Unilever posts strong sales growth in Q3, thanks to Indian market

HUL is the second-largest market for Unilever after the US
The world’s second-largest consumer goods company, Unilever, said on Thursday its Indian market delivered strong volume growth in the third quarter, even as most other regions depended largely on price hikes to shore up sales. 

The commentary comes as Indian subsidiary Hindustan Unilever (HUL) delivers its fourth straight quarter of double-digit volume growth for the July-September period. Last week, HUL said it had delivered a 10 per cent volume growth for the three months ended September 30, ahead of Street estimates, which had pegged volume growth in the region of 7-9 per cent for the quarter.

On Thursday, Unilever said its overall sales growth for the July-September period was 3.8 per cent, led by higher prices in most categories across countries, India being the exception. Had Argentina's pricing growth also been factored in, then overall sales growth for the quarter would have been 4.5 per cent, the company said. Argentina's price-led growth was excluded due to hyperinflation in that market, Unilever said.

The Asia, Africa, Middle East (West Asia), Turkey, Russia, Ukraine, and Belarus (Asia/AMET/RUB) region, which includes the Indian market, reported an overall sales growth of 6.6 per cent, led by a 4.3 per cent volume growth and 2.2 per cent price-led growth for the period under review. 

The other Unilever regions of The Americas and Europe reported only a 0.2 per cent and 1.9 per cent volume growth for the third quarter.

Paul Polman, chief executive officer at Unilever, said the Indian market continued to perform well one year after the goods and services tax (GST) was introduced.

“We are able to increase prices (in most markets), maintaining good volume growth (in countries such as India). We are also accelerating growth in theAsia/AMET/RUB region and our focus on building our business for the long term continues,” he said.

HUL’s Chairman and Managing Director Sanjiv Mehta had said last week the company had gained from the price and grammage changes it had undertaken following introduction of GST in July and rate revisions that were made by the GST Council in November. 

“The 10 per cent volume growth is ahead of the industry volume growth of 7 per cent for the quarter (July-September),” he said.  “This growth reflects the work we’ve done in passing on GST benefits to consumers, with price hikes at 2-3 per cent only (during the quarter), mainly due to commodity inflation.” 

Analysts point to growing commodity and currency volatility as a key challenge for consumer goods companies, including Unilever, since the danger of volume growth taking a hit will increase as price hikes kick in aggressively to protect margins. 

Unilever’s results are already beginning to show this trend. Q3 volume growth of 4.3 per cent reported by Asia/AMET/RUB came in tad lower than the 5.6 per cent volume growth reported by the region in the April-June quarter.

India remains key to this region and the Unilever universe as a whole. HUL is the second-largest market for Unilever after the US, contributing 10 per cent to overall sales. Contribution to sales from India, said experts, will go up as per-capita consumption of consumer staples (FMCG) rises.  “While per-capita consumption of FMCG currently stands at $29 in India, there is potential for it to increase as penetration of products go up as well as disposable incomes improve,” Mehta said. 

“The distribution push into rural areas, for instance, will aid companies in terms of improving penetration and sales in the coming years,” he said.

HUL’s overall retail reach for its products stands at 7 million, which is the highest for any company in the domestic consumer goods market, experts said. In the last few years, the firm has aggressively pushed its retail reach in rural areas, they added.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel