Hindustan Unilever reported good numbers for the fourth quarter and for 2011-12, despite commodity inflation and currency fluctuations. During a media interaction, Managing Director and Chief Executive Officer Nitin Paranjpe outlined the company's strategy over the coming quarters when the environment around is expected to remain volatile. Edited excerpts:
Inflation remains a concern. Will you continue with your policy of price increases?
Inflation is not new. It has been around for some time. But the consumer demand has been quite resilient during this period. And, market growth has been good. Having said that, categories such as soaps and detergents had seen significant commodity inflation, resulting in a situation where the overall growth was good, but led by price, not volume. Personal products, on the other hand, had seen volume-led growth. This had been on account of growing consumer aspiration, which had led to an increase in consumption, resulting in double-digit volume-led growth. Our strategy is not to increase prices. Our strategy is to build great brands and offer value vis-a-vis alternate products around. In that space, innovation plays a key role. Right pricing has a key role, too. And at times, in a high commodity cost situation, we have to take up prices.
Are you seeing ‘downtrading’ in some categories due to inflation? What are those and how are you dealing with the situation?
In a market like India, there are multiple forces in action at the same time. There are some consumers who are downtrading and there are some who are uptrading. If you were to ask me to call out one secular trend, then it would be uptrading. There is more uptrading happening than downtrading. And, we have seen this in various categories.
What has been the growth in rural markets, given that you have trebled reach in those areas?
It has been faster than urban and overall growth. The other channel that is driving growth for us is modern trade. The latter is largely on account of the expansion of stores happening in that segment. This, in turn, benefits us because we can reach that many more people through this channel. As far as the rural market is concerned, this is largely because of the expansion in coverage that we have undertaken in the past two years. Growth has improved as a result of this.
You said innovation would play a key role in your overall strategy...
In the past year, 60-65 per cent of our business would have been touched by a relaunch or a new activity to strengthen or refresh our brands. That is the impact of innovation and the intensity with which we are treating innovation. There are also categories that we have identified for the future: segments that are small today, but will be big tomorrow. This includes face wash, hair conditioners, premium skin lightening and fabric conditioners. We are investing in these categories for the future.