From relaunching brands to strengthening its product portfolio, Hindustan Unilever Ltd (HUL) has done a whole host of things over the last few years. The company’s performance over the last eight quarters seems to suggest its strategy is working. Harish Manwani, HUL’s chairman and COO, Unilever, calls it the “and-and” strategy, which is delivering product innovation, cost efficiency and profitable growth — both in the short term and long term — simultaneously.
At the start of the financial year, few believed HUL would be able to deliver growth in the face of growing competition, soaring costs and slowing economic growth. But consistent performance through the year shows its strategic focus has yielded the requisite results.
For starters, the decision to treble its rural reach last year has helped HUL post double-digit growth quarter after quarter. Today, both rural and urban markets have an equal share in the company’s total sales. And, rural markets are growing at a faster clip than urban India. This explains the company’s revenue growth of 18 per cent in FY12, with nine per cent underlying volume growth. HUL says this growth is not only broad-based but also ahead of the market.
In the fourth quarter, the company’s domestic business grew by 20 per cent while net profit grew by 21 per cent. Though the cost push has not abated entirely, HUL has expanded margins by 170 basis points in Q4. In the third quarter, the assumption was that HUL would not be able to sustain 21 per cent growth levels in the soaps and detergents segment, but the category has grown by a stellar 28 per cent in Q4, way ahead of the industry. The company claims after the relaunch of key brands, double-digit growth has sustained.
The management believes that while the category will continue to grow, some of it may come off this year as a lot of the growth is due to pricing. Compared to the 14 per cent growth clocked in Q3, personal care has grown at 17 per cent in Q4, and is entirely volume-led. This category is keenly watched as the margin leverage is higher in this segment unlike the low value-add business of soaps and detergents.
The food business has grown at a much slower pace at 7.7 per cent and this could be a cause of concern going forward, as food was growing in high double digits compared to the 13 per cent growth the segment clocked in Q3. Nitin Paranjpe, CEO and MD of HUL, said company is trying to figure out what led to the sudden slowdown in the Knorr range. As a category, beverages has grown by eight per cent, while packaged foods has grown at 10 per cent, buoyed by Kissan and Kwality Walls.