Overview

Hindustan Unilever Limited (NSE: HINDUNILVR) is India's largest Fast Moving Consumer Goods company with a heritage of over 80 years in India. On any given day, nine out of ten Indian households use its products to feel good, look good and get more out of life – giving it a unique opportunity to build a brighter future.1

HUL works to create a better future every day and helps people feel good, look good and get more out of life with brands and services that are good for them and good for others.

With over 35 brands spanning 20 distinct categories such as soaps, detergents, shampoos, skin care, toothpastes, deodorants, cosmetics, tea, coffee, packaged foods, ice cream, and water purifiers, the Company is a part of the everyday life of millions of consumers across India. Its portfolio includes leading household brands such as Lux, Lifebuoy, Surf Excel, Rin, Wheel, Fair & Lovely, Pond’s, Vaseline, Lakmé, Dove, Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe, Brooke Bond, Bru, Knorr, Kissan, Kwality Wall’s and Pureit.

The Company has about 21,000 employees and has sales of INR 38,273 crores (the financial year 2019-20). HUL is a subsidiary of Unilever, one of the world’s leading suppliers of Food, Home Care, Personal Care and Refreshment products with sales in over 190 countries and an annual sales turnover of €52 billion in 2019. Unilever has over 67% shareholding in HUL.

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Brands

The company make some of the best known brands in the world, and those brands are used by 2 billion people every day.2

Foods & Refreshment

  • Boost
  • Cornetto
  • Horlicks
  • Horlicks Cardia+
  • Horlicks Growth+
  • Horlicks Lite
  • Horlicks Protein+
  • Junior Horlicks
  • Knorr
  • Lipton
  • Magnum
  • Mother's Horlicks
  • Women's Horlicks
  • Bru
  • Annapurna
  • Brooke Bond 3 Roses
  • Brooke Bond Red Label
  • Brooke Bond Taaza
  • Brooke Bond Taj Mahal
  • Kissan
  • Kwality Wall’s

Beauty & Personal Care

  • Axe
  • Dove
  • Lifebuoy
  • Love Beauty and Planet
  • Lux
  • Pepsodent
  • Pond’s
  • Sunsilk
  • Sure
  • TRESemmé
  • Vaseline
  • Aviance
  • Citra
  • Breeze (soap)
  • Clear
  • Close Up
  • Fair & Lovely
  • Lakmé
  • Pears
  • TIGI
  • TONI&GUY
  • Brylcreem
  • Clinic Plus
  • Elle 18
  • Hamam
  • Indulekha
  • Liril
  • Lever ayush
  • Rexona
  • Pure Derm

Home Care

  • Cif
  • Comfort
  • Active Wheel
  • Domex
  • Rin
  • Surf excel
  • Vim
  • Sunlight
  • Love & Care

Water Purifier

  • Pureit

Industry Overview

Hindustan Unilever Limited operates in the Fast-Moving Consumer Goods (FMCG) industry which continues to be one of the biggest structural opportunities that its country offers. Despite being one of the fastest growing markets globally for FMCG products, the per capita FMCG consumption in India is still amongst the lowest in the world, giving the industry a long runway for growth. The complexity and volatility continue to rise. In the last quarter of financial year 2019-20, Hindustan Unilever has seen an unprecedented global breakout of the COVID-19 pandemic leading to a humanitarian crisis, lockdown across many countries and a significant economic fallout. Around the world, growth has decelerated markedly. In India, the economic impact of COVID-19 is trickling in on the backdrop of an already challenging macro-economic environment. In 2019, the company also witnessed some weather disruptions in the form of late onset of monsoon in parts of the country, post-monsoon heavy showers and a delayed winter. Global trade dynamics, volatile commodity cycles and climate concerns continue to increase the uncertainty further. Conditions like these create challenges for companies and categories across the spectrum. On the other hand, new technologies are changing the landscape of the consumer goods market, bringing opportunities for brands and consumers alike. Consumers are shopping through more diverse channels and smaller local brands as well as digital-first brands are increasingly entering the market.3

In this year, before the breakout of COVID-19, the macro-economic environment had been challenging with lower GDP growth rates, liquidity crunch, and peaking unemployment rate. This is reflected in sluggish demand and weakening consumer sentiment. FMCG markets witnessed deceleration from the highs of 2018 with rural markets seeing sharper rate of consumption slowdown than urban markets. Overall, market also saw disparate trends across divisions with discretionary categories like Beauty & Personal Care seeing the biggest adverse impact of slow down, while Home Care and Foods and Refreshment categories being relatively more insulated due to their essential nature.

Government has initiated various measures to boost the economy including direct benefit transfer, increased allocations to key sectors like infrastructure, agriculture, MSMEs etc. Reserve Bank of India has cut repo rate by 185 bps on a cumulative basis this year to support the aggregate demand and private investment as well as ease liquidity given the COVID-19 situation. The reduction in corporate tax rate is a big boost to the industry; it makes India much more competitive globally and should accelerate investments in the economy. The slew of policy measures and announcements are welcome and signal the Government’s strong commitment to arrest and reverse the slowdown.

The company manage its business with agility and resilience to deliver consistent, competitive, profitable and responsible growth. The company continue to focus on strengthening the core, accelerating premiumisation and driving market development. The company has a large portfolio of strong brands that straddles the price-benefit pyramid. Notwithstanding the macro-economic environment, the company continues to invest behind its brands and drive innovation. The company also keep harnessing its execution capabilities by sharper in-market activations, differentiated consumer insights and improved operational efficiencies.

During the year, the company, in line with its commitment to participate in the ‘Make in India’ initiative of the Government of India, decided to form a new 100% Subsidiary to leverage the growth opportunities in a fast-changing business environment and this will help the company in becoming more agile and customer-focused.

Societies are becoming more diverse and fragmented. Hindustan Unilever is seeing, for example, growing splits between generations, rising affluence in the middle-income tier, growing young and working population and changing family structures. As people increasingly interact with each other and with businesses online, consumers are making more decisions based on their values. Digitally connected shoppers are over-indexed on consumption across all categories and especially in niche categories. They are also using both online and offline channels to find better, more personalised products and services more easily and quickly. In this landscape, brands have to be more visible, convenient and part of the conversation – taking a stand and action on the issues people care about. The fragmentation of consumer expectations and retail channels creates both challenges and opportunities for companies like ours.

Hindustan Unilever is cognizant of the non-linear consumer journey today that traverses across different channels as consumers go through the lifecycle of awareness-consideration-purchaseexperience-repeat-loyalty. Hence, Hindustan Unilever is focused on creating an end-to-end solution for a seamless experience and route-to-market disruption. The company continue to stay close to its consumers. The company continue to put unequivocal focus on building brands with purpose that take a stance and make a positive difference to the society and environment. Underpinned by its Compass belief that brands with purpose grow, its brands are on a journey of becoming purposeful such as Lifebuoy preventing life-threatening diseases, Domex improving sanitation, Red Label promoting inclusivity and togetherness and Wheel empowering women. This enables its brands to connect with consumers at a deeper emotional level.

The beginning of 2020 has witnessed the global spread of COVID-19, i.e. coronavirus. Global threat from COVID-19 is continuing to grow, and at a rapidly accelerating rate. Governments in many countries announced lockdowns and asked people to stay indoors. Around the world, these coronavirus lockdowns have driven professional and social life out of the physical world and into the virtual realm. The economic fallouts of this is still difficult to assess as the situation is still evolving.

In these unprecedented times, Hindustan Unilever is falling back on the fundamentals to drive agility and responsiveness across its value chain. Hindustan Unilever has structured its response around five key imperatives, drawing strength from its values and guiding its strategic framework. The five workstreams that are serving as a foundation of its business and serving its multiple stakeholders during this crisis are – People, Supply, Demand, Community and Cost & Cash.

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Business Overview

Beauty & Personal Care

In the Beauty & Personal Care (BPC) division, Hindustan Unilever has a wide-spread portfolio of more than 900 Stock Keeping Units (SKUs) spread across one or more of the categories with many products tailored for the 14 consumer clusters that Hindustan Unilever has identified in India. Hindustan Unilever is ensuring that each product portfolio straddles the pricebenefit pyramid so that the brands are accessible and aspirational across the length and breadth of the country. The penetration and consumption of the categories in which the company operate, have a healthy headroom to grow, indicating the long-term potential in the BPC market.

The BPC category being discretionary in nature is more affected on account of the challenging macro-economic environment and weather disruptions. Within the category, Personal Products have delivered good growth this year. Hindustan Unilever is working on its Skin Cleansing portfolio to strengthen the competitiveness by taking decisive interventions in the areas of product, proposition, pricing and communication. The company's Skin Cleansing brands command a strong consumer salience and Hindustan Unilever is confident that its ongoing and planned interventions will spur growth in this segment.

The company continue to focus on key areas – strengthening core brands, accelerating premiumisation of the portfolio and driving market development at scale. The company continued to strengthen the core by driving penetration of Fair & Lovely, Pond’s, Sunsilk, Dove and Close Up to name a few. In the Hair Care category, Dove remains India’s No. 1 Hair Care brand. The company launched new variants in Dove and Sunsilk in line with its continued focus on naturals trend in this category. In Skin Care, Fair & Lovely continues to deliver healthy growth. In 2019, Fair & Lovely combined the new facial glow trends along with enhanced technology to arrive at a “High Definition (HD) Glow” product line meeting consumer needs. The company also launched Fair & Lovely soap during the year and the initial response has been good. The company continue to leverage data analytics to reach the right places with right messaging and to customise media mix to each cluster for recruiting more users. Each of its big brands is also ensuring availability in access/recruiter packs in the right channels to continue to grow penetration and increase usage.

The company continue to work on making its core brands more aspirational and driving premiumisation by impactful innovations, understanding the needs of consumers and scaling the new benefit spaces. The company's Skin Care growth was led by premiumisation across the portfolio. In Skin Cleansing, Dove, Pears and liquid portfolio led the premiumisation journey. On Pears, a new transparent bar range inspired from natural ingredients was launched through use of proprietary ‘ultra-low TFM (total fatty matter)’ technology. This range is environmentally more sustainable, gentler with ‘0% paraben’ and packaged in 100% recyclable cartons. In Hair Care, Dove and Indulekha led the charge on premiumisation. The company launched TRESemmé sachet to drive more users into the category and accelerate premiumisation. Lakmé has been at the forefront of bringing on-trend innovations in the Cosmetics and Skin Care segments. Lakmé remains India’s No. 1 cosmetics brand. Some of the consumer-focused innovations the company launched this year include the Matte revolution – a bold and beautiful premium range of makeup which drove growth in the category and a 3D makeup range. Lakmé Fashion Week, the most digitally followed fashion event in the world, which has been a marquee event for the brand, continued to gain in size and scale and helped enhance brand equity with consumers. The company also launched Love, Beauty & Planet, a premium brand across segments in Beauty & Personal Care. The brand stands for its belief that beauty and its environmental impact are inseparable and while the company make you feel more beautiful, the company give a little love to its planet. It is made of sustainably sourced ingredients, is vegan, has no parabens & colourants and has a packaging made of recyclable plastic.

Hindustan Unilever is energised with the opportunity of leading market development across categories through access packs and targeted communication. The company led the charge in face cleansing through Pond’s, Fair & Lovely and Lakmé. Rexona, its leading antiperspirant brand continues to drive market development. Hindustan Unilever is also leveraging the powerhouse of its brands such as Fair & Lovely, Pond’s, Brylcreem and Axe to capture the opportunities in the male grooming segment. In Skin Care, advanced moisturising and skin refreshing ranges were launched by Lakmé to meet evolving consumer needs

The company further strengthened its ‘naturals’ strategy through the three-pronged approach. The master brand LEVER Ayush continued its momentum in the focused market - South India. Ayush further strengthened the portfolio by launching LEVER Ayush Bhringaraj hair oil. The company continue to build specialist brands like Indulekha and Hamam. Indulekha has delivered robust performance, with a unique product formulation and distinctive packaging and launch of new variant – Neemraj Oil in the year. The third leg of its naturals strategy involves various natural variants within its existing portfolio of products like Lifebuoy neem and turmeric, Dove and Sunsilk naturals in Hair Care, and Aloe vera range in Vaseline.

The company continue to focus on the key growth channels of Modern Trade, e-Commerce and Health & Beauty. The company's premiumisation journey is accelerated through the touch and feel benefits of Modern Trade. This channel also helps it in educating consumers on the premium benefit proposition through assisted selling and counters. Hindustan Unilever is also leveraging the fastest growing channel of e-Commerce by making all its brands available across platforms and playing a differentiated portfolio strategy curated for this channel. The Health & Beauty channel continues to grow ahead of the market and Hindustan Unilever has strengthened its position in this channel with sharply differentiated portfolio, differential distribution models and future-fit capabilities.

Home Care

The company's Home Care business sustained its robust volume-driven and profitable growth during the year in both Fabric Solutions and Home and Hygiene. The consistency and resilience of its performance in Home Care, in what has been a challenging market, reflects the discipline and rigour with which Hindustan Unilever is managing its business and executing its strategy The premiumisation opportunity in its core categories remains extremely strong in the country. Hindustan Unilever is well-placed to lead this trend with a strong portfolio of brands including Surf excel, Rin, Comfort and Vim liquid. On the back of continuing premiumisation with Surf excel and Rin, its Fabric Solutions business has delivered a strong performance this year. Hindustan Unilever is driving access to its premium brands with introduction of low unit price packs. In line with this strategy, the company launched Love & Care, a premium expert care solution tailor made for special fabrics like fine cottons, silk and woollens. In the Life Essentials segment, as well, Hindustan Unilever has sharpened the focus on premium portfolio in line with the evolving needs of consumers. Pureit continues its thrust on winning consumers through value added innovations and channel differentiating products. This year, the company launched Pureit Copper+, an innovation inspired by the age-old tradition of storing water in Copper vessels, which adds goodness of copper to RO purified water.

At the same time, its focus on the mass and popular segment also remains unchanged and the company continue to benefit from a large portfolio that straddles the economic pyramid with strong presence

of brands across the mass, popular and premium segments. Hindustan Unilever has sustained competitive growth in the mass segment led by Wheel. The year also saw the strategic relaunch of Rin Matic powders to create affordable solutions for the mid-tier machine segment. The company continue to build strong brand equity with impactful communications and purpose-led engagements.

The company's thrust on building categories of the future with scale continues with even greater momentum. Several actions were taken in detergent liquids and fabric conditioners to make them more accessible to the consumers and drive penetration. New low price and flexible packs were introduced in these categories to make the formats more affordable for the consumers. As a result, Hindustan Unilever has seen strong growth trajectory in Surf excel matic liquid and Comfort fabric conditioner. In Home and Hygiene, Vim is leading market development for dishwash segment by driving adoption of Vim bars in rural India and upgrading existing bar consumers to the liquid format in urban India. Vim liquid and Domex powder continued to perform well by driving trials. Domex toilet cleaner was relaunched with a superior product and long-lasting freshness proposition. The company also delivered significant value improvement on Comfort by landing a unique Biodegradable Active mix.

The company's focus is to build a portfolio of liquid detergents that is spread across the price-benefit map. Surf excel started this journey with the first detergent liquid launch of Matic designed for washing machines and in 2019, the company launched Surf excel Easy Wash liquid into the handwashing segment. This year, the company also launched Sunlight liquid detergent in select geographies and a premium expert care solution range under its new detergents brand, Love & Care. With this liquid portfolio, Hindustan Unilever is not only driving the future formats but also creating a modernised image of its brands in the minds of new-age consumers and thereby, keeping its brands relevant over time. The company also continue to drive the growth of adjacencies i.e. the fabric conditioner category through market development activities and relevant communication to break the barriers of entry into this new category. The company continue the emphasis on building this category of future with launch of Comfort Perfume Deluxe range in select geographies offering longer lasting benefits on fragrances. The company also introduced a unique ancillary product, ‘Magic’ Rinse Powder sachet, which eases the rinsing process by reducing the foam and thereby, requiring less water. This is specially designed to battle the water crisis in areas of Tamil Nadu where people are facing unparalleled challenges. Rin bar was also relaunched in South India, with visual cues. In Home and Hygiene, Vim entered in Dish Wash applicator space, through the launch of Vim scrubber. Hindustan Unilever is building the reach of Vim liquids using digital media and precision marketing to deliver multiple messages to surpass the barriers that consumers may have in adopting this new category. Hindustan Unilever is also adopting a differentiated strategy in toilet cleaners by launching Domex powder in select geographies, which is a unique solution for Indian squat toilets.

Foods & Refreshment

The Foods & Refreshment division delivered yet another year of healthy competitive and profitable growth across categories. The business displayed resilience in the wake of macro-economic headwinds and continued its growth momentum driven by the strategy built on the following four pillars.

The company continue to focus on strengthening the core portfolio through improved innovation, increased penetration and its Winning in Many Indias (WiMi) strategy. In Foods category, the core portfolio of Jams and Ketchup delivered good growth this year. Kissan Ketchup continued its focus on sharper activations basis its differentiated consumer insights and further cemented its market leadership in the segment. The company's deep understanding of consumers and cluster-wise patterns help it to customise its portfolio offering to different consumer tastes and preferences. Kissan range of international sauces which was launched last year saw good traction in the market and is now available nationally. This year also marked the launch of globally loved brand, Hellmann’s Mayonnaise, in Kolkata. In Tea, all its brands continued to focus on serving consumers with superior products at the right price. New advertisements across the brands continued to strengthen their franchise. Taaza continued to upgrade consumers along the quality pyramid by offering superior value at low price points. Fundamental consumer understanding in rural, right price points and targeted communication have been instrumental in the strong growth curve seen by Taaza. The company launched a new communication on Taj Mahal tea to bring alive the brand’s purpose of promoting Indian classical music. In Coffee, the company introduced an improved instant coffee product by leveraging state-of-the-art roasting and extraction

technologies. Staying true to the strategy of Winning in Many Indias, BRU Green Label Nice was launched in South Karnataka which was specifically tailored to the needs of conventional coffee consumers in the region. In the Ice Cream and Frozen Desserts business, its focus on geographic expansion and building a strong innovation funnel continued with even greater momentum. The company rolled out a number of innovations at the top end as well as at the bottom of the pyramid – Cornetto Brownie Silk, Magnum Hazelnut, Sundae Cup, Aamras, Dry fruit Rabri Kulfi, and a new range of tubs in Choco Fudge, Tender Coconut flavours. The newly launched Watermelon stick generated a lot of buzz among kids.

Market development continues to be key for the Foods category. The company continue to invest behind its brands and drive penetration in nascent categories like Jams and Soups. The success of its Ketchup business has been led by the communication aimed at market development, for example, the iconic advertisement on ‘Kissan roll’ - ketchup making the tiffin box interesting. Even in the highly penetrated category like Tea, the company continued its efforts of developing nascent segments of Green Tea and Naturals propositions in Tea category. Red Label and 3 Roses Natural Care Tea, with its differentiated immunity benefit from ayurvedic ingredients, continue to delight consumers. Persuasive communication with strong claims and consistent market development has been leading the charge for growth of these products.

The conundrum its F&R business has been facing is that Hindustan Unilever has a strong existing business; but the company play in relatively slower growing and highly penetrated categories. This has been a driver for its foray into leveraging mergers and acquisitions to expand its portfolio. In this aspect, the last year has been significant with two key transactions: Integration of Adityaa Milk and merger of Nutrition Business of GSK CH. The company successfully integrated the business of Adityaa Milk Ice creams, which has strengthened its geographical presence in the South of India, unlocked physical availability through cabinets expansion in key markets and enhanced its bottom-of-pyramid offerings.

Financial Highlights

On April 30th, 2020 Hindustan Unilever Limited (HUL) announced its results for the quarter ending 31st March 2020.4

The Company’s turnover for the financial year ended 31st March, 2020 was Rs. 38,273 crores as against turnover of Rs. 37,660 crores for the financial year ended 31st March, 2019.

The Profit before tax was Rs. 9092 crores as against Rs. 8,522 crores for the corresponding year. Depreciation / amortization for the year was Rs. 938 crores as against Rs. 524 crores in the corresponding year. Exceptional Items for the period amounted to a loss of Rs. 197 crores as against loss of Rs. 227 crores in the corresponding year.

The spread of COVID 19 impacted the business from mid-March, which culminated into scaling down of operations post the national lockdown. Domestic Consumer Growth declined by 9% with a decline of 7% in Underlying Volume Growth. Reported EBITDA margin reduced by 40 bps (160 bps reduction on comparable basis after adjusting for accounting impact of Ind AS 116). Profit after tax (PAT) was lower by 1%. In this challenging economic context, HUL performance has been competitive with corporate market share gains.

For FY 2019-20, Domestic Consumer Growth was 2% with Underlying Volume Growth of 2%. The company's EBITDA margin improved by 100 bps on comparable basis, PAT (bei)*, grew by 11% to Rs. 6743 Cr. and PAT at Rs. 6738 Cr. was up by 12%. The company sustained its track record of strong cash generation. The Board of Directors have proposed a final dividend of Rs. 14 per share, subject to the approval of the shareholders at the AGM. Together with the interim dividend of Rs. 11 per share, the total dividend for the financial year ending 31st March 2020 amounts to Rs. 25 per share; an increase of 14%.

Demand patterns are changing, and Hindustan Unilever is likely to see an upswing in categories like health, hygiene and nutrition. In the near term, Hindustan Unilever is also likely to see some adverse impact on discretionary categories and out of home channel. Hindustan Unilever has a strong pipeline of relevant innovations and are staying close to consumers to adapt to the emerging demand patterns in the short term and prepare for any structural changes in the medium term. Hindustan Unilever has redesigned its communications to stay relevant to the consumers in the current environment.

HUL Consolidated December 2020 Net Sales at Rs 12,181.00 crore, up 20.57% Y-o-Y 5

January 27, 2021; Reported Consolidated quarterly numbers for Hindustan Unilever are:

  • Net Sales at Rs 12,181.00 crore in December 2020 up 20.57% from Rs. 10,103.00 crore in December 2019.
  • Quarterly Net Profit at Rs. 1,937.00 crore in December 2020 up 19.05% from Rs. 1,627.00 crore in December 2019.
  • EBITDA stands at Rs. 3,017.00 crore in December 2020 up 14.54% from Rs. 2,634.00 crore in December 2019.
  • HUL EPS has increased to Rs. 8.24 in December 2020 from Rs. 7.51 in December 2019.

References

  1. ^ https://www.hul.co.in/about/who-we-are/introduction-to-hindustan-unilever/
  2. ^ https://www.hul.co.in/brands/
  3. ^ https://www.hul.co.in/Images/annual-report-2019-20_tcm1255-552034_1_en.pdf
  4. ^ https://www.hul.co.in/Images/mq-20-results_tcm1255-550931_1_en.pdf
  5. ^ https://www.moneycontrol.com/news/business/earnings/hul-consolidated-december-2020-net-sales-at-rs-12181-00-crore-up-20-57-y-o-y-6404291.html
Created by Asif Farooqui on 2020/06/08 09:40
     
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