Hindustan Lever Limited (HLL) has undergone a complete transformation in the last five years, which has reversed the trend of down-trading in the FMCG industry, Chairman M. S. Banga told the company’s Annual General Meeting yesterday.
Banga pointed out that as a result of the transformation, HLL is now a focussed FMCG company with branded businesses accounting for over 90 per cent of sales, consisting of 35 brands across 20 categories. The company had disengaged from all non-FMCG or commodity businesses, with sales of Rs 1750 crore as in 1999, while deriving excellent value for these divestments.
“In recent years, the FMCG sector has declined due to down-trading. As the largest FMCG player, it was up to us to reverse the down-trading to realize its true growth potential. Our transformation has resulted in a new HLL,
which has successfully faced this challenge and reversed this trend. It
has done so by substantially strengthening the brands and building
capabilities,” Banga said.
Referring particularly to the Foods business, Banga said that the right building blocks had been put in place. The portfolio, which was fragmented and lacked scale, had been consolidated and gross margins have been improved by over 13 per cent through product mix and cost reduction. “The Foods business will now invest for growth through relevant innovation,” he said.
Said Banga, “The most significant challenge has been to move our brands beyond merely
making functional claims to playing a bigger and deeper role in the lives of consumers. We had to move from selling soap or a detergent to something far more important and central to the consumer's life. Consumers today are looking for ways to look good and feel good so that they can get much more out of life. In short, consumers are seeking vitality in their lives.”
Banga said that over the next 10 years, India's per capita income is likely to double, and as a result, the FMCG market is expected to grow to over Rs 100,000 crore from its current base of Rs 40,000 crore.