Dec 2010 Financial News

Unilever's managing director Roxane de Freitas. Staying competitive a constant fight. Tough being a manufacturer

Dec 02, 2010

Being a competitive manufacturer in T&T is a struggle, says Unilever managing director Roxane de Freitas. There are many issues faced by manufacturers, according to de Freitas, including traffic, high wages, low productivity, reduced domestic demand because of the economic slowdown and changing weather patterns. In the past, a Unilever salesman could have made ten calls a day, now traffic restricts him to making only four calls. The labour cost of Unilever Caribbean in T&T is probably the highest among Unilever companies in the world. There are roughly 170 branches globally. The drought earlier this year actually forced consumers to buy less washing detergent as people were conserving water. Inflation has cut consumers’ buying power. These are some of the challenges that Unilever, as a manufacturer, faces in T&T, de Freitas said.

Constant fight
De Freitas joined Unilever in 1985 as brand manager, industrial foods and detergents. She subsequently worked at Smith-Kline Beecham and returned to Unilever in 2001 to assume the post of marketing manager. In 2007, she was appointed to the post of managing director, the first woman to do so, replacing Pablo Garrido. “Staying competitive in T&T is a constant fight.” She said labour costs, bringing goods on the ports. In many instances, the infrastructure do not allow for efficient business and these factors “make T&T inefficient.” “The labour cost for us is very high. As a company, our labour rates and the cost of production, compared to other Unilever branches across the world, we are the highest.” She said the utility costs in T&T are not as high when compared to other countries. “Our electricity cots compared to Barbados is not very high,” she said. She said there needs to be an increase in the productivity levels of the local workforce if the country’s manufacturers are to remain competitive. De Freitas estimates that the lowest paid employees of Unilever work for no less than $40 an hour. “I do not have a problem paying good wages, but I want to ensure we get good productivity in return.”

Improvements needed
On the inefficiency at the Port of Port-of-Spain, de Freitas said this has to improve. “There are port delays, the congestion, the clearing of goods. It’s really important for us as a manufacturer to see the ASYCUDA system running. This system would get my documents prepared, but now my customs department has to spend its time running around.” She said the traffic on the roads lead to a drop in productivity. “Traffic affects the salesmen. In the past, a salesman could have done ten calls a day, now he can only do four.” She also commented on the recent Doing Business report which placed T&T very low compared to other countries.

“That’s the reality in T&T. If only we could we would find ourselves in a more competitive environment where more multinationals and international companies want to come into T&T to do business.” She said that the industrial relations climate in T&T is very rocky. “All stakeholders including labour, business and the Government must come together to create a better environment. When international companies see the antagonistic relationships that labour and business have it does not encourage them to set up their manufacturing base. They have to realise that T&T is already at the bottom of the competitiveness scale.”

Slowdown in demand
According to de Freitas, Unilever’s nine-month report for 2010 showed a profit after tax of $34.5 million; a 26 per cent increase over the company’s income compared with the first nine months of 2009. “Our performance in the third quarter was affected by a significant slowdown in consumer demand and an increase in price competition. “While this was seen in all markets, the North Caribbean market was particularly slow, resulting in volume declines which affected our factory output and manufacturing costs,” according to the report.

For all of 2009, profit after tax for that year was $41.5 million. “In a challenging year we are pleased with our performance.” She said across the Caribbean there has been a drop in demand for products because of the economic slowdown but also attributes the demand reduction to lifestyles and climatic conditions. “Maintaining your market share in a competitive market is not easy. It’s a constant struggle. It’s like guerilla marketing.” She said there was a drop in consumer demand because of climatic conditions earlier this year. “We are seeing a change in the habits of consumers. They are using less and wasting less. We started 2010 with a 100-day drought. Consumers were asked to conserve water by the Government. So consumers started to waste less. They used less detergent powder.” After the drought, the rainy season and floods came which brought another effect.

“Now food prices are higher and the rate of inflation. Consumers are looking for more economical brands.” To counter this, she said, Unilever is offering different types of brands to accommodate different ranges of buying power. “We have a premier brand and a mid-tier brand positioned at different price points. If a consumer cannot afford the premier brand they then have the option of a more economical brand in the Unilever portfolio. I Can’t Believe it’s Not Butter is our premier spreading brand but if you want a cheaper brand we offer Flora or Blue Band,” she said. She believes that consumers are “trading down” in economically tough times. “If you have a consumer buying a cheaper brand then your sales fall but your volumes stay the same.” She described the competition in the market place as fierce. “In the Caribbean, there are a couple powder detergent plants we compete with. But competition is healthy so we are forced to ensure that we are upgrading our products.” She said what affects them is the imported products from the Far East. “Shipments of powdered detergents from places like Turkey and China are very competitive and I’m not sure how many of them meet our standards.”

A regional manufacturer
Unilever worldwide produces 400 brands like foodstuff, personal care brands like deodorants and home-care brands like detergents and soap washing powder. It employs 174,000 people worldwide. She explained that Unilever in Trinidad employs 342 people and is responsible for marketing and distribution of the parent company brands in the south Caribbean market. She said locally Unilever manufactures and is responsible for distribution. In addition, Unilever Caribbean covers other Caribbean territories which include Barbados, Guyana, the Eastern Caribbean States, Suriname and the Dutch islands.

Unilever then exports products like detergents and margarine products to the other Caribbean territories. “Fifty five per cent of our sales is for the local market and 45 per cent is exported to the other islands.” She stated that Unilever in Trinidad manufactures powders like Breeze, Radiante, Skip and Comfort and margarines like Blue band, Cookeen, Golden Ray, Flora and Sizzola. “In Trinidad, 70 per cent of what we sell we still manufacture here. The other 30 per cent come from personal product brands and teas from other international Unilever branches like Argentina, US and Dominican Republic.”

What lies ahead
Despite the hurdles she remains “very optimistic” about the future. “I do think the economy will experience growth in 2011.” Not wanting to reveal their specific marketing strategies for 2011, she said they intend to bring new products to the market but remains tight lipped as to what these will be. “We will continue to maintain an aggressive market share and our current portfolio. Last year we brought ice cream to T&T with Ben and Jerry’s. So I’m not going to reveal what we’re doing in 2011 just yet.” She said these products will be imported from international Unilever plants as Unilever Caribbean has no immediate plans to install new lines in Trinidad. “What we do want for this site in Trinidad is to have a world-class, efficient manufacturing site.” She also said their success, so far, has been based on team spirit among workers and management at the company. This, she said, will ensure their long-term success


Source:
Trinidad Guardian
Thursday December 2, 2010

http://guardian.co.tt/business/business-guardian/2010/12/02/staying-competitive-constant-fight-bg