Fast moving consumer goods major Hindustan Unilever (HUL) has added Rs 97.4 crore to its capital expenditure for personal products, foods and ice creams in FY08.
FOOD FOR THOUGHT
• HUL has added Rs 94.7 crore capital expenditure for personal products and foods
• The increase highlights the company’s focus on these categories as growth drivers
• Personal products contribute 50 per cent of revenue in developing markets like India
Analysts say that this increase reflects HUL’s consolidation in these categories as the possible growth drivers for the company.
The personal products category remains a priority for Unilever, HUL’s parent, globally. The company’s Chief Executive Officer Patrick Cescau, on a recent trip to India, said, “Personal products contribute 50 per cent to our revenues in developing and emerging markets such as India. It is a priority for us here and so is the food category.”
Anand Shah, research analyst with Angel Broking, said, “Personal products is currently the most profitable business for the company. It suffered supply chain disruptions in the third quarter, but its investments in the category would help deliver better growth numbers on account of higher margins and a lower base. However, the food segment is more challenging due to the lack of bigger brands. The company is increasing investments in foods business because limited number of brands and need stronger brands to grow its business here. This may involve adding more products from Unilever’s global portfolio such as the recent addition of Kissan Amaze.”
The company’s ice cream business is very small (revenues at Rs 160.64 crore) as compared to soaps and detergents (Rs 6,374.5 crore) and personal products (Rs 3,671.8 crore). Yet the company is trying to upgrade its ice cream offerings and investing in building capacities and distribution to push sales, according to Shah.
HUL says that the personal product category including hair care, skin care, deodorants and colour cosmetics offers high potential since per capita consumption in these categories is very low (less than $1).
In foods, the company has re-launched Knorr soups and revamped its supply chain. However, its atta brand Annapurna has lost market share.
Revenues from soaps and detergents, which account for 47 per cent of its total revenues of Rs 13,913.4 crore, grew by 13.9 per cent this year. Its Surf brand recorded a turnover of over Rs 1,000 crore for the first time.
However, said Shah, growth in soaps and detergents is limited in terms of volume. Personal products, in which the company is already a market leader with strong brands and distribution network, offer greater growth potential.