HUL uses out-of-home to push foods business

The country’s largest fast moving consumer goods (FMCG) company, Hindustan Unilever (HUL), is using ‘out-of-home’ aggressively to grow its foods business. Out-of-home here means initiatives undertaken beyond just selling products.

The move comes at a time when the over $50-billion Unilever is looking to double its turnover in 10 years. Foods business, which includes packaged foods, beverages, ice creams, etc, would have to grow at 50 per cent per annum, Unilever Chief Executive Officer Paul Polman had said during his India visit last week, if the objective of doubling the turnover had to be achieved.

HUL’s foods business is growing at 15 per cent per annum, according to analysts tracking the company. It constitutes 17 per cent of the company’s Rs 17,524-crore turnover, according to its 2009-10 Annual Report. In contrast, Unilever’s global foods business constitutes 52 per cent of its turnover, growing at 10 per cent per annum.

Polman had said out-of-home had a key role to play in galvanising its foods business in India. HUL Managing Director Nitin Paranjpe agreed: “Out-of-home is a very significant opportunity. And we will look to leverage that.”

The company has taken few steps in that direction, with the launch of three Bru cafes in three cities, including Mumbai, recently. Bru is the coffee brand of HUL. The move, say FMCG analysts, is to build traction for the brand on the ground, something Paranjpe doesn’t deny. He said, “We will systematically approach the business of foods, enter categories, take up initiatives, where Unilever has an advantage and where we will be able to build the market for the long-term.”

Even as it steps into the cafe space, HUL is also ramping up its Swirls ice-cream parlours. “At the moment, we have 130 of them,” said Paranjpe. “We will add rapidly to the number in 2011, possibly one a week.”

On packaged foods, while there is no plan to do anything out-of-home, the company has been using experiential marketing tools to increase awareness and improve sampling. During the launch of Knorr soupy noodles last year, vans dishing out portions of it were posted at different locations in cities such as Mumbai.

As HUL attempts to push its foods business using out-of-home, analysts say the success of it will depend on how much business these outlets can generate. Paranjpe does not get into the details of how much these outlets, especially the Swirls parlours, are generating at the moment. But the service model has been a difficult one for other FMCG companies. Amul, for instance, is looking to discontinue its pizza and ice cream parlours.

According to Shripad Nadkarni, director at Marketgate Consulting, the skill sets for a retail business are totally different as opposed to an FMCG business. “Quite often, the reason for stepping into the retail or out-of-home space is more brand-building than for commercial purposes,” he said.