Hindustan Unilever to widen lead in downturn

By IANS | Published: August 13, 2020 05:23 PM2020-08-13T17:23:13+5:302020-08-13T17:40:35+5:30

New Delhi, Aug 13 For Hindustan Unilever Ltd (HUL), the downturn is the time to widen its competitive ...

Hindustan Unilever to widen lead in downturn | Hindustan Unilever to widen lead in downturn

Hindustan Unilever to widen lead in downturn

New Delhi, Aug 13 For Hindustan Unilever Ltd (HUL), the downturn is the time to widen its competitive advantages and leverage its core strengths to the fullest, according to a research report by Japanese financial services house, Nomura.

"While it demonstrated its best-in-class strategy and execution during recent major events (demonetisation, GST), it continues to display material improvements in preparedness, planning and transforming in current tough times," Nomura said.

"We believe in this downturn, HUL can further widen its competitive lead vs peers and is well-equipped to drive share gains and expand margins," the report said.

Recruiting consumers in its core categories during the downturn, HUL has increased its focus on protecting volumes during the current downturn.

"It has gained share in 86 per cent of its portfolio in Q1 and is consistently doing so, which should, in our view, enable it to gain value share 1.4x faster than peers over the next five years. More importantly, it has started gaining share in soaps (c.16 per cent of sales), where it was losing share; this could meaningfully contribute to its sales," Nomura said.

"We believe HUL is also well-equipped to capture any down-trading, as its products straddle the price-point pyramid," it added.

Introducing new categories and developing markets even in tough times, HUL has introduced new categories (laundry sanitisers, anti-germ wash booster, disinfectant sprays/wipes) given elevated consciousness around hygiene.

Also, the market has become more conducive to developing categories in which it has been investing (hand/dish wash, floor/toilet cleaners, growing at 2x), and HUL's dominant position in these categories with superior right-to-win should further accelerate sales.

"We expect the GSKCH merger to further boost HUL's sales and margin profile. Margins get stronger legs as pandemic brings out sustainable cost efficiencies. In Covid-19, HUL has derived several operational learnings, and is recalibrating to save costs sustainably," Nomura said.

HUL is cutting 20 per cent of tail SKUs, converting fixed costs to variable, lowering ad rates/ costs, maintaining share of voice, realising efficiencies from digital transformation, synergy benefits from GSKCH, and WiMI ('Winning in Many Indias') strategy to drive margin expansion, it said.

( With inputs from IANS )

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