HUL bets on price cuts and monsoon to lift demand after GST cuts hit Q2

Tax cuts on packaged food and personal care products disrupted stocks and depressed sales growth at Hindustan Unilever Ltd in the September quarter, but the consumer goods giant expects the price drop and a good monsoon to boost consumer sentiment and sales in the second half of 2025-26.

HUL will focus on raising sales volumes to drive revenue, said chief executive Priya Nair, who took over as the head of India's largest packaged consumer goods firm in August. “Macroeconomic conditions in India were not favourable. The overall FMCG (fast-moving consumer goods) demand was subdued on account of high food inflation, the overall income was challenged, wage inflation, and even weather vagaries led to subdued conditions,” Nair added.

For the September quarter, the maker of Surf detergents, Dove soaps and Kissan jams reported a 2% annual growth in revenue from operations to ₹16,061 crore, but volume growth remained flat, and profit after tax (before exceptional items) fell by 4%.

Sales may remain disrupted in October as well, HUL said, as changes in the goods and services tax rates for up to 40% of its products affected inventory across its sprawling distribution network.

“The moment the change was announced, the trade knew that new prices will come, which will be lower than current prices,” chief financial officer Ritesh Tiwari said. “Hence, we saw the trade de-stocking. For our industry, depending on the category, there is 4–6 week inventory in the system. And when trade de-stocks, there is always a short-term impact.”

De-stocking refers to retailers and distributors emptying out existing stocks and holding off purchases until cheaper stocks come in. Prime Minister Narendra Modi had announced the coming GST cuts in his Independence Day speech on 15 August, and the GST Council cleared the decisions on 3 September. Hence, many customers and traders chose to defer purchases till the price cuts kicked in on 22 September.

Tiwari said consumers also became measured in their purchases of items such as soaps, detergents, packaged foods and beverages, in anticipation of lower prices.

“... We saw the impact in September, we will (see) some in October as well, and it will stabilize from early-November,” the CFO said.

Nair and Tiwari also expressed confidence that consumer demand will pick up in the second half of FY26, adding that rural and urban markets were growing at the same pace for HUL.

Rising consumer demand thanks to the GST cuts, festive-season spending, and lower inflation prompted consulting firm Deloitte to raise its forecast for India’s FY26 GDP growth to 6.7–6.9%, from its earlier forecast of 6.5%. “This is expected to be followed by strong private investment, as businesses respond to uncertainties and prepare to meet elevated demand,” Deloitte India economist Rumki Majumdar said in a statement on Thursday.

According to HUL's Tiwari, India has seen a "meaningful correction" in food inflation, which was very high in the past. "The monetary relief the government has given gives more disposable income to the consumer. We have to see the overall impact of monsoon last year, but we know the groundwater table is good, and we expect a better rabi crop sowing season. The income tax change—both direct tax, which happened in the Budget, and the GST change, which happened now—if you bundle them all, it is a better economic environment going forward.”

Premium push

Growth in HUL’s biggest business units—personal care, home care, and beauty—remained sluggish, but the company’s premium portfolio grew briskly.

Nair said HUL’s ‘digital-first’ portfolio of direct-to-consumer brands such as Minimalist and OZiva grew in ‘double digits’ this year; the portfolio is worth over ₹3,000 crore. Liquid detergents, premium soaps, and HUL’s newer health and wellbeing unit also posted double-digit growth, the company said, without sharing specific numbers.

“Most of my time coming back (from London) has been spent on the frontline, visiting the trade and in stores, meeting consumers across the country,” Nair said. “I am spending time with stakeholders, giving me good immersion in the market landscape. This has been my focus.”

Nair, who joined HUL in 1995, held several sales and marketing roles across the company’s homecare, beauty and wellbeing, and personal care businesses. In 2022, she was named global chief marketing officer, beauty and wellbeing, at London-based Unilever Plc., HUL’s parent company. The following year, she was appointed president of Unilever’s beauty and wellbeing unit, one of the company’s fastest-growing businesses.

“... It is not a zero-sum game in India,” Nair said. ”The consumer basket itself is evolving. We will keep looking at all four opportunities—growing our existing brands, bringing new Unilever brands to India, launching new brands, and acquisitions.”

Nair said her top priority is to “radically transform” Unilever’s brands in India. HUL’s core brands, especially in beauty and personal care, will focus more on social-first marketing, while the company invests in channels such as quick commerce, she added.

In the September quarter, 7–8% of HUL’s sales came from online retail, including quick-commerce and e-commerce, while a little more than half of its total ad spending was in digital channels. Nair also said India had 400 million Gen-Z consumers who discover brands almost entirely online, even if they shop both offline and online.

“(Consumer packaged goods) consumption in India is at only $54 per capita, so there is a lot of headroom for growth,” Nair said. “We want to ensure that all our core brands are modernized… make them more modern, more desirable, more youthful. This is very important for all our core brands, both with renovation and with innovation. You will see us be bold.”

HUL shares closed 0.36% higher at ₹2,601.00 on NSE, after climbing to ₹2,667.20 earlier in the day, while the benchmark Nifty 50 closed nearly unchanged.

"Whatever positive momentum has to come in will register in Q3, so the December quarter should show positive volume growth," said Sachin Bobade, director of research at equities brokerage firm Dolat Capital. "But in Q4, volume growth rates should normalize to normal levels of 2-3%. While GST rate cuts have stimulated consumer demand, the long-term growth prospects are still not clear. If you were to remove the growth in Minimalist and other digital-first brands, volume growth for HUL looks to be negative for the September quarter."