HUL raises prices by 5%, signals further hikes as inflation persists

Hindustan Unilever Ltd (HUL) is keeping a close watch on India's monsoon and inflation from the Gulf war, even as it treads gently with price hikes across its product range. India's largest packaged consumer goods maker posted its best sales performance in over three years on Tuesday, but the decline in June quarter profit troubled investors, with HUL shares closing over 7% lower, becoming the day's biggest loser on Nifty index.

Sales volume, a key gauge of consumer sentiment, grew 5% in the June quarter, down marginally from the 15-quarter high of 6% in the preceding quarter. HUL is seen as a proxy for India’s consumer demand, given its size and broad product range that caters to a wide section of the population.

Revenue rose at a 13-quarter high of 10% to ₹17,341 crore, led by higher sales and price increases. However, consolidated profit fell 2% to ₹2,680 crore as input costs rose. Ebitda margin stood at 23%, down 40 basis points from the year ago. Excluding exceptional items, profit after tax rose 9% to ₹2,731 crore. Tax expenses nearly doubled to ₹939 crore from ₹485 crore a year earlier, while restructuring costs were ₹115 crore against last year's ₹90 crore in Q1FY26.

Price hikes

The maker of Dove soaps and Surf detergents, which raised prices by 5% in the June quarter, may be preparing for more. “Between the September quarter versus June quarter, we see sequential inflation of 2-5%. So, we will continue to take calibrated pricing into the quarter, depending on how inflation pans out,” said Priya Nair, CEO and managing director. “We will be watchful of the two key issues: the monsoon conditions and the El Nino impact, and the West Asia inflation impact."

Rural demand has seen an uptick, HUL said. “Over the past few quarters, rural has kept up the performance and actually caught up with the urban performance. So, right now, if you see urban and rural, both are growing in similar ranges and they are stable,” said Niranjan Gupta, chief financial officer.

“Our focus remains clear and unchanged, driving competitive volume-led growth anchored to our key priorities,” Gupta said, adding the company “only passed half of the inflation in pricing in June quarter,” and still managed to remain in the guided margin range.

The company’s advertising and promotion spends came in at ₹1,657 crore in Q1, the highest in 11 quarters. HUL continues to spend about half of this on digital platforms.

Price pressures

HUL guzzles commodities like palm oil and crude derivatives for its core products, including soaps and detergents. Supply disruptions and freight volatility driven by the war in West Asia have raised the costs of these raw materials.

Earlier, the India Meteorological Department confirmed the onset of this year's El Niño, which could affect farm output and rural demand. "Looking at El Niño, this is something that we will look into and keep monitoring,” Nair said. She added that the agricultural sector contributes 15% to the nation’s GDP, and that it is more important to focus on rainfall distribution.

Sandeep Abhange, consumer and midcaps analyst at LKP Securities, said, "HUL's Q1 validates the recovery thesis, though pricing did more of the work than volumes as underlying demand recovery remains gradual rather than promising. Margin resilience despite input cost inflation is the real positive, reflecting mix and premiumization offsetting commodity headwinds", he said, adding that volume is a key factor to monitor going forward.

Segment performance

Home care registered 14% underlying sales growth (USG), backed by high-single-digit underlying volume growth (UVG). HUL attributed the segment's highest growth in three years to disciplined market development and product innovation, which helped solidify its market leadership without sacrificing volume. Fabric washes saw double-digit growth, led by volumes.

Beauty & wellbeing recorded 12% USG, driven by high-single-digit UVG. Clean-label wellness brand Oziva, which is undergoing transition, reported soft performance.

The personal care segment, including soaps, reported 4% sales growth as palm oil prices remained volatile amid persistent inflation for the second consecutive year. Nair noted that two consecutive years of inflation have squeezed consumer spending in the mass soap segment, leading to market contraction. She added that the category is undergoing a structural shift toward premium offerings, driven by brands such as Dove.

The foods segment reported 7% sales growth as tea sales were affected by an unusually hot summer and the cooking gas crisis. Boost crossed ₹1,000 crore in annual turnover, becoming the 21st HUL brand to achieve the feat.

The macroeconomic environment did not make things easier for the company. India’s consumer price index (CPI), a widely used measure of inflation, rose to 4.38% in June, driven by higher food prices and energy costs. This marked an increase from 3.93% in May, crossing the Reserve Bank of India’s medium-term target of 4%.