HUL bets on high-margin products to boost sales

Packaged food, skincare and male grooming products main focus areas

The country's largest consumer goods company, Hindustan Unilever, would focus on increasing sales in existing stores rather than pushing for wider distribution, Sanjiv Mehta, its managing director, said at a recent meeting of analysts in the city.

Laying out a road map for the Rs 28,019-crore company, Mehta, who took over from Nitin Paranjpe 10 months ago, said the company would prune non-performing stock-keeping units. Hindustan Unilever will also focus on high-margin, low penetration product categories like packaged food, skincare and male grooming, where chances of increasing sales are higher than the categories of soaps and detergents.

The company would also continue to innovate wherever needed, Mehta said. For instance, the company is contemplating launching smaller packs of its premium Magnum ice-cream and a mix of margarine and butter.

The company, Mehta said, had just launched a Rs 10 pack of instant soup, cup-a-soup, which would be pushed heavily, and a toothpaste, Closeup Diamond Attraction, that made teeth whiter after one brush.

Mehta also said the company now had 11 brands that had crossed Rs 1,000 crore in turnover and eight brands that had crossed Rs 500 crore. He did not give out the names of the brands except to say that Tresemme, a premium haircare brand, had crossed Rs 100 crore in sales within a year of launch. Analysts said Mehta's efforts were aimed at improving efficiency now that Hindustan Unilever had scaled up in the last few years during Paranjpe's tenure.

Hindustan Unilever's products reach nearly seven million outlets in the country, according to analysts, the highest for any consumer goods company. Of this, Hindustan Unilever directly reaches 3.2 million outlets, a three-fold jump in four years, according to Mehta's presentation to analysts. Specifically, under project "I will, 1 Mill", Hindustan Unilever added 1 million stores to its direct coverage in 2013-14, Mehta said.

Hindustan Unilever converted 1 million stores into "Perfect Stores", which meet merchandising benchmarks, according to Mehta. In rural areas, it prioritised white spaces and drove coverage expansion using proprietary tools such as the Unilever Potential Index, while in urban areas, technology was leveraged to improve the quality of execution.

These efforts resulted in improving the company's margins. Between 2011 and 2013, Mehta said, material savings improved 26 per cent, while other costs reduced nine per cent. He added margins would further improve through cost management and a focus on the right set of products.

Hindustan Unilever derives nearly 80 per cent of its sales from soaps, detergents and personal products. The balance comes from packaged foods, beverages and ice-creams.
HUL UNDER SANJIV MEHTA

• Will focus on improving sales, rather than going after expanding distribution footprint
• The endeavour is to drive efficiencies in the current system since HUL has built the necessary scale in the past few years
• HUL will also focus on high-margin, low-penetration categories such as packaged foods, skincare and male grooming in a bid to improve sales
• The company will also focus on innovation and premiumisation will continue wherever needed
• Attention to cost management will also continue to ensure margins do not erode
• Will prune non-performing stock keeping units