Hindustan Unilever, the country's largest consumer goods maker, reported a double-digit volume growth for the fifth straight quarter, with rural demand growing ahead of urban markets, suggesting continued uptick in consumption across India's hinterlands.
"Demand was stable in the December quarter. Rural has grown ahead of urban for one more quarter, around 1.3 times urban growth," said Srinivas Phatak, CFO of Hindustan Unilever.
However, net profit for the maker of Surf detergent and Red Label tea grew at a slower pace due to exceptional items.
In the October-December quarter, HUL's net profit rose 9 per cent year-on-year to Rs 14.44 billion. The company's sales in the third quarter were up 12 per cent from a year ago to Rs 93.57 billion. Volumes in the quarter grew 10 per cent.
Barring, exceptional items, which included restructuring expenses and acquisition-related costs, profit grew 17 per cent.
The company sees stable demand going ahead too, but the environment remains dynamic and one would have to be watchful for various developments like elections.
"From the consumer demand point of view, we are seeing demand is stable. There are a lot of macro-economic factors, whether its international factors like (volatile) crude and from a domestic point of view, we run into elections, there are disruptions happening, there are lot of elements we will have to closely observe over the next 3-4 months," said Phatak.
The strong sales growth is also being driven by products in the naturals/ayurveda segment, under the brand Ayush.
"Our naturals strategy is working very well for us. It is growing at 2-3 times the company rate of growth. We started (Ayush sales) with south India and later expanded. What we found out was we have a bigger traction in south India. So, we have now focused on primarily on the south and want to make it a much bigger brand over there," said Sanjiv Mehta, chairman and MD of HUL.
HUL recently announced the acquisition of GlaxoSmithKline Consumer Healthcare's health foods drinks business, in a deal that valued the GSK Consumer business at Rs 317 billion. The health foods drinks (HFDs) market has slowed down in the recent times, but Mehta sees huge opportunities to grow the business in India.
"The entire space of health and wellness is a big opportunity. The penetration levels of HFDs are still in the 20s (percentage). We believe, the potential of making the wonderful brands more lustrous is massive," said Mehta.
Meanwhile, HUL is also restructuring its water purifier business, wherein it will stop producing its entry level products to focus on the mid to premium-end of the market, which comprises water purifiers based on ultra-violet (UV) and reverse osmosis (RO) technology. The company sells water purifiers under the Pureit brand.
"The market is reshaping towards the mid-segment. RO and upwards is really where the demand is. We always had a play in totality of the portfolio, one was really around the gravity (entry) segment, where you have a simple device, where you put in the kit and water filters through. While it does give you good water quality, it doesn't remove many of the solids that are present and therefore the market is progressively shifting towards the upward segment. So, our focus is really going to be on the mid and top-tier and gradually phasing out the bottom-end," said Phatak.
