Hindustan Unilever Ltd (HUL), the nation’s largest consumer goods major both by volume and value terms, said on Monday that better-than-expected monsoons this year and 7th Pay Commission payouts are likely to drive the demand northwards in both rural and urban markets in the long term.

In the short term, however, the company has warned that the growth is likely to remain muted given the fact that the volume growth is under pressure due to bad monsoon for the last two years and higher commodity costs.

The company, which announced its first-quarter results on Monday as per the new Indian Accounting Standards, said its domestic consumer business grew 4 per cent and underlying volume growth also grew 4 per cent, way ahead of the market that witnessed de-growth at 0 per cent to marginally negative.

The company’s volume grew on the back of offers and massive price cuts. Net sales as per the new accounting standards grew about 4 per cent at ₹7,988 crore in the quarter ended June 2016, against ₹7,713 crore in the previous year period.

Net profit grew 10 per cent at ₹1,174 (₹1,069 crore). Advertising and promotional spends were down 60 bps or 0.6 per cent.

Under the new reporting standards, the company has made changes in its product segments, too.

Sanjiv Mehta, Managing Director, HUL, said: “Modern trade and premiumisation of products across the categories have augured well for us (HUL). 

“We have also peaked at the number of innovations last year, which is now reflecting in our business. We do not see any downtrading (a trend when consumers shift to unbranded or cheaper brands) happening but we see enough headroom to grow across all our categories.”

Rural market

The rural market for HUL has been under pressure because of the drought-like situation in many parts of North India and Maharashtra till July.

Another factor that is dragging the volumes for the maker of brands like Dove and Ponds is the rise of home-grown ayurvedic consumer company Patajanli that has been gaining a strong foothold in the northern part of the country over the past year.

“In slowing market conditions, the business is tracking ahead of the market with sustained margin improvement.

“We continue to make progress on our priorities of strengthening the core of our business whilst driving operational efficiencies.

“While the near-term market growth is likely to remain muted, we are optimistic for the medium term and remain focussed on driving competitive and profitable growth,” said Chairman Harish Manwani.

Related Topics
comment COMMENT NOW