India’s per capita FMCG spending stands at $63, a fraction of what consumers spend elsewhere in Asia. Thailand spends nearly seven times as much, the Philippines around five times, and China and Indonesia roughly three times, according to a Nuvama report. For Hindustan Unilever, that gap is no longer just a statistic buried in an investor presentation. It is the entire premise of the growth plan the company unveiled at its Capital Markets Day on September 4, held under Priya Nair, who took over as chief executive earlier this year.
The company called its strategy ‘Winning in New India’.
HUL’s growth strategy targets consumption, premiumisation and new FMCG categories
HUL has broken down where its future growth will come from. 40% is expected from consumption and premiumisation, another 40% from what the company calls market development, and the remaining 20% from newer categories altogether, as per a JM Financial report.
To decide where to deploy money across this, HUL has built what Nomura described as a 24-cell grid. It plots consumers by affluence, from Democratisers to Premiumisers to Power Spenders, against geography, from big cities to small towns to rural India, and further against the channel they shop in, whether general trade, modern trade or online. Each cell gets its own brand and format strategy.
Behind this sits a demographic story the company leaned on heavily during the event. India has 377 million Gen Z consumers. Women’s workforce participation has climbed from 25% to over 43%. Internet penetration has gone from 43% to 70%. The government is putting close to Rs 2 trillion a year into rural infrastructure. All of this, according to the Nuvama report, is what HUL is calling the ‘structural shifts’ creating New India.
Low FMCG penetration gives HUL room to grow hair care, suncare, bodywash and liquids
The numbers on category penetration are what stood out most. Hair masks are used by less than 1% of Indian households each quarter, a level 64 times lower than in Indonesia, the Nuvama report noted. Suncare and bodywash sit at 2% penetration. Dishwash liquids are at 7%, laundry liquids at 13%.
The JM Financial report added more texture to this. 57% of the detergent market is still tier-three powders and bars. Mass shampoo volumes run eight times higher than premium shampoo. And 60% of India, the report pointed out, already has per capita income comparable to Indonesia, yet its FMCG consumption trails far behind. This gap was attributed largely to a lack of product knowledge rather than affordability by the company.
Comparisons to other markets came up repeatedly throughout. Home care spending per person in Vietnam is 2.5 times India’s, according to Nomura. India’s per capita personal care consumption is half of Brazil’s, per the JM Financial report.
HUL raises EBITDA margin target while increasing capex to fund growth and savings
HUL widened its medium-term EBITDA margin band to 22-24%, up from the earlier 22.5-23.5% range. The logic offered was that the portfolio is shifting toward higher-margin products, but scaling those products up will need more upfront investment, hence the wider range rather than a narrower, higher one.
Capital expenditure is being pushed up too, to 3% of sales from 2%, as per the Nuvama report. Of that capex, more than 85% will go toward growth and cost savings, compared with 75% over the last five years.
To fund the growth pools, HUL is targeting close to 500 basis points of savings over the next five years. According to the JMFL report, better product mix, operating leverage from fixed costs growing slower than revenue, a new ‘Future Savings Lab’ worth 100 basis points, and AI-driven media efficiency expected to improve by around 10%.
Surf Excel, Dove, Minimalist and Horlicks lead HUL’s category expansion strategy
In home care, which is the company’s biggest business by revenue, the opportunity being chased is the 3-million-tonne tier-three laundry market, according to the JM Financial report. Liquids make up just 5% of laundry volumes today despite selling at more than double the price of powders, the Nuvama report noted, and HUL is betting on Surf Excel and Vim to pull that segment along. Surf Excel volumes have tripled, and turnover has quadrupled over the past decade, per the same report.
In beauty and personal care, the strategy runs in two directions at once. Established names like Dove and Pears are being pushed upmarket, while newer, smaller brands are being scaled from scratch. Minimalist has reached roughly Rs 9 billion in annual revenue, Simple has grown tenfold since 2022, and Oziva has grown fourfold since 2023, the JM Financial report said.
In foods, Horlicks is being repositioned away from its old health-drink identity toward what the company calls lifestyle nutrition, with Horlicks Protein as its lead product. Kissan, meanwhile, is being pushed beyond ketchup into chutneys, a category that, as per the Nuvama report, is consumed nearly four times as much as ketchup in Indian households.
HUL stock targets range from Rs 2,315 to Rs 2,820 as brokerages assess growth outlook
None of the three brokerages changed their rating on the stock, but their price targets tell slightly different stories. JM Financial cut its target to Rs 2,315 from Rs 2,425, trimming its valuation multiple to 43 times earnings from 45 times, while keeping a BUY call. Nomura held its target at Rs 2,450, valuing the stock at 45 times its June 2028 earnings estimate. Nuvama kept its target unchanged too, at Rs 2,820, the most bullish of the three.
HUL’s biggest unanswered question is when earnings growth will accelerate
What all three reports flagged, in different words, was the same gap in the presentation. HUL did not put a number on how much its growth will actually accelerate, or by when. The company had earlier guided toward a return to double-digit EPS growth, the kind of run it had between FY18 and FY23, but that guidance was withdrawn and not replaced with anything more specific, the JM Financial report pointed out. Nomura called this “the only area the company pulled back from sharing any guidance.”
According to the JMFL and Nomura report, slower than expected volume growth in core categories, a muted response to new launches, and the possibility of input costs rising faster than expected are the risks foreseen.
For a company that has spent the last two years explaining muted growth, the message from this Capital Markets Day was that the fixes are already underway, not still being designed. Whether that translates into the double-digit earnings growth investors are waiting for is something HUL itself did not put a number on, and the brokerages tracking the stock are watching to see if the next few quarters answer that question.