UNILEVER THAI HOLDING LTD: The largest maker of consumer goods in Thailand sees the economic downturn as the right time to prepare for future increased demand.

Unilever, the consumer goods multinational, has been in Thailand so long many see it as a local company.

‘Thailand is extremely well placed to be a good base for serving Indochina. We have certain operation in Vietnam, and in the long run Vietnam would be a big enough market to start manufacturing there, but I think countries like Cambodia and Laos can be serviced from here’
RALPH KUGLER
chairman

The group established its first factory in Thailand in 1932 under the name Siam Industries to make and distribute Lux beauty soap, Sunlight laundry soap, margarine and edible fats.

But it had been selling products in Thailand much earlier. In 1908, by Royal appointment, Lever Brothers, the parent of Siam Industries, became the soap manufacturer for His Majesty King Rama V.

Siam Industries was renamed as Lever Brothers (Thailand) in 1954 and again as Unilever Thai Holding in 1997.

Although a foreign investor, the company has associated itself so well with the Thai culture that people think of it as locally owned. It takes this approach in all countries.

With more than 1,000 brands under its umbrella, consumers world-wide find its products in their trolleys. In Thailand products such as Breeze, Omo, Comfort, Lux, Dove, Sunlight, Vim, Lipton, Wall's, SunSilk, Organics, Clinic, Pond's, Vaseline, Close-Up, Aim and Pepsodent are household names.

With Asia accounting for 1 5 % of its total sales last year, Unilever acknowledges that the
regional recession has trimmed its earnings growth. Even so, the company reported half-year profits for 1998 of $1.456 billion.

As the largest manufacturer and distributor of consumer products in Thailand, Unilever is the market leader in eight categories: laundry, half-care, soap, household cleaning, deodorants, skin-care, ice cream and tea.

Ralph Kugler, chairman of Unilever Thai Holdings, said it was difficult to estimate the group's investment in Thailand, but it was certainly "here to stay" and was expanding its
production base to meet an anticipated lift in demand when the economy recovered.

"Unilever is committed to Thailand for the long term. We've been here for 66 years and we plan to be here in 66 years' time," he said.

The group confirmed its confidence in Thailand by spearheading a project to encourage foreign investment. In conjunction with the British Embassy and Britain's Department of Trade and Industry, it produced a video entitled United Kingdom: British Investment in Thailand.

Promoted in London, the video encourages British businesses to invest in Thailand by explaining the favourable long-term prospects.

At the launch, Mr Kugler gave a speech in which he praised economic reforms in Thailand and urged foreigners to capitalise on the current potential as Thailand would emerge strong from the recession.

"There is a window of opportunity today to capitalise on Thailand's future potential. I suggest Thailand may turn out to be the strongest 'tiger' of all," he said, referring to the "Asian Tiger" economies.

Mr Kugler plans a similar promotion in the Netherlands.

Unilever's operations in Thailand are divided into three categories: home care, personal care, and food and beverage. It also makes and distributes numerous products and chemicals for industrial use.

Unilever's innovation centres in Thailand develop hair-care and laundry products, as well as ice-cream, for Southeast Asia.

Among the products introduced by these centres are Breeze detergent in 1962, then Breeze colour detergent, Wall's Asian Delight ice-cream and Organics shampoo.

Currently, all of Unilever's factories are at Lat Krabang, but Mr Kugler is looking to expand these and move to sites outside Bangkok. Thailand used to supply products to neighbouring countries such as Laos and Cambodia and will do so again.

"Thailand is extremely well placed to be a good base for serving Indochina. We have certain operations in Vietnam, and in the long run Vietnain would be a big enough market to start manufacturing there, but I think countries like Cambodia and Laos can be serviced from here," Mr Kugler said.

Unilever is not immune to economic trends in each country in which it operates as it relies on domestic demand. "Our margins are definitely down," he said.

Therefore, the company is introducing what Mr Kugler calls "products that the market demands", in other words those at budget prices. Among the latest are Surf fabric detergent, fabric softener and dishwasher. These are priced 20% lower than rival brands. Lux beauty shower liquid is similarly positioned, along with some ice-creams.

Mr Kugler said cost-cutting was under way, but staff layoffs would be the last resort as employees were the biggest asset for the company and had been given intensive training.

Unilever has 2,800 employees in Thailand and frequently sends some to learn from its operations in other countries including Britain, the United States and Vietnam.

"By doing so we maintain our goal of being a multilocal-multinational, which means bringing in the best of our international expertise, but making sure that its absolutely right for Thai people,' he said.
The market for consumer products is said to be the most intense of any industry in Thailand. But Mr Kugler said that was not a worry as all companies were in the same boat.

"Consumer spending is down, so it's as tough for us as it is for our competitors. But in a recession, the whole aspect of competition disappears and all companies should join hands to try to revive the economy rather than cut each others' throat," he said.

One way of reducing costs is the introduction of the Efficient Consumer Response (ECR) system, which matches production with demand, cuts lead time and eliminates excess inventories.

Companies using ECR bring products to consumers faster and at lower costs. All consumer product makers in Thailand are introducing the system, a move that is estimated to save the industry 12 billion baht annually.

Another way to save money is Total Productive Maintenance (TPM) which reduces manufacturing costs and improves quality from raw material stage to delivery of the finished product.

Despite the recession, Thailand was contributing its fair share to the bottom-line revenue of the parent firm, Mr Kugler said. Thailand, India and China were the most important markets in the region.

Unilever Thai Holding Ltd
Major shareholders: Unilever
Main businesses: Manufacturing and marketing consumer goods

Worldwide
Headquarters: Britain and the Netherlands
Number of countries: 90
Number of employees: 270,000
1997 gross revenue: 29.76 billion
1997 net profit: 3.33 million