HUL’KING UP THE GLORY, YET AGAIN?!

IIPM set to beat economic slowdown

IN A DIFFICULT MARKET CHARACTERISED BY RISING RAW MATERIAL COSTS AND DECLINING CONSUMER BASE, HUL HAS STORMED BACK

HUL has seen one of the best times in the year 2008, as the major has become the only FMCG company to have recorded a robust growth irrespective of the present economic turmoil. After years of sluggish growth, the MNC has started recording impressive growth figures and appears to be back in action.

For the third quarter ended September 08, HUL recorded a net sales increase of 20% to a very convincing Rs.4,02.78 billion. Additionally, FMCG sales from Indian market saw a hike by 22%. There’s more! The last two quarter results saw an average net sales growth of 20% and such positive results were expected to be carried forward. The top brass of HUL agree that Nitin Paranjpe and Harish Manwani, the present CEO and Chairman respectively, are the best leaders that HUL has had in the past two decades. The duo stumped market watchers, when for the third quarter, HUL recorded a whopping 34% increase in net profit, now at Rs.5.46 billion. Starting from price hike to penetration, the zealous CEO, resorted to all ‘P’s to sustain his company’s market share. The CEO’s strategy to increase prices, on account of increasing raw material costs, has been well received by both the internal team as well as trade pundits. On an average across 20 categories that HUL straddles, there has been a hike in prices for products between a mean of 1-28% yoy. According to Tushar Bhattacharya, a senior FMCG analyst at FICCI, the move “didn’t disturb the sales of HUL as most of the brands owned by HUL have a strong value proposition where consumer won’t mind spending more.” Interestingly, growth in the personal wash segment (with Lux and Lifebuoy leading category growth) was mostly price led.

Apparently, it is not only the price factor that has helped HUL move out of its earlier impasse. Another strategy that has helped the company stand at the heel of competitors has been continuous product line rationalisation in 2008. Initiatives in the shampoo (new Dove), skin (where Ponds gained momentum with new launches), laundry (with innovations like Rin matic) and several other categories benefited HUL immensely. Besides, the clear cut positioning of Axe-‘dark temptations’ in the deodorant category also helped HUL gain ground over relatively new competitors (read: ITC) in the market.

Comparatively speaking, however, this year even Godrej Consumer Products (GCPL) did a massive re-positioning exercise for its masculine brand Cinthol with Hirthik Roshan. To beat GCPL, HUL concentrated on its penetration strategy instead. Currently, Axe has presence in more than 15 states while GCPL’s Cinthol has a presence in just ten. Apart from urban centres, HUL’s omnipresence in rural India (displaying a strong 30% growth) across categories has also helped. Now that the suave management honchos at HUL have managed to save their mega-corporation from decline, there’s cause to pause and take stock. While competition is at its lethal best, consumers are increasingly getting tight pocketed. So will the ‘Fair & Lovely’ run last?

Angshuman Paul

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Source : IIPM Editorial, 2009

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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