Budget 2020: Hoping for measures to spur demand, says HUL's Sanjiv Mehta

The mid-to-long-term growth story remains intact for the market. Yes, the short term is a challenge, says Mehta

HUL beat Street estimates on volume growth in the three months ended December (Q3) amid weak consumer sentiment. In a press briefing, chairman and managing director Sanjiv Mehta explained what led to the growth and the way ahead for the company. Excerpts:

HUL was ahead of the FMCG market in terms of volume growth in Q3. What contributed to the growth?

Categories such as home care, food, refreshments and haircare continue to clip well for us. In home care, sales growth has been 10 per cent, while food and refreshments saw 8 per cent sales growth during the December quarter. Maintaining the price-value equation (of products) and driving penetration and innovation through the 'Winning in Many Indias' strategy were instrumental in driving volume growth in Q3. We remain agile and responsive to market needs, and that has allowed us to keep our volume growth ahead of market. Skincare did see some issues due to the delay in the onset of winter, which impacted sales growth in Q3. But now, it is doing fine.

Soaps remain a challenge for you. You cut prices to keep sales volumes going in Q3. Did it help?

There are structural issues with soaps as a category. The repertoire of soap brands in a household has come down. That is one. Second, there is down trading within the category, with consumers using smaller bars now versus the trend earlier when soap consumption was robust. At an overall level, the price of inputs going into soaps was benign in the July-December 2019 period, which allowed us to cut prices. Between July and December, there has been a price correction of 6 per cent within our soaps portfolio. But commodity prices, notably, of palm oil, have been inching up, which means we may have to increase the  prices in the future. We intend to do it by March. 

Is it a worrying sign that urban growth has been coming down even as rural growth remains weak for the FMCG market?

Yes, it is. The trend was visible during the December quarter. While the rural market was growing at 0.5 times the urban growth in the December quarter from 1.4 times earlier, urban growth, data showed, was also weak. Consumer sentiment has been down and the market environment reflects that. It remains challenging in both urban and rural areas. But I remain optimistic that the tide will turn. I am hoping that policy measures are put in place that will spur demand and drive consumption. So yes, all attention will be on the (general) budget for these signals. At a broader level, it is important that money is put in the hands of people to kick off a virtuous cycle of growth.

Which parts of India are seeing a sharp slowdown?

Punjab, Haryana, West Bengal, parts of Uttar Pradesh, the Northeast and Maharashtra. The South, in contrast, has been more resilient to the slowdown.

Your outlook for the market?

The mid-to-long-term growth story remains intact for the market. Yes, the short term is a challenge. There is pain in the market. But I see growth coming back in the mediumterm.