Hindustan Unilever royalty charges double in three years

The country's largest fast-moving consumer goods company Hindustan Unilever saw its royalty and technical fees almost double in three years as research and development expenditure fell 14 per cent.

The company has been counting on its parent for technical knowhow, expertise and even trademarks, an admission it makes in its latest annual report.

"Given that the pace of innovations and the scope of services have expanded over the years and that Unilever's global resources are providing greater expertise, superior innovations and scale advantage for all Unilever entities, your company is enjoying the benefits of an increasing stream of new products and innovations, backed by technology and know-how from Unilever," Hindustan Unilever said.

Hindustan Unilever's board had approved a royalty of 3.15 per cent of turnover effective from February 2013 to its parent. This was a significant jump over the 1.3 per cent of sales that the firm paid as royalty fees till then. While lower than a number of peers who pay higher fees to their parents, Hindustan Unilever had argued this increase was necessary in view of a globalising of resources.

These resources included R&D, which was being aligned across the world. The latest annual report reiterates this point. "The R&D labs in Mumbai and Bengaluru are aligned to Unilever's global R&D. Many of the projects executed out of these centres are of global relevance, and have a strong focus on regional needs and the overall developing & emerging world," the company said, adding that its local team had over 750 people comprising scientists and technologists working in areas of home care, personal care, food and  beverages, and water purification.

The result of all this effort, the company said, was that it introduced "several innovations" across categories without specifying how many. The categories included soaps, detergents, household care, skin care, deodorants and foods. Hindustan Unilever derives close to 50 per cent of its revenue from soaps and detergents and nearly 30 per cent from personal products.

In beverages, which gives Hindustan Unilever nearly 12 per cent of its annual revenue, the company said, "The year saw key strategic launches under tea brands contributing to good business growth. Under green tea category, the range was further extended with two new flavours launched, 'Tulsi' and 'Honey Lemon', which helped in accelerating the category growth. In coffee, small pack blends were launched with improved aroma."