Now betting on e-commerce: HUL chief executive
CEO Nitin Paranjpe attributes growth to HUL’s focus on emerging categories and the success of existing strategies
Even though modern retail and consumer discretionary spending slackened in a weak Indian economy, Hindustan Unilever Ltd (HUL) posted a 16% growth in sales for the year ended March. In an interview on the sidelines of the March quarter earnings press conference, chief executive officer (CEO) and managing director Nitin Paranjpe attributed the growth to the company’s focus on emerging categories and the success of existing strategies. Edited excerpts:
You managed to put up a good show in a slowing market.
We are pleased with both results for the (full fiscal 2013) year and (the January-March) quarter. They indicate that our strategy to deliver growth is playing out. It is based on doing two things. First, making sure that we are managing the business for the current term. The second part is to future-proof this business by developing a point of view on India and Indians of tomorrow, and developing a set of capabilities that will position us well as this new future emerges.
Could you elaborate on that?
Our position on consumers and trends has simply been that we are going to see an India where people will have more money, where consumption is changing and so are aspirations. We will see growth in consumption over a period of time and this will spawn many new segments and categories, which will offer benefits to consumers. We have seen some of that play out this year.
But there is a consumer demand slowdown as well. How has it affected HUL?
That has been true for the last couple of quarters. However, we remain convinced that the medium- to long-term future remains strong for consumption. Some of the slowdown is due to the overall environment that we find ourselves in. Consumer sentiment has, therefore, got impacted in the recent past. Inflation levels also have been stubbornly high and this has impacted consumers in the short term.
I hasten to add the slowdown is from higher levels of growth. It doesn’t mean that categories and markets are not growing. Second, growth rates may seem lower due to the dynamics between price and volume. Right now, we have a benign cost environment as a result of which price increases in our categories have been relatively low.
Also, some of the price increases we took a year ago have annualized. It is a a combination of these things which is tempering and moderating consumer demand, particularly in discretionary categories, (such as) packaged foods and skincare, where we are seeing some softening.
Emerging categories in personal care have become a Rs.1,000 crore market now. What does this mean in terms of portfolio changes?
Our portfolio has changed completely in the last three-four years. Look at brands such as Vaseline. Two years ago, we just had a petroleum jelly. Today look at the range—lotions, skin-lightening products, a range for men. Just totally transformed. Likewise with Ponds, which was just a cold cream and talc. Today, you have the anti-ageing products, premium skin-lightening products, and the finest of offerings that we have anywhere in the world. Take new categories that we are developing. A few years ago, we did not have face washes. Now we have almost 50 packs across the portfolio across brands and this sort of transformation is happening everywhere, not just in personal care. There are categories of the future everywhere, whether it is laundry with fabric conditioners or tea with tea bags.
E-commerce and integrated retail are the new emerging themes in the consumer space. Are you planning to develop these channels in India?
Almost 10 years ago, we called out modern trade as one of our categories of the future even before anyone could predict that it will become so large. We trained our people, sent them overseas to work with Walmart and Tesco, and we built the depth and understanding of the channel to make it as strong as our traditional channel. Modern trade now contributes close to 15% of our overall revenue. We have now called out e-commerce and feel it will become large in the future. We are building capabilities and benefiting from Unilever’s experience in developed markets.
You managed to put up a good show in a slowing market.
We are pleased with both results for the (full fiscal 2013) year and (the January-March) quarter. They indicate that our strategy to deliver growth is playing out. It is based on doing two things. First, making sure that we are managing the business for the current term. The second part is to future-proof this business by developing a point of view on India and Indians of tomorrow, and developing a set of capabilities that will position us well as this new future emerges.
Could you elaborate on that?
Our position on consumers and trends has simply been that we are going to see an India where people will have more money, where consumption is changing and so are aspirations. We will see growth in consumption over a period of time and this will spawn many new segments and categories, which will offer benefits to consumers. We have seen some of that play out this year.
But there is a consumer demand slowdown as well. How has it affected HUL?
That has been true for the last couple of quarters. However, we remain convinced that the medium- to long-term future remains strong for consumption. Some of the slowdown is due to the overall environment that we find ourselves in. Consumer sentiment has, therefore, got impacted in the recent past. Inflation levels also have been stubbornly high and this has impacted consumers in the short term.
I hasten to add the slowdown is from higher levels of growth. It doesn’t mean that categories and markets are not growing. Second, growth rates may seem lower due to the dynamics between price and volume. Right now, we have a benign cost environment as a result of which price increases in our categories have been relatively low.
Also, some of the price increases we took a year ago have annualized. It is a a combination of these things which is tempering and moderating consumer demand, particularly in discretionary categories, (such as) packaged foods and skincare, where we are seeing some softening.
Emerging categories in personal care have become a Rs.1,000 crore market now. What does this mean in terms of portfolio changes?
Our portfolio has changed completely in the last three-four years. Look at brands such as Vaseline. Two years ago, we just had a petroleum jelly. Today look at the range—lotions, skin-lightening products, a range for men. Just totally transformed. Likewise with Ponds, which was just a cold cream and talc. Today, you have the anti-ageing products, premium skin-lightening products, and the finest of offerings that we have anywhere in the world. Take new categories that we are developing. A few years ago, we did not have face washes. Now we have almost 50 packs across the portfolio across brands and this sort of transformation is happening everywhere, not just in personal care. There are categories of the future everywhere, whether it is laundry with fabric conditioners or tea with tea bags.
E-commerce and integrated retail are the new emerging themes in the consumer space. Are you planning to develop these channels in India?
Almost 10 years ago, we called out modern trade as one of our categories of the future even before anyone could predict that it will become so large. We trained our people, sent them overseas to work with Walmart and Tesco, and we built the depth and understanding of the channel to make it as strong as our traditional channel. Modern trade now contributes close to 15% of our overall revenue. We have now called out e-commerce and feel it will become large in the future. We are building capabilities and benefiting from Unilever’s experience in developed markets.
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