HUL seen regaining market share in key business

Hindustan Unilever Ltd (HUL), the country’s largest maker of home and personal care products, has started to see market share improvement in its key business of soaps and detergents, analysts tracking the company said.

The maker of Lux, Lifebuoy and Dove soaps and Wheel, Rin, and Surf Excel detergents, has been able to reverse the trend of falling market shares as its brands gained traction at store shelves, in the last two quarters.

While the company lost significant market share in soaps and detergents in the last few years due to intense competitive environment, it seems to have improved market shares across the two categories by 140-160 basis points each.

HUL gets 44% revenue from soaps and detergents. In FY11, the company relaunched its soap brand Lux, and detergent brands, Rin, Surf Excel and Wheel.

“In detergents, majority of the improvement has been aided by its recovery in share in its mid-priced brand, Rin. Additionally, its premium detergent brand, Surf, is witnessing outperformance during the past six months and contributing to the improvement in shares. In soaps, Lux is witnessing better traction and recovery in its market share while Lifebuoy has maintained its market position,” analysts Abhijeet Kundu and Hardik Shah of Antique Stock Broking Ltd wrote in a note to clients this week.

HUL’s approximate market share in toilet soaps is 46% and about 36% in detergents. An e-mail sent to the company did not draw any response, so current or improved market share figures are not known.

According to analysts, the company had lost around 590 basis points (bps) of market share in the soap category, between December 2007 and March 2009, as consumers downtraded to competitors’ brands such as Santoor, Godrej No.1, Dettol and Cinthol.

The recent correction in palm oil prices — approximately 20% — which is a key raw material in toilet soaps will help the company recover margin.

Analysts said the company will have better pricing power in the key business while volume growth in these categories too are estimated to be in double digits. After discounting prices on toilet soaps and detergents to grow volumes, the company in FY11, took a corrective pricing action in both categories, as input costs rose.

“HUL’s aggressive ad-spend, promotions and price cuts are resulting in volume gain at the cost of profit. With rise in competition, HUL will have to further trade off margins for volumes in FY12 and FY13,” a report by broking firm Anand Rathi this week said.