Hindustan Lever Ltd (HLL) is adopting a two-pronged strategy to drive growth this year. The strategy comprises growth driven by volumes and acquisitions in the foods and home and personal care (HPC) segments.
HLL chairman MS ‘Vindi’ Banga told FE: “We will look at acquisitions in foods, to complement our current business, and in HPC, which will fit into our portfolio. We are in talks with a number of small players.”
In the last 18 months, HLL has focused single-mindedly on completing its process of consolidation in businesses. “We would now resolutely chase topline growth driven by volumes. HLL has exited a number of non-core businesses, as also the non-value added exports. We are focused on the Power Brand strategy, which has worked,” Mr Banga added. In HPC, HLL’s Power Brand growth has doubled from 3.2 per cent in 2002 to 6.5 per cent in 2003. In Foods, Power Brands have grown by nine per cent after declining in 2002.
HLL, which has faced competition from regional players and also multinationals with whom it waged a price war last year, will look at acquisitions to drive growth this year. Simultaneously, it would concentrate on pushing volumes through better accessibility and affordability of products to the consumer. The strategy to drive volumes would thus rest in offering products at varied price points. Already, HLL is actively doing that. As has been the case with Lifebuoy, which now comes in a Rs two pack, Dove, which was earlier available at Rs 45 only, is also available at the Rs 25 price point.
“We will now launch shampoo at Rs 5. This strategy will lead to more accessibility of our products and reach out to a wider spectrum of consumers,” Mr Banga said.
Elaborating on the strategy further, he added: “If you look at the population pyramid, 18 months ago we were at 10 million population strata.
Now we are at 50 million and the plan is to go to as much as 500 million.”
In the calendar year 2003, HLL’s net profit before exceptional items has gone up by 4.2 per cent to Rs 1,804.33 crore from Rs 1,731.32 crore last year. Net sales rose marginally by 1.8 per cent to Rs 10,138.35 crore from Rs 9,954.85 crore.
When questioned about the concern among the investor fraternity regarding the slowdown in HLL’s growth and the performance of its share price vis-a-vis the Sensex, Mr Banga stated categorically: “Our strategy is focused on long-term growth. We have been here for 100 years now, and will continue to be for another 100 years.”
In line with its focus to chase volumes, HLL is investing Rs 150 crore in setting up two factories — one in Uttaranchal and the other in Himachal Pradesh. The company has invested Rs 400 crore in quality improvement of its product range in the last three years, and plans to continue investing a similar amount in the next three years.