Gopal Vittal, Executive Director, Home & Personal Care, Hindustan Unilever, is as enthusiastic about his rock band as he is about his work. The skincare category, one of the leading performers at HUL, is growing at above 15 per cent, while, what he calls the ‘TLC, or tender loving care' categories of hand wash, home and fabric cleaners, have been growing at 40-50 per cent. “Last year we added about Rs 450 crore of (incremental) turnover from the TLC categories,” he says. HUL won't yield share even if it means slimmer margins, but it will also intensify innovation to fight inflationary pressure, he says. Excerpts from an interview:

Interview with Gopal Vittal, Executive Director, HPC, HUL

HUL has said that it is in the process of gaining greater customer-centricity and focussing on customer and innovation. How have you been doing that?

To set the context, if you look at the structure of the Indian market, we have the living standards measure (LSM), the number of durables that a consumer owns. LSM 1 or 2 would be very low on the scale, maybe just a pressure cooker or a mobile phone. And LSM 15 /16 would have a DVD, car and so on, so we use that classification. It is a better way to understand benchmarking across countries, across markets. If I look at the lower LSM, almost 85 per cent of India would be LSM 1-4 and and LSM 5 plus would be the rest. If you see the structure of consumption, 80 per cent of the business in household and personal care categories would come from LSM 1-4.

But given the changing affluence and profile of incomes, using the data that NCAER puts out, we looked at what's going to happen in the next 7-8 years. LSM 5-plus would account for 60 per cent of the incremental growth, LSM 1-4 will account for 40 per cent of the growth. While both sets will continue to grow in terms of consumption the structure of consumption across categories will change dramatically. That is because if you look at average consumption of personal care categories such as skin and hair, in LSM 8-plus, there is an 80-fold jump in consumption of skin care products; laundry, on the other hand, is a four-fold jump; skin cleansing, a four-fold jump… as a result the nature of consumption will change.

This will have significant implications for the beauty category. We said that we will need to become a stronger beauty care company, but it's not a situation of this or that, it's this and that. That is a fundamentally different model, as a company we were much more of an LSM 1-4 one in the kind of portfolio we had and the categories we were present in. To do this we needed a completely different understanding of consumer centricity, the marketing models we apply, in sales and in every aspect and that was the genesis of what we would say is a deeper understanding.

What we've done as a consequence, there are rituals in the company to embed consumer-centricity, but apart from rituals you need to be far more demanding across the business as what you need is to be far more connected, need a raised innovation intensity.

HUL has done remarkably well in skincare of late, how has that been possible?

Skincare has been one of our star performers in the past nine quarters. We've been able to step up our personal products growth which used to be around 8 per cent, it's now jumped to 15 per cent and is moving northwards. We've been able to build strong volumes in soaps and detergents as well. There has also been a much greater cost focus on one side of the business while there has been much more experimentation, and a willingness to take risks, on the other side. This is what is needed to win in a changing India. The question is, are we winning in the markets of tomorrow, with the consumers of tomorrow, in the segments and the channels of tomorrow – in each of these there are tailwinds coming our way.

You've been able to consolidate your skincare brands at the premium end of the market?

We brought in Fair & Lovely in the late '70s;

Today, the skin care market is fragmenting, there's anti-ageing, skin lightening, facial cleansing, premium skin lightening, toners, astringents, it's all segmenting at a rapid pace. What we are doing is innovating across the board; chasing a Rs 10-crore opportunity is the same as chasing a Rs 100-crore opportunity, that's the difference in the HPC business.

Your average price points too have risen sharply?

It is not about price points rising - It is growing upgrading across categories caused by the changing structure of consumption. This is right across the board. Even in mass categories such as laundry and cleansing, while the secular trend of upgrading is true, because of food inflation you can have some pressure. So it could go up and down in a given year. It's a function of the penetration in the lower LSMs. If you look at laundry for instance, it is a 99 per cent penetrated category, LSM 1 to 4 tends to account for the large part of the volume and when there is food inflation, this is the consumer who feels the pain and so she tends to downgrade.

Today, you would say you have brands that straddle the spectrum of skincare?

The amazing thing of this business is how many companies have portfolios spanning Pond's, Vaseline, Lakme, F&L, Dove and there are other brands which we could bring in at any point of time, such as styling brand Tony and Guy. Even today, in our portfolio, these brands are capable of getting across the various segments (of needs). Lakme, for instance, plays in sun care, facial cleansing, Pond's plays in moisturising, body lotion, anti-ageing. Vaseline plays right across, including men's. The brand has done very well for us. F&L is in skin lightening but is trying to look at it in different ways – skin lightening for men, in terms of marks and also for slightly older persons.

So, will skin care continue to contribute even more in the coming days to HUL's revenues?

Absolutely. We don't declare results by segments, but in personal products, we see increasing contribution, over the past nine quarters, because the rate of growth is much more than what it is for the rest of the company.

Is it a volume-led growth or a price-led growth?

Both. The premiumisation is happening because of the price-led growth and equally volume-led growth.

At the very premium end of the market,

isn’t there a worry that consumers

may bypass HUL brands and go to a

L’Oreal or a Garnier?

Frankly, we welcome all kinds of competition. This market is going to explode and I will be happy with this kind of share. If the market grows at 20-25 per cent, then for the next 5-10 years we will have a fascinating business but to do that, we can’trun the game the way it was, you’ve got to step up the innovation intensity, you’ve got to make sure there’s a new marketing model because it’s the capacity to target markets much more, it will be a new way of doing business.

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