SOME YEARS ago, Hindustan Lever Ltd (HLL) spoke of growth engines as its main focus. At that time it achieved double-digit topline growth.
Today the company has returned to similar growth rates, but its focus is on cost reductions, maintaining and growing market share and thereby upping its advertising spend.
Faced with stringent competition and margin pressure, HLL would continue its focus on cost, and at the same time invest on brands to primarily help volume growth.
HLL's top officials acknowledge that the market's momentum has partly helped its 2005 performance. "But we would continue to drive growth and invest on brands. Our advertising and promotion (A&P) spend is unlikely to come down," Mr D. Sundaram, Director - Finance, HLL, said.
The company had reported a 50 per cent increase in its A&P spend at Rs 265.37 crore for December 2005 quarter against Rs 177.27 crore in the year-ago period.
"You need to drive market growth and give it sufficient amount of tail wind in your favour. A&P is what converts market growth to your growth," he told Business Line.
The company's A&P spend is not likely to come down even as it works alongside on cost reduction initiatives. "But it may vary from one quarter to another for each of the categories," he said. High A&P did impact margins in some of its products.
"Managing our margins is a serious challenge. We will continue to manage margins with a host of measures without sacrificing our market position," Mr Sundaram said.