Hindustan Unilever announced its fourth quarter results on Wednesday and said that it is working on natural range of products for the Indian market to take on competition from Baba Ramdev-led Patanjali. The FMCG major on Wednesday posted 6.19 per cent increase in standalone net profit at Rs 1,183 crore for the fourth quarter ended March 31 as against Rs 1,114 crore in the same period previous fiscal. It attributed the rise in profit to robust sales across various business segments.
Indian FMCG companies have been facing stiff competition from Patanjali ever since it has launched its ayurvedic range of products in the market. The company earlier this month had said its turnover for 2016-17 stood at Rs 9,346 crore, registering a 100 per cent growth over 2015-16. With this it left well-established firms like Dabur and Marico behind. Company’s founder Baba Ramdev had then said that Patanjali is hoping to grow at 100% again this year and has launched products at competitive prices. This has pushed the competitors to rework on their strategies, revamping its ayurvedic and herbal offerings.
While announcing its fourth quarter results, HUL stated that it is testing a new range of products formulated with Ayurvedic ingredients under ‘Lever Ayush’ in five southern states to meet competition from Patanjali. The company, however, declined to a share a timeline and said that it is focusing on the standards of the product before hitting the markets.
Brokerage House see this as a positive move from HUL. Edelweiss Research, which has maintained a ‘Hold’ rating on the stock with target price of Rs 1,106, said “HUL has taken cognisance of the increasing potential in natural space and described it as a mega trend. It further added, “Launch of the Ayush master brand in the mass segment across categories like toothpaste, facewash, shampoo, conditioner, etc., will propel growth. However, Patanjali’s aggression, especially in core segments of soaps and detergents, needs to be closely monitored.”
The company on Wednesday also said that it is coming up with new skin care brand for women with focus on naturals. Called Citra, the brand provides complete skincare product for overall natural beauty. It is available in countries like Indonesia, Thailand and the Middle East. Citra was initially launched first as a Hand & Body Lotion brand, but in recent years has expanded its brand to other segments, such as, Body Scrub, Facial Wash and Facial Moisturiser.
With Citra, the company plans to target women consumers aged between 15 to 35. Edelweiss sees this as a move that will strengthen its dominance against Patanjali. It said, “The launch of Citra brand will further strengthen HUL’s dominance in skin care and also ward off competition from herbal players like Patanjali, Dabur, Himalaya, etc. Brand launches by HUL in past few years like Tresemme have done well in India.”
Further, the company is expected to gain from the expected normal monsoon and implementation of GST. Brokerage House Sharekhan said,” If monsoon turns out to be normal in 2017, consumer demand in the rural area is expected to come back on track. Though the implementation of GST will have a short-term impact on HUL, it will have a positive impact in the long run in terms of lower tax outgo and reduction in the gap between organised and un-organised segments. Premiumisation and sustained new launches remain the key growth drivers for the company in the near to medium term.