We must be responsive during volatility, says HUL's CMD Sanjiv Mehta

The need of the hour would be to be agile and responsive, says Mehta

Hindustan Unilever reported a good set of numbers for the three months ended September. HUL’s CMD Sanjiv Mehta responded to questions by Viveat Susan Pinto at a post-results conference on what led to the performance in the second quarter. Edited excerpts:

While the rural segment has been growing ahead of its urban counterpart, is it sustainable given the below-normal rainfall this year?

There will be pockets where there will be stress and there will be areas where the demand scenario will not be hampered much, given that the rainfall there was adequate.  We will closely monitor and understand the government’s implementation of minimum support price for crops. How it impacts farm incomes and, therefore, demand in rural areas will be critical. Again, some states may benefit from the move, possibly more than others. 

You indicated that volatility is only growing. Is it then possible to get away with calibrated price hikes or would you need to do more?

The need of the hour would be to be agile and responsive. If you take a lot of time to implement changes, you would then end up hurting your business more. However, if you have an organisation that responds quickly to market changes, it will help you tide over this challenging environment. 

Do you see pricing power coming back to the market. You took modest price hikes in Q2. Will this increase?

The volatility on crude and currency is growing. They are key monitorables as we go ahead. Price hikes so far have been very judicious. But calibrated price hikes could increase as the volatility on crude grows, though benign vegetable oil prices (such as palm oil) for now are partially offsetting it. Since we have a portfolio of brands, we don’t take proportionate price increases across stock keeping units. For us, the price-value equation is very important. 

What did you see in the FMCG market in the September quarter? Rural segment you said is growing at 1.25 times more than the urban one...

At an overall level, the FMCG market in terms of volume grew 7 per cent in the September quarter. Value-wise, growth was 9 per cent. If you see our numbers, we’ve been ahead of the market, led by rural growth. It is ahead of urban growth and what we find is that tier II and III cities have begun mimicking the trends and styles of metro India. We also find that the Hindi heartland is a massive growth opportunity since penetration level (of FMCG products) is still low.  We set up offices in places such as Lucknow and Indore and that strategy has paid off. We are growing significantly faster in central India than in the rest of the country.