Relaunch pays off for HUL

Key brands in their latest avatars, new price points boost consumption.

Hindustan Unilever has taken the Street by surprise again. The company has belted out double-digit growth rates for the third consecutive quarter. While net sales grew 18 per cent in the second quarter, net profit grew 21.7 per cent to Rs 689 crore. The domestic consumer business, which comprises fast moving consumer goods and water, grew 18.5 per cent. While the home and personal care segment grew 20.5 per cent, the foods business grew 17 per cent.

The main reason for the strong show is the relaunch of several brands and the introduction of new variants. Key brands such as Fair & Lovely, Vaseline and Pond’s grew in double digits. According to the company: “Fair & Lovely has been modernised and is yielding good results. Vaseline Total Moisture was relaunched with three variants and Pond’s White Beauty was extended with the Naturals range during the quarter.” No wonder, personal care recorded a growth of 18.2 per cent in the second quarter, thanks to traction in the skincare segment.

The company has also taken action on the pricing front to improve penetration. In the given quarter, HUL introduced the price point of Rs 1 for its Nourishing Oil Care Range and similar sachets were introduced under the Dove brand to expand the consumer franchise.

Even in the foods business, the company’s strategy of enforcing existing brands with new variants helped it put up a good show. The foods business, where the company has struggled in the past, has done well, say analysts. While beverages grew 14.6 per cent, packaged foods grew 20.9 per cent. The Kissan range was relaunched with a new brand visual and a ‘100% Real’ proposition.

However, the cost push continues to be a problem and HUL acknowledges the same. The cost of raw materials is up 340 basis points, especially for soaps and detergents. The company has managed to close advertising and brand building spends at 11.8 per cent of sales. However, competitive intensity in the personal care, beverages and packaged foods businesses has pushed the company to increase spends.