MUMBAI: Hindustan UnileverBSE -0.11 % now owns ten Rs 1,000-crore plus brands after Dove, Pond's and Clinic Plus crossed the mark in annual sales last fiscal, making it perhaps the first instance of three brands a firm joining the elite club in the same year.
The trio have joined Rin, Surf Excel, Wheel, Brooke Bond, LuxBSE -0.11 %, Lifebuoy and Fair & Lovely in the Rs 1,000-crore club that accounted for more than 60% of Hindustan Unilever's annual sales of Rs 25,810 crore last year. The country's largest FMCG company has three-dozen brands in its portfolio.
While its largest brand, Wheel, took almost three decades to hit the Rs1,000-crore sales mark first in 2005, Dove has now become the fastest brand to match this feat, reaching the landmark in two decades after its launch in 1993.
In fact, with sales of Rs100 crore in 2007, the personal care brand has grown ten times in just over five years as it transformed from a bathing bar launched in 1993 to virtually all new age categories such as conditioners, deodorants, hair-oil, body and face wash. "Dove is leading the agenda of driving premiumisation," an HULBSE -0.11 % spokesperson said.
This focus on premium offerings helped Hindustan UnileverBSE -0.11 % post its highest operating margin in a decade at 20% for the year ended March 2013. No wonder, two premium brands — Pond's and Dove —crossed the Rs1,000-crore mark in the same year.
"The categories of the future are what we are talking about, all of them are more aspirational and more premium. If you accept the fact that the general trend is going to be uptrading and premiumisation in the market, every category will see the trend," Hindustan Unilever CEONitin Paranjpe said while declaring the annual results last month.
"Our job is to identify those and take steps well before it becomes obvious and imperative for everyone to act. We will benefit when the tipping point comes in any of these categories," he said. Under Paranjpe, HUL has made a broader push upmarket in new and pricier categories that have helped the company's share price and net profit rise to record levels five years after he took the top position.
The company has been stretching most brands in premium categories. Dove was part of many these forays, helping the two decade-old premium brand to pick up sudden pace in recent years. Piyul Mukherjee, co-founder and director at qualitative research firm Quipper Research, says, "When Dove was launched in early 90's, most companies including HUL (then Hindustan Lever) thought that liberalisation would translate into consumers buying more premium brands.
However, it didn't happen as customers saved money for big-ticket items such as durables." It's happening now. Emerging categories contribute almost 14%, or more than Rs1,000 crore, in HUL's personal care segment. Now, personal care accounts for nearly half of the firm's profits but less than a third in its total sales. "This is the Rs1,000 crore that could become the Rs10,000-15,000 crore ten, fifteen years down the road and it's the business responsibility and strategy to really seed some of the categories," Hindustan UnileverChairman and Unilever COO Harish Manwani said at the time of the firm's annual results.
HUL's upscale drive is not restricted to personal products, which has seen faster rollouts of new brands or categories. Its largest segment, laundry, which has historically seen several instances of price wars in the mass and mid-priced segments, is being upgraded as well. The firm launched its most expensive laundry product, Surf Excel liquid detergent, earlier this month.
It also launched Comfort One Rinse watersaving fabric conditioner and entered fabric blues segment with Rin Perfect Shine in the last six quarters. In the foods category — which accounts for more than half of the Anglo-Dutch multinational's sales but less than a fifth of its Indian arm — Hindustan Unilever's push for premium products included launch of Magnum ice cream and Lipton iced tea. In personal care, it brought in TRESemme hair care range and extended Lux into deodorant and Dove into hair oil.
However, Hindustan Unilever with operating margin of 20.2% still trails some of its global rivals such as Colgate and Nestle that boast of higher margins as their portfolios are skewed towards premium offerings. Colgate, the market leader in oral care, reported an operating margin of 22.3% while Nestle had 22%. HUL's margin is, however, still higher than those of homegrown companies such as Godrej Consumers, Britannia, Dabur and Marico.