HUL’s demand woe is a sticky issue
Subscribe to enjoy similar stories. India's largest household goods company Hindustan Unilever Ltd’s (HUL) struggle with muted volume growth is turning into a persistent concern. In the September quarter (Q2FY25), underlying volume growth stood at 3%, missing analysts' expectation of 5%—hinting that India’s much-touted consumption story may be losing momentum.
Weak demand, coupled with persistent food and commodity inflation, remains a challenge for both HUL and its consumers. Stubborn food inflation continues to weigh on urban demand, limiting the company’s margin expansion prospects. As a result, HUL’s gross margin for Q2FY25 contracted by 150 basis points to 51.6%, reflecting the pressure from rising commodity costs.
(One basis point equals one-hundredth of a percentage point.) Read this | Can Sitapati’s HUL playbook turn around Godrej Consumer? Despite solid double-digit growth from its premium skincare products, HUL’s overall personal care portfolio recorded a low single-digit volume decline in Q2, as the company resorted to price hikes to manage input cost inflation. Similarly, the food and refreshments segment reported a volume decline, particularly in tea, which faced an unprecedented 25% year-on-year inflation in Q2. “Contrary to expectations, HUL’s competitive actions or new formulations in tea and soaps failed to drive volume growth or market share gains in Q2," noted Kotak Institutional Equities in a 24 October report.
A significant portion of HUL’s portfolio, including home care and beauty & wellbeing products, posted 7-8% underlying growth and gained market share. However, the return of price growth remains critical, with management projecting only low single-digit growth for the second half of FY25. The
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