Two big trends – local grocer, ecommerce: HUL’s Sanjiv Mehta

Hindustan Unilever chairman and managing director Sanjiv Mehta spoke about the consumer goods market and the broader economy after company’s March quarter earnings were announced. Edited excerpts:

What were the reasons for sales declining?

Just before the outbreak of Covid-19, we had a scenario where the markets were slowing down. If we look at the last three months ending February, compare that with December, we were still seeing the market slowing down. And that was the scenario when Covid hit us and the immediate impact was on the supply side.

The markets were growing at about 2% and we were gaining shares. So, the normative value growth for us should have been about 3%. Going forward, the situation will be very different. When the lockdown happened, operations came to a standstill and we running at 5%. And slowly they have been moving up.

And now we are in the vicinity of 75% of normal operations that we have been able to run. But we don’t know to what extent the trade pipelines have come down. And we don’t know to what extent the demand would have been impaired, because of non-availability of stocks or more structural reasons. We will have to wait for some time till normalcy happens and we are able to run at normative levels.

Will demand bounce back once the lockdown is relaxed?
At this juncture, there are many variables, which are very difficult to predict. A lot will depend on the trajectory of the virus, the success of the containment efforts, the severity and duration of the economic impact.

And also, very importantly, with economic activities slowing down, there would be an impact on demand, but the critical question will be, has demand has shifted, or are we talking about whether demand has been lost. The critical part is the harvest that has happened. And I do hope that we have sufficient number of people in harvesting. And then it’s really important that the farmer gets the right kind of realisation so that they get income in their hands.

Will ecommerce become more relevant now?
There are two big trends emerging. One is the relevance of the humble grocer and people have realised that they are so close to you… proximity, and (that’s) such a big benefit. The second would be on ecommerce. With people becoming more averse to stepping out, they would like to place the order from home and receive it at home. So this should definitely give a fillip to ecommerce. And we would be ready for that.

Will the company’s strategy change to account for new consumer trends as people adapt to the pandemic?
We don’t know what is going to be the trajectory of the virus. How long would the government have the lockdown and what way the containment efforts will continue. When you look at that, HUL, we have a very strong balance sheet. Second, we have a great number of brands which cater to the heightened need in area of health, hygiene and nutrition. And we have a resilient pool of talent. Right now, we have not shed any jobs and have not done any salary cuts. But I would not be able to say what is going to happen in the future and how the situation evolves. For instance, if the economy bounces back, than we are in business but for instance we get into a deep recession, then we will reevaluate all the steps that we have been taking.

Will pantry loading help your performance next quarter?
Whenever there’s a crisis and when you sense there will be a shortage due to supply issues, then you would think to lay your hands on as much as you can. But the real assessment of how much has been pantry loading by consumers can be gauged if the supply lines were running in an uninterrupted fashion. And we would have got a good picture of what is happening to the trade inventories. Once the operation moves up to 100%, then we would have a finger on the pulse as to what is happening to the innate demand and what is happening to the pipeline

Source Article

Lois C. Ferrara

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