HINDUSTAN UNILEVER

Huge portfolio, reach & recall

Hindustan Unilever, the undisputed market leader in the FMCG space, has a vast essentials portfolio and enjoys market leadership in most of the categories it is present in — with a high brand recall especially in the home and personal care business. The company is rated among the best-managed companies in the country. It has a strong balance sheet and is expected to scale new highs going ahead.

Consider:

• The company is well-diversified and is a clear market leader in many products. In personal care products, it is Asia’s biggest manufacturer by market value. The company is the No. 1 laundry company in India with revenues growing at 10 per cent CAGR. It is also the No. 1 hair care company in India with a hefty 59 per cent marketshare and a CAGR of 11 per cent. Further, it is the market leader in tea under the Brooke Bond brand with a 10 per cent CAGR. Apart from these, the company is also ranked No. 1 in skin care, skin cleansing and make up, No. 2 in oral care and No. 3 in deodorants. z Almost 85 to 90 per cent of the company’s portfolio falls under the essentials category. The Covid-19 pandemic has hit the country’s economy very hard, but HUL is on a safer footing compared to some of its peers during the last 15-20 months. Needless to say, home care (36 per cent of the portfolio) and food and refreshment (19 per cent of the portfolio) have been outperforming the market.
• z A major plus point for the company is its huge market reach. It has a distribution reach of 7 million-plus outlets and direct distribution at 3 million retail outlets. The company’s direct distribution works out to 67.7 per cent in the current times when last-mile reach is crucial and there are several transportation constraints. An extensive distribution network is a major factor for the sustained growth of the company. This will also enable the company to gain marketshare from smaller regional players. Srinivas Phatak, former CEO of the company, has aptly quipped, “Big brands grow faster in this pandemic.”
• z The company has moved fast with the times to take advantage of the new trends in marketing related to e-commerce. Besides associating with leading e-commerce companies, HUL has launched its own e-commerce initiative with Hamarashop.com to tap the grocery segment. The portal has tied up with several kirana stores to reach out to consumers indirectly. According to a research analyst, apart from e-comm the management has also realized that in the current juncture, when feet on the street and sales infrastructure are not able to generate orders in the traditional manner, such technological innovations and changes in the structure of modern and general trade might be beneficial to HUL.
• z The company has resorted to the merger and acquisition route to widen its product categories. Last year it acquired the consumer business of GSK, acquiring the Horlicks brand in India along with distribution of other OTC and oral health products of GSK for five years. This merger has given a big boost to the food and refreshment business of the company. Horlicks, being a nutritional drink, is expected to benefit in the current pandemic situation when consumers are increasing spends on healthy living and nutrition. According to an expert, the food-drinks category in India has only 24 per cent penetration and rural penetration is only 14 per cent. Horlicks has a 50 per cent volume share and with HUL’s extensive distribution reach, the management is confident of achieving double-digit growth going ahead.
• z The company also acquired the intellectual property of the V-Wash brand from Glenmark – a market leader in the female intimate hygiene category which enjoys a 79 per cent recall amongst customers. There is a lot of potential for HUL to grow this market — the company can leverage its distribution channels to introduce the product to larger markets and penetrate rural areas, which can unlock immense value in the long run.
• z The company is also on the path of organic expansion. It has planned to set up a new 100 per cent subsidiary with an authorised capital of Rs 2,000 crore – the idea being to leverage growth opportunities in the changed business environment by commencing manufacturing before March 2023 to avail tax benefits. This subsidiary will enable the company to push up its topline as well as bottomline.

Despite the economic slowdown followed by the pandemic, the company has put up an impressive show on the financial front. During the last five years, its sales turnover has expanded from Rs 31,890 crore in the fiscal 2017 to Rs. 45,996 crore in the fiscal 2021 with the profit at net level shooting up from Rs 4,490 crore to Rs 7,954 crore during this period. The company’s financial position is very strong, with reserves at the end of March 2021 standing at Rs 7,815 crore – over 36 times its equity capital of Rs 216.43 crore, and that too after four bonus issues (1:3 in 1979, 3:5 in 1983, 1:1 in 1987 and 1:2 in 1991). Prospects for the company going ahead are all the more promising. Once the Covid-19 pressures ease, the company will start growing at a fast pace. Investors will benefit substantially in the medium to long term

PERFORMANCE INDICATORS (Rs. in crore)