New Delhi: India could become the largest market for Unilever as affluent Indian households, a young population, and improved retail penetration drive consumption, said Sanjiv Mehta, chairman and managing director of Hindustan Unilever Ltd (HUL), the local unit of the Anglo-Dutch company.
“For Unilever, India is the largest market in volume terms and the second largest in value terms. We clearly see a day when we would become the largest market for Unilever in the world," Mehta said at an industry event in New Delhi on Wednesday.
Mehta said the company is betting on India’s changing consumption pattern as more low-income or poor families manage to escape their circumstances and move up the income scale, fuelling consumption of products ranging from soaps to packaged foods. Rising affluence is key to Unilever’s growth in India, he said.
India is still a large value market with a large number of households still spending on low-priced products such as ₹5-10 packets of biscuits and sachets of shampoos.
“The big inflection point happens when a large chunk of people move from the bottom of the pyramid to the lower middle class and from the middle class to the upper end of the middle class. Today one in four...could be termed as upper middle class and above but by 2030 we clearly see one in two being in that area," he said.
India is also a large general trade market, which means that households still visit local stores to buy their daily needs.
“In India, we have 10 million stores, so for 100 million people food on the table depends on kirana or neighbourhood stores. We cannot afford to let them bypass us. Today technology allows us to connect them and bring the science of retail to them," Mehta said.
HUL has been harnessing data over the past few years to better predict, capture, and fulfil consumer demand. Some of these initiatives include programmes such as ‘Humarashop’, an e-commerce platform that helps neighbourhood kirana stores to sell their products online.
The maker of Lux soaps and Kissan jams and ketchup is the country’s largest packaged consumer goods firm. For the year ended 31 March, HUL generated sales of ₹38,224 crore.
Mehta’s statement on Wednesday reiterates former Unilever chief executive Paul Polman’s comments on the Indian market. In 2017, Polman said India could well be on track to become the company’s largest market. Polman, however, did not specify a timeline.
Interestingly, Mehta’s comments come at a time when Indian households are shying away from spending on everything from cars to biscuits amid a general slump in demand. This has hurt packaged consumer goods makers.
HUL, which reported its September quarter earnings earlier this week, said it has not seen an uptick in demand.
For the September quarter, HUL’s revenue rose 6.7% to ₹9,852 crore from a year earlier. Sales volume rose just 5% in the period as demand cooled, especially in rural India. “On an overall market basis, the slowdown has happened more in rural areas than in urban. During good times, rural growth used to be 1-1.5 times the urban in the last four-five years. Now it has come down to half of the urban growth," he said.
Despite the challenging market environment, HUL has delivered a resilient performance and sustained margin improvement, Mehta said, adding that the near-term outlook for demand in rural India continues to remain challenging.
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