Ltd (HUL) reported good numbers for the September quarter as the company successfully transitioned to the Goods and Services Tax (GST) regime. In a media interaction, managing director and chief executive Sanjiv Mehta
indicated the way forward for the company.
HUL held price lines in categories that moved to 28 per cent GST. Is this sustainable, given that input prices are inching up?
For us, price hikes are not taken after factoring in only raw material inflation. We take into account a number of aspects, including our product and portfolio mix. Our approach to this (price hikes) will be judicious and our focus will remain on volume (sales) growth. Everything else will fall in place if we have our eyes on this goal post (volume growth).
So are you saying that you will no longer look at price-led growth at least for now?
We do not give guidance for the future. But suffice to say that our strategy will be on improving volume growth. This will help maximise revenue realisation, which is key. We will also look at improving operating profit margins with the help of tools such as zero-based budgeting, which we introduced a few quarters ago. The savings we get through these measures will be ploughed back into the business for capability-building and market development. This is a virtuous cycle that we wish to retain.
What explains the eight per cent comparable revenue growth seen in personal care this quarter? It was the lowest of the four segments for HUL.
The problem was oral care, which we admit is a job unfinished. Almost a third of the oral care market in India now constitutes the naturals segment. This is by far the biggest for a personal care category. Other personal care segments (such as skin care or hair care) on average have naturals making up about 10 per cent of the market. We did not see this coming in oral care. But we are correcting it now with the launch of Lever Ayush. Additionally, most of our personal care brands today have a naturals variant and we also have specialist naturals brands such as Indulekha and Citra in our portfolio.
What is the strategy on Lever Ayush? It was rolled out nationally in the September quarter.
Yes, it was. And the strategy will be to strengthen the portfolio with more launches and innovations as we go forward. Naturals is an emerging trend in India and we must respond to it appropriately.
Your sense of FMCG (fast-moving consumer goods) market growth and when do you see it recovering?
FMCG market growth has been in mid-single-digit for some time now and the bigger challenge now is that rural growth is lagging behind urban growth. If the overall market has to improve, it can come from the rural areas only because there is headroom for growth there. In the recent quarters, rural areas have seen signs of distress, but this will eventually settle down and there will be a gradual recovery in rural growth.