HUL sees muted sales growth in Q2 amid increasing competition
The FMCG major reports subdued growth in its revenue and profits despite improving demand scenario
- Oct 19, 2023,
- Updated Oct 19, 2023 8:04 PM IST
Despite gradual recovery in demand for fast-moving consumer goods (FMCG) items, the country’s largest player in this space, Hindustan Unilever Ltd (HUL), reported muted sales growth in the July-September quarter. During the period, the Mumbai-based FMCG major reported a meagre 3.2 per cent rise in its net sales to Rs 15,340 crore, while its net profit declined marginally to Rs 2,657 crore.
According to the company's management, increased competitive intensity during the quarter impacted growth. While its home care business that contributes 35 per cent towards its top-line grew by 3 per cent, largest segment beauty and personal care (38 per cent of the sales) expanded 4 per cent year-on-year. While foods & refreshments business that rakes in a quarter of its sales, grew 4 per cent over the same quarter previous year.
HUL, which rules several categories of the local market with its array of products like Surf and Wheel detergent powders, Lifebuoy and Lux soap bars and Ponds beauty products, managed to grow its volumes by 2 per cent in the September quarter. In comparison, volumes in the overall FMCG market grew by 8 per cent - with urban growing by about 10 per cent y-o-y and rural reporting 7 per cent volume growth.
“In home and (beauty and) personal care which contributes 75 per cent of towards our business, our growth has been competitive. We have gained market share in more than 75 per cent of our portfolio in volume terms. In terms of competitiveness, we performed strong but there has been some loss in share in the mass segment,” Rohit Jawa, chief executive officer & managing director of HUL told Business Today. According to him, with the market demand recovering gradually, the overall demand scenario may remain flat in the current (October-December) quarter.
Ritesh Tiwari, Chief Financial Officer of the FMCG major said that to counter the growing competition from smaller brands HUL increased its ad spends during the quarter to the tune of Rs 700 crore - which resulted in 420 basis points increase over last year in its A&P expenses (advertisement and promotion). During the quarter, HUL’s A&P expenses as percentage of its sales stood at 11.2 per cent, compared to 7 per cent in July-September 2022.
“We improved our gross margin by 700 basis points over the corresponding quarter last year. (However) there are concerns. As we know, we are exiting the monsoon season at 6 per cent lower levels (compared to the long-term average). It is not yet clear what impact that would have on kharif crop yield. Overall, the outlook for the festive season is positive,” he replied to BT’s queries.
Despite gradual recovery in demand for fast-moving consumer goods (FMCG) items, the country’s largest player in this space, Hindustan Unilever Ltd (HUL), reported muted sales growth in the July-September quarter. During the period, the Mumbai-based FMCG major reported a meagre 3.2 per cent rise in its net sales to Rs 15,340 crore, while its net profit declined marginally to Rs 2,657 crore.
According to the company's management, increased competitive intensity during the quarter impacted growth. While its home care business that contributes 35 per cent towards its top-line grew by 3 per cent, largest segment beauty and personal care (38 per cent of the sales) expanded 4 per cent year-on-year. While foods & refreshments business that rakes in a quarter of its sales, grew 4 per cent over the same quarter previous year.
HUL, which rules several categories of the local market with its array of products like Surf and Wheel detergent powders, Lifebuoy and Lux soap bars and Ponds beauty products, managed to grow its volumes by 2 per cent in the September quarter. In comparison, volumes in the overall FMCG market grew by 8 per cent - with urban growing by about 10 per cent y-o-y and rural reporting 7 per cent volume growth.
“In home and (beauty and) personal care which contributes 75 per cent of towards our business, our growth has been competitive. We have gained market share in more than 75 per cent of our portfolio in volume terms. In terms of competitiveness, we performed strong but there has been some loss in share in the mass segment,” Rohit Jawa, chief executive officer & managing director of HUL told Business Today. According to him, with the market demand recovering gradually, the overall demand scenario may remain flat in the current (October-December) quarter.
Ritesh Tiwari, Chief Financial Officer of the FMCG major said that to counter the growing competition from smaller brands HUL increased its ad spends during the quarter to the tune of Rs 700 crore - which resulted in 420 basis points increase over last year in its A&P expenses (advertisement and promotion). During the quarter, HUL’s A&P expenses as percentage of its sales stood at 11.2 per cent, compared to 7 per cent in July-September 2022.
“We improved our gross margin by 700 basis points over the corresponding quarter last year. (However) there are concerns. As we know, we are exiting the monsoon season at 6 per cent lower levels (compared to the long-term average). It is not yet clear what impact that would have on kharif crop yield. Overall, the outlook for the festive season is positive,” he replied to BT’s queries.