Not all consumers curtail spending on discretionary items, says HUL CMD

Hindustan Unilever (HUL) is slowly but steadily getting its mojo back after its production and sales suffered due to the lockdown. Chairman and Managing Director Sanjiv Mehta says the April-June period has been largely about restoring operations. HUL is now operating at 90-100 per cent capacity utilisation, against the pre-Covid levels, even though the emphasis remains on producing essential products. In an interview with Viveat Susan Pinto, Mehta indicates the road ahead for the company. Edited excerpts:

When do you see a revival of the FMCG market? Will the September quarter reflect any change in consumer behaviour?

We will get a good idea of the demand in the September quarter. There were supply-side constraints in the June quarter. The supply chain has shrunk. We were ramping up production in the June quarter after manufacturing came to a standstill by March end. There was a focus on essentials and pantry loading by consumers. I believe we should get a good assessment of demand, and therefore, a sense of the economy in the September quarter.  

A number of firms have pointed to a sales uptick in rural areas and towns because of reverse migration and  the government’s focus on these. Is HUL seeing the same?

You have to remember that the rural markets were slowing down even before the pandemic began. They also suffered because of lack in supplies. Many of the supplies that are now going into rural areas is mainly filling up the pipeline, which was constrained earlier. So I will not jump to conclusions. 

What about downtrading? How pronounced is the trend since consumers are conscious of their spends?

Whenever times are tough, consumers do move to smaller packs and price points. The moot point here is that consumers are seeking value. This is why they look for products and pack sizes that can best address their consumption needs in the most affordable manner. There are different variables at play here and one size cannot fit all.

But will you pursue the premiumisation agenda in FY21 when the focus is on essentials and discretionary spending is low?

For many, FMCG is a small share of their purchase wallet. These people are not likely to curtail their discretionary spending significantly. 

For others, they may want higher-order benefits from their products, but may opt for smaller packs or may want it at an affordable price point. 

Will the emphasis on volume growth intensify since pricing action is likely to be muted?

Volume growth is very important for us. It will ensure we have the market share.