New Delhi: The country’s largest consumer goods company by sales Hindustan Unilever Ltd (HUL) plans to bring one of its popular margarine brands from its global portfolio to India, two people close to the development said.
Food focus: HUL’s managing director and CEO Nitin Paranjpe. Ashesh Shah / Mint
The initiative is part of the company’s plan to strengthen its foods portfolio here in line with other global markets it is present in. HUL is currently working on setting up a distribution network across the country for the product as it would require different facilities such as a cold chain, the two persons said. They did not want to be identified.
Originally developed as an alternative to butter, margarine is vegetable fat that is processed into a spread and can be used in all kinds of recipes, even in applications that need butter. Margarine is also 25-30% cheaper than butter, said R.S. Sodhi, chief general manager of Amul.
The company will need to have a cold chain beginning with suitable transportation facilities to ensuring availability of cold storage machines at retail points to distribute the product, the two individuals said, adding that the process of firming the distribution network has already been initiated.
HUL refused to comment on the issue. “As a policy we do not comment on market speculation regarding future business plans,” the company’s spokesperson said in an email.
The duo did not divulge the name of the brand. HUL’s Anglo-Dutch parent Unilever Plc.’s portfolio of margarine and other spreads boasts of brands such as Blue Band, Rama and Doriana.
The company had launched margarines here under the Blue Band brand about 20 years ago. The product, however, was withdrawn in some time as it failed to catch consumers’ fancy.
In India, HUL’s food portfolio comprises packaged foods such as soups and ketchups under Knorr and Kissan brand names, ice creams under Kwality Wall’s umbrella, beverages such as tea and coffee and wheat flour under Lipton, Bru and Annapurna brand names. This portfolio contributes 16-18% to the company’s total turnover.
For the quarter ended March, foods contributed Rs698 crore to HUL’s total sales of Rs4,034 crore.
In comparison, Unilever’s global food portfolio comprising products such as Becel, Flora, Bertolli, Heartband, Lipton, SlimFast and Knorr contributes at least 50% to the company’s total revenues. The business contributed €4.97 billion (Rs32,504 crore) to the company’s total global sales of €9.50 billion for March quarter.
HUL’s efforts to strengthen its foods portfolio have not been much successful in the past. The company, however, began refocusing on the segment a year ago.
In August, in an exclusive interview with Mint, HUL’s managing director and CEO Nitin Paranjpe had said foods was going to be the company’s focus area. “You will soon see how we systematically build our foods platform. When it’s about food, it has a lot to do with local palate, so while the technology might come from Unilever, it will be designed to suit the local palate,” Paranjpe had said.
Analysts, however, point out that margarine is a very small pie in the dairy products’ segment and is more urban-centric. “It’s not likely to give a huge leg-up to their foods business,” said Anand Shah, an analyst at Mumbai-based brokerage firm Angel Broking Ltd.
Another analyst said HUL may not have a smooth sailing as the dairy segment is already too crowded. “There are lot of regional as well as national players operating in this segment. Some such as Amul (Anand Milk Union Ltd), Nestle India Ltd and Britannia Industries Ltd are well penetrated. It will not be easy to crack into this category,” said Sameer Deshmukh, an analyst with Mumbai-based brokerage Tata Securities Ltd. “Also, the company will have to focus on local needs and demands instead of just bringing in a global product.”
Even rivals such as Amul say the new product will have to compete with well-entrenched brands to establish itself. “Our margarine brand Amul Lite has been present in the market for the past 20 years,” said Sodhi. “It was launched around the same time when HUL brought Blue Band to India. While Blue Band was withdrawn, we have stood the ground all this while and will continue to do so.”
According to market research firm AC Nielsen, the butter and margarine market is currently estimated at Rs688 crore.