>Hindustan Unilever Limited (EDELWEISS)

HINDUSTAN UNILEVER LIMITED

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Building Its Defences....

Rural areas leading growth; volume growth to remain focus area
HUL management expects the FMCG industry’s revenues to continue to grow at around 15-18% in FY10. Though growth has been well balanced between urban and rural areas, the latter have somewhat remained insulated from the current global turmoil and have been leading growth. Additionally, low level of penetration in many personal care segments has been driving fairly good volume growth. The company is trying to boost volume growth via higher promotions and discounts, giving higher volumes for the same price, while also reducing prices in select lower-end (mass) brands. HUL expects this strategy to boost volume growth in the coming months.

Re-innovating distribution for efficient demand forecasting
HUL has over 1,200 SKU’s—650 of these are active while only 75-90 are available at most small retailers. Any small retailer generally stocks on an average 35% of the store capacity with HUL’s products. So, for better servicing and demand forecasting, HUL has been working on building a more efficient distribution system with investments in its IT infrastructure and technology. The company has introduced a new system of demand forecasting with a hand held device for each member of sales team to gather store level SKU data. This could help the company in better sales forecasting and servicing its retailers, and boost sales through analysis of this data. The system could also help in reducing both turnover time and working capital.

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