Wealth Creation Strategies of

Hindustan Unilever

1. Investment in brands and people: The company spent over Rs 4,607 crore (12 per cent of its

FY19 net sales) on its brands. This is equivalent to the revenues earned by Colgate Palmolive or

GSK Consumer Healthcare in FY19. HUL has been one of the most successful in premiumising

its brands like Surf, Dove, Lakme and Brooke Bond. Besides, its investment in human resources

has made it a talent ground for its parent Unilever and the Indian FMCG industry.

2 . Acquisition to fill gaps in portfolio: HUL has time and again made acquisitions to respond

to a threat or fill a gap in its portfolio. It acquired ayurvedic hair oil brand Indulekha, GSK

Consumer Healthcare for its malted food drink brands and Adityaa Milk to beef up its ice cream

portfolio. Though not all its buyouts have been successful, the strategy reflects the company’s

response to take on competition.

3. Agility with focus on the core: The 85-year-old company has kept pace with changing times

and consumer preferences. It has innovated, experimented and invested in new ideas and

technologies. Despite that, it has stuck to its core products in home care, personal care, foods &

beverages. Its response to threats from Patanjali is an instance of its agility.

4. Spelling out the strategic agenda and working towards it: HUL’s management unfailingly

talks of its ‘strategic agenda of delivering consistent, competitive, profitable and responsible

growth’ to the extent of it sounding cliched. But, the company’s performance in revenue and net

profit terms has remained representative of the stated agenda.

The company’s revenues have grown at a five year compound annual growth rate of 6.2% to Rs

38,579 crore in FY19 - with net profit growing at a higher rate of 8.9% to Rs 6054 crore. Its

operating profit margin has improved steadily from 17.4% in FY15 to 22.4% in FY19.

Its stock has out-performed Sensex in seven out of the past ten calendar years and outperformed

ET FMCG Index in five of the ten years. At a market cap of Rs 3.8 lakh crore, it is the most

valuable FMCG stock trading at 64 times of FY19 earnings. Its premium valuations have not

prevented investors from chasing its resilient growth. Data from Bloomberg shows that only four

of the 42 analysts tracking the stock have a sell recommendation on it.

5. No replication by its peers in the domestic market: The company has several inherent

advantages working in its favour — global pedigree, long legacy of doing business in India and

well-entrenched distribution system. Incidentally, Patanjali, the relatively new home-grown

FMCG player, has targeted to unsettle HUL from its numero uno position in the Indian consumer

market by FY20. HUL seems prepared to take on the challenge.

6. Investing in continuous improvement of products: The company is leveraging technology to

further develop and build new capabilities to redesign and automate some of the key business processes

across functions. This will drive increased efficiency in operations and will lead to streamlining of

processes.
SWOT Analysis of Hindustan Unilever

Brand visibility
Market leader in consumer goods
Innovative FMCG company
Financial position
Strengths
High brand awareness
Product line
Market share
Large number of brand in various item classification
Weaknesses
Expanding market
Awareness in the usage rate of consumer goods
Opportunities Increasing income levels
Competition in the market
Price of items
Threats Buyers control