HUL to focus more on premium brands

29 Apr 2024 , 10:53 AM

The managing director of Hindustan Unilever, Rohit Jawa, stated that while HUL is shifting focus to investing disproportionately on bigger and more premium brands, he is not content with the company’s volume growth. He also said that the company has not lost its pricing power.

“Our goal is to increase volume rather than have it remain at 2%. We’ll go where the growth is and work hard towards that, not wait for the macros to change,” Jawa told ET, noting that HUL will profit from tailwinds like better macroeconomic and the agri-economy.

However, we won’t be waiting around; instead, we’ll take action as soon as we can. That will only strengthen us further because we are increasingly investing more money and human resources into high-growth spaces, channels, and formats in an effort to chase more volume and variety.” HUL saw a 6% decline in net profit for the March quarter, despite a 6% increase in revenue.

The company claims that the carry-forward of price reductions in highly price-sensitive segments like laundry and soaps is the reason for the most recent quarterly performance of no pricing growth. “There are parts of our business where we raise prices not linked to inflation because there’s higher desirability and better quality,” the company says. We must match price points and reduce prices in some categories because customers require a sweet spot in order for us to continue being viable. We continue to earn healthy margins from it. Thus, the issue is not one of insufficient pricing power.”

Companies have been cutting prices over the last four quarters in response to consumer demand for less expensive goods, but this tactic hasn’t helped increase sales.

“Over the past two to three years, all consumer goods industries had to pass on a considerable amount of inflation, which primarily affected lower-income and rural households. But during that time, the premium end of the market held strong. The market is gradually getting back to normal. Now that volumes are returning, rural areas are progressively getting better. It will most likely occur in the medium term, according to Jawa, but it’s still not where it was when rural areas were expanding more quickly than metropolitan markets.

With the goal of investing in and pursuing high growth areas, it intends to restructure its 90-year-old legacy business. Its primary objective, for example, is to concentrate on 19 major brands that account for 80% of sales and have annual sales of over ₹1,000 Crore. The company’s second focus is on market-making and premiumization, which combined make up 25% of its total revenue and have grown at a double-digit rate.

“More than two thirds of our media budget and innovations will go toward these categories, representing a disproportionate investment. As a result, we are strongly inclined to follow the money, the people, and the areas of growth. That is crucial right now and will change the business to reflect the direction of the new India, added Jawa.

The consumer products company stated that it believes there is more of a relationship between what the government does in rural regions and elections than there is between consumption and either. Jawa emphasized how important it is for the government to focus on employment, minimum support prices, and capital expenditures in order to bolster the third-largest economy in Asia and make it an attractive environment for global companies, like HUL, to conduct business.

“The policies are successful and supportive of business. The nation’s healthy GDP is mostly driven by government capital expenditures. Jawa stated, “There has never been a better moment to be here developing brands and enterprises.

For feedback and suggestions, write to us at [e-mail]