HUL sees modest volume growth in FY25, signalling some respite for demand-starved FMCG sector

Mumbai: Demand for packaged consumer goods has slowed significantly amid rising prices, but Hindustan Unilever Ltd anticipates a modest growth in its volumes this financial year, signalling somewhat improved prospects for the rest of the industry.

India’s largest fast-moving consumer goods company on Friday said it expects volume growth of mid-to-high single digit in financial year 2024-25. HUL reported underlying volume growth of 2% for FY24, with sales growing 3%.

HUL’s performance is viewed as a proxy for the broader Indian consumer goods sector. 

The industry has been reeling with tepid demand, especially at the bottom end of the market where households adversely impacted by high inflation have been curtailing purchases. This is especially true of consumers in India’s villages.

“2024 was the year when we transitioned from a couple of years of very high inflation into a period where commodity costs became benign. In many cases, we had prices coming down and as a consequence, we had to pass on the benefit of these lower prices to our consumers, which meant that the price increases which have often been a part of our overall growth didn't exist,” Nitin Paranjpe, chairman of HUL, said addressing shareholders at the company’s 91st annual general meeting.

“We continue to expect the FMCG industry to allow us to get volumes in the mid-to-high single digits, and that’s the sort of growth we should start seeing in the medium-to-long term,” he said.

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HUL’s turnover in the financial year ended 31 March increased 2.5% year-on-year to ₹59,579 crore, while profit after tax rose 1.5% to ₹10,114 crore. Volumes grew 2%.

Plenty of growth opportunities 

While HUL is focused on expanding its premium products portfolio, Paranjpe is hopeful of a recovery at the mass-end of the market.

“It is really the mass-end of the business where inflation had squeezed  discretionary incomes of people and curtailed demand. That’s the recovery we hope to see as we move forward,” Paranjpe said, adding that organized trade continues to provide growth opportunities.

In the March quarter, India’s FMCG industry reported 6.6% growth in value terms, with volumes increasing 6.5%, according to market researcher NIQ. In March, rural demand outpaced urban markets for the first time in 15 months.

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Earlier this year, HUL’s parent, the UK-based Unilever Plc., decided to spin off its €7.9-billion ice cream unit by the end of 2025 to focus on its beauty and wellbeing, personal care, homecare, and nutrition businesses. 

HUL is yet to decide on its ice cream business, Paranjpe said.

As for Unilever’s decision in March to slash 7,500 jobs globally as part of a programme that’s expected to save it about €800 million over the next three years, Paranjpe said the impact on the India business will be “modest”.

Globally, Unilever employs 128,000 people; in India, it employs over 19,000 people.

“India is a high-priority country amongst the top countries as far as Unilever is concerned,” Paranjpe said. “There are plenty of growth opportunities in this country and, therefore, while there is always an opportunity to become more efficient… the impact on India will be more modest than it would be anywhere else.”

India’s next phase of growth

On India’s plans to become a middle-income country and grow its economy to $10 trillion, Paranjpe said the “ambitious plan” would pull millions out of poverty, providing housing for all and ensuring suitable livelihood opportunities for people.

“This ambitious goal will require the nation to step up its growth rate from a historical average of around 7% CAGR over the last decade, to over 8%. While not easy, it is much needed and certainly possible,” Paranjpe said. “We have been one of the fastest-growing large economies in the world over the last decade. A growth rate well ahead of the largest economies—the US and the UK at 2%, Japan at 1%, and almost on-par with China (7%).”

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Investments made over the past decade have created the foundation of what is already among the best digital public infrastructure in the world, driving financial inclusion and stimulating economic growth, Paranjpe said.

Greater participation of women can help advance GDP growth, he said, adding that India’s growing working-age population could “prove to be our greatest asset in the next phase of our growth journey”.

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