COMPANY TO WATCH: HINDUSTAN UNILEVER/INDIA
Mumbai-based Hindustan Unilever (HUL) sells soaps, tea, detergents and shampoos to more than 700 million Indian consumers, reaching two out of every three of the country’s inhabitants. As India’s largest consumer products company, it has learned a lesson in pricing.
When commodity prices were soaring last year, HUL decided to raise prices and shave the size of its bars of soap to protect its margins. While margins held and income rose, volumes declined.
A 52%-owned unit of Anglo-Dutch group Unilever, HUL has switched course to protect its market share, cutting prices up to 20% on a broad range of products. While pricing can be tricky in India’s fast-changing consumer market, HUL is well positioned to benefit from structural changes sweeping the country, such as urbanization and rising incomes.
“Population growth, together with sustained investment effort and high productivity gains, indicate that India has the capacity to grow in excess of 6% annually well into the future,” says Peter Hall, vice president and chief economist at Export Development Canada. India’s excess capacity suggests that economic growth in the 7% to 8% range is sustainable in a protracted catch-up period, following growth of just 3.5% in 2009, he adds.