How ITC reinvented itself to “a company that also makes cigarettes”

Aricle first published in +Mint Click here to read


Over a decade ago, one of the doyens of Indian business journalism had written an article, “Tale of two companies”, comparing two packaged consumer goods makers — Hindustan Lever Ltd (still not Hindustan Unilever Ltd (HUL) then) and ITC Ltd. Since then much soap and detergent have been washed down the Hooghly and Arabian Sea — as indeed millions of puffs have been blown through human chimneys. While HUL has regained its old act by re-engineering itself, ITC has got its new act together by reinventing itself.

Till the early 1990s, the punch line of all Hindustan Lever chairmen used to be “we are an Indian company whose largest shareholder happens to be a multinational”. ITC, on the other hand, used to be less apologetic about its BAT Plc. parentage. Following the eminently forgettable K.L. Chugh era, when Y.C. Deveshwar mounted the saddle, in a corporate coup of sorts with the backing of institutional shareholders, he decisively cut off the umbilical chord and embarked on a mission to establish ITC’s Indian credentials with a vengeance.

At the same time, with liberalization of the Indian economy, the new generation chairmen of Lever over time shed their trademark khadi silk bush-shirts in favour of bespoke suits when traversing the power corridors of Delhi. However, this piece is not about comparing the two companies but trace the evolution of ITC as an Indian consumer products giant.

It is easy to surmise why Ajit Haksar — the last of the corporate Mohicans — ventured into hotels. It was partly to hedge against the possibility of curbs on the tobacco business and also as a safe haven for the surplus funds of the mother business that could be easily encashed anytime by selling the brand or the real estate. It is to Haksar and ITC’s credit that they nurtured Welcomgroup for a long time before it became truly profitable. Printing and packaging (where Deveshwar first cut his teeth) and paper boards were but logical vertical integration.

Similarly, one would believe the lifestyle and apparel business was started to secure the Wills franchise. But the real serious diversification was kicked off with ITC’s plunge into the foods business — which arose both out of necessity and opportunity. Subsequently, it naturally extended to pure consumer products play.

The story of ITC’s transformation is one of turning a proverbial threat into an opportunity. As the time-worn cliché goes — cigarettes is a “dying” industry in more senses than one. With the intervention of World Health Organization and a judiciary increasingly sensitive to the hazards of tobacco consumption, the tobacco industry has had to brace itself for a premature sunset like its consumers (smokers).

Simultaneously, there was a need to divert public attention from corporate governance and health (tobacco) to being a socially-responsible organization. This, one would suspect, was the genesis of a “we also make cigarettes” strategy.

The ban on cigarette advertising came as a blessing in disguise as it left ITC flush with cash. Not having a majority foreign shareholding allowed it to enter the food sector — then reserved for domestic players (except those such as Nestle SA, GlaxoSmithKline PLC and a few others — who enjoyed the benefits of a “grandfather” clause). Food was largely an open field with no organized pan-India player barring Britannia Industries Ltd. From biscuits, atta, ready-to-cook or heat meals, it has seamlessly moved to instant noodles, juices and now, one hears, coffee is in the pipeline.

For a cigarette manufacturer with low technology and little product innovation except in packaging perhaps, ITC’s most remarkable achievement was in learning the ropes of an entirely different supply chain and gaining mastery of a new product category, not just in terms of marketing but product development and innovation. Equally challenging was building a network which — contrary to popular belief — had little in common with the cigarette retail channel.

The evolution into personal care was even more interesting because here it had to contend with a giant like Unilever with an 80-year legacy in India, international brands and world-class research and development. Making soaps, body-wash and shampoo brands is as different as paneer is from talcum powder. Globally, too, it is rare for companies to be equally successful in both food and packaged consumer products. Neither Unilever nor Procter & Gamble Co. can really be considered to have handled both businesses with the same level of success while traditional food makers like Nestle and General Foods Corp. have by and large stuck to their knitting.

However, ITC’s real success lies in achieving this transformation with existing, home-grown talent with very little (or practically no) lateral hires at senior levels. ITC remains one of the few large companies that still believes in providing long-term careers to its employees. It is a key differentiator in a fast-changing corporate world where “turnover” and “velocity” are the current flavours of human resources management. Changing the corporate DNA and culture is no mean task. If an organization has to reinvent itself so have to its leaders. This is where Deveshwar scores above many of our present day corporate icons. Arguably, he had an extended stay at the top. But Deveshwar leaves behind a new ITC for the next generation.

In contrast, the much-hyped “Project Millennium” of Lever — riding on which many careers were made — lost steam. Among close to a dozen business ideas incubated — just about one (water, that too in a modified form) has survived the genetic implant.

It was generous of Deveshwar to praise Amul and Patanjali in his speech.The jury on the latter is still out. But, what it does underscore is the rapidly shrinking ramp-up time. What took Unilever 60 years to achieve, Amul did in 40 and ITC in 20. Now, Patanjali has managed to scale up in less than five.
A fascinating battle lies ahead between the global giants and the emerging “swadeshi” challengers.

In the age of Social Media companies cannot be ham-handed in handling employee exits

Much before ‘happy exits’ had become fashionable in the corporate world, HUL had learnt the trick to keep its ex’s happy and involved.

Article first published in @hrkatha.com Click here

The catch line of Hindustan Lever (I am advisedly making a distinction with the new Hindustan Unilever or HUL– old Leverites would understand why) at campus recruitments used to be “We don’t have jobs to offer, only careers”. 

The joke within the company was “HLL is a company you worked not for the salary but to die for or retire”. Salaries in those days were a pittance when compared to foreign banks and even other MNCs – the alternative destination for young MBAs. But, HLL’s superannuation benefits were the best in industry. And, in the odd unfortunate instance, when some manager passed away in harness, the company went the extra-mile to look after the bereaved family.

Just like modern marriages – professional bonds had to necessarily become flexible and open ended with changing times. So, from the 90s onwards – it was no longer “till retirement or ‘death do us part’”.

First exodus from Levers happened when Pepsi Co entered India. One lady headhunter who had earned the sobriquet of ‘man-eater’ – made not just a fortune but also her career out of those prized catches. Still such was the level of corporate chauvinism at HLL – those who quit were seen as prodigal sons of the family, who were lured by lucre.

Cynical bosses quipped disparagingly – “it is not Lehar Pepsi but Lever Pepsi”.  Similarly, Whirlpool India was snidely called Leverpool.

This was also the time there was a change of guard at the top at Levers. Correlation was automatically drawn between the new leadership and the unrest below. A business fortnightly was quick to pick up the story with a cover on ‘Lever Leavers’. Some of the people interviewed were understandably not kind to the company. They cribbed about the slow velocity of professional growth – still stuck on the old formula of people moving in ‘batches’. However, significantly what this media coverage brought home was the need for ‘happy parting’ – just as it is fashionable to say in relationships nowadays ‘Divorce – and remain friends forever’.

Cynical bosses quipped disparagingly – “it is not Lehar Pepsi but Lever Pepsi”. Similarly, Whirlpool India was snidely called Leverpool.

Till that time, in most staid old corporates official ‘farewells’ were reserved only for retiring employees or those who moved on transfers. Resignation was viewed almost as an act of treachery. It was deemed politically incorrect to have ‘send-off’ parties for those leaving the company. Sometimes, a few close co-workers would go out for a ‘parting drink’. Not any longer. Companies now sponsor farewells for employees who quit – celebrating their next ‘big-break’ - even when they are joining competition.

Organisations have realised – every separation need not be bitter. In fact – most separations these days are like divorce by mutual consent. With organisations shrinking, becoming flatter and the pyramid narrowing more sharply at the top – attrition is no longer a bad word, even in the old brick and mortar companies. Firms now have to willingly let go people, while many more – reading the writing on the wall – move on before it is too late.

In the Indian context this is a transitional phase – as companies move from a paternalistic culture to an adult-to-adult relationship mode. For those who have grown up in a benign environment – this sudden shift in gear to an emotion neutral pace can be unsettling. Separation blues are, therefore, natural. Withdrawal symptoms set in easily. Mature organisations have learnt to deal with the process intelligently and, if one may add, caringly.

The potential of damage by a disgruntled ex-employee is immense. Some old-style management and HR practitioners with an industrial relations mindset underestimate the risks of being trapped in the old belief that no individual can take on the might of a giant organisation.

Not every unhappy former executive will take a company to court. But, in an age of social media ‘knowledge workers’ are as empowered as consumers. Besides, there are innumerable ways a hurt or jilted ex-employee can get even with his former employers – even while remaining below the radar, so to speak.

In ‘marketing’ they say, for every consumer complaint – there are a hundred dissatisfied customers who are too lazy to speak up. But, today one tweet or Facebook post can cause an avalanche of protests and many companies have learnt at a cost. In the case of people – one resignation of a star executive can create a wave of exodus. Word gets around in no time. Bitter partings leave behind a stink that also affects remaining employees – who wait their turn for similar step-fatherly treatment.

Growing companies can scantly afford such bad PR is this day and age of ‘war for talent’. Employer Brand – once destroyed – take years to rebuild. Therefore, smart HR leaders realise – taking old analogy of camels in an Arab’s tent – if you must let a camel go, better leave the creature happy and ‘toilet trained’.

The old HLL had the practice of calling its former directors to share the annual performance of the company, to keep them posted of latest developments and seek their counsel. It was routine practice for directors travelling to other cities – to call retired managers and ex-colleagues for drinks and dinner.

One of the first imperatives in working out separation packages – is not to count the small change and be gracious (if not generous) to a fault. Bureaucratic delays – are a major cause of disenchantment. Some organisations – turn cold towards employees no sooner they put in the papers, putting them on a merry-go-round ride of archaic policies and procedures. Unless someone is being fired on disciplinary ground or integrity issues it is advisable to make him/her feel like a member of the family setting out into the larger world and wish them luck. It is always a good feeling – if the employee walks out with a cheque in hand and smile on the face.

Exit interviews count a lot and should not be an exercise of going through the motions. Lot of angst can be dissipated over an empathetic chat – not just one to tick the boxes.

One has seen bosses – who dodge EIs fearing a spill out of their dirty secrets. Good learning organisations treat this as an opportunity to gather genuine feedback – that employees may otherwise be shy of sharing when on the rolls. A dinner or a drink with boss’ boss or the CEO in case of senior executives – followed by a token personalised gift of appreciation – works wonders.

But, progressive corporates don’t stop at that. They make a conscious effort to stay connected with former colleagues creating an alumni association of sorts. Annual get-togethers and invitation to special occasions like new facilities inaugurations and major product launches – help maintain an active positive relationship. Social Media has made this much easier with WhatsApp Groups and Facebook pages creating a fraternity of former colleagues. Very often the HR community subtly inspire these initiatives.

Much before all this became fashionable – even in the pre Internet days – the old HLL had the practice of calling its former directors to share the annual performance of the company, to keep them posted of latest developments and seek their counsel. It was routine practice for directors travelling to other cities – to call retired managers and ex-colleagues for drinks and dinner. These gestures went a long way to keep the fraternal links alive.

Have seen organisations whose former employees turn into their biggest critics. If current incumbents go to seek business from any of them – they are most likely to be disappointed. A good test would be wangling an invite to their homes and see which brands they use now. One can be almost certain they are not of their old company – such is the level of subliminal animosity.

At the other extreme – there are more than a 100 ex-Lever’s managers holding CXO positions across industries. They are, perhaps, the best brand ambassadors of the company – who keep it still at the top of the charts at campuses despite many new flavours – banks, IT, dotcoms, PE firm, International consultancy firms and now start-ups – coming and going each season.


That’s what differentiates an institution from a company.

The Yin and Yang of Anushka Sharma's Lips

[PK becomes Bollywood’s biggest grosser ever]

Let me start with a few confessions.  I have not seen PK nor have any intention of watching it. I hold nothing against those who went for it and loved it. I am happy for Raju Hirani and Aamir Khan that the movie has been the highest grosser. I can only feel  sorry  for those who tried to get it banned or withdrawn from the theatres  but didn’t succeed. And, finally I agree with Anushka Sharma that what she has done with her lips is entirely her business and she is fine as long as Virat Kohli doesn’t have a problem. Others are free to like or dislike her new look.

In fact, this last line pretty much sums up my position on all works of art – whether it’s a book, painting, sculpture, theatre or movie. Take them for what it’s worth – feel free to like, dislike or reject but don’t decide on behalf of others. If it is trash – the public themselves will reject it, which would be the biggest snub to the one who has written or made it. A bad product sinks without a trace and  giving it undue attention can only bestow it with an added lease of life (E.g.– by talking too much  about Anushka’s  missing pout – it can actually turn to be a fashion trend like size zero. Just saying.)

The debate in my judgment lies elsewhere. The dichotomy between faith and rationalism has been in built into every society and religion from time immemorial – just as the conflict between the head and the heart in human nature. This is at times manifest in religious texts itself. While the Gita and Upanishads in Hinduism are largely intellectual – the Ramayana relies more on mythical allegories. (Though sometimes  people can try to invent  pseudo scientific explanations to myths such as plastic surgery to an elephant God or IVF or test-tube conception for a virgin).  These are the 2 sides of the same coin – the Yin and the Yang as it were. I always cite the example of perhaps the greatest legal luminary India produced – who was at once a devotee of Sri Aurobindo (who was as cerebral as one can get) and a miracle spewing saffron-clad hair-raising Godman of Andhra Pradesh. And, you have the example of Vivekananda himself – who was pure brain and his own Guru – Ramakrishna an embodiment of Bhakti and mysticism.

Belief in miracles or the power of penance,  pilgrimage and rituals has been there from the inception of mankind. It, perhaps, stems from man’s realization of his own limitations and the existence of a larger power in the universe – beyond his control – against whom he is but as helpless as an ant. It is to protect himself against such a  force or the elements does he seek the shelter of ‘religion’. Now to question,  whether these devices work – would be as self-defeating as arguing with a votary of homeopathy about the scientific improbability of such a therapy working. Call it ‘placebo’ effect if you will – but it may have its utility. Again to quote Sri Ramakrishna  - “Vishwas-e Mila-e Vastu, tarkey bohu dur” (faith dissolves of things that arguments can’t resolve) or the bard “There are more things in heaven and earth, Horatio..”.

How religion has been exploited over the centuries for geo-political ambitions ends is not the subject of this discussion. As long as the human race exists there will always be a ‘spiritual bazaar’ – where brands and products will come and go. I daresay ‘sexcapades’ under  saintly garbs or cassocks of priesthood have also existed since ancient times – across religions and countries. But, it is the marketing and building huge commercial empires around them that is a relatively recent phenomenon and merits deeper inquiry.

It’s no mean task to manage multi-crore commercial empires (I had read somewhere, one Yoga Guru’s net worth is reportedly valued at Rs 14k crores). Having spent a better part of my working life in Consumer Products and Media industry  I know a thing or two about the challenges and complexity of running a business. Any executive of FMCG companies like HUL or ITC  will tell you  – managing the supply chain, sales, marketing of 100s of SKUs (stock keeping units) across a nationwide distribution network is no “sadhu’s” play. Similarly, operating a business model out of producing and selling audio-visual labels, publishing, web-retailing,  event management and marketing calls for a high level of expertise, core-competency and, above all, requires a commercial organization. The successful marketing of the Patanjali Ayurvedic range can give Himalaya Drugs or Dabur a serious  run for their money.  And, ask Ponytail Chaudhuri how difficult it is to create a chain of colleges and Preetha Reddy or Devi Shetty about  hospitals.. These businesses or institutions can’t be efficiently and effectively run by volunteers alone. Most of them have franchises both domestic and foreign which are source of substantial revenue streams which too have to be managed and the earnings judiciously invested to generate continuous returns to  fund future expansions – just as Chief of Treasury in a large corporation would do. Many banks, professional fund managers, financial advisors and brokers have large Ashrams as their key clients. And, no wonder some of them have to engage private armies to manage acres of prime real-estate.

Management of Religious Institutional Businesses can, therefore, be the subject of Business School case studies and, one day, may be offered as a course in Harvard or Stanford.  It is my thesis  many of these God-men and Gurus are fronts . Behind them are clever businessmen  who run a sophisticate operation. They first invest in creating a brand (perhaps, even engage marketing or image management consultants) and then exploit it as a pure commercial venture.

But, where does that leave the poor devotee or  ‘Bhakt’ ? That brings me back to another favourite quote of Sri Ramakrishna – “Jadio Amar Guru Shuri Baadi Jaye, tobu O amar guru Nityananda Roy” – roughly translated – even though my guru may visit a bar or a brothel, he will always remain my Guru.  In essence, once you have surrendered at the feet of the Guru -  by that act itself if you have moved one step up the spiritual ladder. And, that’s also the key both these Godmen use as also Amir Khan and Raju Hirani who make commercially successful movies out of them. One man’s faith is another man’s business – or put differently Anushka’s lips may be a turn you and me off – but as long as the movie is a box office hit – who cares ?

(Article first published in the @DailyO on January 5th, 2014)