Hindustan Unilever may recombine food, refreshment divisions
Mumbai: Hindustan Unilever Ltd (HUL), India’s largest listed consumer packaged goods company by sales, may have to recombine its food and refreshment divisions following a decision by parent Unilever Plc., according to analysts.
It was less than a year-ago that the maker of Knorr and Kissan had split the two divisions to be in alignment with the category structure of Unilever globally.
The decision to merge the two divisions is among the steps taken by the Anglo-Dutch parent after a review of operations in terms of long-term value generation following a failed $143-billion takeover attempt by US rival Kraft Heinz Co.
The maker of Dove soaps and Knorr soups said it would explore selling its spreads division, buy back shares worth $5.3 billion this year and raised its dividend by 12%.
The moves reflect “increased confidence in the outlook for profit growth and cash generation,” Unilever said in a statement on its website on Thursday.
“The faster pace of change that we are seeing in our markets and competitive set requires us to continue to set the bar higher,” Paul Polman, chief executive of Unilever, said in the statement.
An email sent to the India unit and the global parent’s press team remained unanswered at the time of going to press.
In February, Unilever had rejected a takeover approach by Kraft Heinz, putting both consumer-goods giants under heightened pressure to make bold moves to accelerate growth, Wall Street Journal said in a report then.
HUL had split its food and refreshment divisions into two separate units in June last year. The company brought in Sudhir Sitapati, formerly regional category vice-president for HUL’s refreshments division in South Asia and Africa, to head the refreshments division. Gitu Verma, who was formerly managing both the divisions, took over the foods business which includes brands such as Kissan and Knorr. HUL’s beverage business includes tea brands like Lipton, Taj Mahal, Red Label and coffee brand Bru.
The Indian unit has been increasingly adopting global strategies and initiatives in recent years. The move to separate the foods and refreshments was also a part of the firm getting aligned with the parent. “I don’t rule it out,” said Abneesh Roy, senior vice-president, Institutional Equities - research analyst, Edelweiss Securities Ltd on the possibility of the two units getting merged once again in India.
Globally, foods and refreshments account for nearly half of Unilever’s overall revenue, whereas in India, they account for less than a fifth.
The food and beverages opportunity in India is huge. The size of the market, including alcohol and tobacco, in 2015 was $100 billion, one-eighth of China’s $796 billion; per capita spending on packaged food was just $32, less than one-fifth of China’s $176 and just 3% of the US’s $1,135, according to a June report by Goldman Sachs (Asia) Llc.