It’s a strategy that has been used quite successfully by a number of fast moving consumer good companies (FMCG) in India. However, Mumbai-headquartered Hindustan Unilever (HUL) is deploying it now.
The Rs 17,524-crore sector heavyweight, which straddles segments such as home & personal care, foods & beverages, etc, is slowly but steadily shifting its attention to emerging categories within these businesses in its quest for growth.
Managing Director Nitin Paranjpe says HUL is investing in categories of future, even as it keeps its eyes on the core. The core here includes segments such as soaps & detergents (contributed 47 per cent to the firm’s overall revenues in 2009-10), personal products (28 per cent), beverages (12 per cent) and processed foods (four per cent).
Says HUL Chairman Harish Manwani: “The core will drive the business. But within these segments, we will look to premiumise, identify niches, take price positions.”
At the heart of this strategy lies the need to have a more well-rounded portfolio within its areas of operations, say sector analysts tracking the company. This the firm intends to do by occupying void or vacant niches, which are less competitive at this point.
Paranjpe doesn’t deny this when he lists out the work done by HUL during July-September in terms of new product launches. “For instance, Vaseline saw the launch of a moisturising cream during the quarter. We’ve had a body lotion in the Vaseline portfolio. But now we have stepped into moisturising creams under Vaseline,” he says.
“Then there were two variants launched under Vaseline lip care. The latter again is a niche within the portfolio. Besides, there was an Age Miracle Serum under Ponds and a premium skin care range under Lakme Perfect Radiance. All of these are emerging segments, which will become big tomorrow.”
These launches came on the heels of work that HUL has been doing in other areas to tap niche segments. For instance, the company has been extending its Vaseline range for men, endorsed by actor Shahid Kapoor, in the last few months. It launched a fabric softener, Comfort, last year, and a surface cleaner, Cif, which targets greasy stains, around the same time.
The emphasis on emerging categories means HUL has been spending more to advertise these products, says Shah of Angel. The company’s ad spends as a percentage of sales during July-September, for instance, rose 30 basis points to 13.8 per cent over the corresponding period last year, not only because of competitive intensity in its core categories, but also because of its emphasis on new emerging categories, Chief Financial Officer R Sridhar had said while declaring the company’s second-quarter results last week.
Paranjpe says the company will continue to lead market development of emerging categories and channels, even as it defends leadership in core segments. “We are committed to that.”
