Despite the second COVID-19 wave playing spoilsport and commodity inflation at an all-time high, India's largest FMCG company, the Rs 47,438-crore Hindustan Unilever (HUL), reported a sales growth of 12 per cent, and an underlying volume growth of 9 per cent in the first quarter of FY22. The company's net profit grew 10 per cent, while its EBITDA margin stood at 24 per cent during Q1.
Three of its core categories, cleansing, tea and laundry, bore the brunt of soaring palm oil and crude and tea prices.
However, Ritesh Tiwari, HUL chief financial officer, says the FMCG giant is confident of its ability to navigate the inflated commodity costs. "We have embarked upon a massive saving drive. Today, we generate 8 per cent of our turnover to savings."
Tiwari claims the company has been aggressively pushing for competitive volume growth. "There is a lot of scope for penetration and consumption, and we will continue to drive competitive volume growth," he adds.
The biggest learning for all FMCG companies during the first wave of the COVID-19 pandemic was to build their digital muscle. HUL was no exception.
In the last one year, it has not just got more than half a million retailers to order digitally through its Shikhar app, sales on its direct-to-consumer app, UShop and ecommerce have also doubled. "Over 10 per cent of our sales in the June quarter came from digital," says Tiwari.
The rural markets showed more resilience than urban, yet again. This was despite the second wave impacting rural India much more than it did last time round. "The month of May was tough, there were restrictions as COVID-19 cases mounted and mobility got impacted. In June, the situation improved and in July, the FMCG business was back to where it was in March. This turnaround has been led by rural," explains Tiwari.
So how is HUL gearing up for the third wave of the pandemic? HUL Chairman and MD, Sanjiv Mehta, says he is cautiously optimistic. "The government policy of localising restrictions in the second wave has worked. There was no panic buying and the supply chain was functional too. This helped us to meet demand. In case of a third wave, I am sure this model would continue. Also, if we are able to ramp up vaccination from the current 4-5 million per day to 7-8 million, even if the third wave comes, the impact will be lesser. That gives us optimism."
Unilever globally has divested its tea portfolio, but Mehta says the Indian arm has no intention of getting rid of its tea portfolio. "We are market leaders and very proud of our business."
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