Limitations of Hindustan Unilever

(i) Recession and Inflation: The present recession and falling inflation have been the major
problems for the FMCG business. According to HUL, personal care and food markets are not
expected to decline much. As a result, under the surface of the recession's difficulty lies an
unrealized potential for HUL. Everything hinges on how it takes advantage of the chance.
This is made worse by the rise in input costs brought on by the covid-19 epidemic.

(ii) Price Wars: The lowering price battle in the FMCG business is one of HUL's significant
issues. In a market crowded with too many companies and fierce rivalry, price reduction is
viewed as one of the most aggressive and straightforward strategies to churn the market. With
the global crisis wreaking havoc on the economy, every industry, including the once-
promising retail sector, suffers.

Retailers such as Big Bazaar and More began renegotiating partnerships with FMCG firms
such as HUL and P&G to keep the cash flowing in an otherwise declining retail climate by
selling cheaper items. This means that, in comparison to prior years, FMCG companies will
have to pay retailers more significant margins.

Newer packaging solutions will assist retailers, perhaps lowering transportation and shelf
management costs.
HUL, ITC, and P&G have already begun a pricing war to get a more significant part of the
consumer's wallet and, by extension, market share. HUL has changed its approach, discarding
its premium positioning strategy in favour of cost-saving to compete with P&G. Profit
margins are shrinking due to these price reductions, making it impossible to maintain past
profit margins without compromising product quality.

(iii) Increased Competition: HUL confronts challenges on all fronts due to its more
extensive portfolio. Dabur India, for example, has increased the ante in the shampoo industry
by offering new Vatika versions with unique advantages. The move would put the firm on par
with other big-ticket global competitors like HUL and P&G, who already have anti-dandruff
shampoo products on the market. Local businesses like Ghadi of Kanpur Trading Corporation
and CavinKare compete against HUL in the detergents industry.

(iv) Changing Customer Preferences: Over few years time, there has been a paradigm shift
in customer taste and preferences. Constant innovation is required to meet changing client
requirements such as enhanced product usefulness and increased health consciousness
(v) Employee Surplus: HUL had to reduce management positions due to a significant
personnel excess. It terminated roughly 50 management posts in February 2008, and its
parent business said it would reduce 20,000 employees globally over the next four years. All
of this leads to inefficiency and more operating cost for HUL. These inefficiencies must be
reduced for it to grow further. HUL stock is trading at a discount of 32% from its previous
high as of 5th January 2022.

(vi) Purchase-on-Impulse Products: Chocolates, toffees, colas, and ice creams are
examples of impulse purchases that follow Say's Law, which argues that "supply creates
demand." This means that the most critical aspect in the sale and consumption of these items
is their availability. As a result, transportation and logistics for these items are critical.

HUL only has one product Kwality-Walls (ice cream), in this impulse-buy category. In this
FMCG category, it is second only to Amul. The brand's availability, exposure, and consumer
mindshare must all be enhanced and improved to grow sales and market share.