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Corporate May 30, 2012

How HUL hopes to get a bigger bite of India’s food market

By Rajanya Bose

What's Hindustan Unilever's (HUL's) biggest sales driver in India? Personal products, of course.

That's in sharp contrast to parent Unilever's biggest revenue driver, which is foods. Foods and beverages brought in 52 percent of Unilever's revenues in 2011.In India, in contrast, the foods and beverage portfolio contributed 18 percent to HUL's fourth quarter sales. Foods, clearly, is not a big money-spinner for the consumer giants company.

The company, which has been on a major operational overhaul since chief executive officer Nitin Paranjpye took over in 2008, is now trying to fix that. A report in The Economic Timessays that HUL's management is integrating its food services business, Unilever Food Solutions (UFS), with the Out of Home (OOH) arm, in a bid to drive sales of its food brands.

ET quoted an HUL spokesperson saying, "The integration will enable us scale up with speed and have an aligned portfolio and innovation-driven pipeline across the retail and institutional business. OOH will also be able to leverage UFS' expertise with category and channel strategies, talent and training capabilities and learnings across markets."

In the fourth-quarter, HUL's food and beverage brands like Knorr showed a disappointing performance. The packaged foods business grew 9.7 percent from a year ago, but at the operating level, the division faced a loss of Rs 3.7 crore.

Source:Edelweiss

Source:Edelweiss

Some beverages, admittedly, are doing better: coffee sales, for example, grew in double-digits even in the March-ending quarter despite a tough economic environment. Its brand 'Bru' continued to lead the premium segment through' Bru Gold' and 'Exotica'.

Still, that doesn't take away the fact that it needs to overhaul its food and beverages segment. For instance, it needs to chart out serious growth plans on regarding Kwality Walls Swirl outlets or Bru cafes.

The fact that there could be a little lesser competition in the personal products space -- which is the company's biggest sales driver in India --after rival Procter & Gamble said it might shift its focus to developed countries after losing market share there, could also work in HUL's favour.

Of course, it can't get too complacent. HUL continues to face stiff competition on the food and beverages front from local manufacturers like Amul, Mother Dairy and ITC as well as international competitors like Nestle.

Clearly, HUL needs to get its act together if it doesn't want competitors chomping off its share of the foods market.

by Rajanya Bose

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