The Brands That Are Driving HUL’s Growth

The company, a bellwether for consumption, has about 40 brands across home care, beauty and personal care, and foods and refreshment categories, according to its annual report. About half of these are large brands with a contribution of at least Rs 500 crore each, together accounting for at least 54 percent of the company’s nearly Rs 40,000-crore revenue.

Kwality Walls ice cream, Bru coffee, and Kissan ketchup joined the club of Rs 500-crore brands in FY18, increasing the share of food in the sales, otherwise largely led by soaps, detergents and cosmetics. GlaxoSmithKline Consumer Healthcare Ltd.’s malted health drinks Horlicks and Boost will only boost this category once the acquisition is complete.

Still, personal care remains the biggest contributor with the highest number of big brands. It’s led by Fair & Lovely cream and Lifebuoy soap, each of which contributes Rs 2,000 crore.

Personal care and foods are the faster-growing segments in the economy, Prashant Agarwal, joint managing director at retail consultant Wazir Advisors, said. That’s why these categories have seen more momentum, he said.

Brand consultant Santosh Desai said categories like food and personal care have also been at the forefront in terms of consumer shifts towards higher-end products. “Well placed brands are in a better position to harness the growths in these categories”.

The contribution of personal care in HUL’s revenue, however, has fallen marginally. That stems from a decline in the share of soaps, from nearly 32 percent to about 27 percent in the five years through March 2019, according to its filings. Detergents now contribute more, increasing the share of home care.

Here’s look at categories and brands of HUL:

Home Care

Surf Excel and Wheel have remained the two biggest brands in this category, followed by Vim. Rin, a mass-market detergent and washing soap, entered the Rs 2,000-club in FY14 but dropped to Rs 1,000-crore plus in FY18.

At its analyst meet earlier this month, HUL’s management said the mass segment has lost 1 percent market share. One of the reasons it cited was the entry of unorganised players, and the increasing trend of consumers moving to the premium segment as companies try to sell everything in smaller, affordable packs.

In a statement after the story was published, an HUL spokesperson said the revenue of Rin reported in FY14 included certain brands which were managed within the Rin portfolio and played to the same consumer segment. From FY18, the company decided to represent only core Rin revenues, causing it to move into the Rs 1,000-crore plus segment.

Another mass-market offering by the consumer goods maker, Sunlight detergent, joined the Rs 500-crore league in the last financial year as HUL tries to make up for the loss in revenue from Rin.

The premium market segment in the laundry space, which includes Surf excel, is witnessing two times the growth as against mass market and HUL’s share in the premium segment is 3.6 times its share in the mass category, the company told analysts.

• Surf Excel, Wheel: Rs 2,000-crore plus.
• Vim, Rin: Rs 1,000 crore plus.
• Sunlight: Rs 500 crore plus.

Personal care

This category contributes the largest number of brands having a revenue of at least 500 crore each, comprising soaps, shampoos, toothpaste and lotions and creams. Fair & Lovely and Lifebuoy are on top of the chart, followed by Dove, Lakme, Sunsilk and CloseUp, among others.

• Fair & Lovely, Lifebuoy: Rs 2,000-crore plus.
• Dove, Lakme, Lux, Clinic Plus, Pond's: Rs 1,000-crore plus.
• Pears, Vaseline, Sunsilk, Closeup: Rs 500-crore plus.

Food & Refreshments

While Brooke Bond tea is the largest and the mainstay brand in the category, over the past few years Kwality Walls, Bru and Kissan have also emerged as big revenue generators.

Food and refreshments is one of the fastest-growing categories for HUL, with a revenue of Rs 7,000 crore in FY19, increasing in “double digits”.

That’s in line with the industry trends. The packaged foods space grew 17.6 percent to nearly Rs 5.1 lakh crore in 2018, according to data shared by Euromonitor International. The research agency expects the category to grow at an annualised rate of 16.6 percent till 2023.

The Rs 27,660-crore hot drinks market, including tea and coffee, swelled 9.5 percent in 2018, and Euromonitor estimates it to grow at a CAGR of 9.6 percent till 2023.

GSK Consumer’s health business will add nearly Rs 4,800 crore to HUL’s top line. The company awaits regulatory approval for the buyout, which will bring Horlicks into the Rs 2,000-crore plus category and Boost into the Rs 1,000-crore segment.

HUL’s management told analysts that by next year it expects six brands to be Rs 1,000-crore plus category, including Horlicks & Boost once the regulatory approvals come through. Other names in this portfolio include Knorr soups, Lipton tea, and Magnum ice cream.

• Brooke Bond: Rs 2,000-crore plus.
• Kwality Walls, Bru, Kissan: Rs 500 crore.

Naturals

HUL was a late entrant in the ayurveda segment with the re-launch of Lever Ayush and buyout of Indulekha in 2015-16 as yoga guru Ramdev-backed Patanjali Ayurved Ltd. posed a challenge with its Kesh Kanti shampoo and Dant Kanti toothpaste.

Yet for HUL, none of the brands has entered the Rs 500 club so far. It, however, said that this category is growing at two times the rate of the company’s growth.

(Updates an earlier version to add HUL’s comments)