The worst is behind, says Hindustan Unilever (HUL)'s senior management announcing the company's Q2FY21 results at a virtual press meet. The company reported a 3 per cent growth (the revenue growth including the GSK business was at 16 per cent) vis-a-vis a degrowth of 7 per cent in the June quarter. Its net profit increased by 9 per cent in the September quarter. "I believe things will get better," says Sanjiv Mehta, Chairman and MD, Hindustan Unilever. He is particularly happy that the health, nutrition and hygiene portfolio which contributes 80 per cent to the FMCG major's revenue, has grown by 10 per cent in Q2FY21. "There is clearly an improvement happening. The business is picking up momentum," he further adds.
The discretionary products category (Elle18, Lakme, Axe, Vaseline), which contributes 15 per cent to the revenue de-grew by 25 per cent, while out of home (water, ice cream, food solutions), which also contributes 5 per cent to the overall revenue, also de-grew by 25 per cent. Mehta says that the discretionary business has also bounced back as the degrowth in the earlier quarter was 45 per cent. With a 19 per cent growth (it had degrown by 4 per cent in the previous quarter), HUL's food and refreshment business has been the front-runner in the Q2FY21. The beauty (-12 per cent) and home care businesses after degrowing in the earlier quarter have stabilised at 0 per cent and -1 per cent respectively. "We believe that there is room for optimism and we are well positioned to leverage India's FMCG opportunity," says Srinivas Pathak, CFO, HUL.
The FMCG major in the last quarter came up with 120 SKU innovations and has also increased its ad spends by Rs 340 crore (it had cut down ad spends in the previous quarter). HUL has also seen a lot more resilience in rural markets as opposed to the urban. "The increased outlay and rate of MNREGA, the free food scheme and the hike of MSP rates have surely helped in improving the resilience of rural India," points out Mehta. He is skeptical about growth in urban consumption over the next few months given the high rate of unemployment and reverse migration.
While Mehta surely believes that the worst is behind, he prefers to be "cautiously optimistic" given the fact that a vaccine for COVID-19 is still a while away.