Amid slowing sales, HUL caps employee costs

Recent news reports suggest that FMCG giant - Hindustan Unilever (HUL) is looking to trim its work force by as much as 10-15% in its bid to achieve cost rationalisation. 

Indian FMCG companies have been facing trying times amid intensifying competition from both incumbents as well as new peers such as Patanjali, and slowing consumption demand in both urban and rural markets. 

This in turn has had a bearing on their volume growth. As most companies are focusing on reviving volumes, they are also looking to make their cost structure more efficient. In this backdrop, a look at the employee costs of top FMCG companies (sorted as per latest annual revenue) throws up interesting trends. 

While HUL's employee cost (as a percent of sales) has been falling since FY15, most of its peers have witnessed an uptick in this metric both in the nine months of FY17 as well as in FY16 over FY14. 

Other multinational companies like Nestle India have seen the maximum increase in this metric, followed by GlaxoSmithKline Consumer Healthcare and Colgate Palmolive (India). Notably, Nestle's revenues were impacted by the Maggi ban in the past few months and could be a key reason behind the increase in employee costs as a per cent of sales. Domestic players Godrej Consumer Products, Dabur and Tata Global Beverages have invested behind their employees and increased this metric both in FY16 as well as in the nine months of FY17. 

Apart from HUL; ITC, Britannia Industries and Marico have witnessed flattish movement in this metric since FY14.

	Employee costs as a % of sales
Company	FY14	FY15	FY16	9MFY17
ITC	7.1	7.1	7.5	6.5
Hindustan Unilever	5.4	5.4	5.2	5.2
Godrej Consumer	9.8	9.4	10.7	10.8
Britannia Industries	3.8	3.7	3.9	3.9
Dabur India	8.3	8.5	9.1	10.7
Nestle India*	8.1	8.5	11.2	11.9
Tata Global Beverages	10.2	10.7	11.1	12.2
Marico	6.1	5.7	5.9	6.6
GlaxoSmithkline Consumer Healthcare	9.7	10.0	11.8	12.6
Colgate-Palmolive (India)	5.9	6.5	7.2	7.2
* Follows calendar year
Source: Capitaline