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Mint
09-06-2025
- Business
- Mint
FMCG's urban nightmare: Will these stocks get their mojo back?
New Delhi: A well-worn, even if possibly apocryphal, anecdote from Wall Street is that during a prolonged bear market in the 1960s, a horde of disgruntled investors landed at the office of a famous stockbroker. What riled them was not the deep red shade of their portfolios, which after all was expected during a downturn, but the underperformance of their non-cyclical or defensive stocks. These stocks, belonging to sectors like utilities, consumer staples and healthcare, were sold with the express promise of providing stability during periods of market turbulence. The stockbroker had advised many of his clients to allocate as much as half of their corpus to such defensive scrips. When confronted with the disappointing performance of this portion of their portfolios, the stockbroker shrugged and offered what would soon become a classic quip: 'Half of your portfolio is non-cyclic—the problem is, you never know which half." It is not known whether his clients appreciated his comic flair, but for millions of Indian investors in the fast-moving consumer goods (FMCG) sector, the line currently hits uncomfortably close to home. India's FMCG sector has been an outlier for all the wrong reasons—first sitting out the bull market over the past two years, and then failing to live up to its defensive billing during the downturn, since October 2024. Does this set the stage for a long-overdue rebound in FMCG stocks? Or will investors be unlucky a third time? The recent march quarter (Q4) results offer some clues. The devil in volumes The most conspicuous trend of the just concluded Q4 results season was a tepid demand environment reported by most FMCG firms, with urban growth continuing to remain weak while rural markets maintained their recovery. As per Nielsen data, rural markets outdid urban markets for the fourth straight quarter. Rural volume growth in Q4 came in at 8.4%, nearly 4x more than urban's 2.6%. Overall, this meant anaemic volume growth for FMCG companies. India's biggest FMCG company, Hindustan Unilever Limited (HUL), considered a proxy for domestic consumption in the country, posted an underlying volume growth of 2% in Q4, up from zero in the previous quarter but at the same level as the year-ago quarter. For the full financial year 2024-25, underlying volumes growth stood at 2%, similar to the previous year. 'FMCG market witnessed subdued demand trends in 2024-25. Rural demand continued to improve gradually while urban demand moderated over the year," Rohit Jawa, MD and CEO of HUL, said at the company's post-earnings conference call. 'While syndicated data is available only for general and modern trade, we also incorporate e-commerce data from our partners for internal tracking. Including e-commerce data, urban demand continued to moderate during the year," he added. Peer Nestle India too continued to post muted performance, with Q4 revenue growing by 4.5% over the year ago quarter to ₹5,448 crore. The company finished 2024-25 with 3.2% domestic sales growth and flat volumes—a disappointment for the Street given Nestle India's portfolio strength and its ongoing rural distribution expansion as part of a 'rurban' strategy. Analysts noted that increasing competitive intensity and lacklustre consumer demand affected the growth of two key business verticals—prepared dishes (including Maggi noodles) and milk and nutrition foods. On similar lines, biscuits and bread maker Britannia Industries' Q4 volume growth of 3.5% came in below analyst estimates of around 5%. The company's volume growth rate is on a declining trajectory. The figure was 8% in the first two quarters of 2024-25, slipping to 6% in the third quarter and then almost halving in the March quarter. Analysts also noted the pricing dynamics in the industry. 'The Q4 results across various companies did not demonstrate the anticipated positive effects of price increases, which were expected to mitigate inflationary pressures and contribute to enhanced topline and margins," Saurabh Pathak, head, investment counsellor, Purnartha, a portfolio management services company, told Mint. However, he added that a moderation in agricultural commodity prices is a favourable development and suggests the potential for improved earnings in 2025-26. What hit the margins? Inflationary trend in raw material costs was a conspicuous drag across the sector in the previous financial year. While prices of key inputs like palm oil, tea, coffee, wheat and cocoa have eased a bit, they are still at elevated levels. The rupee depreciating against the dollar too contributed to the rise in import bills. HUL highlighted how prices of palm oil, a critical input for almost all FMCG firms, soared 18% in 2024-25 compared to the previous fiscal year. Tea prices vaulted by 19%, even as crude oil prices dipped 6% and soda ash eased 6%. Wheat flour, forming almost 30% of the raw material costs for Britannia, rose 9% quarter-on-quarter, while that of palm oil increased 7% sequentially. The only respite was sugar prices, which stayed flat sequentially and yearly, but even this too may see upward pressure, given that the Centre has increased the fair and remunerative price (FRP) of sugarcane by 4.41% to ₹355 per quintal for the upcoming 2025-26 season beginning October. FRP is the minimum price mandated by the government that sugar mills are legally obligated to pay sugarcane farmers for their produce. Not just that, India's sugar output for the 2024-25 marketing year, ending in September, is projected to fall below consumption for the first time in eight years, as per the All India Sugar Trade Association. The country is expected to produce 25.8 million metric tons of sugar, down 19.1% from the previous year, while consumption is estimated at 29 million tons. The cumulative impact of the inflation in raw material costs was a decline in margins for FMCG companies. HUL's gross margins contracted 140 basis points (bps) to 50.5% over the year-ago quarter, while that of Nestle India dropped 65 bps to 56.2%. ITC saw acute margin pressure across its cigarettes, FMCG, and paperboards/packaging segments, with its gross margins plunging 347 bps on-year to 54.7%. The company noted that there was sharp escalation in key input materials like edible oil, wheat, maida, potato, cocoa, leaf tobacco and pulpwood, especially in the second half of the year. The K word In stark contrast to the volume pressures faced by FMCG firms, their premium portfolios showed robust growth, demonstrating the K-shaped divide in the economy. For instance, HUL reported that its premium offerings like Dove and Pears are growing faster than Lux and Lifebuoy soap brands. FMCG major Dabur noted that while its beverage portfolio declined due to slowdown in urban consumption, the premium segment has done well, with Real Activ and coconut water recording a robust growth of 11%. Companies like Britannia and ITC said they are stepping up new product launches in the premium space. Even in a traditional segment like agarbattis (incense sticks), ITC launched premium and novel fragrances in dry dhoop sticks and cones format under its 'Scent' range. Almost every company identified premiumisation as a key vector of growth, and reported expanding their premium and value-added offerings. Another common factor in Q4 earnings was that e-commerce growth outpaced that of general trade. This is also margin accretive for companies, as their e-commerce basket comprises premium and higher-priced products. Local trouble At the other end of the spectrum though, listed players are facing intense competition from local players in tier-II, III and rural markets. 'Competitive intensity (including from local players) remained high in noodles, snacks, biscuits, and popular soaps," Kotak Institutional Equities stated in a note on ITC's Q4 results. Many analysts have pointed out that increasing price sensitivity and downtrading in some categories is leading to a resurgence of local players in rural markets. 'Local brands (Samrat atta, Vikram masala, Chheda salt) are outperforming premium names (Tata Tea, Soulfull, Aashirvaad) by leveraging aggressive pricing and local consumer preferences," analysts at Anand Rathi Institutional Equities noted. The slowdown in urban demand and momentum of low-priced local players in rural markets are yet another indicator of the stress in the overall consumption space. This is corroborated by recent macroeconomic data as well. India's economic growth stood at 7.4% in the March quarter of 2024-25, compared to 8.4% in the year-ago quarter, resulting in a GDP growth rate of 6.5% for the full fiscal year. This was its slowest growth since the covid-19 pandemic. For context, India grew 9.2% in 2023-24. Private Final Consumption Expenditure (PFCE), which measures the total spending by households and non-profit institutions on goods and services and accounts for nearly 60% of the GDP, grew 6% in Q4–the lowest in 2024-25. Meanwhile, household income growth remains muted for both urban and rural households, according to RBI's survey of March 2025. Spotting winners To say that the FMCG sector is facing challenges would be to flirt recklessly with understatement. Even so, analysts are optimistic on the near-term outlook for consumer staples stocks on the back of a host of factors aligning favourably for the sector. Resilient rural demand is expected to get a further boost given IMD's forecast of above-normal monsoon this year, which bodes well for rabi crop output. On the urban side, falling inflation, particularly of food items, can aid the recovery of mass-market demand. Retail inflation eased to a nearly six-year low of 3.16% in April mainly due to subdued prices of vegetables, fruits, pulses, and other protein-rich items. Food inflation stood at 1.78%, lower than 2.69% in the preceding month and 8.7% in the year-ago month, as per data released by the National Statistics Office (NSO). The recent income tax cuts delivered in the Union Budget, and the expected revision to salaries and pensions by the 8th Pay Commission, should give a fillip to middle-class disposable income and spur consumption. In a recent report, global investment bank UBS stated that consumer stocks are well placed for a strong rebound in 2025-26. 'We expect this to be driven by an earnings recovery, attractive valuations and structural challenges being successfully overcome," UBS noted. 'Our preferred approach is to buy the laggards with inflection points, companies with successful high growth business models that are not vulnerable to disruption, and companies that can benefit from a cyclical earnings rebound. We also think the sector offers both defensive names (if the market were to remain volatile and risk averse) and recovery stories should risk appetite return," it added. UBS has classified consumer stocks into four buckets. The first category of 'growth turnaround situations' comprises HUL, Godrej Consumer Products, and Dabur, which can see significant rerating if their portfolio issues are resolved. The second group, 'facing disruption narrative', comprises names like Asian Paints and Dmart, which are seeing challenges from new entrants and quick commerce, respectively. The third bucket is seeing moderate growth and no major disruption. Stocks like Colgate, ITC and Marico fall in this group. The last bucket comprises high growth and highly valued names like Titan and Tata Consumer. On the input side, while prices of commodities like palm oil, tea, coffee, cocoa, milk, wheat, copra and edible oil, have been inflationary in the recent past, they are now showing a declining trend. This, along with selling price hikes are expected to boost margins in coming quarters. Many experts also advise investors to avoid the excesses of the past. 'As an investor, if you're still buying a soap manufacturer for 60-times earnings or a paints maker for 70-times earnings, and then expect 15-20% type returns, then I don't know what to tell you," a Mumbai-based fund manager said on condition of anonymity. With heavyweights like HUL and Nestle still facing volume headwinds, analysts say investors should focus on a bottom-up approach within the FMCG sector, as an index-driven strategy may not yield outperformance. 'The near-term outlook for dominant players like HUL and ITC does not appear particularly promising. However, it will be crucial to monitor the Q1-FY26 results for both companies. An improvement in margins and volume could position the index more favourably, although its ability to outperform the benchmark index remains uncertain," Purnartha PMS' Pathak said. 'Investors should closely track volume growth, key raw material price movements, trends in urban demand and spending to gain confidence in the sector or specific companies within it," he added.
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Business Standard
03-06-2025
- Business
- Business Standard
HUL launches iSight to track demand trends, competition on real-time basis
Hindustan Unilever (HUL), one of India's largest fast-moving consumer goods companies, is using its employees to stay ahead of the curve by launching an application called iSight. The app enables employees to track demand trends and competitors' moves in the market. Through iSight, employees can share feedback and insights about HUL's products, their placement, market trends and observations in the marketplace. They can also include suggestions made by family and friends. The app aims to help the company understand product efficacy and shelf placement, provide insights into competitive products, and contribute to addressing specific issues within various categories. While this initiative by the maker of Lux is exclusive to India and was launched at the end of April, the application already has 1,000 employees enrolled and has generated 300 insights since its launch. 'Our employees are our most passionate consumers. With iSight, we're putting the power of market insight directly in their hands — to observe, engage and shape the future of our brands. The goal is to scale this as a force multiplier — not just through campaigns, but by enabling every employee to be a constant consumer and customer tracker,' Rohit Jawa, chief executive officer and managing director of Hindustan Unilever, told Business Standard. After employee feedback is received, the consumer markets insights team collates and extracts key findings, which are then forwarded to relevant teams for further action. While employees previously had the option to send market feedback via emails or customer care lines, this is the first time the company has rolled out a dedicated app for the purpose. iSight is an HUL initiative exclusive to India. The company has already run two changes for its brands Glow & Lovely and Lifebuoy and is currently analysing the ideas and insights. In a conference call with analysts following its results, Jawa said both Lifebuoy and Glow & Lovely had undergone comprehensive relaunches in response to changing consumer needs. 'Lifebuoy has been dedicated to preventing infections and promoting health for over a century, continually evolving with changing consumer preferences. After enhancing the product with Stardust technology, the brand has now elevated its proposition from illness protection to advanced skin protection benefits,' Jawa told investors. He also added, 'We also stepped up our investment behind on-trend demand spaces by relaunching Lifebuoy Lemon Aloe Fresh within the freshness segment. We introduced Glow & Lovely with an elevated proposition of newer, brighter skin every day and modern packaging.' While the application gives HUL real-time insights on market trends to help enhance its processes, the company is also incentivising employees for providing feedback while shopping by allowing them to earn points for their contribution.
Time of India
31-05-2025
- Business
- Time of India
HUL MD's salary up 3.7% to Rs 23 cr in FY25; number of permanent employees falls 8.4%
New Delhi: HUL Managing Director Rohit Jawa's total remuneration in FY25 has witnessed an increase of 3.75 per cent to Rs 23.23 crore, according to the latest annual report of the FMCG major. Jawa's salary was at Rs 3.65 crore along with allowances of 11.45 crore, a bonus of Rs 3.78 crore and a perquisite - long-term incentives of Rs 2.76 crore. The annual report said that Jawa's remuneration was 146.47 times more than the median remuneration of employees. In FY24, Jawa's remuneration was 153.03 time more than median remuneration of employees. Interestingly, the annual report also highlighted a fall of 8.46 per cent in the total number of permanent employees. According to the report, HUL has 6,604 permanent employees on the rolls of the company as on March 31, 2025. However, a year before HUL had 7,215 permanent employees on the rolls of the company as on March 31, 2024. The percentage increase in the median remuneration of employees for the financial year 2024-25 was 8.39 per cent. "Average increase made in the salaries of employees other than the managerial personnel in the financial year was 4.62 per cent and does not include increase on account of promotions. Increase every year is an outcome of Company's market competitiveness as against its peer group companies as well as financial performance," the report said. Jawa, while addressing the shareholders of the company, said in FY'25 HUL witnessed moderation in urban demand and gradual recovery of rural consumption. "Against this backdrop, we remained focussed on driving volume growth and strengthening competitiveness for the business," he said. While HUL chairman Nitin Paranjpe said the business witnessed a challenging operating environment with uneven weather patterns, volatile commodity prices and muted consumer demand. He further said India is "well-poised to deliver strong and consistent growth with rising affluence, a burgeoning middle class, a vibrant young working population empowered by a strong public digital backbone and growth-oriented policies". "Economic development, technological advancements and a better quality of life have fuelled the aspirations of our consumers. These new dynamics present a significant opportunity for the FMCG sector," he said. The company is witnessing a rapid evolution of the Indian consumer with increased digital penetration and access to information. "We are building a robust portfolio for future growth, by sharpening our 'where to play' choices. In line with this, we announced the acquisition of premium science-backed beauty brand, Minimalist. This acquisition is in line with our vision to become the beauty shapers of India," Paranjpe said. In FY'25, HUL divested its water business, Pureit, and announced the decision to demerge its ice cream business, which consists of brands - Kwality Wall's, Cornetto and Magnum. HUL, which owns popular brands such as Rin, Lux, Surf Excel, Pond's, Dove, Horlicks, Bru, Lipton, etc had a turnover of Rs 60,680 crore and its profit after tax was at Rs 10,644 crore.>
Mint
30-05-2025
- Business
- Mint
Multi-channel push: From quick commerce to premium beauty, HUL adapts to evolving consumer habits
Hindustan Unilever Ltd (HUL) is expanding its sales channels, including health and wellness stores, premium beauty outlets, and quick commerce, to adapt to evolving consumer shopping habits, said Rohit Jawa, chief executive and managing director of India's largest packaged consumer goods firm, in its 2024-25 annual report. "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. 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,' he added. 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. HUL's wide portfolio of over 50 brands reaches over 9 million outlets in India, making it among the most well-distributed packaged consumer goods companies in the country. It has invested ahead of the curve in organised trade, leading to higher market shares and strong leadership positions across categories. The growing demand in modern trade will help drive sales. "We are also investing in e-commerce capabilities to build a strong digital moat…Under the WiMI 2.0 mandate, HUL is also building specialised new routes to market (RTMs) for emerging segments, such as health and wellness, premium beauty, and gourmet food. These channels will help HUL reach more than 70% of the premium beauty and foods markets, while also driving assortment growth,' it added. The company uses the WiMI (winning in many Indias) strategy to understand and reach diverse consumer groups across the country. Apart from premiumization and more consumers trading up to better brands, HUL has also outlined rapid digitisation as a core area of future growth. This includes digitizing Kirana store partners via apps, bolstering e-commerce offers, and spending more on digital marketing channels. The company still draws a majority of its business from kirana stores or traditional sales channels. Kirana stores are vital to any large packaged consumer goods company's distribution and reach in India, making up to 70-80% of their sales. 'Over the last year, we have focused on strengthening this channel with a 'kirana-centric, distributor-inclusive' model. Our strategy involves building stronger relationships with our distributor partners and kirana stores, partnering with them in their journey of digitisation, empowering them with future-fit capabilities to ensure we position them to succeed in the rapidly evolving distribution landscape,' it said. HUL is also 'actively' collaborating with the Government of India's initiative, Open Network for Digital Commerce (ONDC). 'With the help of an integrated module in Shikhar, neighbourhood kiranas can go live on ONDC seamlessly and sell their entire range of products online,' it said.
Time of India
30-05-2025
- Business
- Time of India
HUL MD Rohit Jawa's salary rises to 23.23 crore in FY25; permanent workforce down 8.4%
Hindustan Unilever Ltd (HUL) Managing Director Rohit Jawa's total remuneration rose by 3.75 per cent in FY25 to 23.23 crore, according to the company's latest annual report. Jawa's annual pay package included a salary of 3.65 crore, allowances of 11.45 crore, a bonus of 3.78 crore, and long-term incentive perquisites amounting to 2.76 crore, PTI reported. The report stated that Jawa's remuneration was 146.47 times more than the median remuneration of employees. In FY24, the ratio was higher at 153.03 times. Meanwhile, the number of permanent employees at the FMCG major fell by 8.46 per cent. HUL had 6,604 permanent employees on its rolls as of March 31, 2025, compared to 7,215 the previous year. The median remuneration of employees increased by 8.39 per cent in FY25. 'Average increase made in the salaries of employees other than the managerial personnel in the financial year was 4.62 per cent and does not include increase on account of promotions. Increase every year is an outcome of the company's market competitiveness as against its peer group companies as well as financial performance,' the annual report noted. Addressing shareholders, Jawa said FY25 saw a moderation in urban demand and a gradual recovery in rural consumption. 'Against this backdrop, we remained focussed on driving volume growth and strengthening competitiveness for the business,' he said. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Giao dịch CFD với công nghệ và tốc độ tốt hơn IC Markets Đăng ký Undo HUL Chairman Nitin Paranjpe said the company navigated a challenging operating environment, marked by uneven weather patterns, volatile commodity prices, and muted consumer demand. He added that India is 'well-poised to deliver strong and consistent growth with rising affluence, a burgeoning middle class, a vibrant young working population empowered by a strong public digital backbone and growth-oriented policies.' 'Economic development, technological advancements and a better quality of life have fuelled the aspirations of our consumers. These new dynamics present a significant opportunity for the FMCG sector,' he said. Paranjpe said HUL is witnessing a rapid evolution of the Indian consumer due to greater digital access and information. 'We are building a robust portfolio for future growth, by sharpening our 'where to play' choices. In line with this, we announced the acquisition of premium science-backed beauty brand, Minimalist. This acquisition is in line with our vision to become the beauty shapers of India,' he said. In FY25, HUL also divested its water business, Pureit, and announced the decision to demerge its ice cream division, which includes brands such as Kwality Wall's, Cornetto and Magnum. The company, which owns brands like Lux, Rin, Surf Excel, Pond's, Dove, Horlicks, Bru, and Lipton, reported a turnover of 60,680 crore and a profit after tax of 10,644 crore in FY25. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
