Global consumer goods major Unilever says the India market, its second-largest in the world, may see a deflation in pricing within skincare and fabric cleansing, as commodity inflation moderates. The India unit of the London-headquartered company reported a flat price-led growth last week for the September quarter as it cut product prices within laundry and personal care to shore up sales growth. Volume growth at 2% for the period was the lowest in six quarters.
Addressing investors on Thursday, Unilever’s outgoing CFO Greame Pitkethly said that a few categories in India were dependent on commodity prices.
“A couple of our categories in India, fabric cleaning and skin cleansing, are correlated to underlying commodity prices. Local competition has entered the market. We have to adjust pricing therefore in order to maintain competitiveness and our volume position,” Pitkethly said post announcement of Unilever’s global results.
Unilever named a new chief financial officer Fernando Fernandez on Thursday and replaced division heads as new chief executive officer Hein Schumacher promised to revive a company whose ability to win market share dropped to a record low.
The Dutch executive said Unilever will focus investment on its top 30 brands, which represent around three-quarters of revenue, to drive growth, while paring back other parts of its portfolio.
Schumacher also ruled out any major acquisitions and maintained the company’s long-term sales guidance as he spends more on marketing to restore competitiveness. The new approach marks a departure from the strategy of previous CEO Alan Jope, who was criticised for a failed effort to buy GSK Plc’s former consumer health business. Jope also emphasised the social purpose of Unilever’s brands, which some investors said came at the expense of profitability.
As far as India goes, Pitkethly, who will step down from the CFO role on December 31, said that urban areas remained resilient, while rural areas continued to remain subdued. A gradual recovery in rural growth was likely in the Indian market, he said, even as media intensity had increased with the resurgence of small players.
According to Hindustan Unilver‘s (HUL’s) latest investor presentation, the market value growth of regional players over the last three months was 1.4 times that of large brands in tea, and within detergents, regional brands gained six times faster in the same period.
The growing pressure from small brands has prompted HUL to bring its focus on its ‘Winning in Many Indias’ strategy, which classifies India into 15 consumer clusters. The company is also focusing its attention on its 19 core brands to arrest market share loss notably at the mass end of its portfolio.
Source: The Financial Express