The personal products segment was not the blue-eyed boy for Hindustan Unilever in the September 2012 quarter. Consumers cutting back on discretionary spends affected the segment, which clocked its lowest growth in the past five quarters.
Total sales grew 12 per cent for the September 2012 quarter compared to the year-ago period, while the FMCG business clocked a 16 per cent growth.
The personal products segment had been the thrust for HUL, with premium-priced products helping it record better sales and helping profit margins too. But consumers weary of relentlessly high prices cut back discretionary spends.
This segment’s sales slowed to a 12 per cent growth, after clocking growth rates of at least 14 per cent in the previous five quarters. The packaged foods business also slipped back into a slower growth of 10 per cent after a bounce back in the June 2012 quarter. But HUL’s biggest segment soaps and detergents is still steaming ahead, with key brands Surf and Rin recording a double-digit volume growth, and better margins on lower input costs.
Beverages, too, came up with a strong 10 per cent growth and improved margins. Overall underlying volumes grew 7 per cent, below HUL’s record of an average 9 per cent in the past.
This, however, need not be a cause for alarm since it is early days yet to infer that HUL is slowing down. Only sustained volume dips could spell bad news.
Cost savings continued in this quarter too, with lower costs of inputs such as palm oil and packaging. With competitive intensity still high, operating margins are unlikely to show much improvement. The slowing demand for premium products, if sustained, would add to the trouble.