Demonetisation putting pressure on HUL’s near term performance

Even as the whole country is reeling under the shock implementation of demonetisation, India’s biggest advertiser Hindustan Unilever, too, has not remained untouched by its after-effects. 

While terming demonetisation and GST as significant growth drivers for India and calling them “win-win for all”, HUL in a presentation has admitted that these have put its near term performance under pressure. 

The conglomerate cited the temporary pain likely in the near term for consumers, who are impacted by lower cash on hand and have become cautious with their spends, concentrating only on basic necessities. 

Meanwhile, trade is down-stocking due to liquidity squeeze. HUL added that wholesale has been impacted the most, while there is varied impact across geographies. 

Among other pain points are logistics, which have been impacted, particularly in long distance routes, while media heat is likely to be lower. 

In a move to address the challenge, HUL is maintaining competitive ad spends to drive offtake. It is resorting to rapid planning and replenishment to capture fast changing consumer demand. The conglomerate is also dynamically playing the portfolio to deliver value to the consumers across differentiated channel and geography focus. 

HUL is working closely with distributors and retailers to mitigate impact of cash crunch, besides enhancing its direct coverage and assortments further. 

Though HUL feels that market growth would be adversely impacted for a few months, it expects gradual improvement which would be led by urban. However, the speed of recovery will be dependent on liquidity build up across the chain. 

In the meantime, HUL intends to continue to stay close to consumers, invest behind growth and enhance its direct coverage further. In its presentation, HUL added, “We are well positioned as channels and consumers evolve: portfolio, talent, capabilities. Our strategy of 4G growth remains unchanged.” 

Remaining optimistic about the future, HUL maintained that demonetisaion and GST would lead to lower inflation benefits for the consumers, even as the country would see higher investment-led growth and a simpler and effective compliance, along with a level playing field for the industry. For the Government, the key benefits would be lower fiscal deficit and a higher tax base.