HUL Faces New Challenge As Indian Consumers Become More Picky

The changing tastes of India's elite consumers are driving the popularity of organic personal-care brands, which pose challenges for traditional FMCG brands like Hindustan Unilever

These challenges are not just limited to the HUL; other consumer-goods giants like Procter & Gamble Co., L’Oreal SA, and its London-based parent company are also dealing with the same issues ( Image Source :Getty )

Hindustan Unilever (HUL) is now facing challenges in the Indian market as an increasingly sophisticated consumer class with disposable incomes seeks more diverse offerings in the country. The largest consumer company in the world has supplied everyday products, ranging from detergent to instant coffee, to Indian consumers for decades, but the times have changed now. HUL is currently dealing with a slow pace of revenue growth, and its share price is also lagging behind.

Competition From Organic Personal-Care Brands:

The changing tastes of India's elite consumers are driving the popularity of organic personal-care brands, backed by vigorous social media marketing strategies, which pose challenges for traditional FMCG brands. The emergence of firms like Honasa Consumer Ltd, a local newcomer in the market, along with the advancements made by the big global giants such as Estee Lauder Companies Inc. and Clinique Laboratories LLC, is compelling Hindustan Unilever to increase investments in product innovation and promotional activities to compete with them.

These challenges are not just limited to the HUL; other consumer-goods giants like Procter & Gamble Co., L’Oreal SA, and its London-based parent company are also dealing with the same issues. In recent years, they've found that it is necessary to acquire niche brands that are encroaching on their market share.

HUL Earning Prediction:

In January, Emkay Global Financial Services Ltd. and Centrum Broking Pvt. revised their earnings projections for HUL downwards. These brokerage firms expressed apprehensions about potential profit margins as the company is compelled to allocate additional resources to compete against emerging brands in the premium segment.

“Simply put, the large companies like Hindustan Unilever are slow to move and develop strategies compared to the newer brands that are far more agile,” Arvind Singhal, chairman of consulting firm Technopak Advisors, told Bloomberg.

“The power of large brands is decreasing by the day because there are challenger brands coming up at every price point. They offer better margins to retailers, and the local shopkeeper is happy to try them out,” he added.

In addition, amidst these challenges, the producer of Dove soaps and Magnum ice cream has to implement price reductions for its lower-priced brands. This adjustment is prompted by reduced spending patterns among economically weaker rural consumers.

According to Redseer Management Consulting Pvt., India's personal-care sector is expected to reach a market value of $33 billion by the year 2027, up from $20 billion in 2022.