BackHindustan Unilever looks to ride the e-commerce wave
Chairman Harish Manwani says HUL has 'identified the growing e-commerce opportunity ahead of the curve'
Premium
Mumbai: Hindustan Unilever Ltd (HUL), India’s largest consumer packaged goods company by revenue, is looking to ride the e-commerce wave sweeping the country.
The company, one of the early innovators in the sector in the early 2000s during the first Internet wave in India—it even experimented with an online store—has “recognized this shift in consumer preference and identified the growing e-commerce opportunity ahead of the curve", its chairman Harish Manwani said at HUL’s annual general meeting (AGM) on Monday.
Manwani didn’t provide more details, but it is likely the company will strengthen its e-commerce efforts announced last year.
It has been working with e-tailers such as Amazon and Flipkart to sell its goods through their sites, Mint reported on 28 October.
“Globally we recognize e-commerce as one of the big transformations taking place and therefore we know we have to create capabilities within our organization to be able to use e-commerce as an important channel," Manwani said then.
He added that the company had put in place a dedicated team to build e-commerce capabilities.
In February, it moved the sales of some of its high value offerings from the direct-selling model to an online one.
In March, the company piloted Humashop.com, a marketplace that connects consumers with local retailers.
In a February interview Unilever Plc.’s CEO Paul Polman said that the parent’s e-commerce revenue could soon “approach the size of the total HUL business". He added that rather than launching its own e-commerce site, the company would work with e-tailers and distributors.
There is more to HUL’s digital journey.
HUL has increased its ad spending on non-television media. “Non-TV spend is now 30% of the total advertising budget (from low single digits a few years back) while digital advertising commands 10% of the budget," said analysts Nitin Mathur and Vivek Veda of French brokerage Societe Generale Group in a 26 June report.
Countering local competition
Last week, HUL laid out its strategy to counter regional competition at an analysts meeting. Apart from improving distribution channels, it said it would introduce Pepsodent clove, oil and salt toothpastes in south India and small pack tea and unique sampling trade offers in coastal Andhra Pradesh; cut prices of laundry products to shift consumers from local brands in Uttar Pradesh; and promote small refrigerators to push ice-cream sales.
“HUL seems focused on accelerating the pace of innovations and renovations on the one hand and seeding emerging categories for long-term growth and sustainability (on the other)," said brokerage firm Prabhudas Lilladher Pvt. Ltd in a 29 June report and added that it believes the company’s sustained efforts in product innovation, category creation, distribution expansion and go-to market initiatives have increased its competitor edge.
In 2014-15, HUL gained market share across 90% of its portfolio and is confident of the mid- to long-term opportunity in the Indian market, said the Societe Generale Group report. The company’s operating margins have also expanded by 350 basis points thanks to efficiencies achieved through economies of scale from fiscal year 2011 to 2015, the report said. HUL ended the year to 31 March with revenue of ₹ 30,896 crore on a net profit of ₹ 4,315 crore.
At the AGM, shareholders questioned the company on the safety and quality of its Knorr range of food products besides issues like increasing tax outgo. Many also sought to know the company’s plan to enter the hair oil category through the acquisition of the Indulekha brand.
Mint reported on 24 June that HUL is in talks with Mosons Extractions Pvt. Ltd to buy the Indulekha brand of hair care products, including an ayurvedic hair grooming oil and shampoo, for around ₹ 500 crore.
Addressing the issues of food safety and product withdrawal from the market, Manwani said the company’s Knorr brand met all requirements and only Knorr Chinese range of instant noodles has been withdrawn from the markets following a Food Safety and Standards Authority of India advisory of 9 June. Nestle India Ltd is recalling and destroying Maggi 2-minute noodles after excess lead content and monosodium glutamate were detected in some samples of the product.
Shares of HUL rose 1.5% to ₹ 900.05 at the close of trading on the BSE on Monday, while the benchmark Sensex fell 0.6% to 27,645.15 points.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
