HUL Says Risk Of Recession Real As It Preps For Business After Covid-19

As a national lockdown was getting enforced across India following the Covid-19 outbreak, the country's largest consumer goods maker saw its food solutions and water purifier businesses getting affected the most.

These two businesses, Hindustan Unilever Ltd. said at its 87th annual general meeting on Tuesday, contribute nearly 5% of its total revenue. The company sells water purifiers under the brand Pureit; its food solutions business markets ready mixes to restaurants.

Other units were also impacted, Sanjiv Mehta, chairman and managing director of the company told shareholders, over video conference. Its beauty business—under which it sells make-up products—and its ice-cream unit were impacted. The skin care and hair care businesses were affected in April and May, he said.

“The risk of recession remains real, but we mustn't take it as a foregone conclusion,” Mehta said. The government, he said, should keep a close watch on the demand situation and step in if it doesn't revive in the next few months.

HUL's capacity utilisation at present stands at 90-100%. That compares with around 80-90% at the start of June and 70% in April. Manufacturing had ground to a complete halt in the last week of March, it said, when the government first announced the lockdown.

The maker of Dove soap and Lipton tea said it has increased its trucking capacity to nearly twice the national trucking recovery rate to eliminate bottlenecks in its logistics.

It has launched over 50 “innovations” in the hygiene and sanitisation segment like Lifebuoy alcohol-based sanitiser (gels, liquids and sprays), Surf excel laundry powders with enhanced germ kill and Domex sodium hypochlorite-based spray for use in home and offices.

Mehta said the broader e-commerce and online grocery stores have done good business with the ability to scale up, at a time when large modern trade stores inside malls remain closed. This has forced modern trade to increase their omni-channel initiatives and neighbourhood grocery stores have become more popular owing to their proximity, he said.

The company is also leveraging on its in-house capabilities like ‘TrendsWatch' and ‘People Data Centre'—which are internal data trackers—to decipher and identify trends. This, the company said, would help it to understand shift in demands, rejig innovation plans and adjust to channel shifts.

When a shareholder asked about the company's dependence on imports from China, Mehta said HUL sources packaging and raw material to the tune of Rs 429 crore from Asia's largest economy and during the lockdown it has started working on possible alternatives and localisations. HUL's exports to China are very small, he said.

The company announced last week that it's dropping the word “fair” from its skin care brand Fair & Lovely and is awaiting regulatory approval for the new name. The company had already relaunched the skin care cream last year, Mehta said, adding: “After this relaunch, we had a fabulous year. Our penetration went up, our market share went up and these were record numbers and 2019, post the relaunch, we had one of the best years.”

The maker of Ponds cream had said that it has started replacing words like “fairness”, “whitening” and “skin-lightening” with “glow”, “even tone”, “skin clarity” and “radiance”. Fair & Lovely also stopped advertising showing transformation in skin and shade guides.