Hindustan Unilever

Strengths
1) Brand visibility – From soap to mineral water, HUL is shaping the life of 1.3 billion people daily. Being
in consumer goods market with its 20 consumer categories such as soap, tea, detergents, shampoo etc. & each
having large assortments, helped HUL in occupying the large shelf space of Grocery /departmental stores which
itself explains the acceptance/demand of their products in the market.

2) Market leader in consumer goods: According to Nielsen data 2 out of three Indian consumers use HUL
products. HUL used selective targeting strategy to emerge as a market leader in the Indian market.

3) Innovative FMCG Company: Hindustan Unilever Research center (HURC),Mumbai & Unilever Research India,
Bangalore ,both research facilities were bought together in a single site in Bangalore in 2006.Employees in this
facility continuously  working & developing innovations in products & manufacturing processes which is helping
the HUL to set it as front-runner in the consumer goods market.

4) Extensive & integrated distribution system: HUL’s brands are now household name which is only possible due
to its 4 tier distribution system namely

 a) Direct Coverage through common stockist within a town of population under 50000 people.
 b) Indirect coverage: Villages closer to larger urban markets have been targeted.
 c) Streamline: Leveraging the rural wholesale market to reach markets inaccessible by road.
 d) Project SHATKI AMMA: It targeted the very small villages (2000 population) & tapped into pre-
existing women’s SHG (self-help groups). Markets have been segmented based on their
accessibility & business potential.

5) High Brand awareness: By signing popular celebrities for the advertisements of their products HUL has created
positive word of mouth over the ages which helped them in social acceptance of their products intelligently
targeted & meant for different income groups.

6) Product line: It offers product categories namely oral care, personal care, household surface, fabric care and pet
nutrition etc. having deep assortments across the product categories.

7) Financial position: Having more than 80 years of experience in the consumer goods market & backed by
Unilever who owns 61.9% controlling share in HUL, it is financially strong. Below are some of the highlights:

 Rising Net Cash Flow and Cash from Operating activity

 Effectively using Shareholders fund - Return on equity (ROE) improving since last 2 year
 Efficient in managing Assets to generate Profits - ROA improving since last 2 year
 Company with No Debt
 Increasing Revenue every quarter for the past 2 quarters
 Increasing profits every quarter for the past 2 quarters
  Annual Net Profits improving for last 2 years
 Book Value per share Improving for last 2 years
 Company with Zero Promoter Pledge
 FII / FPI or Institutions increasing their shareholding

8) Market share: Through high penetration in the market, HUL had managed to hold their high market share in
different product categories.

9) Share of Wallet: Whether one buys surf /wheel /Rin detergent it will go to HUL’s pockets. HUL strategy to offer
different products within same product categories for different income groups (selective targeting) has been
successful in having share of wallet of a consumer.

Weakness

Decreasing Market share: Competitors focusing on a particular product & eating up HUL’s share, like Ghadi &
Nirma detergent eating up HUL’s wheel detergent market share.

Large number of brands in different product categories: Sometimes having broad brand portfolio can lead to
confused positioning. Price positioning in some categories allows for low price competition like AMUL captured
Kwality’s market share.

MFs decreased their shareholding last quarter

Opportunities

1) Expanding market: By penetrating more in the rural markets through its project Shakti AMMA and transition of
unorganized business to organized one will lead to further expansion of the consumer goods market.

2) Awareness in usage rate of consumer goods: People getting more aware and conscious about the usage may be
through advertising /word of mouth /doctor prescription ,is resulting in increase in usage rate of the these
products.

3) Increasing Income levels: Due to stable political scenario, improved literacy rate & controlled
inflation, disposable income of the people is increasing thereby resulting into upsurge in demand & changing
their lifestyle.

4) Brokers upgraded recommendation or target price in the past three months

Threats
Competition in the market: With increasing number of local & national players it’s becoming very hard for the
companies to differentiate themselves from others. There is also threat from counterfeit products destroying
its brand image in the market.

1) Price of commodities: Increasing price of commodities will result in further increase in the price. Further
increase in price will result in decrease in sales, margins & brand switching.

2) Buyers power: With highly diversified consumer goods market where there are lots of brands claiming
different sorts of benefits, it’s very difficult for consumers to stick to a particular brand & hence results
into brand switching where consumer got power to select a brand based on several factors  like
availability, reference group recommendation, preference & price.

3) Stock with high PE (PE > 40)