What HUL’s decade-long plan tells us about consumption in India

New Delhi: Fast-moving consumer goods maker Hindustan Unilever Limited (HUL) recently unveiled its roadmap for the next couple of years, highlighting a significant shift in Indian consumer preferences.

While HUL’s core mass-market brands will remain a significant portion of its portfolio, the company anticipates a substantial shift in the coming years in several other categories that it projects will double or even quadruple in size, driven by India’s rising GDP.

According to the company, that’s because Indian consumers are increasingly seeking advanced formulations and convenient formats, leading them to transition from traditional soaps and detergent powders to body wash and liquid detergents.

More households are expected to move up the $8,500-40,000 annual income bracket by 2030 versus 2018, even as households with less than $4,000 annual income shrink dramatically by the end of the decade, HUL said in a presentation filed with the stock exchanges on its ‘capital markets day’ on Friday.

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HUL sells more than 50 brands in India across categories such as detergents, foods, soaps, shampoo, toothpaste, cosmetics, and ice cream, among others. The company’s products are priced from ₹1 and ₹10 shampoo sachets to ₹800 lipstick.

Analysts at Motilal Oswal said in a report released Monday that, clearly, the company wants to be “relevant” within India's large consumption theme, which comprises income prosperity, a young population with a median age of under 32-years, and increasing digital and social connectivity. HUL remains “strategically aligned” with India’s evolving economic landscape, leveraging structural shifts in income distribution and consumer behaviour, they added.

In the presentation, HUL identified six ‘high-growth’ segments as long-term bets. These include premium face care, premium hair care, body wash, home care liquids, condiments and mini meals, and wellbeing. It also identified 10 brands from its portfolio that it said are ripe for premiumization.

“As India transitions from a pyramid to a diamond-shaped income structure, HUL capitalizes on rising disposable incomes by driving premiumization across its portfolio while catering to diverse consumer segments. Over 80% of growth is expected to stem from the future core and market makers (leading trends), complemented by core categories that enhance penetration,” Motilal Oswal’s analysts said.

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The move ties in with broader shift in consumer habits.

As more households move to higher income brackets, they are upping their spends on personal care. Consumers in large metros are also leaning towards healthy foods. They are also buying more goods online, travelling, and spending on experiences such as concerts. Several large companies across categories such as liquor and real estate are reporting an uptick in premium consumption.

Affluence and convenience are also driving up demand for home appliances such as washing machines and microwave ovens. Such trends help companies such as HUL sell more washing liquids and convenience foods.

For instance, HUL’s liquid detergent business under Surf Excel grew three-fold between 2019 and 2023; fabric conditioner brand Comfort, too, grew seven-fold between 2014 and 2023.

The company said consumer expectations from its laundry products are “evolving” thanks to wider wardrobes, and growing ownership of washing machines in India is prompting the switch from powder to more premium liquids.

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HUL plans to expand the reach of its liquid detergents going forward.

The company also segmented its portfolio into “core” portfolio, “future core” brands that are ripe for premiumization, while also identifying and chasing future trends via what it called “market makers”.

“Premiumization continues to be the top agenda,” said Manoj Menon, head-research and FMCG analyst at ICICI Securities. “The company reiterated its focus on accelerating portfolio enhancement to capture premiumization while core will grow in line with the market,” he said.

This is already visible in categories such as beauty and personal care, where new-age brands as well as the entry of large global brands is driving up demand for premium skincare products.

Affluent consumers are willing to drop anywhere between ₹1,000 and ₹3,000 on lipsticks and pricey skin treatments. HUL sells brands such as Lakme, Pond’s, Simple, Love Beauty and Planet, etc.

The company will “disproportionately invest” behind categories such as face cleansing, sun care and serums as well as launch push global brands in India, it said in its presentation.

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The move will also help the company compete with new-age, direct-to-consumer brands that have flooded the market such as MamaEarth, Sugar, Juicy Chemistry, and Plum.

“In beauty and wellbeing, there is an opportunity to premiumise (affluent) as well as develop (aspiring) the market. Categories such as serums shall grow aggressively given its convenience and efficacy,” analysts at Nuvama Institutional Equities said in a separate note on the company.

ICICI’s Menon approved the company’s efforts to reshape its beauty and wellbeing portfolio to address changing consumer trends through contemporising the core, focus on high-growth spaces and launching global brands.