Description
It explain the about Industry Trends of FMCG industry, PEST Analysis of FMCG Industry, Competitor Analysis of HUL, SWOT analysis, Company Description, General Information about Hindustan Lever, it's Finance performance, SWOT analysis of HUL and Various Strategies employed.
Hindustan Unilever ltd. Company analysis Products which have a quick turnover, and relatively low cost are known as Fast Moving Consumer Goods (FMCG). FMCG products are those that get replaced within a year. Examples of FMCG generally include a wide range of frequently purchased consumer products such as toiletries, soap, cosmetics, tooth cleaning products, shaving products and detergents, as well as other non-durables such as glassware, bulbs, batteries etc. India?s FMCG sector is the fourth largest sector in the economy and creates employment for more than three million people in downstream activities. Its principal constituents are Household Care, Personal Care and Food & Beverages. The total FMCG market is in excess of Rs. 85,000 Cores. It is currently growing at double digit growth rate and is expected to maintain a high growth rate. FMCG Industry is characterized by a well established distribution network, low penetration levels, low operating cost, lower per capita consumption and intense competition between the organized and organized segments. FMCG index has consistently given good return to investors over the years. Infarct, FMCG index has given a return of 12% in 2011 despite negative returns from Sense. Going forward, HUL and ITC are expected to record good performance, which could lead to positive impact on the valuation of the overall FMCG index. The Rs 85,000-crore Indian FMCG industry is expected to register a healthy growth in the third quarter of 2008-09 despite the economic downturn. The industry is expected to register a 15% growth in Q3 2008-09 as compared to the corresponding period last year. Unlike other sectors, the FMCG industry did not slow down since Q2 2008. the industry is doing pretty well, bucking the trend. As it is meeting the every-day demands of consumers, it will continue to grow. In the last two months, input costs have come down and this will reflect in Q3 and Q4 results. Market share movements indicate that companies such as Marico Ltd and Nestle India Ltd, with domination in their key categories, have improved their market shares and outperformed peers in the FMCG sector. This has been also aided by the lack of competition in the respective categories. Single product leaders such as Colgate Palmolive India Ltd and Britannia Industries Ltd have also witnessed strength in their respective categories, aided by innovations and strong distribution. Strong players in the economy segment like Godrej Consumer Products Ltd in soaps and Dabur in toothpastes have also posted market share improvement, with revived growth in semi-urban and rural markets.
SWOT analysis of FMCG sector is as follows Strength – • Low operational costs. • Presence of established distribution networks in both urban and rural areas. • Presence of well-known brands in FMCG sector Foreign Direct Investment (FDI) Automatic investment approval up to 100 per cent foreign equity or 100 per cent for NRI and Overseas Corporate Bodies investment is allowed for most of the food processing sector except malted food, alcoholic beverages and those reserved for small scale industries (SSI).
Weaknesses: • Lower scope of investing in technology and achieving economies of scale, especially in small sectors. • Low exports levels.
Opportunities: • Untapped rural market, changing life style. • Rising income levels i.e. increase in purchasing power of consumers. • Large domestic market with more population of median age 25. • High consumer goods spending. • Lower price and smaller packs are also likely to drive potential up trading for major FMCG products. • Rural Threats • Removal of import restrictions resulting in replacing of domestic brands.
• Tax and regulatory structure • Rural demand is cyclical in nature and also depends upon monsoon?s demand etc.
Hindustan Unilever ltd, ITC ltd , nestle India ltd ,Godrej consumer product ltd ,jubilant work force ltd these are the FMGC companies having good buying opportunities . Hindustan Unilever (HUL) is the largest fast moving consumer goods (FMCG) company, a leader in home & personal care products and foods & beverages. HUL's brands are spread across 20 distinct consumer categories, touching lives of every 2 out of 3 Indian. HUL was formed in 1933 as Lever Brothers India Limited and came into being in 1956 as Hindustan Lever Limited through a merger of Lever Brothers, Hindustan Mfg. Co. Ltd. and United Traders Ltd. It is headquartered in Mumbai, India and has employee strength of over 16,500 employees and contributes to indirect employment of over 65,000 people. The company was renamed in June 2007 as “Hindustan Unilever Limited”. It has employee strength over 15000 & 1200 managers. It has created widespread network through its 2000 suppliers. There 75 manufacturing locations in India itself. It caters its wide range of products to 6.3million outlets. It has market capitalization of 11.5billion. The company operates in seven business segments. Soaps and detergents include soaps, detergent bars, detergent powders and scourers. Personal products include products in the categories of oral care, skin care (excluding soaps), hair care, and talcum powder and color cosmetics. Beverages include tea and coffee. Foods include staples (Atta, salt and bread) and culinary products (tomato-based products, fruit-based products and soups). Ice creams include ice creams and frozen desserts. Others include chemicals and water business.
Key executive of the company are as follows Chairman Managing director & CEO Director Company Secretary Harish Manvani Nitin Paranjape Aditya Naraynan Dev Bajpai
HUL is the market leader in Indian consumer products with presence in over 20 consumer categories such as soaps, tea, detergents and shampoos amongst others with over 700 million Indian consumers using its products. Seventeen of HUL?s brands featured in
The ACNielsen Brand Equity list of 100 Most Trusted Brands Annual Survey (2011). The company also happens to have the highest number of brands in this list, with six brands featuring in the top 15 list. The company has a distribution channel of 6.3 million outlets and owns 35 major Indian brands. Its brands include: 1) Bru coffee 2) Anna purna salt 3) Kwality ice-cream 4) Lipton tea 5) Kisaan jams
Company is well-known in home appliances also its brands include 1) Active Wheel detergent 2) Vim dish wash 3) Rin detergents and bleach 4) Comfort fabric softeners
Hindustan Unilever?s corporate headquarters is located at Andheri (E), Mumbai. The campus is spread over 12.5 acres of land and houses over 1600 employees. Some of the facilities available for the employees include a convenience store, a food court, an occupational health centre, a gym, a sport & recreation centre and a day care centre. The campus uses green and energy efficient building features such as rainwater harvesting, optimal use of glass and use of „zero-waste? water recycling concepts. Hindustan Unilever Limited won the prestigious Golden Peacock Occupational Health and Safety Award for 2012in the FMCG category for its safety and health initiatives and continuous improvement on key metrics. . Company?s vision is very clear Work to create a better future every day. 1) Help people feel good, look good and get more out of life with brands and services that are good for them and good for others. 2) Inspire people to take small everyday actions that can add up to a big difference for the world. 3) Develop new ways of doing business with the aim of doubling the size of our company while reducing our environmental impact. Company has always believed in the power of our brands to improve the quality of people?s lives and in doing the right thing. As our business grows, so do our responsibilities. We recognize that global challenges such as climate change concern us all. Principle of company is that to succeed requires "the highest standards of corporate behavior
towards everyone we work with, the communities we touch, and the environment on which we have an impact." Company aim to make a positive impact in many ways: through our brands, our commercial operations and relationships, through voluntary contributions, and through the various other ways in which we engage with society.
Company is always keeping eye on hygiene Poor hygiene and sanitation remain the cause of millions of preventable deaths. In developing countries around 80% of diseases are water borne. According to UN estimates, over 2 billion people have limited access to safe drinking water. Of these, nearly 800 million lack even the most basic supply of clean water. This is a major public health issue. Many Unilever brands offer hygiene benefits but none more so than our toilet soaps. Every year, diarrhea and pneumonia claim the lives of over 2 million children under five. Yet studies show that washing hands with soap can significantly reduce the incidence of these diseases. Toothpastes also play an important role in helping to prevent tooth decay which is one of the world?s most common diseases and can lead to more serious health conditions. The simple practice of brushing twice a day can make a big difference to oral health. Finally Pure it, our in-home water purifier, provides water „as safe as boiled? without needing electricity and at a price that is more affordable than boiling water. To make a lasting impact on health we need to encourage people to make changes to their everyday habits, like washing hands with soap before eating and after going to the toilet. We have used our knowledge of consumers to understand what triggers such changes and have devised programmers that drive sustained behavior change.
PEST analysis of the company can be done A PEST analysis is used to identify the external forces affecting HUL .This is a analysis of HUL?s Political, Economical, Social and Technological environment. A PEST analysis incorporating legal and environmental factors is called a PESTLE analysis.
POLITICAL
the first element of a PEST analysis is a study of political factors. Political factors influence organizations in many ways. Political factors can create advantages and opportunities for organizations. Conversely they can place obligations and duties on organizations. Non conformance with legislative obligations can lead to sanctions such as fines, adverse publicity and imprisonment. Ineffective voluntary codes and practices will often lead to
governments introducing legislation to regulate the activities covered by the codes and practices.
ECONOMICAL the second element of a PEST analysis involves a study of economic factors. All businesses are affected by national and global economic factors. National and global interest rate and fiscal policy will be set around economic conditions. The climate of the economy dictates how consumers, suppliers and other organizational stakeholders such as suppliers. An economy undergoing recession will have high unemployment, low spending power and low stakeholder confidence. Conversely a “booming” or growing economy will have low unemployment, high spending power and high stakeholder confidence.
A successful organization will respond to economic conditions and stakeholder behavior. Furthermore organizations will need to review the impact economic conditions are having on their competitors and respond accordingly. In this global business world organizations are affected by economies throughout the world and not just the countries in which they are based or operate from. For example: a global credit crunch originating in the USA contributed towards the credit crunch in the UK in 2007/08.
SOCIAL
the third aspect of PEST focuses its attention on forces within society such as family, friends, colleagues, neighbors and the media. Social forces affect our attitudes, interest s and opinions. These forces shape who we are as people, the way we behave and ultimately what we purchase. For example within the UK people?s attitudes are changing towards their diet and health. As a result the UK is seeing an increase in the number of people joining fitness clubs and a massive growth for the demand of organic food. Products such as Wiki Fit attempt to deal with society?s concern. Population changes also have a direct impact on organizations. Changes in the structure of a population will affect the supply and demand of goods and services within an economy. Falling birth rates will result in decreased demand and greater competition as the number of consumers
fall. Conversely an increase in the global population and world food shortage predictions are currently leading to calls for greater investment in food production. Due to food shortages African countries such as Uganda are now reconsidering their rejection of genetically modified foods.
TECHNOLOGICAL
unsurprisingly the fourth element of PEST is technology, as you are probably aware technological advances have greatly changed the manner in which businesses operate. Organizations use technology in many ways, they have
1. Technology infrastructure such as the internet and other information exchange systems 2. Technology systems incorporating a multitude of software which help them manage their business. 3. Technology hardware such as mobile phones, Blackberry?s, laptops, desktops, Bluetooth devices, photocopiers and fax machines which transmit and record information.
Technology has created a society which expects instant results. This technological revolution has increased the rate at which information is exchanged between stakeholders. A faster exchange of information can benefit businesses as they are able to react quickly to changes. However an ability to react quickly also creates extra pressure as businesses are expected to deliver on their promises within ever decreasing timescales.
Now by conducting SWOT analysis we can come to know companies strength , weakness Opportunities and thrusts in marketing world Strength are as follows HUL is a part of the Reach 6.4 million retail outlets which includes direct reach to over 1.5 million retail outlets Two R&D centers in India in Mumbai and Bangalore Products with presence in over 20 consumer categories with over 700 million Indian consumers using its products. As a part of CSR, HUL has initiatives like project plastic recycling, women empowerment etc
STREGNTH are a follows 1) Market share is limited due to presence of other strong FMCG brands 2. HUL products has stiff competition from big domestic players and international brands Opportunities are as follows, Tap rural markets and increase penetration in urban areas Mergers and acquisitions to strengthen the brand. Increasing purchasing power of people thereby increasing demand. Threats to company are as follows, Intense and increasing competition amongst other FMCG companies FDI in retail thereby allowing international brands Competition from unbranded and local products Companies competitor are as follows 1. Marico 2. L'Oreal 3. Nirma Ltd 4. ITC 5. Colgate-Palmolive 6. Procter and Gamble 7. Dabur Company?s recent increase in prices may prevent further slide in margins. After posting slower growth than its rivals, a shift in strategy by Hindustan Unilever (HUL) is yielding results. Fund managers could have never imagined that HUL could post such a dramatic turnaround. After shifting focus to high-volume growth, the company has clocked double-digit volume growth for five straight quarters, barring the first quarter of FY12, when it dipped to 8.3 per cent. Bank of America Merrill Lynch expects volumes to continue growing at around 10 per cent, due to increased rural reach, focus on modern trade and growth in the personal care segment.
Analysts believe the gross margins saw their worst decline in the first quarter and should improve from current levels, thanks to a rise in prices and stable input prices. In the second quarter, they expect margins to improve by 120 basis points, as the company undertook selective price rises last month and is clocking decent growth in the personal care and processed foods businesses. To stem margin fall, HUL has increased the price of LUX soap by six per cent and of Pears by five per cent. Prices of detergent bars have also been raised. Also, if commodity prices correct, it would directly show on the bottom line. Over the next three-four years, margins could surprise positively and expand 150–250 basis points on an enhanced product mix and slightly better soap and detergent margins.
doc_260839739.docx
It explain the about Industry Trends of FMCG industry, PEST Analysis of FMCG Industry, Competitor Analysis of HUL, SWOT analysis, Company Description, General Information about Hindustan Lever, it's Finance performance, SWOT analysis of HUL and Various Strategies employed.
Hindustan Unilever ltd. Company analysis Products which have a quick turnover, and relatively low cost are known as Fast Moving Consumer Goods (FMCG). FMCG products are those that get replaced within a year. Examples of FMCG generally include a wide range of frequently purchased consumer products such as toiletries, soap, cosmetics, tooth cleaning products, shaving products and detergents, as well as other non-durables such as glassware, bulbs, batteries etc. India?s FMCG sector is the fourth largest sector in the economy and creates employment for more than three million people in downstream activities. Its principal constituents are Household Care, Personal Care and Food & Beverages. The total FMCG market is in excess of Rs. 85,000 Cores. It is currently growing at double digit growth rate and is expected to maintain a high growth rate. FMCG Industry is characterized by a well established distribution network, low penetration levels, low operating cost, lower per capita consumption and intense competition between the organized and organized segments. FMCG index has consistently given good return to investors over the years. Infarct, FMCG index has given a return of 12% in 2011 despite negative returns from Sense. Going forward, HUL and ITC are expected to record good performance, which could lead to positive impact on the valuation of the overall FMCG index. The Rs 85,000-crore Indian FMCG industry is expected to register a healthy growth in the third quarter of 2008-09 despite the economic downturn. The industry is expected to register a 15% growth in Q3 2008-09 as compared to the corresponding period last year. Unlike other sectors, the FMCG industry did not slow down since Q2 2008. the industry is doing pretty well, bucking the trend. As it is meeting the every-day demands of consumers, it will continue to grow. In the last two months, input costs have come down and this will reflect in Q3 and Q4 results. Market share movements indicate that companies such as Marico Ltd and Nestle India Ltd, with domination in their key categories, have improved their market shares and outperformed peers in the FMCG sector. This has been also aided by the lack of competition in the respective categories. Single product leaders such as Colgate Palmolive India Ltd and Britannia Industries Ltd have also witnessed strength in their respective categories, aided by innovations and strong distribution. Strong players in the economy segment like Godrej Consumer Products Ltd in soaps and Dabur in toothpastes have also posted market share improvement, with revived growth in semi-urban and rural markets.
SWOT analysis of FMCG sector is as follows Strength – • Low operational costs. • Presence of established distribution networks in both urban and rural areas. • Presence of well-known brands in FMCG sector Foreign Direct Investment (FDI) Automatic investment approval up to 100 per cent foreign equity or 100 per cent for NRI and Overseas Corporate Bodies investment is allowed for most of the food processing sector except malted food, alcoholic beverages and those reserved for small scale industries (SSI).
Weaknesses: • Lower scope of investing in technology and achieving economies of scale, especially in small sectors. • Low exports levels.
Opportunities: • Untapped rural market, changing life style. • Rising income levels i.e. increase in purchasing power of consumers. • Large domestic market with more population of median age 25. • High consumer goods spending. • Lower price and smaller packs are also likely to drive potential up trading for major FMCG products. • Rural Threats • Removal of import restrictions resulting in replacing of domestic brands.
• Tax and regulatory structure • Rural demand is cyclical in nature and also depends upon monsoon?s demand etc.
Hindustan Unilever ltd, ITC ltd , nestle India ltd ,Godrej consumer product ltd ,jubilant work force ltd these are the FMGC companies having good buying opportunities . Hindustan Unilever (HUL) is the largest fast moving consumer goods (FMCG) company, a leader in home & personal care products and foods & beverages. HUL's brands are spread across 20 distinct consumer categories, touching lives of every 2 out of 3 Indian. HUL was formed in 1933 as Lever Brothers India Limited and came into being in 1956 as Hindustan Lever Limited through a merger of Lever Brothers, Hindustan Mfg. Co. Ltd. and United Traders Ltd. It is headquartered in Mumbai, India and has employee strength of over 16,500 employees and contributes to indirect employment of over 65,000 people. The company was renamed in June 2007 as “Hindustan Unilever Limited”. It has employee strength over 15000 & 1200 managers. It has created widespread network through its 2000 suppliers. There 75 manufacturing locations in India itself. It caters its wide range of products to 6.3million outlets. It has market capitalization of 11.5billion. The company operates in seven business segments. Soaps and detergents include soaps, detergent bars, detergent powders and scourers. Personal products include products in the categories of oral care, skin care (excluding soaps), hair care, and talcum powder and color cosmetics. Beverages include tea and coffee. Foods include staples (Atta, salt and bread) and culinary products (tomato-based products, fruit-based products and soups). Ice creams include ice creams and frozen desserts. Others include chemicals and water business.
Key executive of the company are as follows Chairman Managing director & CEO Director Company Secretary Harish Manvani Nitin Paranjape Aditya Naraynan Dev Bajpai
HUL is the market leader in Indian consumer products with presence in over 20 consumer categories such as soaps, tea, detergents and shampoos amongst others with over 700 million Indian consumers using its products. Seventeen of HUL?s brands featured in
The ACNielsen Brand Equity list of 100 Most Trusted Brands Annual Survey (2011). The company also happens to have the highest number of brands in this list, with six brands featuring in the top 15 list. The company has a distribution channel of 6.3 million outlets and owns 35 major Indian brands. Its brands include: 1) Bru coffee 2) Anna purna salt 3) Kwality ice-cream 4) Lipton tea 5) Kisaan jams
Company is well-known in home appliances also its brands include 1) Active Wheel detergent 2) Vim dish wash 3) Rin detergents and bleach 4) Comfort fabric softeners
Hindustan Unilever?s corporate headquarters is located at Andheri (E), Mumbai. The campus is spread over 12.5 acres of land and houses over 1600 employees. Some of the facilities available for the employees include a convenience store, a food court, an occupational health centre, a gym, a sport & recreation centre and a day care centre. The campus uses green and energy efficient building features such as rainwater harvesting, optimal use of glass and use of „zero-waste? water recycling concepts. Hindustan Unilever Limited won the prestigious Golden Peacock Occupational Health and Safety Award for 2012in the FMCG category for its safety and health initiatives and continuous improvement on key metrics. . Company?s vision is very clear Work to create a better future every day. 1) Help people feel good, look good and get more out of life with brands and services that are good for them and good for others. 2) Inspire people to take small everyday actions that can add up to a big difference for the world. 3) Develop new ways of doing business with the aim of doubling the size of our company while reducing our environmental impact. Company has always believed in the power of our brands to improve the quality of people?s lives and in doing the right thing. As our business grows, so do our responsibilities. We recognize that global challenges such as climate change concern us all. Principle of company is that to succeed requires "the highest standards of corporate behavior
towards everyone we work with, the communities we touch, and the environment on which we have an impact." Company aim to make a positive impact in many ways: through our brands, our commercial operations and relationships, through voluntary contributions, and through the various other ways in which we engage with society.
Company is always keeping eye on hygiene Poor hygiene and sanitation remain the cause of millions of preventable deaths. In developing countries around 80% of diseases are water borne. According to UN estimates, over 2 billion people have limited access to safe drinking water. Of these, nearly 800 million lack even the most basic supply of clean water. This is a major public health issue. Many Unilever brands offer hygiene benefits but none more so than our toilet soaps. Every year, diarrhea and pneumonia claim the lives of over 2 million children under five. Yet studies show that washing hands with soap can significantly reduce the incidence of these diseases. Toothpastes also play an important role in helping to prevent tooth decay which is one of the world?s most common diseases and can lead to more serious health conditions. The simple practice of brushing twice a day can make a big difference to oral health. Finally Pure it, our in-home water purifier, provides water „as safe as boiled? without needing electricity and at a price that is more affordable than boiling water. To make a lasting impact on health we need to encourage people to make changes to their everyday habits, like washing hands with soap before eating and after going to the toilet. We have used our knowledge of consumers to understand what triggers such changes and have devised programmers that drive sustained behavior change.
PEST analysis of the company can be done A PEST analysis is used to identify the external forces affecting HUL .This is a analysis of HUL?s Political, Economical, Social and Technological environment. A PEST analysis incorporating legal and environmental factors is called a PESTLE analysis.
POLITICAL
the first element of a PEST analysis is a study of political factors. Political factors influence organizations in many ways. Political factors can create advantages and opportunities for organizations. Conversely they can place obligations and duties on organizations. Non conformance with legislative obligations can lead to sanctions such as fines, adverse publicity and imprisonment. Ineffective voluntary codes and practices will often lead to
governments introducing legislation to regulate the activities covered by the codes and practices.
ECONOMICAL the second element of a PEST analysis involves a study of economic factors. All businesses are affected by national and global economic factors. National and global interest rate and fiscal policy will be set around economic conditions. The climate of the economy dictates how consumers, suppliers and other organizational stakeholders such as suppliers. An economy undergoing recession will have high unemployment, low spending power and low stakeholder confidence. Conversely a “booming” or growing economy will have low unemployment, high spending power and high stakeholder confidence.
A successful organization will respond to economic conditions and stakeholder behavior. Furthermore organizations will need to review the impact economic conditions are having on their competitors and respond accordingly. In this global business world organizations are affected by economies throughout the world and not just the countries in which they are based or operate from. For example: a global credit crunch originating in the USA contributed towards the credit crunch in the UK in 2007/08.
SOCIAL
the third aspect of PEST focuses its attention on forces within society such as family, friends, colleagues, neighbors and the media. Social forces affect our attitudes, interest s and opinions. These forces shape who we are as people, the way we behave and ultimately what we purchase. For example within the UK people?s attitudes are changing towards their diet and health. As a result the UK is seeing an increase in the number of people joining fitness clubs and a massive growth for the demand of organic food. Products such as Wiki Fit attempt to deal with society?s concern. Population changes also have a direct impact on organizations. Changes in the structure of a population will affect the supply and demand of goods and services within an economy. Falling birth rates will result in decreased demand and greater competition as the number of consumers
fall. Conversely an increase in the global population and world food shortage predictions are currently leading to calls for greater investment in food production. Due to food shortages African countries such as Uganda are now reconsidering their rejection of genetically modified foods.
TECHNOLOGICAL
unsurprisingly the fourth element of PEST is technology, as you are probably aware technological advances have greatly changed the manner in which businesses operate. Organizations use technology in many ways, they have
1. Technology infrastructure such as the internet and other information exchange systems 2. Technology systems incorporating a multitude of software which help them manage their business. 3. Technology hardware such as mobile phones, Blackberry?s, laptops, desktops, Bluetooth devices, photocopiers and fax machines which transmit and record information.
Technology has created a society which expects instant results. This technological revolution has increased the rate at which information is exchanged between stakeholders. A faster exchange of information can benefit businesses as they are able to react quickly to changes. However an ability to react quickly also creates extra pressure as businesses are expected to deliver on their promises within ever decreasing timescales.
Now by conducting SWOT analysis we can come to know companies strength , weakness Opportunities and thrusts in marketing world Strength are as follows HUL is a part of the Reach 6.4 million retail outlets which includes direct reach to over 1.5 million retail outlets Two R&D centers in India in Mumbai and Bangalore Products with presence in over 20 consumer categories with over 700 million Indian consumers using its products. As a part of CSR, HUL has initiatives like project plastic recycling, women empowerment etc
STREGNTH are a follows 1) Market share is limited due to presence of other strong FMCG brands 2. HUL products has stiff competition from big domestic players and international brands Opportunities are as follows, Tap rural markets and increase penetration in urban areas Mergers and acquisitions to strengthen the brand. Increasing purchasing power of people thereby increasing demand. Threats to company are as follows, Intense and increasing competition amongst other FMCG companies FDI in retail thereby allowing international brands Competition from unbranded and local products Companies competitor are as follows 1. Marico 2. L'Oreal 3. Nirma Ltd 4. ITC 5. Colgate-Palmolive 6. Procter and Gamble 7. Dabur Company?s recent increase in prices may prevent further slide in margins. After posting slower growth than its rivals, a shift in strategy by Hindustan Unilever (HUL) is yielding results. Fund managers could have never imagined that HUL could post such a dramatic turnaround. After shifting focus to high-volume growth, the company has clocked double-digit volume growth for five straight quarters, barring the first quarter of FY12, when it dipped to 8.3 per cent. Bank of America Merrill Lynch expects volumes to continue growing at around 10 per cent, due to increased rural reach, focus on modern trade and growth in the personal care segment.
Analysts believe the gross margins saw their worst decline in the first quarter and should improve from current levels, thanks to a rise in prices and stable input prices. In the second quarter, they expect margins to improve by 120 basis points, as the company undertook selective price rises last month and is clocking decent growth in the personal care and processed foods businesses. To stem margin fall, HUL has increased the price of LUX soap by six per cent and of Pears by five per cent. Prices of detergent bars have also been raised. Also, if commodity prices correct, it would directly show on the bottom line. Over the next three-four years, margins could surprise positively and expand 150–250 basis points on an enhanced product mix and slightly better soap and detergent margins.
doc_260839739.docx