 "Sanjiv Mehta")
The country's largest fast moving consumer goods company, Hindustan Unilever (HUL), has a simple mantra: to deliver consistent, competitive and profitable growth. It has more often than not stayed true to its course, despite the increasingly competitive landscape.
Despite parent Unilever's slowest growth in four years in the September 2013 quarter, owing to weak global demand for its soaps and spreads, and despite Unilever's indication that emerging markets - which give it 55 per cent of its revenues - were slowing, HUL delivered decent numbers in the quarter.
Net sales grew nearly 10 per cent to Rs 6,747.20 crore, versus Rs 6,155.41 crore a year ago, while net profit was up 13.2 per cent, from Rs 806.92 crore to Rs 913.80 crore.
Underlying volume growth, a key metric tracked by analysts and investors, was five per cent for the September quarter, lower than the year-ago period, when it stood at seven per cent, but marginally higher than the June quarter, when volume growth was four per cent - its lowest in four quarters.
R Sridhar, chief financial officer, HUL, had said at the time of the September quarter results, "Since December 2012, we have held on to the five-per-cent-mark in terms of volume growth. The June quarter was an exception because of the significant upstocking (stock that was built up) due to the LBT (local body tax) strike in states such as Maharashtra in the March quarter. This impacted volume growth in the June quarter."
The company is expected to hold on to volume growth levels in the December quarter too, traditionally one of the strongest periods for FMCG companies.
What has worked for HUL is its ability to quickly adapt to the changing environment. Take Fair & Lovely. A double-digit performer until a few quarters ago, the company admitted when announcing its results for the three months ended June 2013 that the Rs 1,500-crore skincare brand, one of the largest in its portfolio, was slowing.
"We delivered double-digit growth in most other segments in personal products including haircare, oral care and colour cosmetics. Even within skincare, brands such as Lakme, Ponds and Vaseline did well during the (June) quarter. What impacted growth, however, was Fair & Lovely," HUL's former MD and CEO Nitin Paranjpe, who was elevated in October to the position of Unilever's president, home care, had said about the two per cent growth that the personal products business had seen in the June quarter.
HUL quickly re-launched Fair & Lovely, coming out with changed formulations, and backed the re-launch with a huge marketing campaign. The result: personal products, which give HUL 30 per cent of its revenues, recovered by 11.8 per cent in terms of growth for the September quarter, which analysts say was the result of all brands having contributed, including Fair & Lovely.
In soaps and detergents, which gives the company nearly 50 per cent of its revenues and remains one of the most competitive FMCG categories in India, HUL has kept up the pressure to ensure that it stays ahead of the pack.
In 2013, for instance, the company launched the country's first-ever liquid detergent under Surf Excel in a bid to premiumise its portfolio. But given the competition from Ghari at the lower end, HUL did not ignore its mass-market brand Wheel, which has been given a new lease of life under brand ambassador Salman Khan in the last three years.
While packaged foods and ice-creams are smaller businesses in comparision to personal products and home and personal care, HUL maintains that these segments will evolve - especially packaged foods - as the market for these products begins to grow. In beverages, HUL is pitted against Tata Global Beverages, whose Tetley and Tata Tea brands are fierce competitors to its Brooke Bond range of products. In coffee, HUL's Bru competes with Nescafe from Nestle.
HUL's consistent efforts to maintain leadership and the long-term potential of the nearly Rs 2 lakh crore FMCG market in India prompted Unilever to raise its stake in the subsidiary from 52.48 per cent to 67.28 per cent in July 2013 through an investment of Rs 29,200 crore. The objective was simple: to partake of even more of the growth in the Indian business.
