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Hindustan Unilever (HUL) managing director Rohit Jawa said building beauty and digital capabilities is top priority and disproportionately important for the company’s future in the country.
HUL, market leader in the beauty market with brands such as Lakme and Ponds, will split its beauty and personal care division from April, with a new beauty head, and has also created a new role to push its digital agenda.
“The beauty care market will grow exponentially and create way more value in the decades to come if its per capita consumption is anywhere near even Southeast Asia, forget China. So the primary motive for doing this is to create the focus and specialisation for different competitive sets. Some of them are indeed digital, but digitalisation is more secural and more pervasive, not just to do with a specific segment of players,” Jawa told investors on an earnings call.
“And, of course, because it’s margin accretive, this higher growth would be actually good for the company. The beauty mandate is to increase the level of growth, grow the portfolio, go to faster growth, (create) new demand spaces and essentially be the best in class beauty company or beauty unit in the country,” he said.
Experts said the move is also driven by increasing competition, especially from direct-to-consumer players which have mainly entered the beauty segment. At present, focused beauty brands, including L’Oreal, Mamaearth, Nivea and Nykaa, have 33% share and are expected to expand to 42% in the next five years, while established firms such as HUL and Procter & Gamble, which account for two-thirds of the market, will see their share fall 9 percentage points to 58% by 2027, according to a joint report by Redseer Strategy Consultants and Peak XV.
At present, HUL’s beauty and personal care segment accounts for 37% of its overall sales and 43% of its operating profit, with five brands including Lux and Pond’s generating more than ₹2,000 crore of annual revenue. The company also has nearly half a dozen digital-first brands, including Simple, Love Beauty & Planet, Baby Dove, Acne Beauty and Find Your Happy Place. The beauty category is more premium too compared to HUL’s other categories. Over the past two years, the mass segment across fast-moving consumer goods companies grew 2% while it expanded 9% for premium products.
HUL said its beauty business is expected to grow at a faster pace compared to the personal care segment. “The shape and profile of the personal care growth will be more balanced between top and bottom line and probably not be as fast as beauty because of the sheer tailwind across these 2 different businesses,” he said.
Digitisation
Over the past few years, HUL has innovated across value chains to enable greater agility, flexibility and efficiency. For instance, it has set up nano factories which allow it to produce in batches of kilograms rather than tonnes and roll out product faster. The company is replicating this in other Unilever markets to bring innovation lead times and cost down. HUL’s digitised sales across platforms, including ecommerce channels and internal ordering app Shikhar, account for more than 40% of its overall sales.
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