India a phenomenal market for Unilever, second only to US: Alan Jope

Outlines blueprint for future growth; India, China and US are key

India is a phenomenal market, where Hindustan Unilever (HUL) enjoys a long history and leadership position, Alan Jope, chief executive officer, Unilever, said in an investor call on Thursday.

"Eighty four per cent of the India business has seen growing volume share and there is significant opportunity for growth," Jope said while laying out the company's future roadmap. India is Unilever's largest market after the US, contributing 10 per cent to its topline. The US contributes 18 per cent, while China contributes 6 per cent to Unilever's turnover.

The consumer goods major, which reported a 3.5 per cent increase in underlying sales for the October-December period, will now increasingly bet on India, China and the US as it seeks to aggressively grow in a post-pandemic world. Unilever follows a January-December accounting year.

The December quarter results are the first since Unilever consolidated its headquarters in London in June, moving away from its longstanding Anglo-Dutch structure. Jope said that the company would continue to simplify operations and look at a flatter reporting structure as it sought to be future-ready.

Key categories such as beauty and personal care grew 1.5 per cent, home care grew 4.7 per cent and foods and refreshment grew 5.4 per cent in the December quarter, Unilever said.

The company has also set long-term targets, saying it will aim for underlying sales growth in the range of 3-5% as markets recover in India and China. It will also aim for profit growth to be ahead of sales growth, led by a continued focus on cost savings. Inflationary pressures, however, in inputs such as crude oil and agri commodities, are forcing Unilever to take calibrated price hikes across categories in a bid to protect margins.

Alan Jope, Chief executive officer, Unilever

Greame Pitkethly, chief financial officer, Unilever, said that raw material prices would rise even more in 2021 and that the company would have to be at the "top of its game" in terms of pricing this calendar year.

Unilever has forecast 2 billion euros (or $2.38 billion) per annum in savings, though restructuring costs in 2021 and the next year would be in the range of one billion euros (or $1.19 billion). Restructuring costs are expected to reduce after 2022, the company said.  

India, China and the US contribute a third to Unilever's topline. Jope says that he would like to see their total contribution to company topline go up to 60 per cent by 2030.

For this, Unilever is counting on categories such as hygiene, skincare, beauty, functional nutrition and plant-based foods to drive growth. It is also looking to expand its presence in e-commerce, a channel that has grown significantly in the last one year, as stay-at-home consumers turned online for their grocery needs.

In 2020, Unilever saw a 61 per cent growth in its e-commerce business over the previous year, taking its overall contribution to topline at 9 per cent. Pitkethly said that the company was digitising traditional trade stores it was reaching directly in markets such as India, where the retail universe is estimated at 14 million stores.

Of these, Unilever reaches 5 million outlets directly. Out of these 5 million stores, 1.5 million outlets have been digitised to ensure they are part of the growing online universe that is now counting on neighbourhood stores for fulfillment and delivery.  

For the full year 2020, Unilever's underlying sales growth was 1.9 per cent, led by 1.2 per cent growth in beauty and personal care, 4.5 per cent growth in home care and 1.3 per cent growth in foods and refreshment.