Diet Report : FMCG - Hindustan Unilever - Onset of price war, tough duels, volume play by Elara Capital
The detergent segment of Hindustan Unilever (HUVR) is witnessing promotions in online and modern trade (MT) channels, with consumer promotions of 20-60% YoY on premium liquid detergents and select powder SKUs. HUVR's focus on these channels has increased since Sep ’24, given the rising salience (40-50% in top cities) and the ability to pass on promotions directly to consumers, unlike general trade (GT). We believe this will intensify competition in the category as other players respond. The focus is on volumes, however; it does pose a risk to potential revenue growth (in the Home Care segment) if the pricing aggression continues into FY26, as also portends margin pressure in the Home Care segment.
Current market dynamics of softer growth resembling CY00-03:
The FMCG industry has continued to witness softer growth in the past few quarters. HUVR, a leader, has grown by 2% in FY24 and would grow at a similar rate in FY25E. Such growth trends of <3% in the past decade have been due to demonization (2.7% in FY17) and Covid (1.5% in FY20). A slower growth in the business on account of the overall slowdown in consumer spends was witnessed at HUVR in CY03 (sales growth of 1.9%).
The current scenario resembles the circumstances in CY00-03 on three counts: 1) overall slowdown in revenue was a result of a slowdown in general consumption and downtrading, 2) significant initiatives were taken up by HUVR to drive margin in the preceding years and 3) competitive intensity had spiked as companies looked to gain volume market share.
Detergents witnessing price wars:
Early signs of similar competitive intensity have resurfaced – Thus, the promotions in liquid detergents and select SKUs in powders specific to MT and online channels (as companies focus on market share). Since Dec ’24, HUVR has introduced Unimart schemes (additional consumer promotions in select large SKUs – 2-6kg /liter) sold in small MT outlets. Note that Procter & Gamble (P&G, Unlisted) has also increased promotions in MT and online channels, which clearly indicates rising competitive intensity in the detergent category.
A slowdown in consumption in 2002-03 had led to a spiked competitive intensity in detergents – P&G had adopted a predatory pricing to gain market share. In 2004, price cuts (20-30% YoY range) were seen in premium brands – Airel, Tide and Surf Excel. Similarly, in 2025, our channel checks indicate of promotions (20-35% range) in premium liquid detergents and select SKUs in powders as well.
HUVR seems to be focusing on MT and online channels to drive promotions given: 1) rising salience of these channels with strong growth potential versus GT, 2) in many of the top cities, the salience of these channels is at ~40-50% and 3) promotion schemes get transferred to consumers, which remains a risk in the GT channel. Further, many retailers do purchase through this channel.
Implications – Elara and consensus estimates at threat; risk to margin in store:
* Revenue growth: HUVR’s Home Care portfolio has been growing ahead of the overall revenue growth recently. So, revenue growth assumption of high-singledigit in the Home Care segment seems at risk if this aggression continues in FY26.
* EBITDA margin: Margin expansion in the Home Care segment has been the key driver for earnings growth and stock performance through FY17-9MFY25 (EBIT margin expansion of c.780bps during this period). Increased competitive intensity would result in margin risk for the Home Care segment and HUVR `overall.
While these trends are still budding, remain vigilant on related developments to assess the potential impact. Expect margin deterioration seen through CY03-05 likely to repeat in FY26 and pose a threat to Elara and consensus estimates.
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