TBY talks to Ziya Domanic, Managing Director of Unilever Central Asia and Iran, on the country’s consumer habits and the need for more local competition in the FMCG market.
THE BUSINESS YEAR What are the highlights of Unilever’s experience in 2011, and how can this market be compared to the complexity of Unilever’s operations in the region?
ZIYA DOMANIC I cover Unilever’s operations from Kazakhstan to Cyprus, and Iran joined this group in 2007. This is a rather complicated geography and each country has its own difficulties. That is why we aim to truly understand how to operate in each country. We can be flexible as long as Unilever’s Code of Business Principles is strictly adhered to. Despite having a somewhat more complicated bureaucracy, we are very comfortable in Iran. It is a rewarding challenge to understand the country, the consumers, and how the market operates. I came here in 2007 and with my Sales Director I travelled throughout the country several times to better understand local consumers, their shopping habits, and the trade structure. This contributed significantly to our plans, which turned the business around to deliver profitable and sustainable growth since 2009.
Over the past six years, how has the Iranian market changed and what trends have you observed with respect to the goods you are introducing to the local market?
The Iranian consumer is very conscious of the price-quality relationship, and they are ready to pay more for higher quality goods. Something produced abroad cannot simply be sold at any price—you have to deliver the right quality consistently. Iran has a very experienced and competitive industry in consumer goods. I can quantify the improvement in quality and the marketing skills of local businesses over the past five years. The quality of packaging has also become world class compared to other Central Asian states. Iran has a long history of trade and industry, and competition is welcomed and even encouraged. I believe the presence of multinationals not only accelerates market growth, but also the development of the local competition.
How do you customize international brands and products to suit this unique market?
We separate our goods into two categories: foods and home and personal care. The need for the customization of products in the second category is minimal. The same toothpaste, shampoo, or deodorant can serve the needs of the people in Korea, Iran, or Kazakhstan. However, this is less valid in the case of foods. When we launched Knorr, we developed seven different kinds of soups only for the Iranian market after months of consumer research and development. They are totally different from the soups we offer in Turkey.
What strengths and weaknesses are you observing in the Iranian food industry?
I see strengths, especially in the ice-cream segment. There are excellent ice-cream products; three or four local companies produce delicious ice cream at unbelievably low prices, and we are thinking about partnerships or acquisitions with these companies. The food segment here is much more advanced than anywhere else in the region.
What are the strategies are you putting in place to handle the tough competition and meet consumer demand?
We haven’t perfected our strategy yet. We have a long way to go in terms of soups and bouillon, and it’s hard to compete with the local producers by importing because the margins aren’t huge. Partnership with local ice-cream producers could be one choice, but the market is fairly saturated and it would be a very costly battle. We aim to focus more on the home and personal care areas.
How will you improve the presence of your personal and home care products?
We are confident in the quality of all our products. I know it sounds cliché, but what we’ve been doing so far is proof of that. Unilever researches heavily and its products are well known; Iranians are aware of what’s happening outside the country. The brands are known and the product is good, and we discovered how to bring the product to the consumer. On a weekly basis, we support 28 distributors operating 65,000 outlets throughout Iran. For a product such as body deodorant, there are no local competitors and people are eager to try new and different things. For home detergents, it is different; it is very expensive to import the products and we are thinking about investing locally. However, we believe in the quality of our products, and we are heavily investing and looking at the long term. We use ads and television to promote our products in order to establish our brands; our support budget this year was €15 million. Unilever will continue to invest as much as is necessary to establish our brands; growth is our priority, while profitability comes later.
Which of your products is the most popular for the average Iranian consumer?
Oils, deodorants, and shampoos are widely popular. Product sales in these categories have been growing steadily by 50% for the last four years. I believe that Iranians appreciate the quality of these products.
What is your evaluation on the openness of the Iranian market with respect to international products and investors?
I believe that the market should be more open. My advice would be to let there be competition. In terms of products, our prices are three times more expensive than the local variant, but we offer higher quality. There must be room for local producers to increase quality as well. I don’t mind the exchange rate difference, but I am interested in investing more and increasing quality. I’m optimistic; I think that by the end of 2012 there will be more market activity.
This interview will be published in 'The Business Year: Iran 2013'. To pre-subscribe please e-mail us at firstname.lastname@example.org
© The Business Year - July 2012