What HUL’s 10-Year Plan Tells Us About Indian Consumption

While HUL’s core mass market brands will remain an important part of its product portfolio, the company expects several other categories to double or even quadruple in size in the coming years, driven by India’s growing GDP. times.

The company said this is because Indian consumers are increasingly looking for advanced formulations and convenient formats, leading them to switch from traditional soaps and laundry detergents to body washes and liquid detergents.

In a presentation to the stock exchanges on its ‘annual income’, HUL said it expects more households to have an annual income of US$8,500 to US$40,000 by 2030 compared to 2018, despite annual income Household income below $4,000 will shrink significantly by the end of the century. Friday Capital Markets Day.

ALSO READ | HUL’s demand dilemma is a tough one

HUL sells more than 50 brands in India across categories such as detergents, food, soaps, shampoos, toothpastes, cosmetics and ice cream. The company’s product prices range from $1 and $10 bags of shampoo $800 lipstick.

Analysts at Motilal Oswal said in a note on Monday that the company clearly wants to be “relevant” to India’s big consumer themes, which include an income boom, a young population with a median age below 32 and growing digitalisation. and digital consumption. HUL remains “strategically aligned” with India’s changing economic landscape, capitalizing on structural changes in income distribution and consumer behaviour, they added.

In the presentation, HUL identified six “high-growth” segments as long-term bets. These include premium facials, premium hair care, shower gels, home care solutions, condiments and snacks, and supplements. It also identified 10 brands from its portfolio that it said were ripe for premiumization.

“As India transforms from a pyramid to a diamond revenue structure, HUL leverages the growth in disposable income to drive premiumization of its portfolio while catering to different consumer segments. More than 80% of the growth is expected to come from the core going forward and market makers (leading the trend), supplemented by core categories that enhance penetration,” said analysts at Motilal Oswal.

ALSO READ | HUL: Gradually improving prospects test investors’ patience

The move is linked to a broader shift in consumer habits.

As more families move into higher income brackets, they are increasing their spending on personal care. Consumers in big cities also tend to favor healthy foods. They are also buying more online, traveling and spending money on experiences such as concerts. Several large companies across categories including alcohol and real estate reported an increase in high-end spending.

Affluence and convenience also drive demand for home appliances such as washing machines and microwave ovens. This trend has helped companies like HUL sell more washing liquids and convenience foods.

For example, Surf Excel’s HUL liquid detergent business grew threefold between 2019 and 2023; fabric conditioner brand Comfort also grew sevenfold between 2014 and 2023.

The company said consumers’ expectations from their laundry products are “evolving” due to larger wardrobes, while rising ownership of washing machines in India is prompting a shift away from laundry detergents towards higher-quality laundry detergents.

ALSO READ | How HUL’s Rohit Jawa plans to beat India’s clock speed

HUL plans to expand its liquid detergent coverage in the future.

The company also segments its product portfolio into a “core” portfolio, “future core” brands that are ripe for premiumization, and also through so-called “market makers” to identify and pursue future trends.

“Premiumization remains top of the agenda,” said Manoj Menon, chief research and FMCG analyst at ICICI Securities.

This is already evident in categories like beauty and personal care, where the entry of new-age brands as well as large global brands is driving demand for premium skincare products.

Affluent consumers are willing to be anywhere in between $1,000 and $Lipstick and expensive skin care cost $3,000. The brands sold by HUL include Lakme, Pond’s, Simple, Love Beauty and Planet.

The company said in the presentation that it will “invest disproportionately” in categories such as facial cleansing, sunscreen and serums, as well as launch global brands in India.

ALSO READ | Is consumer demand recovering? HUL bosses think so

The move will also help the company compete with new-age, direct-to-consumer brands such as MamaEarth, Sugar, Juicy Chemistry and Plum that are flooding the market.

“In the beauty and wellness space, there are opportunities to achieve premium (affluent) as well as develop (aspirational) markets. Categories such as serums will grow significantly given their convenience and efficacy,” Nuvama Institutional Equity Analysts said in a separate note on the company stated in the report.

ICICI’s Menon recognized the company’s efforts to reinvent its beauty and wellness portfolio by modernizing its core, focusing on high-growth segments and launching global brands to respond to changing consumer trends.