Hindustan Unilever India (HUL) is shifting its focus towards small retail packs and leveraging the Korean Hallyu wave to navigate the slowdown in the fast-moving consumer goods (FMCG) market. Despite reporting a 2% sales growth in Q4FY2024, reaching INR 151 billion (US$1.75 billion), and a 19% year-on-year increase in profits after tax at INR 30 billion (US$346 million), the company remains cautious due to sluggish consumer demand.
HUL noted that total FMCG volume growth has slowed over the past six months, indicating subdued demand. Market data shows an increase in the growth of small packs across HUL’s portfolio, including foods and beverages. The company believes this shift is driven by macroeconomic conditions and moderated urban consumption growth but considers it a temporary phenomenon. While consumers are opting for smaller packs to manage spending, the premiumization trend remains strong, with premium portfolios continuing to grow faster than mass-market products.
Small Packs as a Temporary Trend
HUL highlighted that small packs have historically gained popularity during economic downturns but tend to self-correct as conditions improve. The company anticipates an improvement in demand as government initiatives boost employment and food inflation stabilizes. While the subdued trend is expected to persist in the near term, HUL does not foresee it lasting for multiple quarters.
Leveraging the Korean Wave
Beyond small packs, HUL is capitalizing on the resurgence of Korean culture in India. The company has strengthened its Knorr brand’s association with Korean cuisine, leveraging the popularity of Netflix’s Squid Game Season 2 for a content creation campaign aimed at engaging Indian consumers. Additionally, Knorr has expanded its Korean ramen range with a new Spicy Gochujang flavor, further embedding its presence in the Korean food segment in India.
Focus on Large Packs for Nutrition Drinks
While small packs are gaining traction in most categories, HUL is prioritizing large pack sales for its Nutrition Drinks segment, which includes brands like Horlicks and Boost. The company reported growth in market share and penetration for these products, particularly in southern and eastern India. To counter inflation-driven consumption moderation, HUL is refining its pricing strategy to encourage large pack purchases, believing that households using larger packs tend to consume more of the category.
New Performance Metrics
HUL is also transitioning to a new metric, the turnover-weighted market share, to better reflect its competitive performance. This metric considers the depth of market share gains or losses, weighted by category and channel size. It replaces the previous ‘Business Winning’ metric, which the company viewed as a binary measure of competitiveness.
By adapting its pricing strategies, tapping into cultural trends, and refining its performance evaluation methods, HUL aims to navigate current market challenges while maintaining its leadership in the FMCG sector.