Beauty, wellbeing, mini meal: HUL eyes high-growth segments to boost demand
- HUL expects markets for some categories to double or grow four times over the next decade on the back of growing GDP leading to disproportionate FMCG growth, the company said
Premium is the watchword for packaged consumer goods major Hindustan Unilever Ltd (HUL), as it unveiled a new strategy on Friday to ride on an expected rise in household income and increasing consumer preference for more expensive brands and products.
In a presentation filed with the stock exchanges on its ‘capital markets day’, the company identified six ‘high-growth’ segments as long-term bets. These segments—premium face care, premium hair care, body wash, home care liquids, condiments and mini meals, and wellbeing—contributed ₹7,000 crore in revenue for the company during FY24, HUL said in the presentation.
The FMCG major expects these addressable markets to double or grow fourfold over the next decade, driven by rising GDP and what it termed “disproportionate FMCG growth”.
HUL will focus on transforming its portfolio to “prioritize growth”. This includes focus on its core portfolio, “future core” brands that are ripe for premiumization, and chasing future trends via what it calls “market makers”.
Also read | HUL approves demerger of ice-cream business into separate, listed entity
More households are expected to move up the $8,500 to $40,000 annual income bracket by 2030 versus 2018, even as households with less than $4,000 annual income shrink dramatically by the end of the decade, the company said. This is set to bring higher spending power to consumers, and HUL wants to ensure it is well-positioned to tap them through premium products.
The company aims to achieve double-digit earnings per share or EPS growth, on the back of top-line performance and premiumization. Currently, 10 of its brands—Surf Excel, Dove, Vim, Pond’s, Lakme, Lux, Pears, Brooke Bond, Horlicks, and Kissan—sit at the “sweet spot” of premuimization and are positioned for growth in premium categories, it said in the presentation.
HUL reported a 2.5% year-on-year (y-o-y) jump in fiscal 2024 turnover to ₹59,579 crore. Its profit after tax rose 1.5% y-o-y to ₹10,114 crore, while volumes grew 2% y-o-y.
Shares of the company closed at ₹2,496.25 on Friday at the BSE, up 1.32% from the previous day’s closing.
Changes underway
The move comes as the company, ranked among the top for parent Unilever globally, has been making key changes to its business.
Earlier this year, HUL’s parent, the UK-based Unilever Plc., decided to spin off its €7.9-billion ice cream unit by the end of 2025 to focus on its beauty and wellbeing, personal care, homecare, and nutrition businesses.
Also read | HUL’s demand woe is a sticky issue
HUL’s ice-cream segment, featuring brands like Kwality Wall’s, Cornetto and Magnum, will be spun off into a separate listed entity, reflecting its strong growth potential and profitability. In July, HUL exited the water purifier business by divesting Pureit in India, and invested in new-age wellbeing brands such as Oziva.
Last December, the company announced the splitting up of its beauty and personal care business into two separate business units. Other divisions at HUL include food and refreshments, and home care. It competes with companies such as ITC, Tata Consumer Products, and Nestlé India, among others.
HUL, with 19 brands generating over ₹1,000 crore annually, sells across 9 million outlets.
Why the change
Consumer habits are evolving rapidly, the company said, talking about the beauty and wellbeing market in India. Rising affluence is leading to greater opportunity for brands to tap both affluent and aspiring consumers via premiumization.
The company also highlighted the changing retail landscape with a majority of consumers discovering brands online via social media platforms. Consumers are also willing to try new products and formulations moving beyond the regular soaps and shampoos, prompting the company to “disproportionately invest” behind categories such as face cleansing, sun care and serums as well as launch push global brands in India.
Within its personal care portfolio that consists of categories such as oral care, soaps and shampoo and deodorants, the company already has four over ₹1,000-crore brands such as Pears and Lux. It will launch more grow categories such as body washes and deodorants.
Meanwhile, commenting on its foods and refreshment business, HUL said consumers moving from loose to branded foods coupled with demand for greater convenience, health products and more premium packaged foods will drive future growth.
Also read | Urban blues now haunt HUL; hopes high on rural
It plans to, for instance, scale brands such as Horlicks Plus and Hellmann’s mayonnaise. HUL sells tea, coffee, health food drinks and ketchups—the segment reported revenue of Rs15,292 crore in fiscal 2024, or 25% of its overall revenues in the fiscal.
The company also unveiled its “Winning in many Indias” 2.0 strategy. Dubbed ‘Wimi’, it classifies India as 16 consumer clusters to provide insights into product development and marketing. Wimi will now focus on 100 cities with an eye on “affluent agglomerations”.
The company’s plans come as growth in the broader FMCG market has slowed down on account of slower off-take in urban markets. In the short-term, HUL expects demand trends to be stable with low-single digit price growth, if commodity prices remain where they are. In the long-run, it will continue to invest in brands and innovations, capex for growth and productivity, and spend on bolt-on acquisitions or acquisitions that are a “strategic fit” to its business in India.
HUL sells over 50 brands in India. E-commerce already contributes to 7% of HUL’s business in India; in beauty and wellbeing the contribution is almost double.
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First Published:29 Nov 2024, 02:25 PM IST
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