Hindustan Unilever (HUL) doesn’t see an immediate end to commodity cost inflation despite a drop in crude oil price and is sharpening its efficiency programmes to protect its margins and avoid large rate increases, Non-Executive Chairman Nitin Paranjpe said on Tuesday.
Addressing shareholder questions at the annual general meeting, Paranjpe said commodity costs saw a significant impact as crude oil price crossed $100 a barrel. While the crude oil price has now declined, Paranjpe said it will take a while for commodity cost inflation to come back to normalcy.
India’s largest fast moving consumer goods company is driving cost efficiencies by looking at every line of the profit and loss account. “We try to ensure that the price increases are less than the cost increases the company faces through efficiency programmes,” he said.
HUL continues to see significant growth opportunities in India over the medium-to-long term, but business will continue to face volatility in the short term. Paranjpe said the company is well poised to deal with the challenges and has chalked out a five-point strategy to capture growth and build resilience. These include leveraging AI, use of science-led innovation in materials, building resilient and flexible supply chains, and understanding evolving consumer behaviour.
Business growth
Paranjpe said the company generates large amounts of cash and that would be used to grow business. In February, it announced a ₹2,000-crore investment to expand capacity in fast-growing premium categories across beauty and wellness and home care liquids. “Of course, capital will be deployed for merger and acquisitions,” he added.
The company will continue its premiumisation strategy and has also set up a dedicated business unit to compete with e-commerce platforms.
“Growth rates in rural and urban markets are steady. Growth in rural areas is little faster, but these things keep changing from time to time and we are not fixated on what happens in one quarter. We see secular trends going forward,” he remarked.