| HUL seeks to streamline its product portfolio | |
| BS Reporter / Mumbai July 4, 2009, 0:21 IST | |
Rising product prices and the declining net content of packaged goods was the top most concern of a large number of shareholders at the 76th annual general meeting of India’s largest fast moving consumer goods (FMCG) company Hindustan Unilever (HUL).
In the calendar year 2008, the company had, on an average, increased the prices of most of its goods by 15-30 per cent on account of the high volatility and increase in the commodities and input costs. As a result, the maker of Dove, Lifebuoy and Wheel detergent has also been losing marketshare in its key segments like laundry, detergents and toilette soaps, according to market research company Nielsen.
However, the softening in commodities and raw material prices in the last six-eight months and the 4 per cent reduction in excise duties saw the company pass on the benefits to the consumers with two rounds of price reduction in price-sensitive goods like Lifebuoy and Wheel in December and January this year.
Addressing the shareholders, HUL Chairman Harish Manwani said: “We have had no control on the economic storm that has taken its toll across continents. Some fallout is inevitable, but we recognise this is a opportunity to step up our game to further drive our business for competitiveness.”
Speaking of strategies that have worked in the past in other markets like Indonesia, where the company cut down on the number of different stock keeping units (SKUs) by 50 per cent to make the country one of its most profitable operations, Manwani said: “In India, we have close to 1,200 SKUs and we are looking at eliminating and rationalising tail-end SKUs here as well.”
He, however, refused to divulge any details on the same. The top 20 SKUs account for 70 per cent of the company’s profits.
Manwani observed that in India there were simultaneous movements of some consumers uptrading and increasing consumption, while others were cutting back consumption or indeed downtrading as a response to the economic uncertainty.
“The strategy of ‘straddling the pyramid’ at a time like this gives us the ability to capture the uptrading opportunities, while simultaneously insuring us against the inevitable downtrading that also occurs in a downturn. This allows us to retain and strengthen our competitiveness through the power of our portfolio even in uncertain times,” he said, referring to the inherent competitive advantage HUL enjoyed through its portfolio of powerful brands, packs and product formats at varying price points that make its offerings affordable and accessible to consumers.
The other strategies include dynamic sourcing with shorter planning cycles, reducing the go-to-market time by integrating distributors with the supply chain and reducing the direct and indirect costs.
“It is known that in marketing and advertising only 50 per cent of advertising works. But we are now using a high degree of science to figure which 50 per cent works,” said Manwani.
Shift to Andheri by March ’10
Hindustan Unilever has once again delayed the shifting from its current Lever House office in the Backbay are of South Mumbai to its new corporate office in Andheri by a few more months to March 2010.
The FMCG major’s plans were to move to Andheri during the second half of 2009. However, this was initially pushed to December 2009 due to the slowdown in the economy.
“The new corporate office at Andheri will be operational by March 2010,” HUL Chairman Harish Manwani said, while addressing shareholders at the company’s annual general meeting today.
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