Sunil D'Souza On Cola Wars, Kiranas & The FMCG Playbook | Qunba

You can't go and tell people I'm not sure. You've got to make a decision and then believe your gut instinct and move on with it. The reason you are here is you add value. The day you stop adding value, you're history. I would rather have 10 ordinary people than have one superstar. Business is not about one person; it's about creating a team that is lasting and can deliver in the long term. The minute the superstar is gone, it could fall apart. The day you arrive, you're history because it's a treadmill; you've got to keep going. Every day when I get up and go to work, it's like today you've got to add something to the business. Walk into a restaurant, sit down and ask for a Coke, and the person says there's no Coke, there's Pepsi. So it is availability that makes all the difference.

It's not that I decided the technical line was not for me. Right out of college, engineering was the thing. I joined Siemens medical electronics, and it was primarily service and a little bit of sales. But as I did my day job, over a period of time I figured that all this is fine, but if you really want to run a business, then only engineering is not good enough. You need to understand the P&L, supply chain, all that stuff. That's when I realized I need to take a step back and go back to school, learn the basics of business, and that's how I ended up doing an MBA. I still love engineering. Like my wife says, if I'm at home, my favorite thing is tinkering around something. I still remember when I went back to my grandma's place, she would have a list of things saying this doesn't work, this doesn't work. Yes, so I still love engineering. It's just that you realized when you need to do business, you need to be knowing much more.

Yes. So I still love engineering. It's just that you realized when you need to do business, you need to be knowing much more.

So the big thing in HLL was not the first week. The first week was a very comfortable week. We joined at Golita, which is now of course they've sold it. All the senior leaders would come down to tell you about different parts of the HLL businesses. That was a big thing: these guys are spending time with management trainees on day one explaining the business. That was one big takeaway: senior leadership needs to get involved if you want to build a real strong pipeline. The basic thing is first get the basics right. So you've started at ground level in sales. I've actually sat on an auto cutting bills in Kanpur in the heat of summer, outlet to outlet. At the end of the day, some accounting would have gone wrong and I had to put money from my pocket because the numbers didn't add up. Or the ITC stint where you went and stayed in a village for four weeks, no electricity, no water, no toilets, no bathrooms. For someone who had never been north of Nagpur, going to rural India, figuring out what life was, learning about actual rural India. I think that connects you to the Indian consumer much more. The entire management training program where you do stints in marketing, sales, finance, operations, everything gives you a good overview of the business, which then sets you up for success in the future. The foundations are the most important thing there.

Yeah, so today's generation is a bit impatient, wants to get on and rise up the career ladder faster. So that's a challenge. But the management training program that we've structured in Tata Consumer, for example, very clearly you start in sales. If you're a sales and marketing trainee, you start in sales. You will do two years. We do have attrition because of that, because a lot of them go through the training program and then leave, but I would live with that attrition because the net result of what you get is far, far better. So instead of the four years that Unilever those days used to have the sales stint, we've crunched it to two, but that two years is critical. Because if you don't understand actually what happens at the moment of truth when a consumer is picking up your product, the execution, sales distribution, then later on in life when you're making big decisions, you're second-guessing how it will actually work. You don't have the ground reality.

One is obviously the pulse of the market. Second is the consumer connect. And the third is that there is a middleman called the retailer who is sitting between you and the consumer. So unless you know how to deal with that, you're history.

Three and a half.

Yes and no. I mean, fleetingly you would think, am I making the right decision? And they always say you're always lonely at the top. So bottling plant, you're the head. You can't go and tell people that I'm not sure. This was in Surat. You can't go and tell people I'm not sure. You've got to make a decision and then believe your gut instinct and move on with it. So at times, yes, am I taking the right decision? But here's the thing: I have this philosophy that doing something is better than doing nothing. So you just got to move on. Did have those doubts, but after some time you start rolling and all the doubts disappear.

Yes.

No. So it was Ahmedabad, Surat, and then my last thing was Mumbai, running what is now I think the Bhiwandi factory. It was the Gold Spot factory then. Coke had just taken over all the bottlers including the Parle plant in Mumbai, and I moved here to run the Mumbai business. Then for whatever reason, I decided to move on and I get this call from Pepsi. My first instinctive reaction was no, I can't be working for Pepsi. You can't have worked for Coke and then work against those guys. But it was Pepsi Hong Kong calling up for Vietnam. So I went up and first looked up on the map as to where is Vietnam. One thing led to another, landed up in Hanoi. Actually landed up for an interview in Hong Kong, they said cancel your return ticket, go to Ho Chi Minh City, meet the team. Ho Chi Minh City the guys said okay fine, but go to Hanoi and have a look at the place, don't come back and say you made a mistake.

It was. So the equation was 8% distribution, 5% share, 20 people, and half a million dollars of bad debt. That was the equation. But my calculation was it can't go worse than worse. So that's how I landed up in Vietnam.

Correct. So this is Wun War Vun Bhun said very clearly: Sunil, the only reason you are here is you add value. The day you stop adding value, you're history. Because expats normally, those days expats were much more common, and when you landed up, people expected you to be superman. If you're not superman, then the local team will never respect you, so why are you here? So yeah, every day and that continues till now. Every day when I get up and go to work, it's like today you've got to add something to the business.

Yeah, I think for me the big learning was when I went for the interview in Vietnam. From Hong Kong to Ho Chi Minh City and met Wun. When I landed up in his office, I said the person, and this was the year 2000, Vietnam had just come out of the embargo. It is not the Vietnam that people see today. They were quite constrained in their development till that point. There were no foreigners or expats big time. My question to him was: listen, when I landed at the airport, this guy was standing with a sign, I understand, but after that I couldn't make any conversation because I couldn't read any street signs, it's all written in Vietnamese, Roman language but couldn't make out anything. I still remember I was asked for lunch, what sort of cuisine, so I said I eat anything, so he said Chinese is okay. I said yes okay, till I landed up, oh this Chinese is not the Chinese that I thought it was. I said so how do you survive in this place? And Wun's answer was: you know Sunil, I'm a Punjabi, and my last posting was Chennai. They eat rice there, not rotis, they wear lungis, not kurta pajamas. I couldn't read the sign boards, I couldn't converse in Tamil. So what's different? I think that was my big aha moment: the big thing in India is because of the diversity, you adapt very quickly, whether it's the south, north, etc. So adaptability to the local culture was the big aha moment. My biggest learning in Vietnam was: when you operate in India, it might be different languages, geographies, but broadly Indians are Indians. Whereas when you land up in a foreign country, you're not only dealing with business variables, you're dealing with cultural variables. So you begin to multitask on a different level as an expat. I think that was my big takeout.

I think fundamentally, you've got to be competent. Because if you don't have competency, no matter which culture, people will not respect you. That's number one. Second, you've got to respect people. You got to understand their culture. You got to understand that you're a foreigner who will come to adapt, not that the rest of the team adapts to you. And then I keep using this dialogue: you've got to find a few good men and point their noses in the right direction, because you will have competent people in any culture. It's all about setting a vision, setting a plan, and then getting it rolling, respecting the team and taking them along.

So Vietnam was as when I landed up in Vietnam again, it was Wun Berry there and he called me employee number three: driver, secretary, and Sunil. Because Pepsi had cut out their entire franchise office, seconded all the marketing folks to the bottling team, and that was me and Wun. I think fundamentally, in a resource-constrained environment, the only thing you can bring to bear is differentiation. Figure out how to differentiate. So innovation was critical. One of the things we figured out was we probably had a 20 share, or 14-15 share actually. We realized we couldn't go up against and compete in colas because Coke was so big. So we pivoted and moved the entire business to non-carbonated. So we launched Sting, we launched Tropicana juice in bottles, we launched Lipton tea in bottles, Gatorade. Those days there were very specific specifications for Gatorade, including that you had to have a 38mm cap because you needed to chug the sports drink. We convinced the global system to put it in a glass bottle and a returnable glass bottle, which had never been done anywhere in the world. Regular Pepsi we put in a 25% sweetener blend because we needed to take cost out, and the easiest way to take cost out is take out sugar. So once you're resource-constrained, it forces you to look at different things to innovate. I think that's what we did in the Philippines.

The big thing about the cola wars for the common consumer is most of the cola wars are in advertising, when everyone is taking pot shots at each other. But the real cola wars are not fought on television or on the screen. The real cola wars are fought on the street. Because it's an impulse product. If you walk into a store, walk into a restaurant, sit down and ask for a Coke and the person says there's no Coke, there's Pepsi, most consumers are indifferent. So it is availability that makes all the difference. Therefore the big learning is execution and availability is key. It's cold product, merchandise well at the point of sale. Whoever does that better will win the game.

I'm not sure how this will pan out because the typical Reliance playbook is enter industries with high capex, suck the oxygen out, a few casualties will happen, and then come back to power because there is inertia to move out. Here, number one, this is not a high capex scenario. Number two, the competitors on the other side are Coke and Pepsi, not local players. Number three, food and beverage, especially soft drinks, is not a decision that is few and far between; the decision is taken every day. So this whole game is going to come out differently. How it will play out, I'm not very sure, but it is not going to be what you've seen in other industries.

I think both of them. In HLL, getting the basics right from day one was key. The competency of the people you worked with or who you worked for was key. But PepsiCo, again execution being key. PepsiCo, at least Asia that time, was a very entrepreneurial mindset. So you made decisions in the region. You made decisions on business models depending on what works. We were faster off the blocks on non-carbonated beverages, saying colas is not the only game in town. People and competency. Someone said a few years back, once upon a time there was G which turned out best globally, now it is PepsiCo. If you look around the names who've moved through PepsiCo and then gone to head different businesses, there's a whole lot of them. So working with people like that, you learn a lot.

I'm passionate about running a business, handling a P&L, and I was not very sure the role that I was moving into next in PepsiCo would give me that. So Whirlpool came, started talking. The big critical thing was not about refrigerators; it's still a consumer business, consumer durables. But the critical thing was that it was a listed company in India. It was a great brand when I grew up. They still had a very decent position in the market and a listed company. The one thing I had not done in my whole career was running a listed company. Someone had told me a career is about gathering different experiences, not about moving up the chain. As long as you gather different experiences, ultimately they will all come together to propel you. This listed company thing excited me. And again, a Western multinational, good ethics, professionalism, good systems. I said let's give it a try.

Your report card is public in a listed company. In any other business, you don't have to tell your story publicly. In a listed company, you have to convince people that what you're saying will work. Your whole communication and narrative becomes different. Especially now, people will question you, analysts, investors, and you've got to answer them. Whereas in PepsiCo, I had to answer my bosses, that's about it. It was not the general public at large who fire any and every question at you. The other thing is, running a P&L in any other business is different, but ultimately there is someone else running the balance sheet, making the big decisions. In a public listed company, the buck stops with you. Whether it is cash flow, dividends, capex, everything decision you've got to make, and you've got to convince the board and the shareholders.

Yes and no. Actually, there's not too much of a difference in the way you recruit people, because ultimately even in PepsiCo I was running a business, but it's still a listed company. The big thing in a listed company is, I think this is again the Whirlpool CEO I remember said it: you earn the right to define your long-term, provided you're delivering the short term. In a listed company, that balance comes into play because you got to deliver every quarter. If you deliver every quarter, then board, shareholders, investors get the confidence saying this guy can deliver, and therefore let us give him leeway on what he wants to do in the long term. I think you learn that in a listed company very well.

I think the big thing was, I was speaking to Suresh Narayan once. Suresh incidentally was my first branch manager. We were discussing this same thing. The thing is, in any other consumer business, you got to change consumer habits, especially if it's food and beverage, so it's a long drawn stuff. You've got to create a great product, advertise it well, get sampling, trialing done, distribute it well, and only then the product takes off. The big thing in consumer durables is it's a one-zero game. What you do today will determine tomorrow. You don't have to wait for three or four months. If you come out with a new compressor and start talking about how that compressor is different, then the next day your sales start chugging. There is no building habits and that kind of stuff. So you bring in one big consumer important differentiator in your product. For example, we put a heater into semi-automatic machines. No one else had it till then. The aha moment was that in the dead of winter, especially in North India, women when they're washing clothes don't want to put their hands into the cold water. So just putting that heater, saying you'll feel comfortable doing this, all of a sudden sales numbers change dramatically. Or you create a specific price point, capacity for either a washer or a refrigerator, next day it's selling off the shop floor. So the big aha moment was you need to figure out the consumer differentiation, and if you implement it right, you get results instantly. The other big thing in durables is you're making a decision on launching a new product. It requires capex, and it is at least two to three years implementation. So the call you're taking today better be right. You've got to be sure where the consumer is trending, where the products are trending, because you're going to write $5 million capex which is going to pay you back three years later. But unless you do that, you're going to be left behind. So there's no option but to do that. But when you do that, your future thinking ability has to be fine-tuned.

Yes and no. But over a period of time, you realize ultimately businesses are not about one person. Businesses will carry on. When I quit Coke, I thought oh no, Bombay we built Bombay, and you know, there's going to be no business. It moved on. So there was a temporary blip, expected reaction, but then the stock came back. Because all great businesses are businesses, it's not that one or two persons. The institution is obviously larger than any one individual.

So actually, when Atul from Egon Zehnder called me, I was in San Francisco spending the weekend with my daughter. It was a Saturday morning when the call happened. My first instinctive reaction was I don't think this is a very agile, fast-moving company which is going places. So my instinctive reaction was no, why would I want to do that? And Shashank from Egon Zehnder said this is precisely the reason why they're looking out, because they want to change it. Chandra wants to change the whole direction of the company. And ultimately, the Tata name matters in India. It's trust, ethics, doing the right thing. So that was how I said okay, let me go through the motion. So I met the NRC and then met Chandra. The one thing about Chandra is he's a fantastic salesperson. So my initial reaction was what do you want to do? He said I want to build the premier FMCG in the country. The Tata name has every right to succeed in the consumer space. And where we are is not where we should be. We need to change that. His point: the big thing about the Tata group is you get all the resources, the right ethics, the right culture, and therefore attracting good talent is not an issue. So when Chandra says okay, I want to build the premier FMCG, let's do it together, I said why not?

The good part was in the three months I was serving my notice period at Whirlpool, I had started interacting with people. On weekends, mostly Saturday and Sunday, I would spend time with the team. So I had been down to Bangalore, done market visits in Delhi. So I was familiar with the people, I had names to faces. I had also met Chandra a couple of times. I still remember telling him once, I thought this was a bandage operation, this is not, it's going to be surgery. He said yeah, so what? So including, I said we'll have to make a lot of changes. He said so what? Including, I said we'll probably need to change the system and change a lot of people. He said yeah. That was a big thing for me, because in my mind it would be difficult to change systems, lay off people, especially with the Tata name on the door, because that's not the typical DNA. But Chandra was very clear: we can do all that, there's just a Tata way of doing things. You treat people with respect, you have honest conversations, you make sure financially they're set up. But if we need to change, we need to change. So I had walked into this assignment with confidence saying I have his backing to start making changes. That was a good part. Video calls actually is good and bad. We overhauled the entire distribution system during COVID. The good part was people couldn't come storming into your office or shout or scream. It is at the other side of a screen. You can do all that you want, but there is an off button when you don't want to listen to them. So that was the advantage. We overhauled the system during COVID and that was easy. The difficult part was you couldn't be in the market, you couldn't meet people, therefore you couldn't understand what was actually happening on the ground level. But net net, I think we came out of it quite well.

Actually not. I had always heard about the ethics, professionalism. The one thing which did surprise me sort of is the Tatas were not known to be fast-moving, ambitious, aggressive businesses. But now you can see the group overall across different businesses, I think that has come to the fore. But what I have not been surprised about is the ethics, the professionalism, the quality, competency of the people. I think that is a big expectation of what I had.

So this was an example: the Capital Foods acquisition. It was December of 2023 when Goldman Sachs, who was running the process, said we want to make a presentation to Chandra and you. So I said why do you need the chairman in the room? He said because all the global guys are getting their senior decision makers to come down. I said here I'm going to call Balaji, who sits on my board. Both of us are going to listen to you, and if you're convinced, it's a five-minute walk to Bombay House to convince the chairman. So you don't need him to be in this. But if we are convinced, we'll get his approval to go ahead. As simple as that. So in the Tata consumer world, in most multinationals there is this dirty word called alignment. I don't have to align anyone. I have to just make sure the chairman and the board are on board. There's no layers and layers of marketing, legal, all that to convince. If you're convinced about the business, just get all of them together. The other big thing is in most multinationals, they don't want to make a decision, so you make presentation after presentation. Here I don't have to do that. It's either a yes or a no, there is no in between.

I wouldn't say haven't figured out, but what happens in most multinationals is bureaucracy steps in. To win in the Indian market, you got to be agile, you got to innovate and be agile and change very quickly. Multinationals are loath to do that because there's so much bureaucracy, so the resistance to change is huge. That's one. Second, the thing which multinationals, some of them have got it, but many of them haven't: India is not a price market, India is a value market. The Indian consumer will pay for the price-value equation. It's not the lowest price product. If companies understand that, then you're in a sweet spot.

So I think there Indian leaders can learn a lot about global ambition and scale. But the transcript ends here, so I'll stop.