HUL may not be the largest food company as per Experts

Dec 11, 2018

 

Hindustan Unilever, the country’s largest consumer products company, may not be the largest food company despite its acquisition of GSKconsumer business-Horlicks. The reason behind is that HUL still operates small in overall food sector, industry experts said.

Though HUL is the market leader in tea, ketchups, soups and jams and second largest player in ice-cream and coffee, the entire market size of all these segments if put together is roughly Rs. 25,000-30,000 crore. In comparison to this figure, biscuits or packaged snacks segment alone is as this big, experts said. GSK Consumer business, which came under HUL last week, is the largest player in the malted beverages, but the contribution is relatively small at Rs. 7,000 crore, they stressed.

“The biggest problem with HUL is that their existing categories are small and will remain so even in the future,” said Abhijit Kundu, vice president, research-consumer and retail, Antique Broking. “Despite being leaders in several categories, they have no play in large segments like snacking, biscuits or dairy. With their current portfolio, they can never be the largest food company in the country.”

Sudhir Sitapati, head of foods and refreshments (F&R) at HUL, recently said that HUL is aware of its current position and the company’s share in India’s value-added foods — which is less than 10% of the Euro 500-billion (Rs. 40.6 lakh crore) food markets —was “very small at 5%. The problem that we face is we are actually playing for legacy reasons, and bulk of our foods businesses is tea where we play in 15% part of the market,” he addressed the media.

Referring to the parent company of Unilever, foods and refreshments segment is basically four diverse businesses — packaged food, ice-cream (Euro 7bn) each, tea (Euro 3bn) and food solutions business (Euro 2.5bn). These account for roughly 41% of Unilever’s global annual sales.

In India, the F&R division that sells Lipton Tea,  Kissan jam and Knorr soup accounted for sales worth Rs. 6,328 crore, or less than one-fifth of HUL’s overall sales in FY18. Only 13% profit is contributed by the division.

Likewise, in comparison to HUL the revenue generated from ITC’s foods business is a little less than Rs. 9,000 crore. The ITC company operates in a considerably extensive market that includes biscuits, dairy, confectionery, noodles, ready-to-eat meals, spices, staple and snacks when brought together is estimated to be over Rs. 1 lakh crore currently.

HUL said it is trying to promote loose tea consumers into packaged tea and endorse wider spectrum in its ice-cream bus

Leave a Reply

Your email address will not be published. Required fields are marked *