the company,” he adds.

Unilever’s business here is dominated by the washing powder brand Sunlight and Surf Excel, Lifebuoy soap, margarine brand Astra, tooth paste brand Signal, tea brand Ceylonta. These are called the ‘billionaire brands’.

“More than 50 percent of our business is still form two big brands; Sunlight and Lifebuoy. Together with Surf Excel, Signal, Ceylonta and Laojee they bring in two thirds of our business,” he says.

Outlook

Unilever brands dominate many aspects of daily life in Sri Lanka from the soap we use to the products used to clean our homes and the food we eat. The firm says its revenue has grown 200 percent from nine years ago.

Unilever Sri Lanka Chairman Amal Cabraal, says last year was the best in the company’s 75 year history in Sri Lanka.

“First, it’s a long term view. They may not necessarily give you the best return today but if you keep investments behind those brands and you have a good marketing mix behind it, the rewards will come,” explains Cabraal.

He says the firm is aggressively diversifying its product line to counter the limited market size here.

“In this limited market volume growth is a bit difficult if we stay in the same range of products because consumption reaches optimum levels,” says Cabraal.

Ranasighe says internal processes at the marketing giant were re-examined during the economic downturn and commodity price spike in 2008 to reduce costs, which enabled the firm to hold prices and retain consumers.

“Very big changes were done in the way we make our soap. Soaps are normally manufactured by reacting caustic soda with oil. We changed that process completely to what is called distilled fatty acids. So when palm oil prices went up drastically in the world market we were able to hold the price of Sunlight soaps for a long time,” explained Ranasinghe.

“We have moved out of high cost boiler systems to bio mass boilers which is very good for the environment too,’ he added.

Unilever is also building a 40 million dollar new production facility outside the capital which where goods will start to be produced form year end. Once complete all the firms production lines will be relocated to the facility.

However Ranasinghe says now that the economy is reviving his biggest challenge is to maintain the dominant positions it has achieved in a market where completion is severe.

“For the big brands with big market shares the challenge is to retain and still grow. Safeguarding our leadership position is my biggest challenge.”

Packaging

Ninety five percent of the products marketed by Unilever in Sri Lanka are manufactured and packed locally.

“Packaging cost can go up to 20-30 percent of your product cost and sometimes even 50 percent of your product cost depending on the product type,” said Ranasinghe.

“Packaging raw materials are not locally available. Although we have a good packaging industry that can be benchmarked to anywhere in the world all our converters have to import paper, plastic and web and when you import obviously there are lots of cost,” he adds.

Sunlight is Unilever’s flagship brand. Packaging material for the 125 year old brand is imported from India at low duty. But the value addition process which consumes costly elements such as electricity increases product cost up to 30 percent.

Competitors such as Hemas imports finished products in the same category such as Diva from India at low duty and markets to Sri Lanka at lower prices.

He says it is challenging to work in a low tariff structured environment where both finished goods and raw materials are imported at the same price or at zero duty.

Ransinghe says packaging costs are highest in the categories of washing powder, tea and personal care products like shampoo.

“Toothpaste cannot be packed in a plastic bag. It has to be packed in a tube with a shoulder and nozzle which is very expensive. Surf Excel which has enzymes has to be packed in a particular type of material. And tea will lose its aroma and flavor unless you have triple layer packaging. Those are very expensive,” he explains.

“Packaging has tremendous scope as an industry for the country so that we can add more value inside the country than importing value added products,” he pointed out.