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In a sign that all is not well in the consumer goods segment, Hindustan Unilever recorded just four per cent volume growth in the quarter ended June, well below Street estimates. In a media interaction, outgoing managing director and chief executive Nitin Paranjpe, who has been elevated to the post of president (home care), talks about the pressure points for the company and the steps it is taking to cope with these. Edited excerpts:
Personal products recorded mere two per cent growth in the June quarter. Is that a concern, as in the last few years, you have devoted much attention to this category in your drive towards premiumisation?
What pulled down growth for us in the personal products segment was Fair & Lovely. We are taking the necessary action to revive growth in the fairness category. But let me add even as there were signs of a slowdown in the fairness segment, Fair & Lovely held its market share. In fact, we have seen growth in most other segments in personal products such as hair care, skincare, oral care and colour cosmetics. Brands such as Lakme, Ponds and Vaseline did well during the quarter. Are we feeling the impact of the slowdown? Of course, yes. The market growth across categories is slowing. It is more pronounced in premium categories and categories dependent on discretionary spends. But we will not abandon our long-term strategies due to short-term developments. I have always said the long-term secular trend would be uptrading, and that would continue, as consumers evolve.
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Does it make sense for HUL to focus on volume growth at a time when consumers are deferring purchases?
We are clear we will not deviate from volume growth. Our growth model will be volume-led because that is a reflection of consumers buying your products. At the end of the day, that is what we want-— ensuring consumers buy your products. We will continue to build scale using different levers, whether these are, investing in our brands or distribution or advertising. We will leave no stone unturned in our endeavour to deliver consistent and competitive growth.
While lower commodity costs boosted margins, did you take any additional step to give your operating margins a fillip?
The 70-basis-point increase in operating margins came at a time when expenditure on advertising and sales promotion (ASP) was raised by Rs 70 crore. As percentage of sales, ASP rose by 19 basis points over the corresponding period last year. We had to do this in view of the competitive market scenario. What did we do to sustain margins? We initiated cost-efficiency measures, due to which we were able to improve operating margins during the quarter.
You had only two new product launches during the quarter, one in the ice-creams space and the other in salons. None of these were mass products. What was the reason for this muted approach to new launches?
We test-marketed Magnum ice-cream bars in Chennai and the feedback was positive. This is a premium ice-cream and we are happy with the response it has received so far. TIGI is a range of premium hair care and styling products we launched in select top-end salons. Again, this was in response to a market need. We are clear we will straddle price points with our products across categories — home, personal care, food and beverages. We felt these products were needed to be launched in the marketplace. So, we did it.
You did well in the beverages space, delivering 16 per cent growth. What led to this growth?
Our performance in the beverages segment was accelerated by the growth we saw in tea, across all our key brands. Taaza, for instance, performed well on the back of strong marketing for the brand during the quarter. This is also true for our other tea brands such as Taj Mahal and Red Label. Also, the emphasis on market development of tea bags saw us register double-digit growth in flavoured and green tea bags during the quarter. Our coffee brand Bru also did well in a slowing market. Overall, beverages did well across segments and brands.
