On strategy for Horlicks the recently acquired brand from GSK Consumer Healthcare: Mr. Phatak, said that HUL will approach this category with market development to start with. This is because, the India penetration for Health Food Drinks (HFD) segment is about 24%, while Rural is about 14%. While for HUL the penetration in some of its advanced categories is as high as 80% thus it gives us an opportunity to grow this well established HFD brand Horlicks. The CFO said that they are looking to grow HFD business in double digit over the medium term. But for this, there are clearly 3-4 elements where work needs to be done and these are work on product, communication and distribution (strength of HUL) and this can make a whole lot of difference.
On Horlicks brand extension: Regards brand extension, CFO says that first and foremost the focus is on Rs. 7,700 crore HFD category which can easily grow in double digits in the near future as there is immense scope for penetration for both Horlicks and Boost which are iconic brands. Thus in the near future HUL is not looking at brand extension like its competitor Bournvita. Bournvaita is present in the Malted Food Drink (MFD) category and the biscuits category which is a Rs. 25,000 – 30,000 crore category in India.
On strategy for slow growing MFD category: The MFD category has grown by 14-15% over a decade and has thus very well. Further, if one looks from a demographic point of view or rising affluence, or from micro-nutrients needs of children point of view, there is ample headroom to grow. Mr. Srinivas Phatak, said that as a market leader it is important to work on market development and increase size of the price and is thus a fascinating category. At HUL, the team is not at all concerned about any slowness in demand infact, the team is confident of growing the category in double digits into the medium term.
On challenges like higher sugar content in Holricks and Boost: Mr. Phatak took the opportunity to actually dispel this myth and said that the sugar content that has been talked about is not that high a concern. Having said that it is still a healthy level in the overall portfolio. There is also a strong set of innovation to cater to the different needs and from whatever HUL has seen GSK Consumer has their products and have the R&D and HUL will look at all these aspects post the impending merger which is expected to complete in the next 9-12 months.
On EBITDA Margin expansion of 8%-10% from synergies: The gameplan to achieve this EBITDA Margin expansion of 800-1000bps will come from opportunities across the value chain. First and foremost it is to look at synergies is that it all comes from the strength of an existing HUL business. We are a Rs. 35,000 crore business and adding 10% said the CFO. So the whole infrastructure and what HUL has will be leverages and in that context 4-5 areas have been called out by us. Clearly, in the whole space of supply chain, logistics, distribution, warehousing the strength of HULs distribution is going to be a big plus. Further, the strategy HUL adopts for Go-to-market in terms of distribution in the same way it will be in costs too and is going to be an important one.