Mumbai: India’s largest consumer goods company by revenue Hindustan Unilever Ltd, the maker of Surf, Lux and Kissan, on Monday announced a 2% drop in its fourth quarter net profit after adjusting for tax, exceptional items and extraordinary items, but its net sales rose by 13.5% year-on-year, to Rs 4,899 crore.
In an interview with Mint, Nitin Paranjpe, managing director and chief executive officer, Hindustan Unilever, spoke on opportunities in the Indian market. Edited excerpts:
How has the company grown last quarter and the year as a whole?
We are quite pleased with the performance this quarter. We had a volume growth of 14%. For the full financial year, the growth is 13%. It is a growth we haven’t seen for a long, long time.
A 13% volume growth is the highest in at least a decade. What were the contributing factors?
Things that have led to this are quite simply the sharp focus on consumers and customers. We made sure that we invest in our brands. We raised the intensity of innovations. During the course of the last one year, 50% of our business has been touched and impacted by some launch or relaunch.
We have been strengthening our brands; we have been making appropriate investments behind the brands.
Constant innovation: Paranjpe says during the past year, half of HUL’s business has been touched by some launch or relaunch. Photo Ashesh Shah/Mint
During the course of the year we saw A&P (advertising and promotion) investments spends go up by 60 basis points (bps) to ensure competitive support. And, of course, we have been substantially strengthening our “go to market” strategy and expanding our rural reach and improving the quality of our coverage by deploying technology in a way that we never had done before.
With five lakh new stores added to your distribution network this year, HUL’s direct distribution reach of 1.5 million stores is equally distributed in urban and rural India. That’s significant, isn’t it?
Most of these (new stores) are in rural India, and that has resulted in our ability to treble our rural coverage. This is a very significant advantage, and it helps us to widen the gap (with competition) as we move forward.
We have always been a company which has one of the deepest rural distribution networks. But other companies catch up and our job is to make sure that we start widening the gap. We were hoping to do it over two years and I am happy to say that we managed to do it in one year.
You have spoken about the consumer pyramid becoming a diamond as growth takes place at the bottom and the top. Is that happening?
Indeed, it is. That is an inevitable trend that we are likely to see. As India becomes more affluent, more and more people will come out from below the poverty line and get into the consumer class. We are beginning to see that. That augurs very well for companies such as us as it is a combination of increasing affluence, and more people getting into the consumption net for the first time.
Does the changing structure of the pyramid signal the market in the middle is getting squeezed?
The good news in India is that we will see growth everywhere. It is not correct to say that the middle is getting squeezed. The beauty in the Indian market is that we will see growth in the top, the middle, and the bottom.
We will see growth across all categories. So personal care will grow, foods will grow, soaps and detergents will grow —top will grow, middle will grow, bottom will grow. What helps us is that, over a period of time, over the many decades that we have been here, we have a portfolio of brands that straddles the pyramid. It is best placed to address the growing opportunities that exist at all price points, and across all categories. That is why we are so optimistic.
In categories such as skincare and personal care, the move to premium brands seems to be driving growth. Is the contribution from the top-end brands increasing?
We are beginning to see premiumization as a general trend across all categories, and we are likely to continue to see that. The reason for that is simple. Increased affluence and changing attitudes is resulting in premiumization taking place, and we are rapidly building a portfolio across all categories that is best placed to address these opportunities.
That, however, does not mean that at the bottom of the market, opportunity does not exist. People from the bottom reach the middle class; the middle class is also offering significant opportunities. All in all, we see significant opportunities for FMCG companies across all segments.