
New products, innovations earn HUL ₹900 cr in 2 years

Summary
The company launched brands like Acne Squad, Find Your Happy Space and Novology, among others. However, HUL's chairman Nitin Paranjpe flagged ‘short-term’ challenges due to inflation and supply chain disruptions caused by the pandemic.New Delhi: Packaged consumer goods firm Hindustan Unilever Ltd on Monday said it clocked ₹900 crore in incremental revenue over the past two years, as it strategically intensified its digital-first launches in response to rising competition in India’s fast-moving consumer goods market. The company management said innovations and new product offerings played a significant role in achieving this feat.
“Talking about innovations, HUL has produced over ₹900 crore of incremental turnover coming from products which did not exist and completely new offerings (were) brought into the market, over the last two years. Many new brands, some digital-only brands, some are catering to new segments in beauty, which are coming up," Nitin Paranjpe, chairman, HUL, said, addressing shareholders at the company’s 90th annual general meeting.
The company launched brands like Acne Squad, Find Your Happy Space, and Novology, among others, recently. Aided by the Agile Innovation Centre which was opened in 2022. The company has been driving its data- and technology-led innovations at scale, and that too, at a brisk pace.
Commenting on near-term demand and commodity outlook, Paranjpe flagged “short-term" challenges while maintaining that within 6-24 months, it could start reaping benefits of lower commodity prices, and volumes could rebound. To be sure, most consumer goods makers faced unprecedented inflation with the pandemic disrupting supply chains. The Russian invasion of Ukraine further delayed global economic recovery. High prices also had an adverse impact on consumer demand. In FY23, the FMCG market for categories in which HUL operates grew 8%, while volumes fell 4% from a year earlier.
“In the short-term, we will continue to see uncertainty and volatility, as we move from a period of extreme high inflation that required us to take high price increase to a position where pricing will taper off; in some cases, we have even begun bringing prices down modestly. What that means is that within 6, 12, 18 or 24 months, balance between volume growth and price increases will undergo a change. We will see less pricing and much more volume growth," Paranjpe said.
While in the last two financial years, HUL saw 30% inflation, it took price hikes of 18%, the management had said earlier this year. HUL reported volume growth of 5% in FY23.
However, as commodity prices come off their peaks, HUL has initiated price cuts. “How it will transition and in what manner, time will tell, but your company is extremely conscious and aware of this transition and is keeping an eye and making sure we remain competitive in the market. It will also mean, as we move forward, the nature of growth will undergo a change between urban and rural markets," he added.
Commenting on margins, Paranjpe said it will be “restored". “Over coming years, we will restore our gross margins which had got compromised in the last two years…we will take right measures in order to do so." HUL reported a net profit margin of 17.1% in FY23.
HUL often reflects India’s broader consumption landscape, as its goods reach nine out of 10 households. “We have over 46 million relatively affluent households. Share of the middle class with annual income of ₹5-30 lakh doubled to over 30% between 2004-05 and 2021-22, and is projected to double to over 60% by 2047, That will help consumption demand to rise," he said.
“Second, is urbanization. The famous ‘India’s soul’ that lives in its villages is crossing over to cities, in search of opportunities and a better standard of living. In fact, by 2030, more than 100 cities are expected to have populations over one million. At the same time, we see tremendous growth in tier 2, 3 and 4 towns and in semi-urban India, what we address as ‘Bharat ke Shehar’, which provide a massive and still untapped opportunity for businesses," he said.
Changing demographics have a bearing on how companies such as HUL sell their products to consumers.
In fact, Paranjpe also highlighted the emergence of a “rapidly growing" nuclear family structure. “Studies show that younger decision makers in nuclear families spend 20% to 30% more per capita than older ones in joint families, leading to higher consumption," he said.
In his speech, Paranjpe cited India as the ‘silver lining’ in a challenging era marked by low growth, low investment and low co-operation.