Faced with declining volume growth and high competition, global FMCG giant Unilever has raised concerns on the performance of its Indian unit Hindustan Unilever (HUL). Unilever has even discussed several measures, including a revamped incentive structure for distributors, to throttle slowing sales and thrust volumes back in 2017, people privy to the developments told CNBC-TV18.
India’s FMCG has been facing headwinds in the recent quarters owing to slowing sales growth and demonetisation. In the third quarter of FY17, HUL’s volume growth decelerated to – 4 percent from a 6 percent growth in the year-ago period.
Parent Unilever is particularly concerned about HUL’s performance in the past few quarters. The Rotterdam-based company and HUL may now focus on Naturals portfolio and target innovative products in the personal care space, officials said on condition of anonymity.
Responding to CNBC-TV18’s queries, HUL said the company doesn’t comment on market speculation. HUL has driven consistent growth with improved margins for last 10 years and the company’s strategy to drive consistent, competitive, profitable and responsible growth remains unchanged, it said.
Also, HUL is reworking incentive structure for distributors in a bid to drive growth, sources said, adding that it has implemented monthly incentives. HUL operated a quarterly incentive structure for distributors earlier.
There has, however, been no change in overall overall distributor incentive rates. Incentive rates range from 0.3-0.7 percent of overall sales turnover, HUL told CNBC-TV18.Watch video for more.