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Simplicity within complexity

HUL's analyst meet always gives the feeling of it being a complex business (keywords of robotics, data lakes, nanotech, many 4-letter acronyms etc.). However, this analyst walked away with higher visibility and confidence on its simple business model. It is now applying WIMI (winning in many India) at scale, produces high quality products (per it's blind tests) in factories with new-tech and has an evolving sales system (Shikhar is a true competitive advantage, in our view). It still is an employer of choice and has potential to accelerate M&A (see reports - link). Premiumisation continues to be the top agenda; we reckon margin gains will be reinvested for further category development (DCF-accretive). ADD.

* Premium portfolio now contributes ~33% of revenues vs ~22% in FY12 with >25% of demand being captured digitally. One of the major drivers for ~1,000bps margin expansion over last 10 years.

* R&D capabilities of the company allow it to have superior product than competition in blind tests which is now 2x (number of brands) as compared to precovid.

*In Beauty & Personal Care (BPC), HUL aspires to grow ahead of the market for its core with 2x growth in premium segment. In terms of channels, it aspires to grow 2x of the market in Modern Trade, Pharma and Cosmetics channel with 4x growth in ecommerce. Further, HUL plans to move their raw material basket for BPC business to other sustainable alternatives (from crude linked raw materials).

* Focus in category development of Light Moisturiser, BB/CC Cream, Sunscreen, Body Wash and Intimate Hygiene categories in BPC division for next decade. These categories have penetration levels in low single digits.

* Reached the highest shares in Hair Care in last 2 decades with +400bps market share gains in last 3 years. It is now 3x of its largest competitor. ? Premium Beauty Business Unit (PBBU) has launched 5 digital first brands – Simple, Love Beauty and Planet, Baby Dove, AcneSquad and Find Your Happy Place.

* Premium laundry now contributes 52% of volumes of Home care division in 2021 vs 31% in 2010. Mass laundry contributes 33% in 2021 vs 58% in 2010. Liquids portfolio is >Rs20bn.

* Home care division business of India is the largest in the world for Unilever.

* HUL through it three-pronged strategy has got clear market leadership with long term market share gains in tea category.

* HFD business has now 3x direct coverage, 1.3x numerical distribution and 11x ecommerce run rate in Sept’22 vs day 1 of acquisition. Category development activities has led to 177bps of penetration gains. Launched Ready Mix Horlicks (with milk added) to solve for convenience as well as price.

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