HUL signals first steps to regain market share from small players

livemint.com:

Hindustan Unilever (HUL), the largest fast-moving consumer goods (FMCG) manufacturer in the country, has recently revised its distributor margins. The company has shifted from a fixed margin model of 3.9%-3.3% to an increased variable margin in the 1-1.3% range across various distributor categories. This shift is an attempt to stimulate volumes and reduce distribution costs.

Will the distributors agree to work with this? HUL recently acknowledged a decline in its value market share particularly in the mass-end of its portfolio that includes categories like detergents and tea, losing ground to smaller competitors. “We have seen the resurgence of small and regional players in select categories and price points, many of whom had vacated the market during the peak of inflation. This has continued into the September quarter from the June quarter," HUL’s CEO & MD Rohit Jawa said following the company’s second-quarter earnings.

According to a recent Redseer survey, a significant portion of consumers are open to purchasing unbranded products, provided they meet the criteria of quality and perceived value. The trend among mass consumers is shifting towards utilizing e-commerce platforms for a wide range of shopping categories, including FMCG. The attractive pricing and product variety offered by direct-to-consumer (D2C) brands might impart valuable marketing insights for FMCG brands.

Moreover, as a Nielsen report also said, prominent FMCG companies are experiencing a decline in pricing growth. This shift is ascribed to adjustments in trade pipelines and the integration of product price reductions by companies, now becoming evident in pushing for retail sales. Analysts anticipate gradual improvement in volume growth.