“March Quarter and Financial Year 2024

Earnings Call of
Hindustan Unilever Limited”

April 24, 2024

Speakers:

Mr. Rohit Jawa, Chief Executive Officer and Managing Director

Mr. Ritesh Tiwari, CFO and Executive Director, Finance and IT

Mr. A Ravishankar, VP - Finance

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Moderator: Ladies and gentlemen, good day, and welcome to Hindustan

Unilever Limited Conference Call for the Results of March

Quarter and Financial Year Ended 31st March 2024. As a

reminder, all participant lines will be in the listen-only mode

and there will be an opportunity for you to ask questions after

the presentation concludes. Should you need assistance

during the conference call, please signal an operator by

pressing star then zero on your touch-tone phone. Please note

that this conference is being recorded.

I now hand the conference over to Mr. A. Ravishankar, Vice

President, Finance. Thank you, and over to you, sir.

A. Ravishankar: Thank you, Yashashri. Good evening, everyone, and welcome

to the conference call of Hindustan Unilever Limited. This

evening, we will cover the results of March Quarter and

Financial Year Ended 31st March 2024. On the call with me is

Rohit Jawa, CEO and Managing Director; and Ritesh Tiwari,

CFO. We will start with prepared remarks from Rohit and

Ritesh, where we will cover an overview of our performance in

the financial year and in March quarter and our future outlook.

We expect this to take around 30 minutes, which will leave us

with an hour for the Q&A session. Before we get started with

the presentation, I would like to draw your attention to the

Safe Harbor Statement included in the presentation for good

order sake.

With that, over to you, Rohit.

Rohit Jawa: Thank you, Ravi. Good evening, everyone. Thank

you for joining us on the call today. It's always a pleasure to

interact with all of you.

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Let me first start with an overview of the operating context for

financial year '24. With softening in prices of key commodities,

especially those with Home Care and Personal Care, we

passed on this benefit to consumers. Consequently, there was

a nominal to no price growth in the year. Volume recovery

remained gradual due to high levels of cumulative inflation

over the past few years, coupled with a weak monsoon

affecting rural demand. Urban, organized trade and premium

portfolio stayed resilient and led growth for FMCG overall.

Given this context, we delivered a resilient performance for the

year with an underlying sales growth of 3% and an underlying

volume growth of 2%. EBITDA margin was up 40 bps year-on-

year. We continue to focus on operational excellence and built

back our gross margins, with a substantial part of this being

reinvested behind brands and capabilities. Net profit crossed

the milestone of 10,000 crores in this fiscal. PAT before

exceptional items and EPS grew 4% and 2%, respectively.

Moving on to our competitive performance. It's important to

look at corporate market shares and MAT business winning

metric over a longer period, to fully appreciate the impact of

the inflation, deflation cycle on these metrics. Compared to

2021, we have improved our corporate market share by

almost 200 bps. As we said previously, we have seen

resurgence of small and regional players, who had vacated

the market during peak inflation.

Consequently, in recency, we have seen a marginal dip in our

market shares. But it's important to note, we are holding on to

almost all of the gains made in 2021 and 2022. Last quarter,

we discussed how we expect our MAT business winning metric

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to be impacted as we lap the high base. While the metric has

dipped below 60% this quarter, we are confident that it will

come back towards the second half of calendar year 2024.

Our business fundamentals continue to remain strong, as can

be evidenced by healthy penetration gains and business with

growing or stable brand power as we continue to expand our

physical and mental reach.

I had first spoken to you about key thrust areas for HUL in our

October Earnings Call. A lot of what we have already been

doing has strengthened our business, and we continue to

build on it. However, it's equally critical for us to transform our

business to serve the changing consumer aspirations to

ensure we outperform in the years to come.

Let me delve into the progress we've made against each one

of these thrusts during the fiscal. Our first thrust is to grow the

core through unmissable brand superiority. This chart is

evidence that we are a powerhouse of big purposeful brands.

We have a total of 19 brands clocking over INR 1,000 crores

each in annual turnover. Put together, these 19 brands

account for over 80% of our turnover. Clinics Plus is now an INR

2,000 crores brand for us, having moved up the table in the

fiscal. Boost, Sunsilk and Vaseline are the next three brands

that are moving towards the INR 1,000 core mark.

Consumers are increasingly discerning and are making well-

informed holistic buying decisions. We started on our product

superiority journey to provide best-in-class products and over

the years have made very good progress in this space. With

evolving consumer needs, we are now broadening the way we

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measure and deliver superiority. Under the framework of

unmissable brand superiority, we will measure our products

against six tangible and distinct drivers, namely the 6Ps, all of

which are proven drivers of consumer preference.

We have already embarked on this journey of making our

brand unmissably superior, and I will take you through two

examples to bring this concept alive. Starting with Vim liquids.

During the year, we have driven multiple initiatives across

each of the 6Ps to land an unmissably superior product in the

market. From improving formulation to sharpening

proposition and modifying the packaging to be more

aspirational and ergonomical, specific actions were taken to

address each driver of consumer preference. The result of

these actions has been promising, Vim liquids has seen a

double-digit volume growth in FY '24 with highest penetration

gains in over a decade and continued market leadership.

Horlicks is another example of a brand that has pivoted its

actions around the 6Ps to deliver an unmissably superior

brand. We have sharpened and fortified the proposition of

taller, stronger and sharper through precise and focused

communications, packaging redesign and promotions. We

have dialed up nutrition science information at the face of the

pack, providing consumers with crucial information about the

product. As a result of these actions, the brand has

significantly strengthened its position in the market.

Penetration, market share and brand power have all seen

improvement year-on-year. We are confident that our journey

from product superiority to unmissable brand superiority will

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take our brands from strength to strength and solidify our

market leadership.

Moving on to market making and premiumization. Given the

context of increasing affluence and under-indexed FMCG

consumption, we have a huge opportunity to build categories

of the future through market making and premiumization. We

are doing this through persuasive communications via the

right medium, innovating in new demand spaces and formats

of the future and educating consumers at scale.

During the year, we've used these levers disproportionately to

invest in market making and premium cells. For instance, more

than 75% of incremental media investment was spent on

market making, premium cells. Similarly, more than 70% of our

innovation turnover also came from these cells. We continue to

lean in on home-to-home connects to drive trial and usage. As

a result of the sustained investments in market making and

premiumization, we now have a very robust portfolio that is

leading growth for us. We have not only seeded categories

and formats but have successfully built them to scale. The

portfolio you see on the slide contributes to more than 25% of

our business and has grown double digits this financial year.

I had previously spoken about the job we have to do to

continue transforming parts of our portfolio to on-trend

demand spaces, especially in Beauty and Foods. Let me give

you an update on the Beauty segment today.

We are the largest beauty company in India with a history of

creating categories across skincare, hair care and color

cosmetics, making us the distant number one in these

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segments. In our journey of transforming our Beauty business,

we are focusing on, A, contemporizing our current master

brands, B, investing behind identified high-growth demand

spaces, and C, embedding capabilities across supply chain,

mental reach, media models, and thought leadership.

We have led significant transformation across our key master

brands, and results of a few are here for you to see. We've

revamped our brands by refreshing product, packaging,

communication and innovating them into new demand spaces

and formats.

The Indian beauty market is rapidly shifting with changing

lifestyles, increased disposable income, exposure to global

trends and a growing emphasis on self-care and wellness.

We've identified six key demand spaces, big bets, which we

believe will grow disproportionately over the next few years.

We already have a strong INR 2,000 crores portfolio across

these big bets, and we continue to invest to scale them up. This

portfolio delivered a double-digit growth in this fiscal with a c.

50% growth in e-commerce.

To build and bring our vision of creating a world-class beauty

company to life, we are embedding core capabilities into our

present processes. Let's talk about three critical capabilities:

make for beauty. Our focus is to enhance desirability of

products using superior technology, premium packaging

solutions and formats. To continue to innovate with speed, we

will invest and expand our footprint of nano factories and the

supply chain for smalls. Reach for beauty. Consumer journeys

have increasingly become non-linear and on digital mediums.

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And hence, we are pivoting our mental reach model towards

more digital media and influencer marketing.

Authority for beauty. Building on our 20-plus years of

experience in creating India's most iconic beauty moments

through the Lakme Fashion Week, we are creating a beauty

council with key opinion leaders from the fashion and the

beauty Industry. In January this year, we unveiled our first

addition of the beauty collective, through which we aim to

strengthen Beauty partnerships with e-commerce and modern

trade customers.

Through these actions, we aim to build a future-fit portfolio

and capabilities that will enable us to meet the evolving needs

of Indian beauty consumers.

Our fourth thrust of leadership in Channels of the future is

about brilliant execution and curating a tailored portfolio and

leveraging our design for channel approach.

In general trade, we are focusing on expanding and fortifying

our distribution moat. Our effective coverage and assortment

both have seen a steady rise, standing at 1.2x and 1.25x of

FY’20 levels respectively. Our e-B2B app, Shikhar, continues to

be a strong point of differentiation for us, and we have

successfully onboarded 1.3 million stores in Shikhar till now.

We have enhanced Shikhar's functionalities to include loyalty

programs, innovative marketing campaigns, and best-in-class

app features. These are yielding good results for us. For

instance, stores onboarded on Shikhar are growing faster than

the other stores.

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We have elevated our execution excellence by amplifying our

in-store activation through strong partnerships with customers

in modern trade and e-commerce. As a result of our focussed

actions, we have increased our on-shelf availability by 200 bps

in modern trade and online availability by 500 bpsin e-

commerce.

These strategic thrusts are underpinned by our distinctive

capabilities that we continue to strengthen. Let me speak

briefly on each. Winning in many India’s is a capability that we

continue to embed deeply across our organization, allowing

us to cater to differentiated needs of Indian consumers. Our

net productivity program is crucial for generating fuel for

growth to invest behind our brand and capabilities. We will

continue to generate efficiency across all lines of the P&L

through this program. Re-imagine HUL has given us a head

start in our digital transformation agenda. Shikhar is a

tangible example of the success of this program. We are now

focusing our digital agenda of superior consumer and

customer experience with an objective to sell more, save more,

and manage better.

Speaking about sustainability, sustainability can future-proof

the company and create new opportunities. It safeguards our

operations, de-risks our supply chain, helps us attract and

retain great talent, and shapes our response to the most

pressing and relevant global challenges we face.

Going forward, we will accelerate our sustainable agenda

around four key priorities that have the biggest material

impact on the business, notably climate, nature, plastics, and

livelihood. By focusing our efforts and resources, we will make

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stronger, tangible progress on these complex challenges while

creating opportunities for our business.

Our distinctive and meritocratic culture has helped us attract

and retain the best talent in the country. During the year, we've

invested in building a future-ready organization. We have

separated beauty and personal care into two segments,

appointed a Chief Digital Officer and a Chief Sustainability

Officer to bring greater focus and speed and execution in

these areas. We've also set up a customer strategy vertical for

each business unit to operationalize and execute business unit

relevant actions across channels.

I am a big believer of the India story and the FMCG

opportunity. Our journey of transform to outperform will take

HUL to the next phase of growth by enabling us to continue

serving the evolving aspiration of Indian consumers and win in

the market. Now let me hand over to Ritesh, who will cover our

results in detail.

Ritesh, over to you

Ritesh Tiwari: Thank you, Rohit, and good evening, everyone. I will now walk

you through our in-quarter and financial year performance in

more detail and also then cover our outlook. In the quarter,

demand trends remained broadly similar to what we have

seen in DQ'23. In this context, we delivered a resilient

performance with underlying volume growth of 2%. Pricing

remained marginally negative, leading to an underlying sales

growth of 1%.

Moving on to bottom line performance, EBITDA margin

remained healthy at 23.4%. I will cover EBITDA construct in

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more detail later in the presentation. Profit after tax before

exceptional items and profit after tax declined by 3% and 6%,

respectively. The difference between PAT (bei) and PAT is

primarily on account of lapping higher exceptional income in

the base period.

Let me now move to performance across our three segments.

Home Care and Beauty and Personal Care segments continue

to see negative UPG in the quarter. Home Care grew 1% with

mid-single-digit volume growth. BPC USG declined by 2%, with

volumes remaining flat. Foods and Refreshment, on the other

hand, had positive pricing and delivered mid-single-digit USG

with flat volumes.

We continue to see positive volume growth across most of our

business. Overall, 75% of our business is growing volumes. In

fact, 50% of our total business is growing volumes in mid- to

high single digits. Margins in all three segments remain

healthy, with Home Care and Foods and Refreshment at 19%

and Beauty and Personal Care at 26%.

I will now click down to talk about performance within each of

the segments.

Starting with innovations and activations in Home Care,

Comfort Crease Ease Spray is a format innovation that

refreshes you clothes on the go. It helps release wrinkles while

giving your fabric a refreshing fragrance. In Surf Excel liquid,

we launched a new winning proposition of ‘removes tough

dried stains first time in the machine’.

Moving on to Home Care performance in the quarter. Volumes

in both Fabric Wash and Household Care grew in mid-single

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digit. Premium portfolio continued to lead growth. On a 2-year

CAGR basis, Home Care delivered double-digit revenue

growth.

Let's look at key innovations in BPC. With summer rolling in, we

have launched a range of sun care products catering to

different consumer needs. One of these is the Invisible Sunstick

by Lakme, a revolutionary sunscreen that is 100% invisible on

all skin tones, yet effective with SPF 50+. Dove sensitive care

range of body wash and soap, which helps repair skin’s

weakened barrier was launched. Lakme recently launched

Multislayer Face Stick at Lakme Fashion Week. Available in two

variants, these sticks replace a multistep makeup routine with

a single product.

Moving on to performance in Beauty and Personal Care. It has

been a story of two halves this quarter with divergent trends in

Beauty & Wellbeing and Personal Care. To give you more

clarity on this, we have disclosed the underlying sales growth

for the two segments this time. As communicated earlier, we

will begin detailed financial reporting for the two segments

from June quarter onwards.

Beauty & Wellbeing delivered a volume-driven mid-single-digit

growth, whereas Personal Care witnessed a 10% decline.

Talking about Beauty & Wellbeing, Hair Care delivered high

single-digit growth, driven by volumes. This was led by

outperformance in premium brands, including Dove and

TRESemmé. The post-wash hair treatment segment continues

to gain consumer traction and clock strong growth. Volumes

for Skin Care and Color Cosmetics grew at low single digit. If

you were to split the performance by price tiers, mass skin

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portfolio, including talc, declined on account of muted

demand. However, premium skin continued to outperform,

growing in double digits.

Oral Care delivered a broad-based double-digit growth,

driven by pricing. Skin cleansing has declined on the back of

price cuts taken, coupled with reduction in volumes led out of

mass portfolio. We are not satisfied with this performance of

skin cleansing. Let me share an overview of the actions we are

taking to improve the business.

These are focused around four key pillars of pricing, product,

innovation and channels of the future. We have adjusted

pricing across relevant packs in the mass and popular

segment to ensure we provide our consumers with the right

price-value equation. With respect to products, we are

contemporizing our brands and improving formulations in our

core portfolio. We are stepping up innovation intensity in fast-

growing demand spaces, especially in premium portfolio.

Bodywash has been clocking strong growth over the last

several quarters, and we will further lean into this format. The

Dove Sensitive range and Hamam Turmeric variant are some

of the other examples of recent innovations in premium space.

We're also stepping up assortment in modern trade and e-

commerce to ensure we win in these high-growth channels.

Whilst we expect to start seeing a change in the category’s

performance trajectory, it is likely to take a few quarters before

the full benefit is felt.

Coming to innovations and activations in Foods &

Refreshment. Brooke Bond Red Label Tea has always stood for

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bringing people together. Our "Swad Apnepan Ka" campaign

embodies this ethos with the latest rendition that attempts an

un-stereotypical portrayal of differently abled people. Ice

Cream had multiple innovations, landing in the market before

summer season kicks in. We took our very successful

partnership with Cadbury forward by launching a product

which gives our consumers the best of Cadbury Crackle

Chocolate and Feast. Mango Duet is a winning combination of

vanilla and mango that offers a superior multilayer experience

at INR10.

Moving on to performance in F&R. Tea further strengthened

market leadership in this quarter with strong gains in both

value and volume. Business had a muted performance year-

on-year as we continued to witness consumers downgrading.

Green Tea and functional tea continued to perform well.

Coffee delivered double-digit growth, driven by pricing.

Functional nutrition drinks, which includes Horlicks and Boost,

delivered high single-digit growth, led by outperformance in

the Plus range. This category continued to witness market

share and penetration gains during the quarter.

Foods delivered mid-single-digit growth, led by soups, Food

Solution, mayonnaise and peanut butter. Ice Cream had

volume led double-digit growth. We have had exciting

launches in Ice Creams this quarter in lieu of upcoming

season, a couple of which I spoke about in the previous slide.

Let me now spend a few minutes explaining the components

influencing EBITDA margin.

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At 23.4%, EBITDA has declined 30 bps year-on-year. Gross

margin at 51.3% has improved by 350 bps year-on-year. We

continue to focus on building back our gross margin through

improved price coverage, mix and net productivity initiatives.

Advertisement and promotion investments at 10.8% is up 200

bps year-on-year. Our absolute A&P investment was almost

INR 300 crores higher than last year as we continue to invest

competitively behind our brands and maintain share of voice

ahead of share of market. We have also stepped up our digital

media investments significantly as we rework our mental

reach and media models with the reshaping of our portfolio.

Employee benefits and other expenses at 18% is up 120 bps

year-on-year. This includes an impact of 30 bps on account of

staggered rate increase in royalty. The rest of the increase can

be attributed to investments made in future-fit capabilities

and lack of price leverage.

On a full-year basis, other expenses and employee benefits

expenses at circa 13% and circa 5% of turnover, respectively,

are in line with our long-term trends. The termination of

consignment selling agreement with GSK will have an impact

of 60 bps starting this quarter. Hence, between this and

increased royalty there isan impact of 90 bps on the EBITDA in

the quarter.

Moving on, a summary of our performance for this quarter. I've

already taken you through most of the lines in detail, pausing

a few seconds on this slide for you to read through. Coming to

financial year results, Rohit has already shared the headline

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performance at the beginning of the presentation. Let me

quickly recap the numbers.

Underlying sales growth for the year was 3%, EBITDA margins

remained healthy at 23.8%, up by 40 bps year-on-year. PAT bei

and PAT grew by 4% and 2%, respectively. Effective tax rate for

the year was 26% after taking into consideration prior-period

tax adjustment.

Moving to segmental performance for the financial year, this

year has witnessed a transition from high commodity inflation

to deflation in 75% of our portfolio. In this context, we have had

an underlying sales growth of 3% in Home Care and 2% in

Beauty & Personal Care, led by volumes. In Foods &

Refreshment, commodity prices remained inflationary during

the year. Consequently, we delivered a mid-single-digit USG,

driven by pricing. Margins in all three segments remained

healthy, with Home Care at 18%, Beauty & Personal Care at

26% and Foods & Refreshment at 19%.

Let me now talk about the progress made in rebuilding gross

margin. As you are aware, we took a hit to our gross margin

during the period of high inflation as we did not price to the

full extent of commodity price increase. This ensured that we

have the right balance between competitive growth and

margins.

With more benign commodity situation this year, we focused

on building back gross margin through our net productivity

program by bridging the price versus cost cap and improved

mix. We remain focused in further stepping up gross margin as

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this serves as a crucial source of funds for investments behind

brands and capabilities.

Considering our performance in the year, the board of

directors have proposed a final dividend of ₹24 per share.

Along with interim dividend of ₹18 per share, the total dividend

for this year is ₹42 per share, with an 8% year-on-year increase.

Let me now turn to outlook. We expect FMCG demand to

continue improving gradually, forecast of above-normal

monsoons and improving macro-economic indicators augur

well. We expect our price growth to be low single digit decline

in near term. If commodity prices remain where they are, we

envisage price growth to plateau in midterm and become

positive in low single digits by end of this financial year. In this

context, our focus remains on driving competitive volume-led

growth across our business.

As I spoke earlier on skin cleansing, actions are underway to

address performance in this segment, and we expect to see an

improvement over the midterm. We will continue to generate

savings through our productivity program and reinvest ut

behind our brands and long-term strategic capabilities while

maintaining EBITDA margin at the current levels.

While we expect near-term demand to recover gradually, we

remain very confident of mid- to long-term opportunity in

Indian FMCG. India's booming economy, expanding affluent

population, accelerating digital transformation, coupled with

under-indexed FMCG spend will spur premiumization and

provide companies with a strong runway for growth. With our

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distinctive capabilities and our strategic thrust of transform to

outperform, HUL is well placed to capture this opportunity.

With this, we conclude our prepared remarks, and we will now

hand it back to Ravi to take Q&A.

A. Ravishankar: Thank you, Rohit. Thank you, Ritesh. We'll now move to the Q&A

session. As always, we request you to kindly keep the questions

to a maximum of two, so that we get to take as many

questions as possible. In case you have any further questions,

please feel free to join the queue again. In addition to audio,

participants also have an option to post the questions on web,

if there are any unanswered, we will take them at the end.

With that, I'll hand over the call back to Yashashri to manage

the Q&A session for us.

Moderator: Thank you very much, sir. We'll take our first question from the

line of Abneesh Roy from Nuvama. Please go ahead.

Abneesh Roy: Thanks. My first question is on the liquids across your

categories. So in dishwash liquid, you are seeing double-digit

volume growth. I wanted to understand in dishwash liquids,

what is the salience of liquids in the overall portfolio? And if I

take it parallelly to a Personal Wash and Fabric Wash, what is

the salience of liquids there? Is there any learnings which you

can translate from dishwash to these categories? I'm asking

this because upfront, you have highlighted dishwash liquids as

a big success.

A related question here itself on fabric dishwash liquid -- fabric

liquid wash. So we have one of your competitors come out with

an INR99 disruptive pricing. So what are your thoughts on that?

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And one related question here will be in terms of disruptive

pricing in liquids, we have seen HUL being more of a follower.

Earlier, we did see competitor launching hand wash and body

wash ahead of you. So is there a thought process that we can

be ahead in terms of innovation in terms of liquid, in body

wash and hand wash?

Rohit Jawa: How are you doing? Thank you very much for the question. I

think there probably first, I should try and clarify a few things

because in your question, you stated so much facts, and I just

want to make sure that we get those right. Is that okay?

Abneesh Roy: Sure.

Rohit Jawa: So broadly there is a macro secular trend of consumers

moving towards liquids across categories. Second, we have a

total liquids business in Home Care liquids of close to, and I'm

talking of fabric conditioners, fabric wash and dishwashing

included, to well in excess of INR3,500 crores. So that's huge.

And we've been the pioneers in fabric conditioner liquids, in

fabric wash liquids and dish wash liquids which is the reason

why we are where we are. So that's the first fact just to clarify

that we are not followers, but we are leaders and it's not now,

but it's been at least 8 years, 9 years of building these

categories they haven't happened overnight.

Second that in so far as specifically Vim is concerned in dish

wash it's already 25% of the dish wash sales which is sizable.

We have a very strong share. And the reason we showed that

was we are very proud of what we have done there and we

believe that is, of course, a huge runway of growth because

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consumers are upgrading to liquids as I mentioned in the

beginning generally across categories.

On body wash liquids which is more in the personal care space

we were again -- and I'm not speaking from facts so we might

have -- I'm very confident we were pioneers many years ago

and we have now multi-brand portfolio in shelf. Not only this,

we are market leaders in body wash liquids globally and are

gaining shares handsomely in India as well.

And the growth rates are in 50% - 60% and beyond and we do

see because the penetration of liquids -- body wash liquids is

quite small it's under 2-odd percent that there is a large

runway of growth in body wash liquids and we have a full

portfolio at play and technology which is on shelf and in the

pipeline whether it's through Dove, Pears or Lux or Lifebuoy

which is another brand we have to play specifically in hand

wash.

So to round up all of this I just want to say that we have been

pioneers in the liquids category in India across segments in

home care and personal care. We've built a business short of

INR4,000 crores which is not small by any circumstances. And

yes, there is more competition now especially in fabric wash

liquids in what we call Tier 2.

And speaking of Tier 2 or now that the market is fragmenting

and opening up there are many players not just one which

have entered the market given the market is now quite sizable

whether it's global players or local players. We do have a

portfolio play as we have in many of the categories we play in.

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We have Rin which is in the market and at a Tier 2 price with a

great product and unbeatable value for the consumer and you

should and will see a lot more action on the front of both Surf

Excel liquid and Rin liquid when it comes to fabric wash. So I

hope it gives you a sense of sentiment and commitment and

decisiveness around this space.

Abneesh Roy: Just one follow-up in terms of the fabric wash what will be the

salience on liquids? And my comment on the follower was only

based on the disruptive pricing absolutely on your size,

etcetera, liquids and the first entry, I think, clearly you have

done a commendable job. So if you could give clarity on the

salience in terms of Fabric, what's the liquid?

Rohit Jawa: On Fabrics just help me with the numbers 20% within that sort

of range and I -- don't hold me exactly to that number, but in

that sort of range but growing at 20%. So fast growth part of

our portfolio, but we still do, of course, have a larger business

in bars and powders. But we're talking of I mean of massive

category. So therefore -- and the growth is in liquids and as

you mentioned there's also now Tier 2 INR99 or thereabouts

other brands from other players across the industry.

And we will therefore see more growth coming here because

the conversion is becoming easier since cost of washes are

quite accessible for more customers and we have a very large

share in the segment we intend to fight the hardest to keep it.

Abneesh Roy: My second and last question will be on the outlook. So you

have mentioned that there is a gradual improvement in FMCG

demand in terms of outlook and you have mentioned the

reasons will be essentially partly monsoon, partly improving

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macro. My question here is last 2 years we have also seen rural

customer spend more on education, more on the medical

needs because he's getting a lot of free food, freebies,

etcetera. So he is going for better life for his kids in terms of

better education, more on the medical etcetera.

Now the issue is post elections very clearly telecom charges

will increase 10% to 20%. That is the correct expectation and

that's again a big component for the lower end of rural

customers. So how do you see that kind of impact. Is monsoon

enough to overcome this kind of issue because for the lower

end 10% to 20% hike in some of the cost component can be

quite severe?

Rohit Jawa: You're right, Abneesh. There is clearly a chance, as consumers

are evolving their monthly consumption from based on the

surveys that came up recently, but we are a very small part of

the consumption basket as FMCG. There's so many more

categories there. And indeed over the last few years because

the inflation or price increases are quite sizable, they had an

impact on rural especially as it came through COVID and

inflation shocks, but I think we are seeing gradual recovery, we

are hopeful of a better monsoon and monsoon does have an

impact as we all know.

It might not be the only impact, but it has an impact on the

agri economy and therefore rural consumption. And I think in

that sense, most likely, the worst is past us and from here

onwards we do see gradual recovery in rural consumption and

of course as we said the urban consumption has been more

resilient especially at the premium end.

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Abneesh Roy: Sure thanks. That’s all from my side.

Rohit Jawa: Thanks Abneesh.

Moderator: Thank you. The next question is from the line of Manoj Menon

from ICICI Securities. Please go ahead.

Manoj Menon: Just one question on both laundry and HFD the growth what

you've delivered and what should be the outlook we should be

thinking about and secondly on beauty which I will come after

this. On laundry, in general, if you could help us understand

how do we think about the medium term because there seems

to be a deceleration in the overall volume growth. So what I'm

trying to understand is the heavy lifting for laundry growth has

been delivered by premiumization.

I understand the solid to liquid or powder to liquid conversion,

but if you could talk about the premiumization otherwise

which is happening in the powders, etcetera, which is an

integral element to the, let's say, pushing us to double digits

that's one. Second, it's heartening to note that in HFD there is a

high single-digit growth. Again, if you could help us with the

drivers of growth and sustainability and one specific comment

would be helpful, are we back to 2019 volumes in HFD?

Rohit Jawa: I can take up.

Manoj Menon: The second part was HHC or HFD?

Rohit Jawa: HFD. So I think you are talking about Horlicks?

Manoj Menon: Health food drinks, actually.

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Rohit Jawa: Nutrition – functional nutrition. So I can speak to laundry first,

it's – I carry it close to my heart again as I used to be in this for

a long time. I think we are -- our business in laundry and fabric

wash and conditioner is very robust. We are growing, powders

continue to grow in volume. The recovery -- and liquids as I

mentioned before are ahead of this because the conversion is

fast there. And of course, there's more competitive heat there.

In so far as bars are concerned, they're now returning back as

we have corrected prices. So some of the volume improvement

will come on account of the bars going back to growth and

powder sustaining and liquids continue growing ahead. And

so I think we feel confident that secularly this category will

continue to sort of clock volume growth. It's also showing quite

level durability through all the cycles if you look back quarter-

to-quarter.

And here the job remains that of premiumization. We have to

upgrade consumers to high convenience and performance

and that's what we're doing with high-performance liquids

now with Rin and the fabric conditioners and other formats

that are in the pipeline. So I think that path to growth including

Surf Excel Easy Wash upgrading rural consumers is still -- the

engine is very much vibrant and relevant. So that I hope it

addresses your question of the Home Care business. On

nutrition, functional nutrition I'll just probably request Ritesh to

answer.

Ritesh Tiwari: So Manoj, on functional nutrition our business grew in high

single digit and the growth was driven both by some amount

of pricing and volume growth. So it is a good mix of volume

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growth and price growth that drove high single-digit overall

growth for our functional nutrition business.

And if I just give a little more color within that as you know we

have a Plus range which is high science backed portfolio, be it

protein, be it diabetes or for that matter Women's Horlicks. This

part of the business has seen more acceleration, it’s more

premium and more acceleration in terms of growth. So it's a

pretty good outcome and we have spoken in the past as well

that our trajectory of building penetration has yielded results

continuously. We continue to build penetration improvement

for the category for us and for the industry, number one.

Number two, we've also seen further improvement in our

market share both value and volume market share. And one of

the key areas we've spoken in the last call especially we've

spoken about driving consumption in HFD because that's what

had taken a beating in the high inflationary period. And milk

was one of the, let me say, limiting factor, which was

impacting consumption.

Good news is you have seen, as you know, fresh milk prices

have tapered off, they are more benign now. There's no further

inflation happening. And overall commodities which go into

making HFD has also seen some amount of deflation. So all

put together, the pricing and the cost element is now going to

help us in terms of driving further consumption build, and we

are seeing initial results of consumption build coming in.

The job of doing home to home and ensuring that we're able

to get the product pretty well established and known to

consumers, that effort continues. And I'm assuming that

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between that effort and overall macro improving in terms of

our commodity costs in the Foods area, it is helping us now to

start seeing the results that we always wanted to see in this

space. So yes, so that's a little bit about HFD in terms of the top

line. In terms of bottom line, the job of doing margin

improvement has been very successful, as we called out. And

going forward, the focus singularly for us remains keep

building consumption.

Manoj Menon: Just quickly a follow-up here. Are we back to 2018, 2019 sort of

indexed volumes in the nutrition business?

Rohit Jawa: The volumes are back. They're growing. And as I mentioned,

the key job for us is to ensure that we start to keep building the

consumption as penetrations have improved already. So

number of units have improved, we will start seeing

consumption improving, and that is a focus area for us.

Manoj Menon: Fair enough. And lastly, I just want to make a statement of

hypothesis and just stress test whether it's a right way of

thinking. When I look at calendar year 2023, we have seen, let's

say, the start-up funding has declined 70% in 1Q, the number

what I saw is another 30%, etcetera. It does appear that it's a

great enabling environment for a large company like HUL with

all the capabilities to outperform in Beauty. Is that the right

statement or hypothesis, let's say, can I make for the next 24

months, assuming the ceteris paribus template, the one we

see currently in the market remains?

Ritesh Tiwari: Yes, for the Beauty segment, correct?

Manoj Menon: Yes, that's right.

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Ritesh Tiwari: Yes. See Beauty, as we mentioned as part of the prepared

remarks and if you unpack the category growth in current year,

Beauty has grown mid-single digit. And if I see that in terms of

further impact, the premium part of the portfolio has grown in

double digits. And it's a mass part of the portfolio, which has

declined and given the conversation we had in rural macros,

etcetera.

And we did call out on one of the slides, the six big bets that

we want to take in Beauty segment going forward. We named

them in the slides being sun care, face cleansing, masstige,

serums and stuff like that. These segments put together is

INR2,000 crores business for us, growing at strong double digit.

And within that, the e-commerce of this footprint of this

business is growing at 50% plus.

So the way we see going forward in the Beauty space, two or

three clear callouts. The market will keep fragmenting, the

market will keep getting more premiumized and more

demand spaces – sub-demand spaces will keep opening up.

Six are the ones which we have called out that we are going to

lean in, and this is where you'll end up seeing more amount of

actions.

In terms of portfolio brand, all three jobs to be done. Number

one, extending the current brands into more demand spaces.

So be it Pond's getting into more serums and sun care, I'm

seeing examples like that or Lakme for that matter or b,

bringing brands to capture new demand spaces. A classic

example of that was Simple Beauty in the Clean Beauty space

or for that matter, Novology. And those brands will be needed

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to ensure that the upcoming demand spaces we are able to

address and start making business with.

And third, goes without saying that we have mentioned and

called out earlier as well that we are always active in the space

in terms of any inorganic opportunity that we need to do. And

if at all, something comes across which is the right value, we

will lean into that as well.

So all three elements of making our own brand, leveraging

brands of Unilever, of course, leveraging technology globally

and ensuring that the demand spaces that we called out is

what we keep focusing on, and we are seeing those results

coming in, as I called out in quoted numbers for the current

quarter on those segments. So we will go behind where there is

growth in this space.

Moderator: We have our next question from the line of Arnab Mitra from

Goldman Sachs. Please go ahead.

Arnab Mitra: My first question was on the soaps business. So there has

obviously been a very sharp duration in the performance here.

And in the context of my understanding that some of your

competitors are doing better, could you just take a minute to

make us understand what exactly has gone wrong here in

terms of value equation that you mentioned?

Is it driven by competitive intensity spike? Or is it that the

brand equities have worsened and therefore, you need to

invest back? If you could just help unpack what exactly is the

problem here and how much time do you think it could take?

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Rohit Jawa: Sure. Absolutely. We very much would like to because first of

all, so we don't take this lightly. And particularly in this quarter,

we've seen an inferior performance, and we have addressed it,

and let me just unpack for you really the causality and really

what we have done.

On the whole, as you know, it's a sizable business for us. We

have a strong portfolio. We have increased the level of A&P

investments since middle of last year after we had space to

invest as the commodities softened. We have improved the

product formulations of all of our key brands, lifebuoy, Lux,

Dove, Pears, and Hamam. And they are now -- the superiority

levels in products is strong.

I'm heartened to say that the brand power -- in fact, recently I

was reading, it is strengthening. So I think at a brand level, we

are moving in the right direction. So the real issue of this

decline in volume was essentially because price effectively is --

because we're lapping a price decrease base and therefore,

that is I think generally true for the industry. But volume, which

has dipped materially this quarter, is the one that -- is what we

are addressing. And that is largely because of the mass end of

the portfolio.

So Lifebuoy and Lux, especially Lifebuoy, where we saw -- in

past, we sell at low unit price, we were off the value equation

more recently in the last few `quarters, and we have

addressed that quite quickly this quarter, and now the new

price stock is in the market, and we are seeing early signals.

And we expect that to come back in the next quarter or two

because we've seen the same happening with NSD bars. And in

this case, I think we took a bit longer than we should have on

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addressing the low unit price value equation and which we

have done now.

Now as we do that, let's not forget that the market is also

upgrading. And our premium brands, Dove and Pears, are

doing well. And basically there, we are doubling down on

innovation, on product quality and on formats. So as I

mentioned previously in the call, our work on the bathing

shower liquids is paying dividends. We see that becoming a

sizable category like in other big categories we play in. So we

are investing in innovation, new benefit segments and liquids.

At the same time, making sure that our mass portfolio remains

very much in the sweet spot of price and quality. And we're

working, of course, at the same time, upgrading also the

formulation in the mass segment to take it even to the next

level with some proprietary technologies that we will talk when

it's appropriate. So we do think this is really limited to the mass

end of the portfolio. And we have taken the actions that we

needed to take, and it should recover back in the next quarter

or two.

Arnab Mitra: Thanks for the detailed explanation. Just one thing on pricing,

again, from Ritesh's comments that you expect pricing to

remain negative in the near term. Now we've seen a little bit of

bounce in palm oil, crude prices. Given that you're anyways

lapping a deflation year, normally one would have expected

HUL or most people in the industry to start putting in some

pricing growth now. Why is that not the case this time? Is there

anything different that you see in terms of pricing increases

from here on?

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Ritesh Tiwari: Yes. So Arnab, let me just pick up your pricing question. So

year-on-year, the total commodity basket for Home Care, for

Personal Care, there is deflation. So there is no case for us to

take price increases. Crude at $85 is still range bound. It goes

up a little bit, given various amount of elements of

geopolitical, which are influencing it in the short term. But as

you've seen, it then recedes back to $85. CP also is firm at $850.

We are in season now. We'll come to know how the season

pans out. And then we'll come to know what the, if at all, the

trajectory of that $850 changes materially.

Typically, what we don't do is we don't react to short-term

variation and volatility in commodities. The moment we have a

read that there's a deterministic change in direction up or

down, which is then when we start adjusting to the price so

that we don't, let me say, react to short-term changes in the

market. So as of now, given where the commodity prices are, is

a total deflation on the two categories. There's no case for us

to change in terms of take price increases.

The only exception of our entire portfolio is coffee, where

coffee, as you know, has remained firm and keeps inflating as

a commodity and where we have taken price increases. But

have we finished the job of passing on whatever we had to

pass on with all commodity deflation? The answer is yes. The

last element which was left out, as Rohit called out, was in the

area of mass skin cleansing, especially the low unit price point

packs, even that correction, as we speak, has happened.

So I believe that where we are today, if commodity prices

remain, in near term, short term, we will end up seeing

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marginal decline in UPG. In midterm, we should see that

pricing plateaued out.

The second half of financial year, we will be able to keep

leveraging our NRM and take some calculated price increases.

And, we expect to see a positive low single digit price increase

in second half of this financial year. This again, as I call out, is

everything else being equal in terms of commodity market.

But to your point, if at all we do see CPO running from $850 to

$1000 plus, or crude running $95 plus, of course, we do

operate with mindful level of inventories. And our supply chain

is extremely resilient. And if at all we have to react and take

price increases, we will do that. And for that matter, if at all we

have to further titrate price decreases where we need to, we'll

do that. So we are on the ball. And it is a high volatile period.

And we are closely monitoring it.

Arnab Mitra: Okay. Thanks so much, Rohit and Ritesh. All the best.

Ritesh Tiwari: Yes. Thank you. Appreciate it.

Moderator: Thank you. The next question is from the line of Avi Mehta from

Macquarie. Please go ahead.

Avi Mehta: Hello team. Thanks for the opportunity. I wanted to kind of just

understand the EBITDA margin, given our earlier comment of

targeting 23% to 24% band. As a concept, what do you think is

required for us to start looking at moving from the bottom end

of the band towards more at the mid and at the top end? Is

this more a volume recovery? Or is there anything else that you

would want -- is this more external, internal? I would love to

hear your comments on that.

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Ritesh Tiwari: Yes. No, thanks for the question, Avi. So a few things on EBITDA.

Exactly as you mentioned that at 23.4%, where we are, we

would want to maintain at current levels in short term, our

EBITDA margins. Medium to long term, we have always called

out that our stated ambition is to do modest margin

improvement. But if I just bring it back now for next some

quarters, this is a level that we want to maintain the margin.

Now what are the puts and takes out here. First, within this, we

want to continue driving gross margin improvement. Even in

this quarter, when we delivered a 23.4% EBITDA, you saw a very

strong 350 bps gross margin improvement. A large part of that

got invested into A&P. We continue to operate SOV ahead of

SOM. And we further invested in capabilities so that our ability

to bring innovation and for that matter improve execution in

the marketplace is installed and keeps increasing.

So hence, if commodity prices remain where they are, and

those are the factors which have impacted. And again,

remember, in this quarter, when we delivered 23.4% margin,

this is after taking impact of 60 bps for the business of GSK - we

used distribute their products, and we used to end up making

margin from that. And now that margin we no longer make. So

for next 4 quarters, you will end up seeing that 50 to 60 bps

impact coming in from that business, which now we have

discontinued. So that impact comes in.

Going forward, improving mix, number one, which is what we

want to see; further volume growth, number two; number

three, price growth. Ultimately, there's always a pretty robust

operating leverage, Avi, that works in the P&L. When you have

a deflationary scenario and you don't have a price growth, you

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end up missing that operating leverage, which then drops into

the P&L.

So those are the conditions which need to be existing for us to

then start going towards a higher band or for that matter

going beyond 24%, which is A- trajectory of overall market

recovery, which is gradual, should continue to improve. Macro

is looking better, number one. Number two, we should start

seeing some recovery of overall pricing in the segment and

hence, the operating leverage coming in. And the job of

continuously improving mix is already there in the mix

happening. So those are, I would say, 3 drivers which will help

us to start inching margins further up.

Avi Mehta: Got it. Ritesh. Thanks a lot for that. And Ritesh the other bit I

just wanted to clarify. See, we understand what is happening

in skin cleansing and the correction that we've done. Would

you be all -- would you give us some sense on what is

happening in the mass skin care? Is that a demand issue or a

competitive issue, where you need to also revisit pricing

equation?

Ritesh Tiwari: Yes. Mass, skin, simple answer. It's a demand issue. No

competitors challenge. Products, distribution, all in place.

Avi Mehta: Okay, perfect. Thank you very much. That's all from my side.

Moderator: Thank you. The next question is from the line of Vivek

Maheshwari from Jefferies. Please go ahead.

Vivek Maheshwari:Hi, good evening, team. My first question still is on the soap’s

bit. The volume decline looks quite surprising. Do you think it's

a product formulation issue? Let's say, the TFM content versus

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some of the competition, is that what is the chief problem in

your view?

Rohit Jawa: No. We are quite certain it's not quality. In fact, quality is

better. It is the few grammage short of the benchmark in INR10

price points in 2 very specific price-sensitive regions, where we

sell a lot. And that once corrected, we will see response in

volumes. We already see some early shoots, but that is -- so

when you narrow down the volume loss in the last 3, 4, 5

months, it was primarily in that space. We are growing

volumes in other parts, in the South. We are growing in

modern trade.

We are growing -- we are also now growing volume share in --

as a total, but this is basically the issue that we had to

address, which we have done. But again, we will not be not

taking it lightly. We are also strengthening quality more as a

proactive measure because we do have some access to

proprietary technologies that we bring in the market. And

we're strengthening, of course, as I mentioned, the overall A&P

investment, salience. And brand powers are picking up.

Vivek Maheshwari:Got it. And just a follow-up, in terms of whatever corrective or

preemptive measures that you have to take, is everything

there in place right now? And it's just more about these hitting

the markets and therefore, automatically things start to move

or there are more interventions that you think you still need to

take?

Rohit Jawa: It's pretty much the former. We have been working on this and

addressing this. We have a programmatic set of events. And

you will see them. You already start to see some of them in the

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market, innovations, our investment on liquids. But you will see

them, the events flowing in the market programmatically

through the period ahead.

Vivek Maheshwari:And Rohit, second is a big-picture question. I don't know how

much you can address this. But over the last few years,

government has been very focused on capex buildup,

investment side of things. A lot of investors have been asking

this question that there are a lot of data points which are like -

- which have been very, very good. And there is probably one

of the very few spaces where things have not been very good,

is the consumption on -- particularly on the staple side.

If the growth agenda of the government continues, the

investment bit continues after June, what will it take for all of

that to percolate down to the bottom and the consumption bit

picking up? What needs to happen from that point of time?

Because as it appears, it doesn't look like that this government

is going to boost consumption on its own, which means that it

will follow the investment bit. So how does it percolate down

basically?

Rohit Jawa: It's a difficult question to be precise about from my end. I can

give you my -- our thesis, if that's acceptable.

Vivek Maheshwari:Sure, please, would love to know that.

Rohit Jawa: No. We do think that the -- because we are -- 60% sale is urban,

about 40% is rural. And so far as urban is concerned, the

growth has been resilient. And in the top end of the urban, it's

been strong. And that is not changing. I believe that trend is

somewhat secular. So I think when it comes to premium end

and more upgradation, all of those things will continue.

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The GDP growth is driven a lot by government capex, but also -

- and that trickle down effect will take time. But if we -- if all of

those jobs and livelihoods that get created, there is -- I mean

that money should end up going back to the households more

in the mass end, and that should democratize consumption.

And we should, in my view, start to see that. And how long it

takes? I do not have the ability to forecast, but I think we do

see gradual recovery in rural, and perhaps some of this could

be that as well.

As you know, rural has got 3 sources of income, the agri

income, the income from repatriation, the income from labor.

So the labor is going to get affected through the investments

in capex. When it comes to repatriation from urban areas,

that, I think so, post-COVID has been repairing that should

start to click up. And then finally, on agri, is a lot more weather

dependent. And all of us are hoping for a good monsoon. And

if that does happen, then we should see that also coming.

So there's a cyclical effect of consumption. I believe now that

we've had some years a negative, perhaps the positive end of

the cycle is coming in. But in all honesty, we -- I just want to

close by saying that while all of us are discussing and

speculating on this or perhaps making some good judgment,

we at HUL are not waiting for the macro to shift one way or the

other. We are going to do what we can do, which is we are

focusing on transforming our business to go where the growth

is, to go where the people are, go where the money is.

So that is why you see very clearly laid out an agenda since

September of pivoting our business to where the growth is

because it's unevenly distributed. So we are investing in

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innovation, market development, in shaping portfolio in high-

growth spaces, in channels of the future. We are deliberately

going where the growth is, so that when macro does get

better, it will also lift our boat.

But we're not going to wait for that to happen. We'll start to

focus on we are focusing on things that we believe we can

impact. So that's why I just want to make the emphasis of this

point that, that is the energy of the company, is to transform

ourselves to be a business that is shaped for where the growth

is, and is shaped for the new India, and that is going to be a

source of outperformance as quarters go by.

I hope that gives you some sense of really what we are trying

to do inside the company while we wait for the macros to

change.

Vivek Maheshwari:Absolutely. Thank you and wishing you all the best.

Management: Thanks, Vivek.

Moderator: Thank you. The next question is from the line of Percy from IIFL.

Please go ahead.

Percy Panthaki: Hi everyone. Good evening. I have two questions. Firstly, on

Horlicks. So I saw your slide on all the actions you have taken

and you've grown penetration, market share, etcetera.

However, the category growth is a little sort of subdued.

Now in the past, you have said that there are inflation issues

with milk, etcetera. But apart from that, don't you think there is

an issue of perception, especially in the last few quarters or

months, there has been a lot of noise on social media that

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health food drinks are not actually very healthy and they have

sugar content in them. So what are you doing in terms of

correcting that perception issue is point one of that question.

And point two of the first question is that packaged beverages

is a very fast-growing sort of segment in India. We have seen

multiple companies reporting good growth in this segment. I

think it's sort of an inflection point or it's a lifestyle sort of

change or whatever you might call it -- so don't you think that

you can play the packaged beverages space through Horlicks

launching RTD Horlicks, it used to be there.

I think I don't know if you have discontinued or if it's still there,

but like focusing much more on that part. Yes. So this is my first

question, two parts to it, please?

Rohit Jawa: Okay. Let me just -- so functional nutritional drinks -- function

nutrition. I think the -- let's just the category serves an

important community need of fulfilling the carbohydrate,

protein and micronutrient deficiency of the average Indian,

men and women, poor or rich. It's a pan-India opportunity, and

therefore, this category has a real meaning in the lives of

people that it improves their functional health and that's the

purpose of this category.

Secondly, it's underpenetrated, mainly in the South and East

and somewhat lower and under 30%-odd and on the average

20%-odd. So there's a huge opportunity for us to get this

category to grow, and we have got great templates in

Southeast Asia, for instance, where the category is much

bigger.

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So what are we trying to do about that? One is to get more

users, it’s a check against that because our penetration

continues to grow. Second is to build a strong premium end

where we're seeing quite a good traction with the adult

portfolio or the adult science portfolio where we see we

already have under INR600 crores of business that is growing

strong double digits and is more profitable. And we still have

more share and more market growth to feed on and that part,

whether it's serving diabetes, or women’s health, those sort of

needs, those are being served or lite such drinks without sugar

and so on and so forth.

So that's a segment that's growing. We do need to do more in

the area of relevance. And there, we believe we have found the

right proposition in 'Taller, Stronger, Sharper'. And the moms in

south and the east of India do swear by this product, and have

seen this being used over generations. And if you can keep

reminding them that this is good for their families, then they

do use it as long as we speak to their language and they're

using seasons like exams, monsoons, etcetera, to make sure

the relevancy of this category stays high, and we are seeing

very good traction. Our market shares are improving and were

also stronger, not just in GT, but also in modern trade.

So we will stay the course of reinforcing the relevance because

obviously, if you don't remind consumers, then they do not

know that this option exists for them to improve their

functional health. When it comes to the issue of sugar, we

have less than one teaspoon full of added sugar to these

drinks. And in our adult portfolio, we have no added sugar.

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So in the kids portfolio, you do need a little bit to improve the

palatability for the kids to like to drink it. And effectively, what

we have done there is that we make sure that we fit, of course,

not just the local regulations, but also the Unilever standards

and our added sugar is less than teaspoon full for so one

200ml cup we have less than one teaspoon full of added

sugars.

So our sugar levels are just adequate to create it, make the

drink palatable. And we have reduced them by the way over

years in the past, so we continue being on that journey. So that

is really...

Percy Panthaki: It has become more relevant in the past few months? Are you

communicating on this platform is what my question was. On

the lack -- I mean on the fact that the sugar is not a big issue?

Rohit Jawa: No, the controversy or the discussion you're referring to

perhaps is in the infant space, and we don't have infant -- we

don't serve kids in that age bracket. Our portfolio starts with

kids onwards. And there, we meet the nutritional standards

and we are fully compliant. And I don't think there is any more

work that we need to do proactively apart from making sure

that formulations continue to sort of remain within the bounds

of Unilever Nutrition Standards and we're well below that in so

far sugar is concerned.

Percy Panthaki: Right. And on the RTD part?

Rohit Jawa: Yes, sorry, RTD, broadly speaking, on the food space, there is

clearly our brand like Boost, Horlicks, Knorr, Kissan, Hellmann's

that have a brand equity that can stretch more broadly. We

are working on a strategy where we can make some choiceful

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decisions around where we can invest. We have in the past

tried a few things. And we found some of those have

succeeded. We're scaling them.

We have -- before also RTD, we have, for instance, already a

scalable investable mix in Hellmann's mayo, we have an

investable mix in Knorr Korean noodles, the peanut butter

from Kissan, these are sort of things that we've tried and we've

seen them working well and now they're scaling.

Similarly, we have got a very small test on Boost RTD, but it's

very early. We are just sort of dipping our toes to see how it

does in the South. But we'll, in all full transparency, be more

coherent around the food business, our packaged food and

drink business in a few more months than we have made up

our mind and where we actually feel we have the right to win,

and how we would like to grow that business. So we are

working on it. And like we did for Beauty today, we're very clear

on the agenda there. We will come back to you once we have

more clarity on the food side.

Percy Panthaki: Yes. And my second question is on the beauty space. So we

have seen over the past few years, many companies launching

new brands like recently, we saw this news of Dermaco getting

a INR500 crores ARR, it's about a three year-old brand or four

year-old brand. So just wanted to know, in light of that, you

have also taken some initiatives like Simple and Acnesquad, if

you can give us some idea on what your experience has been

over the last couple of years and these couple of brands, two

or three brands that you have launched, what is the ARR or

what kind of traction they are getting in the market?

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Rohit Jawa: Yes. I think you have to look at the beauty business as a

portfolio because it's not -- so let me just give you a couple of

data points. So we have a business that’s well over INR12000-

odd crores in scale. We are number one in many categories, as

we mentioned in the presentation. Already in the last couple of

years, we've been focusing on multiyear bets. On six specific

segments, these are a combination of demand space and

formats like sun care, like facial cleansing, like weather

resilient body lotions or things like masstige products such as

Simple, Love Beauty & Planet, between this lot, we've already

built a business of INR2,000 crores.

And this is annually, the last year, financial year, and is

growing quite fast. And to give you an example of that, it's

growing at 50% in e-commerce. So just to give you the scale of

-- and not all of this is new brands, it's also extensions of our

brands like Ponds, Lakme. So our first port of call is to stretch

our existing brands, and they, of course, cannot stretch all the

way, but there is a limit. But we do find the first thing for us to

do is to stretch those master brands, we've done that, revamp

them.

Then, of course, we are building specific equities that these

brands cannot address like in facial cleansing, we do have a

successful equity now with Simple. We think it's got a good

future. And now we are going to -- we're working on scaling it.

And Love Beauty & Planet is also showing traction. And both of

these have got strong pull in e-commerce channels. Between

the two, they are in about excess of INR100 crores ARR, but

that's just a starting point. We will like to see them go much

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bigger and we are working on investing in that sort of

ambition.

Yes, that's basically where we are. We, of course, have

wellbeing brands like OZiva, where we have also crossed

INR100 crores ARR well above that. So we are quietly building

the specific brands, but please note we play the full portfolio

of our existing strong equities and the new brands, not just the

new brands at HUL.

Moderator: Next question is from the line of Kunal Vora from BNP Paribas.

Please go ahead.

Kunal Vora: First question is on distributors. So regarding the change in

distributor margin last quarter, can you tell us how it impacted

your distributor payout in the current quarter? And did they

make higher or lower margins in aggregate?

Rohit Jawa: The margins have gone up and the service levels are going up.

We will watch that more carefully in the top 100 cities that

they've gone in and it's yielding the results we were looking for.

It's a win-win, both for our distributor and the company. And

now we'll watch it closely and that's where we are at this point

and make sure that all people concerned, the customer, most

importantly, in this case, the retailer, the distributor, and the

company, all of us benefit by this extra investment that we're

making in this space.

Kunal Vora: Understood. And continuing on this, like you've heard from --

heard concerns from some distributors in smaller towns, there

is some dumping happening, supplies coming from larger

cities are cheaper compared to the price at which you might

be providing to them. And like some of them also mentioned

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like this impacted viability. Are you facing any such issues with

retaining smaller city distributors? Any comments on this?

Rohit Jawa: No, we are not. In fact, we watch both attrition and the ROI of

our distributors programmatically. And our attrition levels

have actually, if I remember correctly, I haven't -- I had looked

at this figure a few weeks back. I'm not 100% exact number, but

the trend was, in fact, improving this year. And we don't -- we

haven't picked up anything that you anecdotally may have of

any scale or pattern. So I don't know. I can't comment on it

because it's -- the number or the indicators, ROI trending and

its healthy levels, up or down, and the attrition levels are

headed, in fact, in the right direction. We watch these numbers

quite carefully.

Kunal Vora: Understood. Okay. Second and last question is the proportion

of business winning share seems to have moved after dipping

for a few months. Which are the categories in which you have

redeemed market share gains and which besides which are

the categories in which the market share is still declining?

Rohit Jawa: On the whole, we're doing much better on volume shares

because that is what our focus was initially, and now pricing,

therefore, we know where to sort of make it catch up. And as

we said that if you look '21 to '23 end, we have held the

massive share gains that we made during the inflation period

which is not typical of other cycles we've had, where we've

actually donated back the shares. In this case, we've held and

we lost a little bit marginal share and 10, 20 basis points, but

we're still holding pretty much by largely holding share. And

where we had lost share, which is in mass end of detergent

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bars, we have seen a recovery in volumes almost like a U-turn

after we corrected in the market.

And the second on mass skin cleansing, we had to go one

more level because we had corrected prices. And we will see

how that turns around in the next few quarters. But those are

the two categories where we had to -- where we lost more

material shares, but those are coming back. And then

otherwise, it's a constant focus from our end to -- we look at

this competitiveness is basically the only strong metric of

success, because the rest of it -- this is what is in our hands.

And the way we are now dealing with it is to basically go where

the growth is and make sure that we're leaning on in fast

growth areas and we grow faster there and not lose in the

mass areas by just being absolutely sweet spot-on price and

quality.

Kunal Vora: And what's happening in the Oral Care market?

Rohit Jawa: We are gaining market share.

Moderator: The next question is from the line of Latika Chopra from

JPMorgan. Please go ahead.

Latika Chopra: Just one question. If you could share the channel salience for

FY'24 across general trade model, brick and mortar and e-

commerce and is it possible for you to share any comments

and thoughts on the fast growth of quick-commerce at least in

large metro catchment areas. And furthermore, how should

one think about these channel moves influencing margin

profile of the company over midterm. I understand you end up

selling higher premium mix in this channel, but somewhere

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would driving share of these modern channels limit margin

improvement capacity for the company? Thank you so much.

Rohit Jawa: Thanks, Latika. I think I'll give it a shot and then if Ritesh, he

wants to add. I think the -- so high-level salience and I'm giving

you rounded numbers. We are about under 70% on general

trade. We are under 20% or thereabouts on modern trade

organized, modern trade retail, and we are around 6%, 7% on

e-commerce. Clearly, e-commerce is growing the fastest,

followed by modern trade then followed by general trade. And

that's the high-level shape of the market as well.

Quick commerce is increasing. It is about a quarter to a third of

our e-commerce sales at the moment, but growing much

faster. And we are gaining share in quick commerce and in e-

commerce. And that is really what's -- that's the relative

position we have. And of course, we have to do more there

because this channel is showing signs of continued growth.

This is not one channel but subsegments like q-commerce,

beauty commerce and marketplace are the three main

platforms within the e-commerce segment, and they are also

growing. All of them are growing, and we expect the e-

commerce growth to continue and it is sustained. That is the

view on channel salience and trends.

To your point about margins, at this stage, I think the

structural point is that -- generally speaking, we do sell

different portfolios in these channels. And therefore, what we

must look at is basically the net operating margin based on

the mix we sell in these channels, and that basically means

more value dense portfolio in e-commerce, somewhat more

stable portfolio in modern trade, which is actually not a new

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channel and general trade basically more around access

packs.

And I think the only place we have to now watch this is in e-

commerce where, frankly, the industry is all focused-on growth

right now. And we haven't quite settled to any equilibrium,

where we can have a very informed discussion on margins.

And right now, everybody is trying to do is to basically grow.

And I think we are generally growing very high margin

portfolio in quick commerce, beauty commerce and in

marketplace.

Moderator: The next question is from Shirish Pardeshi from Centrum

Broking. Please go ahead.

Shirish Pardeshi: Just two quick questions. On Slide 12, you have given 6 Ps and

what efforts we have taken on Horlicks and especially on HFD.

I've been seeing the last three years, we have been doing a lot

of sampling and home to home. Do you think this category

turn will happen, and this is very slow turn and maybe another

two years, we will have to continue these efforts? Or do you

think the efforts what we have done and will start showing the

numbers and the volume growth in second half?

Rohit Jawa: Our indicators are brand power, market share, penetration,

our profitability, all strong. We have two brands, Horlicks and

Boost. And the future of this category may not just be the core,

it might be a lot more to do with functional science and what

we can do with the adult space, and that's our focus right now.

That's about 10%, 15%-odd percent of the portfolio growing

quite fast. And we haven't even looked at the white spaces. So

there are many levers of growth for this business. The first what

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we have do is to just do the basics and make sure that we stay

focused on 'Taller, Stronger, Sharper' and make sure the core

becomes robust.

And I think on Boost, is already responsive even before this

conversation we are having today, but for some years now.

And Horlicks is now strong, stable. And if you walk the stores

in, South, you'll start to see the power of this category in

modern trade, for instance. And the single minded clarity with

which we are now category managing this with our modern

trade customers with Boost and Horlicks. So these are two

pillar categories. We just have to stay the course and do the

right things with more users, more usage and more benefits.

Shirish Pardeshi: I got that. The reason I'm asking is the time 5 years we've been

tracking this, the recovery will happen. So I'm more curious

that we have done this door-to-door sampling. What kind of

sampling till date would have done? Or maybe suffice to say if

the pace can say that how much promotions and ad spends or

activities we have done over the last 5 years since the time of

acquisition?

Ritesh Tiwari: So, Shirish, around 40 million to 50 million is what we did, as

you remember, we have shared the number as well of home-

to-home. And the way we had tracked, I had mentioned to you

that we did not go and give products for free. We do have a

learning that when you give these products for free, people

don't end up using it. So you end up giving them at a discount,

then that encourages them to start consuming it. The outcome

that we were seeking from this entire job of home-to-home

was improving penetration. And to Rohit's point, we have seen

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penetration build up year after year for the last 3.5 years as we

have owned the business in 4 years coming to it, number one.

Number two, consumption, remember, we had mentioned, is

linked to not only what we end up doing in terms of building

penetration, but overall macro, it was COVID first and high

inflation and food inflation -- so the a, macro and of course, B,

very clearly the overall benefits that we end up selling as part

of the portfolio. The good news is on a macro front, food

commodities have started now to taper out, milk inflation,

which was very high inflation, fresh milk, which has also come

down sequentially and we are seeing benefit coming in. This

quarter, we grew at high single digit. The point I was making

earlier. We got the sales was due in both the volume and some

amount of price that we have taken. So we are seeing results

which are encouraging -- and within that, of course, the key

job for us was to keep building a plus range, which is more

premium part of the portfolio. So our investments have gone

into product in terms of making the packs more accessible,

which is bringing down the average price point pack -- that is

in it penetration. Investments went in terms of building more

salience of the brand and which is why we have started to see

market share improving. And of course, investments have

gone into developing portfolio into more broader wider

species. And there is where we have also seen incremental

growth coming in.

So all the three investments are paying off. And of course, the

job continues -- these categories are multiyear jobs to do in

terms of building penetration, consumption. And where they

are today roughly 30% odd, there's a big runway for growth for

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us to keep building penetration and consumption, and we will

be at it.

Shirish Pardeshi: Thank you Ritesh. My second question is on Beauty and

Personal Care. Quickly, you have given the split between

beauty and wellbeing, which has grown 4%, and Personal Care

has declined 10%. I was more curious if I compare on a Y-o-Y

basis, what kind of mix towards premium would have

happened in Personal Care and Beauty and Well-being?

Ritesh Tiwari: So we did articulate Shirish earlier that when you look at within

beauty and wellbeing to start with, the way the premium

portfolio has grown much stronger at double digit and it's the

mass portfolio, which has seen more impact on the demand

coming in. Rohit did call out that the issue in Personal care was

more at the mass end of the business, not the premium end of

the business. So overall, between the two, Beauty and

Wellbeing is more on an average, more profitable business

that we have compared to Personal Care. And of course, within

the Beauty and Wellbeing there are different price points at

which we end up doing the business. I hope that helps for you

to get some amount of understanding.

Shirish Pardeshi: Yes. The reason why I was asking that if the mix is towards

premium, we will be able to defend the margin in these two

segments?

Ritesh Tiwari: See, overall Beauty and Wellbeing the point we're making that

this is where the growth are at the premium end, and this is

where also we are investing and Beauty and Well-being a) is

above average margin business for Hindustan Unilever. So the

moment to start driving growth in spite of investing and in

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spite of probably taking some margin down in beauty and

wellbeing, it will be overall mix accretive to Hindustan Unilever.

And which is the point we mentioned that our job will be to

ensure that the Beauty and Wellbeing we end up driving

growth ahead of overall average of Hindustan Unilever.

Shirish Pardeshi: Okay. And just last, quickly, if you can touch on Unilever's

existing ice cream business. So any thoughts here in India,

what is our strategy or what -- if there is an outcome, which is

visible?

Ritesh Tiwari: Yes. So you've seen the announcement by Unilever. The idea is

to separate the business given the business model, and they

will end up doing this entire job by second half of next year,

calendar next year, 2025. The Board of HUL and working with

the management of Unilever, we will work through the

implications and the actions we will end up taking in India

pertaining to that. At this stage, we are in peak season of ice

cream. Our job is to put our head down and do a good job in

terms of executing in the marketplace. And as and when we

come to any conclusion, we will, of course, come and share

with all of you.

Shirish Pardeshi: All right, thank you and all the best.

Ritesh Tiwari: Thank you, Shirish

Moderator: Thank you. The next question is from the line of Jitendra Arora

from ICICI Prudential Life Insurance. Please go ahead.

Jitendra Arora: Thank you. Actually my question has been answered. It was

about the ice-cream separation.

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Moderator: Thank you sir.

Ritesh Tiwari: Hi Jitendra. So yes, we have covered the ice cream question

Thank you.

Moderator: We'll take that as a last question for today. I would now like to

hand the conference over to Mr. A. Ravishankar for closing

comments. Over to you, sir.

A. Ravishankar: Thank you, Yashashri. With that, we come to the end of the

session. If there are any further questions, feel free to reach

out to any of us at IR team. Playback of this event will be

available on our website in a short while. Before we conclude,

I'd like to take a moment to extend a warm welcome to Shilpa,

who takes over as Controller and Head of Investor Relations

and also take a moment to thank all of you for the wonderful

engagement over the past 3 years that I was in the role. Thank

you again and have a great evening.

Moderator: Thank you, sir. On behalf of Hindustan Unilever Limited, that

concludes this conference. Thank you for joining us, and you

may now disconnect your lines.

Disclaimer: This transcript has been edited to remove any grammatical

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