HUL recently announced its first quarter FY24 results, reporting that underlying sales for the quarter grew 3% year-on-year to INR 5,958 billion (USD), and profit after tax grew 4% year-on-year to INR 1,011 billion (USD).
According to HUL CFO Ritesh Tiwari, much of this revenue came from the company’s food and beverage division, which comprises energy drink brands such as Horlicks and Boost, as well as its ice cream, condiments and tea businesses.
“Of HUL’s three major segments – home care, beauty & personal care and food & refreshment – food & refreshment is [the best with] “Pricing is strong and we continue to see mid-single-digit growth.”He said this at a recent HUL investor meet where the company announced its Q1FY24 results.
“We have invested heavily in innovating and reinvigorating the category, for example in ice cream we have implemented multiple product innovations. [such as] In partnership with Cadbury, the company launched Cadbury Crackle Chocolate and Feast ice cream, as well as Mango Duet ice cream.
“Our tea further strengthened its market leadership this quarter. [and despite seeing] Green tea and functional teas continued to perform well amid declining consumer sentiment.”
Tiwari stressed that the company remains focused on its energy drinks portfolio and said he expects further gains from the segment as it is less hampered by inflationary pressures.
“Our functional nutrition drink portfolio, which includes Horlicks and Boost, delivered strong single-digit growth, driven by strong performance from our Science-Based Plus portfolio, driven by both price and volume growth as well as price increases.”He added.
“The Plus Series comprises products targeting areas such as protein, diabetes and women’s health, which are more premium and are part of the business that is accelerating more in terms of growth.
“We have been working hard to boost consumption in this category because it was hit during periods of high inflation and milk was one of the limiting factors impacting consumption. Now, milk prices are gradually coming down and becoming more moderate and the commodity costs that go into these products have seen some deflation overall.”
“So, the pricing and cost factors taken together will help drive further growth in consumption. Our sole focus going forward will be to continue to drive growth in consumption.”
HUL CEO Rohit Jawa added that the company also plans to make further investments in the sector to increase access to a larger consumer base.
“We’ve been focusing on building out our Plus Series, which is the more premium part of our portfolio, and we’ve seen promising results, so we’re also investing in the product with a view to making our packs more accessible.”He said.
“This means lowering the average price per pack. [will contribute towards increasing] “These initiatives, including increased penetration, brand awareness and broader portfolio variety, are already seeing increased market share and growth.”
Reach Requirements
Given the role HUL has to play in addressing the malnutrition challenge in India, Jawa emphasised the need to expand HUL’s nutrition portfolio beyond premium functional brands to expand access and reach.
“This category addresses a critical community need of addressing the carbohydrate, protein and micronutrient deficiencies of the average Indian, male or female, rich or poor.”He said.
“This is a pan-India opportunity and hence the category has a real purpose of improving functional health in people’s lives.
“Currently, the category is still under-penetrated primarily in South and East India, so there is a huge opportunity to grow this category. And in places like Southeast Asia, where the category is much larger, we know this is very possible as there are already good templates in place.”
He also expressed optimism for the near future and the belief that “the worst is over” for the market, saying he hopes this will result in an opportunity for rural consumers to play a greater role.
“Inflation and price increases have been quite large over the past few years. [and so had] “COVID and the inflationary shock have had an impact on sales, especially in rural areas.”He said.
“But I think it is slowly picking up and we are hopeful that the monsoon will be much better. [which] As we all know, there are consequences. [on] The agricultural economy and therefore rural consumption, I think in that sense, the worst is probably over.
“Looking forward, rural consumption is expected to recover gradually, while urban consumption is also expected to recover, particularly for luxury goods. [so] The past few years have been negative, but we believe we are now approaching the positive end of the cycle.”
At the upcoming Growth Asia Summit 2024, a multitude of experts are set to join the discussion on important topics such as healthy ageing, women’s health, active nutrition, children’s food and nutrition, healthier product innovations, and more. Click here to find out how you can join the discussion.
