Volume may better for India biz from July: Unilever CEO Hein Schumacher

Hein Schumacher, chief executive officer of Unilever, informed investors after its earnings report that they expect the volume growth for HUL to be in a similar range as witnessed in Oct-Dec qtr

Unilever Plc expects volume growth in its India division, Hindustan Unilever (HUL), to improve in the second half of 2024.

Hein Schumacher, chief executive officer of Unilever, informed investors after its earnings report that they expect the volume growth in Q1 and Q2 (calendar year 2024) for HUL to be in a similar range as witnessed in the October-December quarter.

“We have observed volume growth, so the minus 2 per cent on pricing was balanced by a 2 per cent volume growth. I think that’s a positive sign for India. We do see that situation continuing for the first and second quarters, and we see improvement opportunities in the third and fourth quarters. Therefore, we believe that in the balance of the year, India should see a slowly changing trajectory,” Schumacher said.

 

During the quarter, HUL saw a 2 per cent volume growth in the October-December quarter. Its net profit was at Rs 2,509 crore in the same period, up only 1.4 per cent from Rs 2,474 crore in the previous year’s quarter, while revenue was marginally down by 0.3 per cent year-on-year (Y-o-Y) to Rs 15,294 crore.

The parent company of HUL also highlighted rising local competition in the country due to deflation in commodity costs. HUL responded by reducing prices to compete in categories more sensitive to commodity costs.

“In India, HUL remains a powerhouse, with strong brands, rival distribution, and exceptional talent. As has happened many times in the past, the business is navigating a commodity cycle, aiming to strengthen our long-term competitive position. We have decisively adjusted prices in categories more sensitive to commodity cost deflation, such as fabric cleaning and skin cleansing bars,” said Fernando Fernandez, chief financial officer at Unilever, during the conference call.

He added that HUL witnessed a flat top line in the fourth quarter, but with volumes returning to the long-term growth trajectory and improving gross margin, the fast-moving consumer goods major will continue investing in its brands and capabilities in the country, even if prices are expected to remain negative in the near future.

He also added, “It will take a bit of time for our pricing to stabilise, probably one quarter or two more. But at this stage, our priority is to defend competitiveness in these markets, and we will price in line with the objective of preserving our market share.”

He explained that during a commodity inflationary cycle, in categories where commodities play a key role in their cost structures, like laundry or skin cleansing bars, the company sees many competitors abandoning or reducing their presence in the market. However, when the commodity cycle reverses, the company sees these players returning, given the expansion in gross margin, putting some pressure on pricing.

“We are navigating this commodity cycle in places like India or Brazil, as we have done many times in the past, always preserving long-term competitiveness,” he added.