Friday, July 27, 2012

Is HUL Losing The India Plot?

From #22 in 2009 to #30 in 2010 and now #35 in B&E POwer 100 list. Onkar Pandey tries to find out where is HUL Going Wrong


Certainly, the first decade of the 21st century has been a rough ride for Hindustan Unilever. For one, it’s growth rate has taken a big beating. It hasn’t been able to double its revenue in the last 11 years; poor, considering its scorching pace in 90s, when in was doubling its revenue in every four to five years. Second, it’s no more the feared giant whose marketing skills scared lesser FMCG mortals. Now Players like ITC, P&G, Nestle, Dabur, Godrej Consumers and Marico are slowly and steadily nibbling away its market share in both home and personal care category.

A big reason for the same is the fact that the company has gone for quite a few leadership changes and strategy overhaul in the last decade, which though were course-corrective in nature, forced the company towards a fits and start growth, with each new leadership and strategy change. And now it seems something has really gone amiss with the FMCG giant. The shareholders have started earning less and less from HUL (EPS has gone down from Rs.11.46 in FY’09 to Rs.10.58 in FY’11), which might force them to stay away from the stock in future. Already, Goldman Sachs has further muddled the troubled water by downgrading HUL to “sell” from “neutral,” saying it will find it difficult to sustain strong volume growth in a highly competitive environment, while high input costs will continue to put pressure on margins. It’s profitability is showing continuous dip – from Rs.25 billion in 2008-09, it dropped over 11% in 2009-10 to Rs.22.07 billion. Though it managed to improve its bottomline in the last fiscal to Rs.23.06 billion, it’s just a marginal 4.7% rise.

But more than the profit figures, the real problem for HUL at present is that it has been consistently losing market share across categories. According to Euromonitor International, its market share has dropped from a high of 36.6% in 2005 to 33.3% in 2010 in the personal care segment. Going by individual brands the problem is more worrisome. Its classic brands like Fair & Lovely (down from 5.5% to 5.3%), Lux (5.1% to 4.3%), Lifebuoy (4.2% to 3.7%), Clinic Plus (2.4% to 2.1%), Close-Up (1.8% to 1.2%), Breeze (2.1% to 1.1%), have continuously declined from 2005 to 2010, shows Euromonitor data.


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