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Sanjiv Mehta, CMD, Hindustan Unilever
Jan 25, 2019 | Source: Business-Standard
On reasons for HUL’s growth ahead of Indian GDP growth: Mr. Sanjiv Mehta, the Chairman & MD of Hindustan Unilever (HUL) said the company brought focus on the ‘core of the core’. These are brands in categories that are highly penetrated. HUL leveraged its ‘Winning in Many Indias’ strategy, and sought to drive penetration and distribution for its brands. The second leg of our strategy is market development, which is not only about growing market share, but also building categories of the future. The third leg is premiumisation. About 1 per cent of the FMCG market is moving from mass and mid-tier to premium every year. At an overall level, about 28 per cent of the FMCG market is premium. Our aim would be to help consumers trade up. The fourth leg is talent and building capabilities.
On demand outlook for FMCG companies: The Chairman and MD said the company is always circumspect about how the market will shape up, given the variables at play. Unlike other sectors, FMCG does not grow exponentially during a boom nor does it tank during a tough phase. It is resilient. Further, with a stable government comes inclusive growth and thus will need to wait and watch to see if we get a stable government going ahead as a stable government gives a sense of hope for future and also witness’s law and order in the state.
On getting millennials into the company’s fold and emergence of new-age challengers: Mr. Sanjiv Mehta believes that it is not the big that will beat the small or the small that will beat the big, but the fast that will beat the slow. He also believes that disruptors are often overplayed and that adaptability is underplayed. An incumbent, if agile and resilient, can be a formidable force for anyone. The other thing to keep in mind is that FMCG is not a zero-sum game. There is room to grow. As a company, we keep a hawk’s eye on what is happening in the market. We do not have to be the first to enter a category, we could be second or third, but be better.
On acquisitions as a route-to-market in food as it is a big bet for HUL: HUL is open to M&A, especially bolt-on acquisitions. Mr. Mehta says, there aren’t many such as GSK Consumer around. That is an once-in-a-lifetime opportunity. We will continue to scout for relevant opportunities though.
On plan of action on Horlicks the acquired brand: HUL’s first job is to get regulatory and statutory approvals. The second would be to plan for integration. The Chairman and MD briefed the team that the combined food and refreshment business should be more than the sum of two parts. This means HUL is going to harness the skill sets of the people at GSK Consumer and marry them with HUL. The company’s objective is to accelerate growth and drive synergies.
On disconnect between HUL and the GST anti-profiteering body: We have been one of the most vocal supporters of GST and believe it is right for the country, said Mr. Sanjiv Mehta. We also believe we acted appropriately when it came to passing on GST benefits. You cannot change the price of consumer goods overnight. Where we took time to change the price, we suo moto offered it to the government. Had the rules been laid out clearly, in terms of passing on GST benefits, we would have complied with them. Because there are no rules, companies have ended up interpreting them in different ways. That is where issues are cropping up. We believe in the judicial system and feel it will be fair to us.
Outlook on price-led growth coming back and factors causing volume-led growth despite the thrust on premiumisation: There is no price control in the country. Let’s get that clear. FMCG is a highly competitive market. If you are off even Rs 1, you will lose volumes and margins. There is a self-correcting mechanism in the market, which ensures equilibrium. The company keeps a close watch on strategic price points as well as the price-value equation. India is a price-sensitive market and HUL is conscious of this all the time said the Chairman. HUL’s 10-year CAGR, in terms of top line, has been 10%. Of this 60% has been volume led while 40% has been price-led growth. Mr. Mehta explains volume growth has a number of benefits; 1) helps get more consumers, if one is driving penetration. However, if one is driving consumption, existing consumers are using more. Price growth alone is not sustainable.
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