HUL soap, detergent, tea sales go up; firm expects rural to recover after a year of FMCG slowdown

FMCG giant Hindustan Unilever has been witnessing robust sales for its essentials category growth with a majority of its portfolio doing better than last year. “80% of the portfolio comprising essentials — such as soaps, detergents, tea, oral care, etc. — grew at 6% in Q1FY21,” a Motilal Oswal report said on Thursday. The company has also reported an improvement in rural outlook after a year of FMCG slowdown. However, HUL management maintained that it will monitor monsoon progression before conclusively announcing a robust rural growth outlook for 2HFY21.

While essentials category has been doing better amid coronavirus, the pandemic has impacted certain segments of the company’s total portfolio. For instance, skin care which amounts as the largest segment of the remaining 20% portfolio, performed poorly in Q1FY21. It is yet to turn positive on-year while it has started to pick up since June, the report said. HUL’s ice-cream business has also been down in Q1FY21. The slip in the ice-cream category contributed significantly to business decline in the quarter. However, since the ice-cream business is generally less salient in the base quarter of Q2FY21, the quarter in review is not expected to be as drastically impacted. The company took price increase in the tea category, whereas detergents saw price reduction in some brands in certain geographies. However, the overall pricing impact is positive.

HUL had recently acquired GlaxoSmithKline Consumer Healthcare Limited (GSKCH) and Horlicks brand. However, it said that the business was affected due to temporary plant shutdowns owing to coronavirus-led disruption and some labour issues. “It may have less-than-optimal additions for the quarter,” the report said. Further, HUL also reported growth in-home consumption and the outlook for the remains strong, which may help in bettering the trend for GSK products in the second half of the current financial year. The overall outlook for the company in the medium-term remains strong on the back of robust earnings growth potential owing to its portfolio and execution strengths and significant synergies in FY22 as a result of GSKCH merger.