“We don’t want volume to be just 2% and want to see it grow – that is our focus. We are not going to wait for the macros to improve, but we’ll go where the growth is and work actively towards that,” Jawa told ET, adding that tailwinds including improving macros and agri-economy will benefit HUL.
“But in meantime, we are not waiting, we are going to do what we can do. That will only make us stronger because we are chasing more volume and more mix by going more and more into high-growth spaces, channels, and formats and putting more funds and people there.” In March quarter, HUL reported a 6% drop in net profit while revenue remained unchanged.
According to the company, the latest quarterly performance of no pricing growth is the carry-forward of price cuts in segments such as laundry and soaps that are highly price-sensitive. “There are parts of our business where we raise prices not linked to inflation because there’s higher desirability and better quality. In some categories, we have to lower prices and match the price points because consumers need a sweet spot for us to remain sustainable. And we still make good margins on it. Therefore, it’s not about lack of pricing power.”
In past four quarters, companies have been slashing prices amid visible consumer preference for cheaper products, but strategy hasn’t helped boost volumes.
“The level of inflation that all consumer goods companies had to pass on was sizeable over the past two to three years and impacted rural and lower-income households to a greater degree. However, the top end of the market remained resilient through that period. Slowly, the market is returning to normal. Volumes are now coming back, and rural areas are gradually recovering. It’s still not where it was when rural areas were growing faster than urban markets; it will probably happen in the medium term,” Jawa said.It is looking to transform its 90-year-old legacy business to chase and invest in high growth areas. For instance, its top priority is focussing on 19 big brands, each with annual sales over ₹1,000 crore, contributing 80% of sales. The second thrust is on market-making and premiumisation, which together accounts for a quarter of its business and has expanded at double-digit growth rate.”The investment in these segments will be disproportionate with more than two-thirds of our media spends and innovations. So, we are leaning in heavily to follow the money and follow the people and go where the growth is. That is very important at this point and will transform the company to where the new India is going,” said Jawa.
The consumer goods firm said it doesn’t see a big correlation between consumption and elections, which is instead connected more with what the government does in rural areas. Jawa underscored the role of the government around employment, minimum support prices and capex push in helping strengthen Asia’s third-biggest economy, and becoming a great place to do business for all global players including HUL.
“The policies are pro-business and are effective. The government capex is what’s driving the country’s GDP, which is strong and robust. There hasn’t been a better time to be here to build brands and build businesses,” said Jawa.
Over the past few quarters, there has been a resurgence of small brands. There have been nearly 500 direct to consumer or digital only brands, mostly in the beauty and skin care segment. “In beauty, we are gaining market share, but we need to do more. In our beauty business, six big bets that we focused on, are already worth ₹2,000 crore as per last year’s sales and are growing at 50% in ecommerce. In fact, just a small part of our total beauty business is already the size of a successful D2C company,” said Jawa.
