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“Consumers may become wary of discretionary spends”: Sanjiv Mehta, HUL
In a detailed conversation with edutech startup upGrad, Sanjiv Mehta discusses a changing world in the face of the rapidly spreading Coronavirus.
It’s no secret that the way we work is going to change forever, thanks to the rapidly spreading Coronavirus. This was the main topic of discussion in a session hosted by upGrad, which featured a talk by Sanjiv Mehta, chairman and managing director, Hindustan Unilever Ltd (HUL). The talk followed a question-answer format with Mehta - who is also president, HUL, South Asia, and is a member of the Unilever Leadership Executive. One of upGrad’s founders - Ronnie Screwvala mentions, in an introductory note, that Unilever, when he was growing up, was a company that had mapped its consumers and their thinking in rural and urban areas, clearly. The only difference now, Screwvala said, was the depth of Unilever’s penetration into these markets. Mehta has been with Unilever for 26 years and, during the last 17 years, has led businesses in different parts of the world.
Here’s some edited takeaways from the conversation:
How bad is the impact of Coronavirus on the economy? Is there any chance for recovery? What’s the lasting structural impact of the crisis?
There is no single number that credibly captures, or foresees, what the impact of COVID-19 could be on the economy. Numbers from indices all over the world, including the BSE and NSE, might indicate that the world is on a path to recession. The risk of a recession is real, but let’s not take it as a forgone conclusion.
While financial markets are a good indicator of a recession, history shows us that bear markets don’t always lead to a recession. How India emerges from this crisis will be based on how well we can control its spread. The dependence is not very high on exports, so that helps. The risk is that the economy was weakening before the crisis and we could have comorbidity. The government has done a good job of locking down the economy.
What does the recovery path look like?
The degree of delay in demand, or loss of demand itself, is one of the factors that determines this path. We should not rule out the recovery of a market just because of pessimistic circumstances.
How does the impact manifest itself?
Well, there are three possible transmission channels.
1) It takes a knocking on the confidence. Household wealth starts to contract and the tendency is to start saving money – this impacts consumption.
2) When there’s a direct hit to consumer confidence because of the performance of the financial markets – that’s when consumer sentiment drops sharply. It could even make them wary of discretionary spends and more pessimistic in the long run.
3) The supply side. The 2008 financial crisis is very different from what’s happening today. At that time, if you took care of the big global and domestic financial institutions, you’d be able to start overcoming the crisis. Here, we have a problem on both demand and supply sides, and this could lead to severe financial problems. The gaps in the supply chain will eventually start turning into problems.
It’s important to remember that recessions are cyclical in nature and not structural, however, that boundary can be blurred. History also suggests that the global economy, post a pandemic, like COVID-19, can be different in a number of ways.
Crisis can spur the adoption of new technologies and business models. For example, the 2003 SARS outbreak is credited with the birth of online shopping.
What’s the future of WFH, jobs and careers?
We’ve worked from home at HUL in the past, but never at a scale when thousands of employees had to work remotely at the same time. While working remotely, we’ve also been doing our best to keep the supply chain of essentials running.
As we settle into new routines, it is making us question our constant need to travel. It is also making us understand new ways of keeping virtual teams engaged and, very importantly, accelerating the adoption of technology at work. Isn't this the new future of work? The transformation of work and organisations is being shaped by technology and talent. Faster computing power, connected devices, cloud blockchain, IPAs are redefining the man-machine interface.
Another game changer is the entry of the digital natives in the workplace. This is a generation which has grown up in a world that feels much flatter, due to the way that technology connects people. It allows for immediate responses and a whole new way of collaboration. The implication of this combination on jobs and careers is tremendous. McKinsey Global Institute estimates that 60-65 million jobs in our country could be created through a productivity search in the next few years. While at the same time, redeployment will be essential to help about 40-45 million workers whose jobs are likely to be displaced, or transformed, by technology.
What are some of the effective leadership traits that will help us get through this crisis?
Keep calm and relentlessly communicate with people. Make them comfortable and collaborate with your partners in the community. Some timeless skills include building and nurturing relationships with the customer. Creativity, at the point of purchase, will also be required. Not only are our jobs being transformed, but so is the way the work gets done.
Another tip is to focus on cash and liquidity. Cash is going to be the determinant of who survives and who doesn’t in this pandemic.
Do you see a role where artificial intelligence (machine learning) and creativity can come into play and change the function of a sales job?
We have put in massive investments into bringing technology into sales. If you take the stock at a grocer in two different places, it should be based on the kind of consumers and shoppers who live in the vicinity, their purchasing power, and behaviours. And today, machine learning and AI allows you to do that.
As a tool, we cover millions of stores, but I have a very clear vision that in another couple of years, each of the next million stores will have an assortment just made for their shoppers. That's where machine learning and AI comes in.
What are some of your lessons from working in sales over the years?
I worked in sales for three years - that is when I saw how a product gets converted to cash. That is where the rubber hits the road. That is where you know if there is a two rupee difference on a case, the stock will flow from Mumbai to Delhi. I would still urge everyone to work in sales, if they have an opportunity, because it helps you hone your leadership skills and helps a person understand the fundamentals of the business.
Can we use COVID-19 to give a fillip to healthcare?
Healthcare could become a big employer, and it could attract massive foreign exchange. This could really help the country tremendously... I'm betting on edutech, but healthcare is also an important cause.
There are estimates of 20 million job losses over the next six months, depressing as it may sound…
Right at the beginning of my chat, I said, we can't directly put our finger on the numbers. No one is in a position to accurately predict what is going to be the impact of covid-19. Most of the companies which are dependent on China for their supply chain are definitely not going to put all eggs in one basket... If India is able to survive this, our stature amongst nations will definitely go up.
Watch the full seminar below.