Will continue to spend on innovation, activation, says HUL's Sanjiv Mehta

Hindustan Unilever reported good numbers for the quarter ended June

Hindustan Unilever (HUL) reported good numbers for the quarter ended June. HUL’s Chairman and Managing Director Sanjiv Mehta responded to questions by Viveat Susan Pinto at a post-results conference on what led to the in-line performance in the first quarter. Edited excerpts:

Give us a sense of market growth in the June quarter. You have said rural is ahead of urban in terms of growth rates. Please specify.
 

If you look at the last 12 weeks, urban growth is at 6 per cent and rural growth is at 7.5 per cent for the (domestic) fast-moving consumer goods (FMCG) market. These are Nielsen numbers and looking at the way rural is going, it should continue to stay ahead of urban. The triggers are there; monsoon, minimum support price announced for crops recently, this should impact the market positively. Per-capita consumption of FMCG in rural is just $16 versus the national average of $30. There is scope for growth, provided there is more money in the hands of our rural brethren. Whether it is building infrastructure, creating employment in rural areas, improving effective realisation of agricultural produce or giving wages to farm hands, it is a combination of factors that can improve spending power in rural areas. In my view, it is not absolute GDP that impacts FMCG, it is when the spoils of the GDP are shared over a larger population that FMCG categories move up.

But the progress of the south-west monsoons has been patchy with some regions receiving deficient rains. Do you see this impeding rural growth?
 

It is early days to say anything. The monsoons are advancing and could gather momentum. 

Do you see pricing power improving as inflationary pressures kick in? What would be your strategy on volume growth then? 
 

When prices go up, we ask ourselves how do we optimise our lines. That is how we have done it and will continue to do. What you are seeing now is inflationary pressures linked to crude, but vegetable oils have not seen a spike yet. Our strategy is to take judicious price hikes. Since, we have a portfolio of brands, we don’t do it on an equivalent basis across pack sizes. We look at it from an overall point of view, keep in mind the price-value equation and then take hikes if needed.

But with input cost pressures growing, will it be easy to maintain high advertising and promotional spends?
 

We look at all areas of cost when inflationary pressures grow. Advertising and sales promotion (ASP) expenditure is a factor of competitive intensity, our market strategy and development. So, how it moves is based on these factors and we have never shied away from spending on ASP even when times were tough, including the demonetisation quarter. We invested behind our brands then and we will continue to spend on innovation and activation now and back all our market-related activities.

You have launched an e-commerce-only male-grooming line in the June quarter. Please elaborate
 

We experiment with our products on a regular basis. We have been trying to resurrect the Brylcreem brand for a few years now with a number of innovations. In the latest instance, we have been tied up with Amazon to launch a range of male-grooming products, some targeted at the hair, beard etc. It is a collaboration and for the time being, it will be on e-commerce; on Amazon to be precise.