Premiumisation continues, but consumer preference shifts to smaller packs: HUL’s Rohit Jawa

HUL highlights ongoing challenges in the FMCG sector, emphasising subdued demand in urban markets and a noticeable shift towards smaller pack sizes as budget-conscious consumers adjust their spending habits

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New Delhi: Hindustan Unilever highlighted ongoing challenges in the FMCG sector, pointing to subdued demand in urban markets and a notable shift towards smaller pack sizes as consumers tighten budgets.

HUL CEO and Managing Director Rohit Jawa said, "The urban demand has been moderating for the last few quarters, and rural has been growing and effectively gradually recovering and becoming quite sustained." 

On the rural side, he said, "We expect the signals of rural, given where the kharif and rabi crops have been, and also the signals we pick in terms of demand, to be robust and keep recovering gradually." 

Jawa, however, said, "We see shopping behaviour changing with a larger share of the small pack consumption or contribution to total sales, even in the more premium brands." While premiumisation is continuing, he said, "There is a preference for smaller packs across categories and that has become more evident this quarter (third). We do not see that changing in the very near term." 

Explaining the reasons for the slowdown in the urban market and the overall increase in sales of smaller packs, Jawa said, "It is driven by some degree of households tightening their budgets. It is the reason why we see across the market, not only HUL, we see people are titrating to smaller pack sizes."

Despite these headwinds, HUL reported a 19.18% rise in consolidated net profit to Rs 2,989 crore for the December quarter, compared to Rs 2,508 crore in the same period last fiscal. The growth was primarily driven by the divestment of its ‘Pureit’ water purification business.

To bolster its portfolio, HUL announced the acquisition of a 90.5% stake in premium beauty brand Minimalist for Rs 2,670 crore. 

Speaking on the acquisition, Jawa said, “This acquisition is another key step to grow our beauty & wellbeing portfolio in the high-growth masstige beauty segment. We continue to unlock a billion aspirations by contemporising our core business and exploring new demand spaces.”

HUL's consolidated advertising expenditure declined by 7% to Rs 1,507 crore in Q3 FY2025, compared to Rs 1,626 crore in the same quarter of the previous fiscal year.

However, ad spending in Q3 FY2025 was slightly higher than the September quarter by Rs 6 crore.

Overall, in the first three-quarters of FY2025, the FMCG giant's advertising and promotional expenses saw a 4% drop, amounting to Rs 4,689 crore, down from Rs 4,873 crore in the corresponding period of FY2024.

In another significant move, HUL’s board approved the demerger of its ice cream business into Kwality Wall's (India) (KWIL). 

Looking ahead, HUL Executive Director, Finance & IT and CFO, Ritesh Tiwari, said the company expects demand moderation to persist in the short term, influenced by macroeconomic factors like real wage growth and inflation. However, he emphasised that these challenges are transitory. 

“India remains the best consumer story in the world. While near-term consumption may be impacted, the long-term growth potential is strong,” Jawa added.

 

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