Unilever in Vietnam: The “Perfect Village” Initiative

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This case was written by Jasjit Singh, Associate Professor of Strategy at INSEAD and Helen Duce, INSEAD EMBA 2013. It is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation.

The authors would like to thank Unilever executives for their partnership in making this case possible and INSEAD Emerging Market Institute for providing financial support.

Additional material about INSEAD case studies (e.g., videos, spreadsheets, links) can be accessed at cases.insead.edu.

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In October 2015, Alex von Behr, Unilever’s Chief Customer Officer, was busy at his desk in Singapore – finishing up some work before heading for the airport to catch a flight for the quarterly meeting of Unilever’s global leadership team.1 He had just finished a call with senior managers from Unilever Vietnam, where they had updated him on the latest status on their “Perfect Village” initiative. In addition to Nguyen Thi Bich Van, Vice President (VP) of Customer Development for Vietnam, the call had also included Tran Tue Tri, VP of Marketing and Tran Vu Hoai, VP of Communications and Sustainable Business.

The Perfect Village approach was launched in Vietnam in October 2013 under the leadership of J.V. Raman, who had been the General Manager of Unilever in Vietnam until his recent move to Russia (in September 2015). For Unilever, this represented a new way of going to market, as it extended traditional marketing and sales activities to also include active engagement and investment in economic development-related activities for the local communities. Alex was pleased to note that, in just two years, the model had already showed signs of delivering impressive sales growth as well as having a significant social impact.

With extensive managerial experience in senior roles in marketing and sales in other multi-national companies, Alex had joined Unilever six years ago. Shortly thereafter, Unilever had launched the “Unilever Sustainable Living Plan” (USLP) as a bold commitment to finding new, more sustainable ways to do business. Alex was a strong supporter of USLP, and firmly believed that - properly integrated into strategy – the sustainable business approach also provided an opportunity to drive business growth, build trust and reduce costs and risks.

It was in this context that Unilever had launched Perfect Village as a new business model for rural markets. The model held the promise of bringing together Unilever’s expertise in three areas – marketing, sales and social and environmental sustainability – in an integrated fashion for these traditionally difficult-to-reach markets. While the management teams in some countries had doubts about suitability of the model for their context, Vietnam had enthusiastically agreed to be an early pilot (soon after India).

Now, looking at the results from Vietnam, it was difficult not to get excited. Alex knew it was early days, and the current scale small by Unilever standards. Still, as the model had worked out well so far in the initial villages it had been launched in, what was there to stop it from being just as successful at scale? Could this become the next big growth platform for Unilever not just in Vietnam but also other emerging markets? As he gathered his papers and readied to leave for the airport, Alex wondered whether it was time to put bigger investments behind the approach and how to facilitate adoption of possibly localized version of this across markets.

Unilever’s Worldwide Business and Sustainable Living Plan2

Unilever was an Anglo-Dutch multinational and a leading supplier of “fast moving consumer goods” (FMCG). Its portfolio included more than 400 brands, including some of the world’s leading brands with annual sales approaching or above Euro 1 billion: Dove, Rexona, Lux, Axe and Sunsilk in Personal Care; Knorr, Hellman’s, Flora and Rama in Foods; Lipton,

1 In Unilever, “Customer Development” was the term used to describe the sales function and “Chief Customer Officer” referred to the global leader of this function.

2 This section draws significantly from www.unilever.com.

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Magnum and Heartbrand in Refreshments; and Omo and Surf in Home Care. Its 2014 turnover was Euro 48 billion (Exhibit 1), 37% in Personal Care, 25% in Foods, 19% in Refreshments and 19% in Home Care. Emerging markets accounted for 57% of all business.

With strong local roots in more than 190 countries, Unilever had about 173,000 employees globally. Its employees were particularly proud of the company’s historical commitment to social responsibility that went as far back as 1890 to the days of the company’s founding father Lord W.H. Lever – who had sought to improve the lives of ordinary people, and also championed for better welfare, shorter working days and improved social conditions.

Unilever had stayed true to its roots of integrating societal considerations into everyday business. Former Chief Operating Officer (COO) Harish Manwani explained in a 2013 TED talk, “I don't know how many of you know that two million children don't reach the age of five every year, because of illnesses that can be prevented by a simple act of washing their hands with soap. With Lifebuoy, we are now running the largest children’s school hand-washing program in the world. Across Unilever, we now have programs on hygiene and health that touch about half a billion people. It's not just about selling soup and soap, there is a larger purpose out there. And brands indeed can be at the forefront of social change.”3

Unilever’s commitment to integrating sustainability and growth agenda had been further strengthened since 2009, when Paul Polman took over as CEO. Soon after taking over, Polman had done away with earnings guidance and quarterly reporting - stating that a focus on short-term performance gets in the way of achieving sustainable results. This radical move had garnered a lot of media attention, particularly when he went as far as saying, “We tell hedge funds and short-term speculators: You don’t belong in this company. The sheer fact that you buy a few shares doesn’t give you the right to mess up our strategy.”4

In 2010, Polman had introduced the “Unilever Sustainable Living Plan” (USLP), a blueprint for building a more sustainable business. The plan was based on a careful review of future mega trends impacting the business. Among these was the recognition that by 2020 there would be another billion people on the planet. While this represented significant growth opportunities for Unilever’s brands, it also meant putting more pressure on already-constrained natural resources and social systems. Polman explained, “We thought about some of the megatrends in the world, like the shift east in terms of population growth and the growing demand for the world’s resources. And we said, ‘Why don’t we develop a business model aimed at contributing to the society and the environment instead of taking from them”’

USLP’s stated vision was to “make sustainable living common place”. It aimed to double the size of Unilever’s business, and at the same time reduce its environmental footprint and meet ambitious social impact goals by 2020. It spanned Unilever’s entire portfolio of brands and impacted all countries, with 72 specific targets clustered under three key themes with nine broad commitments under them (Exhibit 2). Each of the nine commitments was supported by clear metrics, with a process for continuous monitoring and public reporting on progress. J.V. Raman shared the rationale for this approach, “USLP brought the various parts of the business together. This whole concept of bringing purpose into business was a very powerful motivator and a great tool for energizing and rallying people across the company globally.”

3 www.ted.com/talks/harish_manwani_profit_s_not_always_the_point 4 “The HBR Interview: Captain Planet” Harvard Business Review. June 2012.

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Unilever’s efforts seemed to have paid off, with strong financial performance as well as significant headway against the USLP targets. In fact, USLP had established Unilever as a role model for sustainability. In September 2015 it was awarded number one within its industry group in the 2015 Dow Jones Sustainability Index, the 14th year it had achieved that since 2000. In the same month, Polman won the UN’s highest environmental accolade – “Champion of the Earth” Award – for leading the business world towards a new model of sustainable growth. Unilever’s leadership was also being recognized by leading sustainability experts, such as it being an undisputed number one in Globescan’s 2015 global rankings.

As Unilever’s Chief Customer Officer, Alex von Behr had formulated a comprehensive go-to-market strategy to embed USLP’s sustainability goals into the way that his team conducted business. For him, the USLP approach presented a particularly promising opportunity in serving low-income populations in emerging economies (often referred to as the “base of the pyramid” or BOP). He believed that, both for achieving sustained impact and growing the business in this segment, it was critical to build viable business models with the same level of rigor and analysis that was expected for other (higher income) segments.

Unilever had a long history of employing decentralized management structures and allowing its subsidiaries flexibility in adapting to local conditions. As a result, Unilever had a lead over its global competitors in terms of coming up with solutions addressing the unique needs of emerging markets, which had helped it build market leadership (Exhibit 3). In addition to investing in localizing its own business and building a strong workforce, Unilever invested significantly in recruiting and training small retailers as a part of its sales network. This sometimes went as far as providing them with extended credit, business training and even equipment (like bicycles). Unilever’s distribution network already reached millions of small-scale retailers, giving it a competitive edge particularly in serving rural markets.

Unilever did not have to start from scratch in integrating sustainability goals with BOP strategy, as many such initiatives already existed. The most visible was “Project Shakti”, which Unilever’s Indian subsidiary had been running since 2000. The initiative, targeting relatively small and remote villages, relied on locally recruiting women as micro-entrepreneurs and training them on basics of accounting, inventory management and selling. These women then helped create demand for categories like soap and toothpaste, and then sell the corresponding Unilever products door-to-door. Unilever thus empowered these women and enhanced livelihoods, while also profitably bringing its products to the hardest-to-reach consumers. As of 2015, the Shakti network was comprised of 70,000 micro-entrepreneurs, giving Unilever access to four million rural households in 165,000 villages.5 Unilever had also in recent years rolled out similar schemes in Bangladesh, Sri Lanka and Vietnam.

Unilever in Vietnam

Vietnam was one of the largest and fastest growing countries in South East Asia. With a population of over 90 million, its economy has grown by over 70% in the last 5 years due to

5 http://www.hul.co.in/sustainable-living-2015/casestudies/Project-Shakti.aspx

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rising exports and significant foreign direct investment. While GDP per capita was still relatively low at $2,000, the overall domestic market was large and growing rapidly.6

Compared to other emerging economies where Unilever had typically existed for close to a century, Vietnam was still a relatively new place for it to do business. Since it started operations in 1995, Unilever Vietnam had achieved double-digit annual growth and now employed more than 1,600 people. It was already #1 in 95% of the categories it competed in and had revenues about three times that of its global rival P&G, the lead being even bigger in rural areas. While the Vietnam revenues were still small by Unilever standards, there was clear headroom for significant growth as the country continued to develop. As a result, Unilever had set ambitious targets for Vietnam as a part of its global strategy (Exhibit 4).

Unilever saw a key growth market as rural Vietnam. This was comprised of approximately 9,000 communes (local communities or villages), accounting for about 68% of the country’s population. Western-style “modern trade” was small in Vietnam, present only in major cities. Practically all of the rural business was conducted through distributors managing retail relationships for selling products to the end consumers. About 37% of Unilever’s Vietnam turnover came from rural areas, amounting to Euro 219 million in revenues and Euro 98 million in gross profits as of 2014.

While still behind urban areas in terms of income levels, rural areas had seen rapid income growth in recent years. Given the difficulty of penetrating these markets, the competitive intensity was also lower than that in cities. Nguyen Thi Bich Van, Unilever’s VP of Customer Development, explained how Unilever had been a first mover: “Winning in rural has been on the agenda for Unilever almost from day one. We’ve been focusing a lot in terms of how to build our products in rural households.” Noting the rural potential, she added, “The economic development in rural will help unleash growth. When we look at per capita consumption across our categories, rural consumption is still between half to two-thirds of the urban level.”

Addressing the rural opportunity was not without challenge. As the smaller towns and villages were typically spread out over large geographic areas with weak infrastructure links, it was hard to build economically viable business models. At the same time, as rural incomes were on average half of urban dwellers, consumers did not have as much disposal income to spend on FMCG products. Further, about 70% of the income was seasonal, being dependent primarily on traditional means of livelihood (like farming and fishing). Education levels were also relatively low, with only 12% of the adults completing college.7

The biggest challenge, however, was that most product categories Unilever operated in were nascent and underdeveloped in rural areas. Therefore, driving rural growth was not just about building sales distribution or market share but also first creating demand for these categories. Even basics like soap and toothpaste often needed to be built from the ground up in order to increase awareness regarding these products as well as their use. This became even more challenging where infrastructure was underdeveloped. For example, there was little point in educating people to wash hands or brush teeth if they did not have access to clean water.

6 http://country.eiu.com/vietnam 7 http://www.nielsen.com/apac/en/insights/reports/2014/demystifying-rural-vietnam.html

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Through years of trying to build a rural business, Unilever had come to realize that rural challenges were closely intertwined with the community’s broader economic development priorities. Tran Tue Tri, VP of Marketing commented: “In the past we looked at a one-time marketing investment, and it never worked. We learnt that we need to start with people. In the rural areas, people don’t have a proper toilet to use and don’t have good education. So we need to start with these bigger needs.”

Defying conventional wisdom, Unilever’s rural profit margins in Vietnam were comparable to those in urban areas despite rural incomes being lower and there also being unique sources of cost. The management attributed this to rural sales generally involving smaller package sizes (with bigger margins), traditional distribution channels (with less price pressure than large retailers) and a smaller range of fast-moving products (enabling economies of scale).

Recognizing that it needed to take a more integrated approach in developing rural areas as markets, Unilever often worked in partnership with local NGOs and communities to ensure they understood the particular needs of these individuals and the socio-economic context in which they lived and worked. Managers also invested significant time in building a close relationship with the government, which had in recent years launched a number of initiatives and resolutions towards a decentralized development policy based on local participation. In this approach, infrastructure-related funding for rural areas would continue to come from the government, but have to be complemented by resources mobilized locally in the form of voluntary contributions from communities and business investments.

Tran Vu Hoai, VP of Communications and Sustainable Business, explained Unilever’s approach of engaging the government and communities: “It was not about writing a cheque but using the company’s strengths to help address the country’s needs. We identified three core areas where we could really contribute to Vietnam’s progress: child development, health and hygiene, and women’s empowerment. We chose these three areas because they are priorities not just for Unilever, but also the three top priorities for Vietnam. The government was our main stakeholder - we developed long term strategic partnerships with them.”

With an existing foundation already in place, Unilever Vietnam was well-placed to adopt USLP goals when the programme was first announced. A natural opportunity to formally align Unilever’s USLP agenda with the government’s goals came up when Vietnam announced a national framework for rural development. The framework was based on 19 “New Rural Development” (NRD) criteria for improving living standards in rural communities (Exhibit 5). Van reflected “When the government introduced the new rural program, we got so excited because their objectives were the same as ours - to improve the lives for rural people… But we knew we needed a new model. How do we find a repeatable model for us to scale up with the ambition of the new rural program of the government?”

The “Perfect Village” Initiative

Experience from Project Shakti in India and similar initiatives elsewhere provided a natural launching pad for Unilever to come up with a more comprehensive rural strategy. The first extension was to broaden the scope of the distributor and retailer support Unilever provided. The second was to coordinate these more closely with market development, as low penetration rates would otherwise limit the potential of distribution and retail. The third was

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to combine the go-to-market approach with broader USLP goals. Developed first in India, the resulting “Perfect Village” (PV) model aimed to drive awareness, knowledge and adoption of product categories and Unilever products therein in hard-to-reach communities (Exhibit 6).

PV was unique in the way it integrated three key elements that in the past had been seen as largely independent activities: retailer support (through the “Perfect Store” programme), market creation (through “Market Development” investments), and sustainability (through USLP-related goals). With this approach, Unilever aimed to create an ecosystem in which sustainable living would be an integral part of the company’s go-to-market operations. As J.V. Raman explained, “By coordinating all Unilever activities in a community, our impact would be significantly larger and our business footprint bigger... To be sustainable, USLP could not be about CSR but had to be linked to the business and connected to our brands. This was a very important link that came about with the Perfect Village.”

Given Unilever’s decentralized organization, however, an initiative like PV could not be forced upon individual subsidiaries. Instead, templates and best practices had to be made available to the countries, who were then free to adopt and adapt as they saw best. Alex remarked “I was asked by our COO Harish Manwani to identify great ideas - in part from experiments conducted ‘on the ground’ – in order to build repeatable models that we would encourage countries to adopt. As he used to say, ‘Think global, act local.’”

After India, Vietnam was one of the first countries to adopt the PV framework in October 2013. Tri recalled, “I was sitting in a meeting when people shared the India example. We thought that we could do it even better because the Vietnam team had been doing community activities for many years anyway, and already had a strong program with the government in education and health”. PV had reached 150 villages by 2014 and 300 by 2015, with an ambition of scaling up to 500 villages by 2016 and 1,000 by 2020. J.V. Raman explained, “A lot of good ideas get killed if they do not have business viability. So my approach has been to think big but start small: first show business viability and then roll out fast.”

A key difference between PV implementation in India and Vietnam was the critical role of government partnership in Vietnam. J.V. Raman explained, “We were already running public-private partnerships, and had one of the closest relationships in the world with the government… The government was embarking on a development project called ‘New Rural’ for 2,000 villages and we had called out for rural to be a strategic intent for us, so it made sense to join hands together… In a country like Vietnam, if you have the blessings of the government, things obviously move faster and it opens the doors to make things happen.”

Starting with the 2,000 villages announced as a development priority by the government, Unilever identified villages with high long-term adoption potential for its products. The villages were selected on four criteria. First, they had to have a population of more than 1,000 people to ensure sufficient market size to justify the fixed costs, which translated into the villages in the PV programme having an average annual turnover of about Euro 53,000. Second, there had to be at least 20 stores in order to justify the cost of a Unilever sales representative servicing the village weekly and supporting the retailers. Third, the villages needed to have a school and a medical clinic already so that there was a platform to launch Unilever’s health and hygiene campaigns. Finally, there had to already be active engagement and support from the local authorities to facilitate implementation of Unilever’s PV agenda.

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Once a village had been selected, the PV approach involved Customer Development taking the lead to ensure local availability of its products, enrolling small local retailers in their “Perfect Store” programme. An Area Sales Manager and a local distributor was selected to build Unilever’s distribution reach and ensure appropriate execution of the “4Ps of Marketing” (Product, Pricing, Place and Promotion) in local outlets. The programme also helped nurture local entrepreneurs and teach small-scale distributors basic merchandising and business skills. Working with the local government, Unilever also sponsored women in opening small shops and supported store owners with preferential financing.

After solid distribution was achieved, Market Development followed up by “activating” the village with a range of programmes. These included product education sessions as well as health, beauty and hygiene workshops that helped accelerate the adoption and growth of Unilever’s product categories. Unilever promoters would actively engage the village, and train local brand influencers (such as beauty parlors and small retailers) on product function and usage. This would also often involve running product education and experience sessions.

Tying the sustainability agenda back to USLP goals, the third part of the PV model involved making broader USLP investments in the community. Some of these could have a direct business benefits in the form of creating demand for certain product categories. For example, sponsoring school camps explaining the benefits of brushing teeth twice rather than once a day increased demand for Unilever toothpaste (like PS) and demonstrating how hands washed with soap are more effective at killing germs than just using water increased the demand for Unilever’s soap (like Lifebuoy). However, USLP also involved making general investments in things like a hygienic wet market or a children’s playground, even though the link to business was less direct and had to involve a longer-term perspective.

The Vietnamese team focused on three main brands for initial PV rollouts: Lifebuoy soap, PS Toothpaste and Vim toilet cleaner. Villages were classified into three groups - “Bronze”, “Silver” and “Gold” - depending on the level of investment made and the extent of deployment (Exhibit 7). Van explained “A Bronze village starts with basic execution, building relationships with retailers and executing the ‘Perfect Store’. Once this is done, we can transition to Silver by putting in place market development activities, such as educational and awareness programs. Finally, if there is good support from local authorities and existing investment in schools and clinics, the village can transition to Gold with the addition of USLP activities, such as upgrading toilets, improving wet markets and building playgrounds.”

Making a “Business Case” for Perfect Village?

The essence of PV was to take the village as a unit of analysis in making a business case and evaluating financial performance. This meant that all costs incurred on a village were to be treated as business expenses, whether these were related to retail support (through Customer Development), market creation (through Market Development), or community development (through USLP). And these investments were expected to provide a financial return in the form of increased revenues and profits in the following years, though the time horizons allowed for payback were now longer than what had been the practice in the past.

All expenses – even those for community investment – came from “Brand Marketing Investment” (BMI) budgets. Unilever leadership consider this important in order to emphasize

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that the project was to be managed and executed with as much rigor as any other business, rather than treated as a separate “Corporate Social Responsibility” (CSR) initiative unrelated to business activities. Tri explained “We see this as an integrated and more effective way to engage rural markets. I tell the employees that this is their everyday work, not extra work. If they don’t do it the PV way, they would still have to find another way for rural activation”.

In the earliest pilots, PV start-up costs turned out to be high relative to benefits. The Vietnam team therefore carried out a careful cost-benefit analysis of all activities to make the model more viable. They found that market demand in many villages was smaller than expected, manifesting in the number of people turning up at the events also being smaller. The team therefore scaled back on things like promotional materials, demonstration aids, sound systems for events, etc. There was a sharp focus on cutting out things that looked fancy on paper but not effective in the field. Rather than carrying out the campaigns through its own employees or costly agencies, Unilever also started relying more on local individuals (such as school teachers) and organizations (such as women’s associations) to educate the communities. The team figured that, because the created value was to be shared, the costs could also be shared.

The openness of the Vietnam team to learn from the initial experiences and reengineer the model for financial viability achieved positive results. By 2015, the cost of rolling out a new PV had fallen to about one-thirds of the initial levels: the investment was down to about Euro 3,000 for a Bronze village and Euro 6,000 for a Gold village. About three-fourths of the investment difference between Bronze and Gold villages was related to USLP activities.

Results for PV also looked good in terms of growth. The current year Gold village sales growth (annualized) had been 32%, more than double of the 14% achieved in similar villages not in the PV programme. J.V. Raman remarked, “While it might be too optimistic to expect Gold PV growth to remain twice as much as for the average village in the longer run, the growth rate being a third larger is perfectly realistic.” There was also evidence that USLP-related investments had been particularly effective: Bronze villages – which executed the Perfect Store but had no USLP investments – had a much lower growth rate of 15%.

The PV approach also held significant promise for profitability. A crucial aspect of the “business case” for PV was that most of the brand marketing budget would be needed even in activating a conventional village. Hoai explained, “Profitability can be significant because PV doesn’t require that much incremental expense. One way to look at it is that we mostly prioritize our resources to make their use more effective.” So PV would be seen as generating a positive return on investment as long as the incremental benefits from employing the PV approach exceeded the incremental costs. The management team believed this could be ensured by selecting the most promising villages and also managing costs carefully.

The PV model had not been around for long enough to allow precise determination of performance based on historical data. Therefore, a particular challenge in establishing a business case was that the PV approach involved upfront investments with pay-offs that would only be realized in the longer term. It was also uncertain as to when and how much additional investment might be needed (for example, for refurbishing playgrounds or toilets). While bearing in mind that any costs and benefits estimates for PV were therefore sensitive to the assumptions made, Unilever managers did explore some financial projections expected for a typical village- and found these to support a clear business case for pursuing PV.

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Social impact of PV also appeared strong. Tri remarked “On PS toothpaste in the first round we did not get it right. So we worked on improving it, and in the second round we saw that 70% of people do remember to brush their teeth at night”. Convinced that lives have significantly been improved due to Unilever’s intervention through PV, she added, “When we teach the communities programs like handwashing or brushing teeth, I can feel we’re impacting their lives. At the same time that we help the community, we also see our business quickly improve as well. This is what keeps us all excited about the project.”

Going Forward?

While the early results certainly provided cause for celebration, Unilever management also recognized that challenges might lie ahead. PV was still new, with a 2015 spending that was just 1.5% of Unilever’s overall Euro 57 million brand marketing budget for rural Vietnam. There was a concern about how to maintain momentum within existing villages at the same time as scaling up to reach new villages, and how to ensure that there will continue to be equally strong synergy between government investments and Unilever’s PV spending.

Hoai noted, “The biggest challenge is how we scale up with the same level of efficiency and effectiveness. Doing 400 villages is already tough, doing 1,000 will be much harder. It will require a lot of coordination and monitoring.” Remarking on the learnings from the experience thus far, he added, “The biggest lesson has been about follow up and commitment. If we do a sanitation programme or a hygiene campaign for a school, we need to keep on investing so that things do not downgrade. That requires work, dedication and resources.”

Another potential risk was whether and by how much the cost per village might go up as the PV project was scaled up. Unilever might also face unexpected challenges on parameters that were still unknown, “Over the years, there will likely be diminishing returns. As we go to more villages, there will be fewer households, and they will be more difficult to access. How much will that affect the model? We do not know yet.” However, J.V. Raman’s view was that the model would remain viable as long as the above diminishing returns could be compensated for by increased revenues from rising rural income levels and further efficiency gains through learning, scale economies and sharing of costs through partnerships.

Overall, the management team was committed to resolving the challenges and excited about ensuring a successful scaling up. Van summed up the situation, “I know that the scale is still small, but I just have to remind myself that we have grown from nothing to the biggest FMCG company in Vietnam in 20 years. The passion of the organization is for this to be something big. After all, it delivers exactly what we believe is sustainable business – positive social impact through a growing, profitable business. We are just in the second year, and are still figuring out how to create a robust repeatable model. But I am confident we will get there.”

There was also the issue of competition. PV was getting a lot of publicity within Vietnam, so competitors might get induced into trying to set up similar programs. What mitigated this threat was the fact that Unilever was significantly ahead of its competitors in terms of scale as well as government relationships, making it harder for others to justify similar investments.

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The Global Perspective?

As Alex reviewed the PV numbers from Vietnam again, he could not help but think that the initiative was still just a blip relative to the scale at which Unilever normally did things. The number of villages the Vietnam team was targeting even for as far out as 2020 was only 1,000. If they really wanted this to be a key engine for growth and a platform for making a huge impact at a global scale, shouldn’t they be setting targets much more aggressively?

By aligning Unilever’s commercial goals with USLP-related targets, PV did on the whole seem like a “win-win”. Alex also recognized there were choices to be made at the level of individual villages. As a leader in the sustainability space, could Unilever really say no to launching PV in villages in dire need of development but with limited potential for Unilever’s business? And if Unilever did decide to be more open in choosing the villages, what would they do if profitability suffered and the shareholders complained?

More importantly, what could senior management do in helping PV scale beyond India and Vietnam? In its first iteration, PV had been rejected by countries like Indonesia and Thailand. Instead, they had chosen to continue focus on cities through a variant they called the ‘Perfect City’. Cities just seemed easier and more profitable at least in the short run, and the Customer Development function could still embed some of the USLP agenda into their go-to-market strategy (for example when going into slums). The learnings from PV might still be relevant, so Alex wondered whether it was okay to let this flexible ‘Perfect Communities’ (PC) blossom in ways each country saw fit. Or should he insist on PV-like rural agenda for all emerging markets with a significant rural BOP population in need of more development?

Beyond Asia, one continent where a lot more needed to be done was Africa. However, neither PV specifically nor PC more generally had worked there so far. The challenge was in figuring out a viable financial model, as Africa was a poorer continent - with more limited purchasing power and worse infrastructure. Unilever’s businesses in African countries were too small to pull off projects like PV at scale on their own. But Alex was convinced that the basic idea did make sense even for Africa. Perhaps the way forward there was to work through partnerships with not just governments but also NGOs and development agencies active on the ground?

Alex’s thoughts shifted to his specific agenda for the conference as he boarded the plane. How aggressively should he try to make a business case for other countries to adopt the model? Should it be PV or PC? Was there anything obvious he was missing that would prevent the model from having success beyond Vietnam? Maybe he could try establishing specific criteria for deciding which markets should execute PV or PC, but he wasn’t sure what these should be. But maybe it was too early for all of this. Maybe the key was to first ensure that the Vietnam model was definitely scalable and repeatable, and only then try to expand beyond Vietnam. He hoped the long flight would give him time to think this through and decide what his recommendations should be at the conference.

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Exhibit 1 Selected Financial Data for the UNILEVER Group

Source: Unilever Financial Statements (2014)

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Exhibit 2 Unilever Sustainable Living Plan (USLP)

Source: www.unilever.com

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Exhibit 3 Unilever’s Emerging Market Presence (2012)

Source: http://www.hul.co.in/Images/Winning-in-DandE_tcm114-354369.pdf

Exhibit 4 USLP Targets for Unilever in Vietnam

Source: Unilever

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Exhibit 5 Vietnam Government’s New Rural Development (NRD) Program

As per its Decision 491/QD-TTG on 16 April 2009, the Vietnamese Government established a national framework based on 19 specific “New Rural Development” (NRD) criteria for measuring progress towards rural development. In end-2014, as many as 785 (about 9%) of the 9,000 or so overall communes met all the NRD criteria, and another 1,285 (about 15%) met at least 15 of the 19 criteria. The approximate percentage of communes meeting each respective criterion was as follows:

[Planning criteria] 1. Planning (97%)

[Eco-Socio criteria]

2. Transportation (23%) 3. Irrigation (45%) 4. Electricity (76%) 5. School (31%) 6. Culture (18%) 7. Trading place and market (45%) 8. Post office (86%) 9. House (50%)

[Economic aspects]

10. Income (45%) 11. Poor rate (36%) 12. Labor (72%) 13. Production form (65%)

[Culture-Socio-Environment]

14. Education (61%) 15. Health (54%) 16. Culture (57%) 17. Environment (27%)

[Politic system]

18. Politic-Socio organization system (68%) 19. Social security (91%)

Source: http://ap.fftc.agnet.org/ap_db.php?id=407

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Exhibit 6 The Perfect Village Business Model

Source: Unilever

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Exhibit 7 Implementation of Perfect Village in Vietnam

Source: Unilever

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