¡°Don't See Recession Hitting India, Government & RBI Doing A Good Job¡± Says Hindustan Unilever's CEO
At a time when the IMF and World Bank have already warned about the possibility of a global recession in coming months, FMCG giant Hindustan Unilever Ltd (HUL)¡¯s CEO and Managing Director Sanjiv Mehta feels optimistic. HUL manufactures a wide range of products for leading household brands such as Lifebuoy, Surf Excel, Lux, Lakm¨¦, Bru, Knorr, Dove, and others.?
At a time when the IMF and World Bank have already warned about the possibility of a global recession in coming months, FMCG giant Hindustan Unilever Ltd (HUL)¡¯s CEO and Managing Director Sanjiv Mehta feels the other way.
About three months after a Bloomberg survey of economists indicated that India has a zero probability of recession, HUL's CEO has expressed similar thoughts, unlike 66% of CEOs in India who expect a recession to hit within the next year. Sanjiv Mehta has said that India is unlikely to face a recession and the country remains a bright spot, sounding a note of cheer amid mostly grim global economic commentary.
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"I don't see a recession in India. At this stage, I am optimistic that our economy could grow in the region of 6-7%, which under the circumstances would be a great achievement. The Reserve Bank (RBI) and the government have been doing a good job despite the challenging context," HUL CEO Mehta told ET in an interview.
"There are two imperatives for the government-one is to tame inflation and the second is to keep the economy growing. Halfway through the year, few large economies can say with a reasonable degree of confidence that they could deliver growth in the vicinity of 7%," he said.
HUL is the manufacturer of a wide range of leading household brands' products, including Lifebuoy, Surf Excel, Lux, Lakm¨¦, and Bru, Rin, Wheel, Glow & Lovely, Pond's, Vaseline, Dove, Brooke Bond, Knorr, etc., had posted 16% growth in sales, fueled by price increases and not demand as volumes-or the products consumers actually buy-expanded 4%.
'Recession Resistant But Not Recession Proof'
The country's largest consumer goods company said the FMCG industry, by its very nature, is recession-resistant but never recession-proof.
HUL said its net material inflation was 22% and it's difficult to predict where this will go in the next few quarters, even as there has been some moderation in palm oil prices, as per ET report.
"Most commodities remain at an elevated level. We must also understand that the rupee depreciation is causing an increase in cost. Oil prices have been oscillating but if there is an end to the geopolitical tensions then they could start cooling off, which, in turn, could start the process of tapering of other commodity prices," said HUL CEO Mehta. "The government has done a good job of maneuvering to ensure that some of our oil imports come at lower prices."
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"Despite the challenging context, the headline growth is holding on, and it has also increased a bit, so these are green shoots," said Mehta. "This is where our optimism comes in, but there are several variables at play which could turn into headwinds, and this is where caution comes in."
HUL¡¯s Innovation Advantage
The report mentioned that over the past few years, HUL has innovated across value chains to enable greater agility, flexibility, and efficiency. For instance, it has set up three nano factories that allow production in batches of kilograms rather than tonnes and help in faster product rollouts. This is being introduced in other Unilever markets to bring innovation lead times and costs down.
"We are certainly the thought leader when it comes to the whole digitisation of the value chain," said HUL CEO Mehta. "Many of our models like Livewire and Jarvis, which use our own algorithms to optimise various FMCG variables, have now been adopted by other Unilever markets. Shikhar too is now being adopted by several developing countries."
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Also, Hindustan Unilever Limited's digitised sales across platforms, including ecommerce channels and the internal ordering app Shikhar, are reportedly more than 20% of its overall sales. Over a million kirana stores use HUL's Shikhar app to order now, up from about 3 lakh outlets 2 years ago.
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