HUL confident of growth in FY26 amid improving demand, lower prices

New Delhi: Hindustan Unilever Ltd (HUL) expects demand conditions to improve over this financial year, aided by broad monetary stimulus, lower food and crude inflation, and higher agricultural output, helping India’s largest consumer goods company drive up its sales volume.

For fiscal year 2024-25, turnover surpassed ₹60,000 crore for the maker of Dove soaps and Kissan sauces and jams. The company reported a 2% increase in sales, a similar rise in volume growth, and a 5% growth in earnings per share (EPS). Profit for the fiscal year improved 5% to ₹10,644 crore.

“Looking ahead, we expect demand conditions to improve gradually over the next fiscal year,” Hindustan Unilever said in its annual report for 2024-25. “Macro conditions will benefit from monetary stimulus, lower food and crude inflation and higher agricultural output. In this context, our focus remains on driving competitive volume-led growth across our business.”

HUL said it had a “strong conviction” in the significant mid- to long-term potential of India’s fast-moving consumer goods (FMCG) sector, fuelled by increasing affluence, substantial headroom for growth in per capita consumption, and rapidly developing digital infrastructure that enhances market access and consumer engagement.

HUL boasts a portfolio of more than 50 brands spanning 15 categories, including packaged foods, home care, and personal care, and reaching nine out of every 10 Indian households.

At 11:26 a.m. on Friday, the stock was down 0.22% at ₹2,362.55 on BSE, while the Sensex was trading 0.24% lower.

Growing demand

In FY25, India’s FMCG industry witnessed subdued demand in urban markets, although rural areas saw a gradual improvement in consumption. Commodity prices increased significantly, particularly in palm oil, tea and coffee, whereas crude oil, soda ash and skimmed milk powder were deflationary.

“Despite this, we maintained a healthy gross margin at 50.3%,” HUL said in its annual report. 

“During the year, we continued to generate fuel for growth with our end-to-end net productivity programme across all the lines of the P&L, leveraging buying efficiencies, smart formulations, driving logistics and manufacturing cost efficiencies, marketing efficiencies, net revenue management and accelerating simplicity through digital transformation,” the company said. “We deployed the generated savings to build our brands and strategic capabilities, in line with our capital deployment strategy.”

Portfolio revamp

HUL segmented its portfolio into core, future core, and market makers portfolios in FY25 to attract more customers.

The company has revamped core brands like Lifebuoy, Vim, and Lakmé, and launched more premium brands such as Liquid I.V. and Hellmann’s Mayonnaise. It also acquired new-age personal care brand Minimalist for ₹2,955 crore, divested its water purifier business Pureit, and announced the demerger of its ice cream business.

“This year marked a significant transformation towards excelling in demand drivers for our affluent and aspiring consumers. Consumers now navigate across platforms, creating a complex web of touchpoints and we aim to go where our consumers are,” Rohit Jawa, chief executive officer and managing director, HUL, said in the report. 

“For instance, we have significantly boosted our investments in digital marketing—today 40% of our spends are on digital media. We have over 12,000 influencers whom we collaborate with for our brands,” Jawa added.

The company added that its core portfolio will focus on brands “that are at the sweet spot of premiumisation”. 

“We have continued to unlock access to these brands to a larger number of consumers by democratising trends, and as a result, grew faster than the market. We are building segments of the future through our market makers portfolio. While it is currently a smaller part of our business, it will continue to grow rapidly in the years to come. This ₹7,000 crore segment has delivered double-digit growth during the year, as we focus on expanding business,” the company said.

HUL also announced the acquisition of the palm undertakings of Vishwatej Oil Industries Pvt. and an investment in Lucro Plastecycle Pvt., a maker of recycled plastics.

Distribution

HUL is expanding its sales channels, including health and wellness stores, premium beauty outlets, and quick commerce, to adapt to evolving consumer shopping habits. 

“We now have a dedicated premium retail organisation focused on distributing and creating demand for our premium beauty products through the beauty and pharma channels,” Jawa said. “New channels have necessitated superior point-of-sale availability. We are leveraging advanced technology expertise to strengthen our presence in modern trade, e-commerce, and the fast-growing quick commerce.”  

In October 2024, HUL’s beauty and well-being portfolio, which includes brands such as Lakme and Dove, went live in 75,000 outlets with the beauty premium retail organisation (PRO). PRO is an exclusive route to market for offline beauty, with 75% coverage focused on health and beauty stores.

Meanwhile, HUL's foods category is witnessing a significant expansion in channels such as modern trade stores and e-commerce, including quick commerce, the company said. 

It has rolled out several exclusive products for such channels.

“We had several modern trade and e-commerce exclusive launches in the year, led by Pukka herbal infusions, Bru cold coffee and Korean meal pots. With our premium ice cream portfolio of Magnum, Cornetto and Slow Churn, we continued to strengthen our play in channels of the future, building on the trend of in-home ice cream consumption,” it added.

E-commerce currently contributes 7-8% to HUL's business, a share that is growing faster than the company's overall average. This contribution could potentially reach 15% in the next few years, according to the company's management during their post-earnings call for the March quarter.

Quick commerce accounts for approximately 2% of the business. HUL’s assortment on quick commerce has doubled in 2024-25 compared to a year ago.

HUL said e-commerce has evolved into various models. It has set up teams for each model, focusing on future-ready, need-based portfolios.