Hindustan Unilever blames weak demand in rural areas for flat revenue and profit in latest quarter

19 Jan 2024 --- Hindustan Unilever posted weaker earnings than expected in the December 31, 2023 quarter. Profit rose just 0.6% to ₹25.2 billion (US$303 million) amid softer demand from the country’s rural regions, where winter came later than usual.

India’s largest consumer goods company acknowledged that urban areas remain resilient. CEO and managing director Rohit Jawa says: “[The company] delivered another quarter of resilient performance with strong operating fundamentals amidst a challenging operating environment.”

“Looking forward, we expect a gradual recovery in market demand to continue, aided by increased government spending, recovery in winter crop sowing, and better crop realization. Rural income growths and winter crop yields are key factors that will determine the pace of recovery.”

Profit pinched by lower commodity prices
Part of the profit miss is due to the company cutting prices of many products, including detergents and household care, to account for lower commodity prices. Hindustan Unilever says the benefits of lower commodity costs were passed down to its consumers.

In the Beauty and Personal Care segment, revenue stayed flat year-over-year. The Dove soapmaker said product sales pulled back 0.3%. Skin Cleansing revenue declined, but body wash market developments saw “good” results, while Hair Care saw volume-led double-digit growth.

Hindustan Unilever expects gradual recovery in market demand to continue but warns rural income growth will determine pace of recovery.Delayed winter affected performance in the Skin Care segment. However, the company’s premium non-winter portfolio continued to do well.

Key launches in the quarter included Glow & Lovely Powder finish crème, the new Active Skin Barrier Care range by Simple, Sunsilk hair serums and Lakme’s range of make-up products.

Unilever seeks strategic growth
Parent company Unilever aims to introduce new products as part of its “higher growth” focus and shelve brands it believes do not fit its long-term growth strategy.

Personal Care Insights recently reported on its acquisition of biotech hair care brand K18. Unilever touted the brand as sitting “at the intersection of beauty and biotechnology.”

We also reported on the FMCG giant’s sale of its Elida Beauty division to Yellow Wood Partners. We spoke to the private equity firm’s co-founder, Dan Schmaltz, about how the Boston-based company would move forward with the brands that include Q-Tips and Pond’s skin care.

Unilever’s earnings are due next month. Its third-quarter earnings, released last October, were met with a lukewarm response from analysts. CEO Hein Schumacher promised to focus on 30 of Unilever’s strongest brands, accounting for 70% of company sales.

By Anita Sharma

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