Hindustan Unilever To Prioritise Growth Over Margins, Says CEO Rohit Jawa

Hindustan Unilever (HUL) CEO and Managing Director Rohit Jawa stated that the company plans to ramp up investments in innovation, distribution, and marketing to drive a revival in volume growth, even if it results in a temporary dip in profit margins. As India’s largest fast-moving consumer goods (FMCG) company, HUL is banking on improving macroeconomic conditions, such as declining interest rates and moderating inflation, to spur consumer demand in the months ahead.

“We feel it’s a good time to take a bet on the future and play to win. We want to make sure that we stay at the right price point, and if it moderates some of our margins in the near term, so be it. Because in the passage of a few quarters, we will adjust for that. But we want to ensure we have enough bandwidth to invest in good products, good trade investment and good A&P (advertising and promotion) investment,” Jawa told The Economic Times.

HUL, often seen as a barometer of consumer sentiment in India, has been contending with sluggish value sales growth, which has hovered between flat and 4 per cent for nearly two years. In the quarter ended March 31, as well as for the full fiscal year, the company reported a modest 2 per cent increase in volumes, reflecting the number of units sold. Additionally, HUL revised its near-term operating margin guidance to 22–23 per cent, down from the earlier estimate of 23–24 per cent.

“The priority is to try and drive growth. This eventually impacts the bottom line, which is the operating margin. We feel that we don’t want to compromise the opportunity,” said HUL MD.

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Sluggish Demand

Over the past year, demand in urban markets, which contribute nearly two-thirds of HUL’s total sales, has softened, impacted by a high base, sluggish wage growth, and a pullback in discretionary spending amid persistent inflationary pressures. However, it remains optimistic about a recovery, anticipating that lower interest rates, potential tax relief, easing food inflation, and declining crude oil prices will help revive consumer demand in the near term.

“On the urban side, we expect things to improve as a result of macro changes, such as the reduction of interest rates, which will positively impact EMIs and household budgets. Inflation now is under 4 per cent, which is quite heartening. Crude oil is going down further, which will augur well for consumers, and then the tax relief benefits also help materially. So, these benefits will start to pass through the households in the next few quarters. So, there are many drivers that give us the confidence that this is the time to lean in,” Jawa added.