Mumbai: It’s not just the rural areas that have prospered because of rising food prices and the government’s National Rural Employment Guarantee Scheme (NREGS). Personal and home care products maker Hindustan Unilever Ltd (HUL) is also a beneficiary.
The two factors have led to a rise in demand for consumer goods in rural India, HUL chairman Harish Manwani said in a speech to the company’s shareholders at its annual general meeting in Mumbai.
Tough times: Hindustan Unilever chairman Harish Manwani. Abhijit Bhatlekar / Mint
NREGS guarantees a minimum 100 days of work a year to at least one member of each rural family.
However, rising food prices and NREGS have not really insulated HUL from what has been a tough year. The company has been hurt by rising input costs, falling volumes and a decline in market share. The HUL management is charting a plan to minimize the impact of such problems.
HUL will implement a cost-saving strategy involving reducing and rationalizing the number of stock-keeping units (SKUs) that it sells. SKU is a computerized marking of every product so that there are data records of each. Analysts say that the number of SKUs has declined from 2,000 three years ago, to around 1,200 in the last fiscal; and the process continues. With less than 30% of SKUs contributing to at least 75% of profits, rationalization is the way to go, they say.
HUL has also decided to reduce working capital and pare plans to expand capacity. To adapt to changing market dynamics, it has already switched to a monthly planning cycle, from an annual one.