Unilever is among the leading global players in the Fast-moving consumer goods market where the use of plastic packaging remains high.
In Kenya, the multi-national has cemented its position in the production key products in nutrition, hygiene and personal care, enjoying a combined 43 per cent market share in the FMCG segment.
The Nairobi factory serves mainly the East African market- Kenya, Uganda, Tanzania, Burundi, but also reaches the southern African markets, West Africa and exports to the US.
The Star Spoke to Unilever Kenya managing director Luck Ochieng on the company's localisation and sustainability strategies.
Tell us about the localisation strategy and why go that way.
We have had a good balance of what we source outside and locally. However, when Covid happened, it created a massive disruption in the global supply chain and I think it helped to highlight the need for businesses to try and minimise that dependence on the global supply chain. In alignment with our sustainable goals, we want to have a positive impact where we operate. We have seen an opportunity for us to increase the inputs being sourced locally. It is a journey we have adopted and so far we have seen good progress since 2019 when we were doing about 23 per cent. We have an ambition to drive the amount of inputs we source locally from the current about 50 per cent to 75 per cent.
What are you doing to achieve your localisation agenda?
We have a target of spending over 40 million euros, about Sh6.6 billion by the year 2025 on local suppliers, where we are also building their capacity to be able to meet our standards and demand. We also have a supplier development programme, right now we are working with SMEs where we identify them and support them to develope their business capabilities. We are also keen on diversifying for example we have set aside a portion of business for the underrepresented thus women, people who are differently abled as well as the youth. We are intentional about offering them these opportunities with up to Sh1 billion set aside.
Challenges?
We are a high-volume consumer of raw materials for manufacturing and packaging and sometimes the capacity is not available locally. We also have very high and stringent standards and some of the local suppliers struggle to meet that, hence the reason that we have continued to source some supplies from other markets. We are however building partnerships and capacity to ensure we increase local content to the targets we have set.
Unilever was recently accused of abusing buyer power. What exactly happened and how are you making sure you remain on good terms with your suppliers?
Yes, we did have an issue with some customers who felt that the payment terms were not flexible enough for their needs. It is something we were able to sit down with them and address. Before somebody becomes a supplier or vendor to us, we get into an agreement. During Covid, some suppliers got into a bit of stress but we were able to flex enough and be able to adapt to the changes that they needed to be able to support them. This included helping them access financial support where we acted as the guarantor.
What makes Unilever the best employer as voted severally?
As a business we have three beliefs; companies that have a purpose do last. Brands that have a purpose get to grow and people that have a purpose get to thrive. We invest a significant amount of our resources in developing our people’s capability to be able to do their jobs and giving them exposure globally. We pay well, and give our people opportunities to grow career-wise, so we take good people of our people. During Covid, for instance, we guaranteed our people their jobs and salaries for one year with whatever that would have happened.
How did you survive Covid as a business?
Covid was a tough one. With the global supply chain disruption and lockdowns, to diminished incomes of our consumers. All these had a huge impact. The first thing we did was make sure our people were safe so a lot of input went into providing support to our employees. We made several shifts including increasing what we source locally. We made adjustments to our huge portfolio, where we shifted to serve the needs at that time, for example, hygine products were in greater demand and we were able to turn around and deliver these products and slowed down on some other products. Having a big portfolio did help us a lot.
How do you compare the East African countries in terms of doing business and market at large?
Historically, Kenya has been the centre of East Africa from a commercial perspective. It remains a strategic place to invest with a strong economy. Over 50 per cent of what we produce goes into the Kenyan market with the rest exported. We have however seen a shift where the Kenyan economy is struggling while others are thriving and we are feeling that heat as well. The cost of doing business, fuel and electricity, the tax regime has become a bit hostile compared with other countries, inflation and other factors. The cost of production in Kenya is becoming a bit of a challenge. Consumer buying patterns have also shifted to cheaper products. Business in Uganda is growing by over 20 per cent, it is also growing in Tanzania and Rwanda so Kenya as of now is not in a good place. However, we believe the Kenyan people are resilient and we remain bullish about the Kenyan market.
The Kenyan market has continued to be impacted by counterfeits, is it a problem on your end?
Counterfeits are not a big problem for us. The bigger problem is parallel trade, where we have people importing genuine products at cheaper costs compared to our local production costs, which makes their products sell at lower prices. We also have people who evade taxes for instance diverting products meant for other markets.
What are you doing to address the plastic menace?
Data suggests between 0.5 to 1.3 million tonnes of plastic is produced in Kenya annually. Our packaging material that has plastic annually is about 1,600 tonnes. We are leading a journey in driving the recycling agenda. We helped set up Mr. Green Africa, a Nairobi-based recycling company that sells pre-processed recycling materials with a traceable social and environmental impact - fairly traded plastic. We remain keen on helping address the plastic issue by embracing a fully circular model which includes re-using recycled plastic. We have taken off about 100,000 kilogrammes of plastic out of circulation but we agree there is a lot more that can be done. We want to use less plastic and better plastic including doing away with plastic material in some of our products. We are piloting dispensers where one can buy products, for instance, washing powder, using their packages.
What is your take on Extended Producer Responsibility
We think while with good intentions, the way the regulations are designed is not necessarily going to deliver results. We need to work together in addressing these challenges.