Hindustan Unilever, the largest fast-moving consumer goods maker in India, expects a heightened demand for hygiene and nutrition products this year as people will focus more on protecting their health in the backdrop of the COVID-19 outbreak. The company, which makes the Lifebuoy range of soaps and hand washes, is getting ready to launch several new products in the space in the next few months to cater to the rising demand.
“Demand patterns are changing and we are likely to see an upswing in categories like health and hygiene and nutrition. We are staying close to the consumers to adapt to the emerging patterns and bringing in relevant innovations to suit us, both for the short-term and for the medium term,” Srinivas Phatak, chief financial officer at HUL said in an interaction on Thursday.
In the next few months, the company aims to launch several new products like Lifebuoy 'germ kill spray', Domex disinfectant sprays, germ removal wipes, Lifebuoy cloth sanitizers and Surf Excel anti-germ wash booster, he said.
HUL recently completed the acquisition of the nutrition portfolio, which includes Horlicks and Boost brands, from GlaxoSmithKline. The company remains confident in the portfolio’s medium-term prospects.
“The merger became effective April 1. It's a very good acquisition for us, because nutrition becomes another important aspect as people think in these times. Therefore, the expanded portfolio serves us well to meet the requirement of the consumers. We are very optimistic and hopeful on the medium-term potential of the category, it's a low penetration category. We are working through plans to really take Horlicks forward,” Phatak added.
India announced a nation-wide lockdown on March 24, which was extended till May 3 in the wake of rising COVID-19 cases. With district and state borders closed, the lockdown led to a huge disruption in supply chains even of essential products, although the situation is now improving.
“Our operations in the first few days were running in the vicinity of 5 per cent and since then we have now moved to a stage where we are operating at 75-80 per cent. Things have definitely improved with all the steps that the government has taken to ease economic activities. We are doing our bit to ensure that the business starts operating, but operating keeping in perspective the risks and the new measures that need to be taken to operate in the current circumstances,” said Sanjiv Mehta, chairman and MD of HUL.
Even as sales of health and hygiene products are likely to remain strong, demand for discretionary goods, like premium skincare products are likely to be impacted in the current scenario. Ice cream sales have also taken a big knock given that the summer is the peak season for the category.
HUL’s net profit for the January-March quarter, declined 3.6 per cent year-on-year to Rs 1,515 crore, from Rs 1,571 crore a year ago. Quarterly revenue declined 8 per cent to Rs 9,475 crore, compared with Rs 10,314 crore in the year-ago quarter. Underlying volume growth, that is the number of units sold, fell 7 per cent.
Growth had already been slowing for the last few months and the COVID-19 related disruptions added to the woes, officials said.
“We had continued to invest behind our brands in March quarter. It was critical that given we were actually going into the season for our skin cleansing business and ice creams, we had to support our brands with right levels of spends. Obviously, the loss of sales, with our investment levels sustaining has meant that we have suffered deleverage and that impacted our net profit,” said Phatak.
Given the current uncertainties, the company will review all areas of cash generation, usage and re-evaluate all costs, although there have been no job losses or salary cuts so far. The near-term outlook on the growth prospects also remains uncertain.
“We go into unprecedented times with a lot of unknowns. It is difficult at this stage to estimate the timeline of recovery, given we are still in lockdown and number of positive cases continue to rise,” said Phatak.
HUL shares closed down 1.6 per cent to Rs 2,195.70 on the BSE on Thursday, even as the wider Sensex jumped 997 points or over 3 per cent.
There have been reports that drugmaker Glaxo plans to reduce its 5.7 per cent stake in Hindustan Unilever. HUL refused to comment on the report.
