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Hindustan Unilever Ltd reported six per cent volume growth in the quarter ended March, the highest in the past four quarters. In a media interaction, Managing Director and Chief Executive Sanjiv Mehta explains how the company doubled volume growth on a quarter-on-quarter basis. Excerpts:
Price cuts aided sales growth in the March quarter. Will you continue with such cuts?
Price cuts depend on a number of factors. We look at commodity prices. In the past few months, crude oil prices came down significantly. But now, from a low of mid-40s (the price of a barrel of crude oil, in dollars), oil prices have moved up to the 60s. The rupee, which stood at 62/dollar, has now touched 64/dollar. These factors have to be considered before taking a decision on prices. We have cut the prices of our detergents and skin cleansing products in the past few months. Are there more price cuts at this stage? The economic situation does not warrant that.
How are rural markets performing? What is your outlook on this front?
I would look at the year gone by, rather than the quarter gone by. For our sector, the volume growth has been less than one per cent. Value-market growth has been five-six per cent. Within this, the rural segment has grown faster than urban. But, I don't think a definitive trend has emerged, in terms of an indication on the future trajectory. One would have to wait for a quarter or so to see how it pans out.
Has growth in rural areas been higher because of a lower base?
You have to remember penetration of categories in rural areas is low; that explains the lower base. But as rural incomes improve and given 70 per cent of India's population is in rural areas, penetration and consumption in these regions will have to go up. That will push the base higher. At the moment, relative to urban, growth from the rural segment will be higher on account of a lower base.
Your advertising and sales promotion expenditure rose in the March quarter. What prompted the decision to increase spending in this segment?
As far as advertising and sales promotion expenditure goes, we look at the competitiveness of our spending in the categories we operate in. We want to ensure our share of voice remains consistent. We also want to ensure all our marketing programmes are well-funded. These are the various factors that go into our decision on ad spends. What we are clear about is we are not going to shirk from spending what is right for maintaining the saliency of our brands and on market development.
How has an urban-centric category such as packaged foods managed to see its sixth consecutive quarter of double-digit growth?
In the packaged foods segment, we have our rhythm back, through our two key brands - Knorr and Kissan. Through some great activation, we have been able to unlock growth. In the past six quarters, we have clearly shown we can grow packaged foods in a healthy manner. We have started doing experiential marketing. We also have a pipeline of innovations, which should augur well for the business.
