A recent research note from broking firm Sharekhan Ltd quotes AC Nielsen retail data that shows HUL’s volumes in key categories such as soaps, laundry bars and shampoos have declined in October, by 9.5%, 5.5% and 5.5%, respectively, over the same period last year. Washing powder volumes grew by 7%, however, which is a key positive. Market shares in some categories are improving too. The December quarter’s results will provide some clue of which way its performance is headed, and how much time HUL has before it recovers.
It will be under pressure to deliver—usually it is an outperformer in the Unilever Plc stable. Its parent Unilever went through the same volume decline that it did, but has pulled back, with volumes growing by 3.6% in the September quarter. If the trend in volume declines continues, then HUL’s results in the December quarter may not be all that great. But occasionally, retail sales trend data and company sales data diverge, especially during volatile periods such as the one we are seeing. Investors will hope that the company has better sales growth numbers to report.
Meanwhile, P&G has launched Tide Naturals, which will compete with Rin in the detergent powder segment. As of now, there are no signs that P&G is going to start a bruising price war again. A longer-term competitor is a worry but will not immediately hurt HUL’s growth or margins. A key positive trigger will be improved volume growth, achieved without affecting its operating profit margins.