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HUL ad spends down 10 per cent in Q4-2014, up 12 per cent in FY-2014

BENGALURU: Indian FMCG giant Hindustan Unilever Limited (HUL) Advertisement and Promotions spends (Ad & Promo spends) was down 9.59 per cent in Q4-2014 at Rs 840.34 crore as compared to the Rs 929.46 crore in the immediate trailing quarter (Q3-2014), but was 2.34 per cent more than the Rs 821.13 crore in the year ago quarter (Q4-2013). The company spent the lowest amount towards Ad & Promo in Q4-2014 during FY-2014.

Note : All figures are standalone.

Overall, across eight quarters starting with Q1-2013 until Q4-2014, HUL’s Ad & Promo spend shows an upward trend, both in rupee value as well as percentage of Operating Income (Op Inc) terms. Please refer to Fig 1 below.

Also,  the company’s Ad & Promo spends is trending upwards, both in absolute value and as percentage of Op Inc terms between FY-2012 to FY-2014 as is evident from Fig 1A below:

Across the eight quarters under consideration, HUL’s Op Inc shows an upward trend, though Op Inc in Q4-2014 was (-1.79) per cent lower at Rs 7094.1 crore  as compared to the Rs 7223.35 crore in Q3-2013, though y-o-y Op Inc was higher by 9.72 per cent than the Rs 6465.81 crore in Q4-2013.

The company’s PAT has shown a declining trend, both in absolute as well as percentage of Op Inc terms during the eight quarters under consideration. PAT for Q4-2014 was (-17.90) per cent lower at Rs 872.13 crore as compared to the Rs 1062.31 crore in Q3-2014 and was 10.79 per cent more than the Rs 787.20 crore in the year ago quarter Q4-2013.

However, on annualised basis, across three financial years from FY-2012 to FY-2014, PAT has increased and is showing an upward trend, albeit slower in FY-2014, during which it grew by 1.87 per cent to Rs 3867.49 crore from Rs 3796.67crore in FY-2013. Correspondingly, PAT grew in FY-2013 more rapidly at 41.07 per cent from Rs 2691.40 crore in FY-2012. Please refer to Fig 2 and Fig 2A below.

HUL says that the slowdown in the market in growth (volume and value) across categories continues, and though input costs have been firm, there has been a sharp rise in cost of PFAD, while at the same time competitive intensity has remained high. The company says that its Q4-2014 domestic business has increased by 9 per cent with a 4 per cent underlying volume growth that is far ahead of the market. It says that its soaps and detergents business grew by 9 per cent, personal products and beverages grew by 8 per cent each and packaged foods by 13 per cent during the quarter.

Here is what the company has to say about various categories.

Soaps and Detergents: Healthy performance

Skin Cleansing delivered double digit growth, aided by a step up in price growth as judicious pricing actions were taken to manage input cost inflation. Growth was broad based across brands with the liquids portfolio seeing accelerated growth.

In laundry, growth was led by the premium segment with Surf maintaining its double digit growth momentum and Rin delivering good growth on the bars portfolio. Wheel growth stepped up on the back of its re-launch in the last quarter. Comfort Fabric Conditioners continue to lead market development with sustained high growth. Vim led the performance in Household Care.

Personal Products: Growth in a challenging environment

Skin Care grew well in a soft market. The re-launch of Fair & Lovely, with the new ‘Best Ever Formula’ and supported by a focused activation plan, is yielding positive results. Ponds had a good quarter at the premium end while Lakme and Dove sustained their robust performance. The Facial Cleansing portfolio registered broad based growth driven by innovations launched in previous quarters.

Hair Care sustained volume led double digit growth with Dove delivering another strong performance and Clinic Plus doing well. TRESemmé, which saw the addition of a new Split Remedy variant, continued to make very good progress.

In Oral Care, significant investments were made to sustain our competitiveness in the category. While Close Up grew in the quarter, Pepsodent was impacted by the high promotional intensity in the market. Actions are underway to step up performance.

Colour Cosmetics maintained its strong innovation led growth momentum across both Lakme and Elle 18. Lakme continues to strengthen its position in premium make up driven by a range of exciting and contemporary offerings.

Beverages: Growth led by Tea

Tea sustained double digit growth on the back of stepped up volumes. Taj Mahal, Red Label and 3 Roses grew in double digits, driven by a strengthened mix and focused in-market activities. The thrust on leading market development for tea bags saw flavoured and green tea bags more than double sales in the quarter. In Coffee, Bru Gold continued to perform well.

Packaged Foods: Strong performance by Kissan, Kwality Walls and Magnum

Kissan registered another robust quarter with growth accelerating on both Ketchups and Jams, driven by impactful activation while Knorr growth continued to be led by Instant Soups which more than doubled volumes. Ice creams saw strong growth arising from the selling in of Magnum which was extended to four other cities, and sharper in-market execution on Kwality Walls, ahead of the season.

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