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HUL ramps up ad spends in second Covid2019 quarter

Ad spends were down in terms of percentage of revenue

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BENGALURU: FMCG major and the largest player in terms of advertising and marketing spends, Hindustan Unilever (HUL) upped its advertising spends by 43 per cent during the second Covid2019 quarter – (Q2 2021, the quarter ended 30 September 2020, quarter or period under review) as compared to the immediate trailing quarter Q1 2021. The company had pared quarter over quarter (q-o-q) and year-on-year (y-o-y) advertisement expenses in the first quarter of fiscal 2020 (Q1 2021, quarter ended 30 June 2020) during which the Covid2019 lockdown was in place by over 30 per cent to Rs 800 crore from Rs 1,175 crore (down 31.9 per cent) in Q4 2020 and Rs 1,167 crore (down 31.4 per cent) in Q2 2020 respectively. For the period under review, HUL spent Rs 1,144 crore towards advertisement expenses as compared to Rs 1,200 crore in the corresponding year ago quarter. All numbers in this report are consolidated numbers unless stated otherwise.

The company reported 15.2 percent y-o-y and 8.2 percent q-o-q increase in total revenue at Rs 11,776 crore as compared to Rs 10,223 crore in Q2 2020 and Rs 10,885 crore in Q1 2021 respectively. However, in terms of percentage of total income (operating revenue plus other income), HUL’s ad spends during fiscal 2021 were down when compared to previous periods. The FMCG major’s ad spends in Q2 2021 of Rs 1,144 crore were 9.7 percent of operating revenue of 11,776 crore. Please refer to the figure below:

For the half year ended 30 September 2020 (H1 2021) the company had spent Rs 1,944 crore (8.6 percent of total revenue), which was 17.9 per cent lower than the Rs 2,367 crore (11.4 per cent of total revenue) during the corresponding year ago quarter. For FY 2020 and FY 2019, HUL had spent Rs 4,688 crore (11.9 per cent of total revenue) and Rs 4,552 crore (11.7 per cent of total revenue) respectively.
The company reports numbers for four segments, the largest of which in terms of revenue is the beauty segment, followed by the home, foods & refreshments, and ‘Others’.

The company has reported y-o-y revenue growth for the four segments. In an earnings press release, HUL said that growth in Q2 2021 was competitive and profitable with reported turnover growth of 16 per cent and domestic consumer growth (excluding the impact of merger of GSK CH and acquisition of ‘VWash’) of 3 per cent. The FMCG player avers that the strength of its portfolio is demonstrated by the fact that 70 per cent of its business was gaining penetration and that health, hygiene and nutrition products, which formed cumulatively 80 per cent of its portfolio, grew in double digits.

Company Speak:

HUL chairman and managing director Sanjiv Mehta said: “In the context of a challenging economicenvironment, our growth has been competitive and profitable. We continue to demonstrate execution prowess,agility, adaptability, resilience, and passion of our people. We have expanded our portfolio with consumerrelevant innovations and have invested strongly behind our brands. Our operations and service levels are now back to pre-COVID levels and we have accelerated the pace of digitizing our operations under the ‘Re-imagine HUL’ agenda. The economic outlook has improved given the various initiatives taken by the Government and Reserve Bank ofIndia. In our sector, rural markets have been resilient but the demand in urban India especially in metropolitancities has been muted. We believe that the worst is behind us and we are cautiously optimistic on demand recovery.”

Segment Results

Excerpts from the HUL Q2 2021 earnings release

Home Care:

Household Care delivered strong performance across all segments led by continued penetrationgains. We have stepped up our innovation intensity to address the ‘clean living’ needs of consumers; ‘Domex’ range is now available nationally. In Fabric Wash, we have reduced our prices to pass on benefits of lowercommodity costs to consumers. Category consumption of Laundry has been adversely impacted due to confinedliving. Continued focus on driving market development has enabled us to grow our Liquids and Fabric Sensationsegments strongly.

Beauty & Personal Care:

Skin Cleansing grew in double digits on back of a very strong performance in ‘Lifebuoy’and a good delivery in ‘Lux’. Hand Sanitizers and Handwash segments continue to gain penetration and havedelivered robust growths. Oral care grew in double digits with accelerated momentum in ‘Close Up’. Hair Care alsogrew in double digits; our portfolio interventions along with repurposed communications are resonating well withconsumers and driving salience. In Skin Care, ‘Glow & Lovely’ and ‘Glow & Handsome’ have successfully landed onshelves across the nation and we continue the journey towards a more inclusive vision of beauty. While theessential part of Skin Care saw pickup in demand, ‘winter portfolio sell-in’ was impacted due to muted tradesentiment and liquidity constraints.

Foods & Refreshment:

Foods, Tea and Coffee sustained the high growth momentum and grew in double digits; ourconsumer-focused activations and innovations are leveraging the ‘in-home consumption’ trend. Our prudent anddynamic management of unprecedented inflation in Tea has enabled all our brands to grow in double digits andthis positions us well. Performance of our Nutrition business was competitive and disrupted supply lines are nowfully restored. In the quarter, we expanded ‘Boost’ nationally with the narrative of ‘Play a bigger game’ andlaunched a special film on ‘Horlicks’ to celebrate the deeper meaning of growth that stems from courage andconfidence. While we saw sequential improvement, Ice Creams, Foods Solutions and Vending businesses continueto be impacted due to out-of-home consumption loss.
 

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