Amidst the heightened regulatory scrutiny surrounding processed foods, Hindustan Unilever (HUL), Tata Consumer Products (TCPL), and Nestle India have released their March quarter results. Here’s what you need to know:
Although volume growth remained subdued to moderate across the three companies, there has been an expansion in gross margins. This increase in margins can be attributed to improved operational efficiency and productivity gains. Various strategies such as implementing price hikes, reducing advertising expenditures, and streamlining costs have been employed to achieve this margin expansion.
For TCPL, enhanced margins in international operations contributed to the overall margin expansion. HUL experienced an increase in gross margin thanks to reduced input costs and a more favorable product mix. Nestle India saw margin expansion driven by elevated realizations and decreased input costs.
Premium Segment Performance:
While overall growth remained subdued, HUL’s premium portfolio across various categories continued to perform strongly. Premium skincare products, in particular, witnessed robust double-digit growth.
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In TCPL’s domain, both premium and sub-premium segments excelled, surpassing the overall performance of the Indian beverages sector, constituting over two-thirds of total Indian tea sales. In FY24, the company introduced 18 new premium products compared to 6 in FY23. Value-added salts experienced a 34% growth in FY24, representing 9% of the Indian salt market. Nestle India revealed its venture into premium coffee with its Nespresso brand and remains committed to expanding its premium product offerings.
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E-commerce Sales Growth:
In fiscal year 2024, HUL witnessed a remarkable 50% growth in ecommerce sales within its beauty and skincare category. TCPL, on the other hand, experienced a notable 35% increase in ecommerce channel sales. Ecommerce sales accounted for 6.8% of Nestle’s total revenue during the same period.
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It utilized this platform to enhance the accessibility of its petcare products. Nestle’s rapid commerce expansion was supported by acquiring new users and employing targeted digital communication strategies.
Strategic Acquisitions and Diversification:
To stay ahead of the competition, the companies have adopted various strategies including price reductions, brand investments, launching new products, and acquiring direct-to-consumer (DTC) startups and significant regional players, notably in the spices segment. Tata Consumer successfully acquired Capital Foods and Organic India. Additionally, it ventured into the vending business, surpassing 1,000 machines in operation by FY24. Meanwhile, Nestle introduced the Nespresso brand of coffee and vending machines in India.
HUL experienced urban-led growth in the March quarter. The FMCG giant anticipates a gradual rebound in rural demand moving forward.
Both TCPL and Nestle have directed their efforts towards expanding into ‘rurban’ regions, which refer to rural areas situated on the outskirts of towns or cities. Nestle’s coverage extends to over 200,000 villages.
Fluctuations in commodity prices could potentially impact companies’ profits in the near future. The monsoon season also remains a crucial factor to monitor. Forecasts indicating an above-normal monsoon are promising, as a regular monsoon can contribute to boosting rural demand.
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