The second leg of our strategy is market development, which is not only about growing market share, but also building categories of the future. The third leg is premiumisation. About one per cent of the fast-moving consumer goods (FMCG) market is moving from mass and mid-tier to premium every year. At an overall level, about 28 per cent of the FMCG market is premium. Our aim would be to help consumers trade up. The fourth leg is talent and building capabilities. We have notched this up.
What explains the growth in FMCG market at a time when GDP growth is slower like in Q3?
We are always circumspect about how the market will shape up, given the variables at play. Unlike other sectors, FMCG does not grow exponentially during a boom, nor does it tank during a tough phase. It is resilient. What counts for the market is inclusive growth. Do more people have money in their hands? This comes with a stable government, when there is law and order and a sense of hope for the future. This government is at the end of its tenure. We will have to wait and watch.
How is HUL countering new entrants and digital-only brands, many of which are targeted at millennials?
I am of the belief that it is not the big that will beat the small or the small that will beat the big, but the fast that will beat the slow. I also believe that disruptors are often overplayed and that adaptability is underplayed. An incumbent, if agile and resilient, can be a formidable force for anyone. FMCG is not a zero-sum game. There is room to grow for everyone. As a company, we keep a close watch on what is happening in the market. We do not have to be the first to enter a category, we could be second or third, but be better.
What is your outlook on acquisitions, especially in foods?
We are open to mergers and acquisitions, especially bolt-on acquisitions. There aren’t many such as GlaxoSmithKline
(GSK) Consumer around. That was a once-in-a-lifetime opportunity. We will continue to scout for relevant opportunities in foods and other areas.
The CCI approval has come, but there is still work to be completed. We also have to plan for integration. My brief to my team is that the combined food
and refreshment business should be more than the sum of two parts. This means we are going to harness the skill sets of the people at GSK Consumer
and marry them with HUL.
Our objective would be to accelerate growth and drive synergies.
Will price-led growth ever come back?
FMCG is a highly competitive market. If you are off even Rs 1, you will lose volumes and margins. There is a self-correcting mechanism in the market, which ensures equilibrium. We keep a close watch on strategic price points as well as the price-value equation. India
is a price-sensitive market and we have to be conscious of this all the time. HUL’s 10-year compound annual growth rate, in top line, has been 10 per cent, 60 per cent of which has been volume growth and 40 per cent price-led. Volume growth has a number of benefits. It helps you get more consumers, if you’re driving penetration. If you are driving consumption, existing consumers are using more. Price growth alone is not sustainable.