With increased competition from regional and local players, India's largest fast-moving consumer goods (FMCG) company Hindustan Unilever (HUL) is witnessing market share loss in the mass end of the segment.
"The number of local players that have come in the market have just increased. In tea, small players' market value has grown 1.4 times that of large players. In detergent, small players' market value has grown 6 times that of large players," said Rohit Jawa, Chief Executive Officer of Hindustan Unilever.
In an inflationary cycle, when raw material prices go up, regional players exit the market. But, in a deflationary environment, they make a comeback, he explained.
Also Read: Passing benefit to customers via price cuts, not grammage increase, says HUL's Ritesh Tiwari
That said, the company is gaining volume share and value share in over 75 percent and 60 percent of its business, respectively.
Going ahead, the management sees moderating inflation and the government's focus on increasing capex, resulting in more disposable income in the hands of rural India. This can boost rural volumes.
Rural demand in the FMCG market remained subdued in the July-to-September quarter. Volumes in rural declined 1 percent on a two-year CAGR basis, while urban volumes increased by 3 percent on a two-year basis.
Furthermore, HUL said that uneven monsoons and global commodity volatility that should be watched. Though raw material prices have fallen, commentary on their volatility remains in focus on the back of the ongoing Israel-Hamas war.
Also Read: HUL Q2 results: Earnings beat street estimates; net profit up 3.86% on-year
“We are seeing a very resilient consumer when it comes to urban metros. There are many categories on the premium side where there is a lot of opportunity,” said Jawa.
In beauty and wellbeing, the FMCG company has done a lot of innovation on its winter portfolio which includes the company’s premium brands, Ponds, Indulekha, and Lakme, he added.
For the quarter ended September, HUL's underlying sales growth in the homecare segment was 3 percent, while segmental margins were at 19 percent and volume growth was in mid-single digits.
In the beauty and personal care segment, underlying volume growth was in mid-single digits, while sales growth and segmental margins were at 4 percent and 27 percent, respectively.
The foods and refreshment segment recorded volume growth in mid-single digits, and sales growth and segmental margins were at 4 percent and 19 percent, respectively.
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