HUL targets volume-led profit growth with premiumisation

Hindustan Unilever Limited (HUL) is shifting its strategy from 'Winning in Many Indias' to 'Winning in New India' to raise consumption by increasing usage. The company aims to chase premiumisation by offering more benefits and enter new spaces by adding more categories. This was stated in its investor presentation for Capital Market Day.

The focus remains on delivering volume-led profit growth. HUL’s medium-term earnings before interest, depreciation and amortisation (Ebitda) margin target is 22-24 per cent.

Shaping the portfolio structurally towards higher margins and a wider range allows flexibility to invest for growth, the maker of Surf Excel said.

HUL’s value creation model is designed to deliver volume-led profit growth. Execution will be powered by three key enablers: crafting desirable brands, accelerating a future-fit go-to-market, and building AI as a distinctive competitive moat.

The company is investing disproportionately in its premium brands. It is investing two times more and spending over 60 per cent on its digital media spends. HUL is also investing in specialised channels.

HUL’s market share in the premium segment is growing at a higher pace, at 1.3 times of its mass segment products, according to NIQ (formerly known as Nielsen) moving annual total data from May. The firm said India’s premiumisation is entering a new phase of acceleration.

HUL said it is leading the market in under-penetrated segments, including hair masks, suncare, body wash, dishwasher liquid, laundry liquid, and face cleansing.

Laundry liquids is on the tipping point for scale, HUL said, adding that it has a repeatable and proven market making model.

The company will decisively enter select high-growth new spaces and is building a segmented frontline to win in New India.

HUL will chase growth in quick commerce with a dedicated cross-functional organisation and joint business planning. It will look to scale in specialised channels, which include open format stores, chemists and cosmetics, and expand its general trade distribution with a differentiated go-to-market strategy for rural reach and assortment selling.

The firm will use artificial intelligence to increase research and development for faster innovation, effective marketing, integrated planning, and operations across its supply chain, go-to-market strategy, and finance.