Hindustan Unilever Limited (HUL), India's leading FMCG company, is intensifying its focus on the Foods business while also planning to demerge its ice cream business, Kwality Walls India. These strategic moves aim to unlock significant value for shareholders and accelerate growth across multiple segments.

Foods Business Strategy

CFO Ritesh Tiwari outlined HUL's approach to the Foods business, which now receives the same strategic attention as its Beauty & Personal Care and Home Care segments. The company has identified six priority demand spaces:

1. Tea and coffee
2. Lifestyle nutrition
3. Out-of-home food solutions
4. Condiments
5. Mini-meals
6. Accompaniments

HUL plans to leverage its brands strategically, using Kissan for Indian cuisine, Knorr for international cuisine, and Hellmann's for condiments, while avoiding the staples category.

Beverages and Nutrition Performance

The company's beverages portfolio showed strong performance, with double-digit growth in coffee and high single-digit growth in tea. HUL is also planning a Horlicks relaunch with product changes to boost category consumption, acknowledging that more work is needed despite gaining market share.

Ice Cream Business Demerger

HUL is set to demerge its ice cream business, Kwality Walls India, with plans to list it as a separate entity by the end of FY25. The demerged entity will include popular brands such as Kwality Wall's, Cornetto, Magnum, and The Dairy Factory, along with five ice cream factories and cold storage logistics infrastructure.

Growth Projections and Market Opportunity

Tiwari expressed confidence in the future of the demerged ice cream business, projecting it to double in size over the next 2-3 years. The Indian ice cream market, currently valued at ₹30,000.00 crore, is projected to reach ₹50,000.00 crore by 2028, highlighting significant growth potential.

Current Performance and Future Potential

The ice cream business currently contributes ₹1,800.00 crore to HUL's revenue, accounting for approximately 3% of the company's total turnover. While current EBITDA margins are in the low single digits, substantial improvement is anticipated post-demerger.

Strategic Considerations

Unlike its global parent Unilever, which sold tea businesses worldwide, HUL retained its tea and coffee operations due to growth potential and ownership advantages. Tiwari ruled out separating the Foods business, citing synergies across supply chain, distribution, and go-to-market structures.

Future Outlook

HUL expects sequential improvement in growth over the next few quarters, with the first half of FY25 expected to outperform the latter half of FY24. The company is on track to complete the ice cream business demerger process by Q4 of Financial Year'26, subject to necessary approvals.

These strategic moves position HUL to capitalize on growth opportunities in both the Foods and Ice Cream segments, potentially delivering enhanced value to shareholders while addressing the evolving needs of the Indian market.

Hindustan Unilever Limited (HUL), India's leading fast-moving consumer goods company, has reported a 5% year-on-year growth in consolidated turnover for the quarter ended June 30. The company's performance was driven by a 4% increase in underlying volume growth, demonstrating resilience in a gradually recovering market environment.

Financial Highlights

HUL's consolidated turnover stood at Rs. 16,323.00 crores. The company's EBITDA margin was 22.80%, down 130 basis points year-on-year, reflecting strategic investments across various lines of the profit and loss statement. Despite the margin compression, the company's Profit After Tax (PAT) grew by 6%, primarily due to a re-estimation of certain tax provisions pertaining to prior years.

Segment Performance

The company witnessed varied performance across its business segments:

• Home Care: Delivered robust volume growth with a 4% Underlying Sales Growth (USG), driven by high single-digit Underlying Volume Growth (UVG).
• Beauty & Wellbeing: Achieved a 7% USG with low single-digit UVG, supported by strong performance in premium brands and market share gains in e-commerce.
• Personal Care: Grew 6%, primarily driven by pricing actions.
• Foods: Reported a 5% USG with mid-single-digit UVG, led by double-digit growth in the Beverages portfolio.

Strategic Investments and Portfolio Transformation

HUL continues to invest strategically in its business, focusing on portfolio transformation and future-readiness. The company has shifted approximately 500 basis points of its portfolio towards Future Core and Market Makers categories over the past two years. This shift aligns with evolving consumer preferences and high-growth segments.

Leadership Transition

HUL announced a significant leadership change. Rohit Jawa, who has served as CEO and Managing Director for the past two years, will be stepping down. Priya Nair, who returns to HUL after leading Unilever's Global Beauty & Wellbeing Business, will succeed Jawa as the new CEO and Managing Director.

Acquisitions and Business Expansion

HUL completed the acquisition of Minimalist, a skincare brand, for Rs. 2,706.00 crores. The company is focusing on leveraging synergies in R&D, supply chain optimization, international expansion, and offline distribution scale-up for Minimalist.

Additionally, HUL's health and wellbeing brand OZiva has shown remarkable growth, tripling its turnover year-on-year and reaching an annual recurring revenue of Rs. 450.00 crores.

Outlook

HUL expects the first half of the current fiscal year to perform better than the second half of the previous fiscal year. The company anticipates low single-digit price growth if commodity prices remain within the current range. HUL remains committed to driving competitive volume-led growth while maintaining its EBITDA margin guidance of 22-23%.

Rohit Jawa, outgoing CEO and Managing Director, commented on the results: "We have delivered a competitive performance this quarter with an Underlying Sales Growth of 5% driven by an Underlying Volume Growth of 4%. Our strategic focus on portfolio transformation and investments in future-ready capabilities positions us well to capitalize on the gradual recovery in consumer demand."

As HUL navigates through a changing market landscape and internal transitions, the company remains focused on long-term value creation for its shareholders while adapting to evolving consumer needs and market dynamics.