Good day, and welcome to Hindustan Unilever Limited conference call for the results for quarter ended 31 December 2021. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please tell an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. A. Ravishankar, Group Controller and Head of Investor Relations. Thank you, and over to you, sir.
Thank you, Faizan. Good evening, everyone, and welcome to the conference call of Hindustan Unilever Limited. We'll be covering this evening the results for the quarter and nine months ended 31 December 2021. On the call with me from HUL is Mr. Sanjiv Mehta, Chairman and Managing Director, and Mr. Ritesh Tiwari, Chief Financial Officer, HUL. We hope that you're staying safe and healthy. We'll start the presentation with Sanjiv talking about our performance in this quarter, perspective on the operating environment, and our outlook for the near term. Ritesh will then share deeper insights into our performance for the quarter with category highlights. Before we get started, I would like to draw your attention to the safe harbor statement included in the presentation for further sake. With that, over to you, Sanjiv.
Yeah. With good health and a lot of optimism. Thanks again for joining us today. I do hope not only you, but all your loved ones remain safe and well. Let me begin by talking about our performance in this quarter, and then cover the market environment and the strategy to navigate through the challenges. We have delivered what we certainly believe is a strong all around performance in this quarter. It's a result of our strategic clarity, strength of our brands, operational excellence, and dynamic management of our business in an environment which has been changing rapidly. Our domestic consumer business grew 11%, significantly ahead of the market, resulting in handsome market share gains. More importantly, we've been able to build on the momentum and consistently step up our growth when seen from a full year lens.
In December quarter 2021, our two-year sales target was 9%, an increase from the 7% we had in September quarter and the 2% in June quarter 2021. I will talk more about December on the subsequent slide. Moving on to profitability, our EBITDA margin for this quarter increased 100 basis points compared to December quarter 2020, driven by prudent financial management led by increased focus on cost savings and incremental pricing based on the strength of our brands. Now, what we have done here is to unveil the two-year CAGR at a category level for a better appreciation of the quality of growth. It is a wonderful sight to see all parts of our portfolio contributing to a robust two-year CAGR.
Starting from the left side of the chart, you can see that our big categories of fabric wash, beverages, and skin cleansing have delivered a very strong double-digit two-year CAGR. Household care and ice cream have done exceedingly well and also delivered a robust double-digit two-year CAGR. Around two-thirds of our portfolio is growing double-digit CAGR. Another 30% of our portfolio, which includes categories like skincare, haircare, foods, and oral, have grown in high to mid-single digits. Just 3% of our portfolio, which includes COVID-impacted categories of color cosmetics and water, had relatively soft performance over the two-year horizon.
I have said this earlier and cannot stress enough that in times of such high inflation and uncertain operating environment, it is extremely important to look at our business from the lens of competitive growth and whether we are retaining and growing our consumer franchise. In this regard, I'm extremely pleased to see that our consistent strong performance has translated into handsome market share gains. We have seen the highest year-over-year share gains in more than a decade.
These gains are broad-based, and we have gained in all our divisions and both in urban and rural markets across all our regions. Share gains have come not only in the mass segment but also in the premium and popular segments. In fact, the market share gain in the premium segment is at levels similar to our gains in the mass segment. The pandemic, while it has tested us, has made us stronger, more agile, and much more resilient as a business. We clearly are cementing our market leadership. The world has never had a clearer view of the environmental challenges that face all of us. The need for action has never been greater.
We know we have a big role to play. We're a company of brands, of people with a clear purpose to make sustainable living commonplace. One of the biggest challenges we all face is that of plastic waste. Plastic is a very versatile packaging medium that helps us get our products to consumers safely and efficiently. It's often the lowest carbon footprint option compared to other materials, yet far too much plastic ends up in our environment. To give you some numbers, India consumes an estimated 16.5 million tons of plastic annually. Around 70% of this ends up being discarded and remains in the environment. We need to minimize this plastic waste and create a waste-free future for the next generation.
To achieve this, we have set ambitious targets which would all be attained by 2025. First, we'll help collect from the environment and process more plastic packaging waste than the plastics we use in the packaging of goods we sell. All our plastic packaging will be fully reusable, recyclable or compostable. Lastly, we will reduce the amount of virgin plastic we use in our packaging and use of recycled materials and other means. We continue to make good progress. In calendar year 2021, we became plastic neutral, i.e., we have collected and processed more plastic packaging than the plastic we use in the goods we sell. Our program is not limited to a few cities, and we have a pan-India network spanning 160 locations.
We are perhaps the only company of this size and scale to do this in every state and union territory of India. We have a framework called Less Plastic, Better Plastic, No Plastic, with which we evaluate our plastic footprint. Let me talk about a few examples. The first is an example of where we have reduced virgin plastic usage by replacing them with post-consumer recycled plastic, or what you call as PCR. Bottles used for Rin Dishwash, Surf Excel Matic, Surf Excel Easy Wash, Rin Matic, and Comfort are made with 50% PCR. Our Sunsilk and TRESemmé shampoo bottles, Vaseline body lotion bottles also have recycled plastic incorporated. Last quarter, we spoke about the Smart Fill vending machine, which offers an innovative option to consumers to reuse plastic bottles while refilling their favorite home care liquids.
We are already seeing encouraging signs from this pilot, and we intend to scale this up in future. We're also transitioning our soap wrappers and shampoo sachets to recyclable structures. Another example is Lakmé, where we have created a refillable product. The Lakmé Absolute Perfect Radiance cream will be packed in terms of the main product and the refill pack. Consumers can order a refill pack once this product is consumed and thus save on plastic packaging. Ritesh will cover our income and performance in more detail in his section. Let me now spend some time talking about the operating environment and our outlook. After two devastating waves of COVID, Indian economy is on the path to recovery. Several sectors of the economy are back to pre-pandemic levels of workforce.
However, the recovery is still in the making, with different parts of the economy improving at varying pace. From an FMCG market lens, and here I'm talking about the FMCG categories in which HUL operates, we are seeing a moderation in market growth. We cautioned about rural growth in our September quarter earnings call, and we do see the deceleration continuing forward. With very high levels of inflation that consumers are witnessing, volumes in the market have declined, and this decline is more accentuated in the rural markets and in those categories which have been impacted more by the commodity inflation. Commodity inflation continues to be a significant headwind for the industry. Palm oil remains at historic highs, while crude has rallied by more than 30% in the last year. Packaging fees and stocks have also inflated significantly.
The appearance of the Omicron variant even before the economy has completely recovered from the shocks of the previous two waves has made the environment more challenging. COVID cases are rising, and it is a reminder for all of us that this pandemic is not yet over. We should definitely not throw caution to the wind, and we should continue to take all the precautions. In these challenging circumstances, I'm confident that a clear and compelling strategy together with the growth fundamentals of operational excellence will hold us in good stead. We remain focused to deliver a 4G Growth Agenda, growth that is consistent, competitive, profitable, and responsible. As seasoned sailors, we will dynamically adjust our sails and navigate through the turbulent external environment. We are well-positioned.
The nearly two years of pandemic has made us a stronger, better business, which is much more resilient and responsive. What makes us a formidable organization is the people who work and always will remain our number one priority. A wide and diversified portfolio, more than 50 trusted brands across 15 categories places us uniquely. Our supply chain has become much more agile and responsive. All these positions us well to deal with the uncertainty that we face.
Let me now conclude with the outlook we have. In the near term, the operating environment remains challenging. While the rising cases in COVID wave three are a concern, we expect a limited impact due to a robust vaccination program and the health and safety measures taken by the authorities. FMCG market growth are moderating, and consumers are price-rationing volumes owing to the significant inflation that they are witnessing. Further, the inflationary conditions that I spoke about earlier are likely to persist in the near term. In fact, we expect to see sequentially more inflation in March quarter compared to December quarter. These commodities affect large parts of our business, and hence margins are likely to remain under pressure. Strength of our people and our brands, a clear strategy, and resilience of our business positions us well.
We will continue to manage the business with agility, take all steps required to protect the business model, and expand the consumer franchise while sustaining our margins in our healthy range. We remain confident in our focus to deliver our 4G growth agenda. Growth, like Defined said, is consistent, competitive, profitable, and responsible. With this, let me hand over to Ritesh Tiwari as we provide deeper insight into this quarter's performance. Ritesh Tiwari, over to you.
Thank you, Sanjiv. Good evening, everyone. I hope that you and your loved ones are safe and keeping well in these difficult times. Let me talk you through our December quarter performance in more detail. We had a very strong delivery in December quarter. Domestic consumer business grew 11%. Reported turnover growth was 10%. The difference between the reported growth and domestic consumer growth is largely our export sales, which have declined off a high base that we had some one-off. This has been a strong, competitive, and broad-based growth. Underlying volume growth in the quarter was 2% and significantly ahead of market volume growth. Let me give you further insight into this.
Almost 30% of our business comes from packs that operate in multi-price points, like INR 1, INR 5, or INR 10. In these packs, our preferred mode of taking pricing is by reducing grammage. As a result, even the same number of units sold leads to volume decline. This had a circa 2% impact on our volumes. Talking about our bottom line performance, EBITDA margin was healthy at 25.4%.
In the backdrop of continued input cost inflation, I am pleased that we have dynamically managed the business to deliver margins in a healthy range as we had indicated earlier. Our focus on taking calibrated price increases using net revenue management principles, coupled with a laser-sharp focus on savings while investing behind our brands competitively has helped us improve profitability. On a year-on-year basis, EBITDA margins improved 100 basis points. Profit after tax, but before exceptional items, were up 17%. Our net profit at INR 2,240 crores increased 17% versus Q2 2020. Let me now give you a breakdown of the growth across the three divisions.
Home Care sustained its very strong double-digit growth momentum, growing at 23%. Beauty and Personal Care grew 7%, led by skin cleansing, skincare, and color cosmetics. Foods and Refreshment delivered a steady performance, growing at 3% on the back of high teens growth in the base. Let's break down to talk about performance within each of the divisions in subsequent slides. Talking about innovations, we continue with the momentum we have, and let me call out some of them. Simple, our clean beauty digital-first brand, has launched a new range of no perfume serums, which are naturally derived and suitable for sensitive skin. Dove has launched [Love & Care] a range of hybrid body moisturizers. Lakmé has expanded its cosmetics range with volume mascara, liquid concealer, and highlighters. Bru has launched a new product, Bru Decaf Coffee, on e-commerce channel.
We have also launched a new toothpaste, Sensodyne Mineral Boost Whitening, for sensitivity relief, which has been launched in Tamil Nadu in select channels. Moving on to the activations in this quarter, let me talk about a few. Kwality Wall's activated ice cream gift packs and reached consumers offline as well as through digital channels to cheer during the festive season. Surf Excel had a new ad campaign on Matic Lift with its new automatic washing machines. Clinic Plus created [Rapunzel crews] in South India, building on its proposition of long and strong hair. A new DVC of Dove Beauty Bathing Bar is talking about its moisturizing cream formula that provides moisturization like a cream while it washes our skins like a soap.
Home Care had another strong quarter of double-digit growth enabled by robust performance in fabric wash and household care. Household care grew in high teens, with a strong performance growth in dish wash and domestic surface cleaners. Fabric wash grew strong double digits, with all parts of the portfolio performing well. This has also grew volumes in high single digits, reflecting the strength of our brands to price up in inflationary conditions. Liquid and fabric conditioners continued its exceptional momentum and grew handsomely. With the significant inflation persisting in food and in derivatives, we have continued with our calibrated pricing actions in both fabric wash and household care. Moving on to beauty and personal care. Beauty grew 7%, led by skin cleansing, skincare, and color cosmetics. Skin cleansing had a strong quarter, with double-digit growth driven by hygiene.
The beauty and premium soaps portfolio comprising of Lux, Dove, and Pears, grew in high teens. Hair care had a steady quarter enabled by strong performance in premium portfolio. During the quarter, we further strengthened our competitiveness, with our market share being at a 15-year high.
Our brands Clinic Plus, Dove, and Sunsilk were rated as the top three hair care brands in the country in [Kantar] Hair Brand Health Check Report. Our calibrated approach towards price increase in skin cleansing and hair care has helped protect our business model, even as vegetable oils continue to inflate at record levels. Together, skin care and color cosmetics delivered double-digit growth and are above pre-COVID levels. Winter portfolio performed well, growing on a very high base. You will recall that we had low winter selling during FY 2020 due to new tax rate sentiment at that point in time, and hence we were lacking a higher GQ in the base. Oral care had a soft quarter, lacking a high base comparator from DQ 2020.
Let me now turn to consumer refreshment. F&R had another strong quarter in Q1 2021. The growth at 3% came on a very high base, resulting in a healthy two-year CAGR of 11%. Tea continued its robust performance and grew competitively on a strong prior year comparator, delivering high-teens two-year CAGR. We further expanded our value and won market share in the quarter. Coffee continued to perform well and grew in high single digits. During the quarter, we launched Bru Decaf Coffee. We have spoken about extensive market development actions, including home-to-home sampling that we're doing in nutrition. This, along with A&P investments made in Horlicks and Boost, have helped us improve our market share substantially and gain penetration. We had a soft quarter due to a high base, slowing market growth and quarter four disruption in sales integration.
Ambitious market development actions have been planned to enhance category relevance and grow the market. However, with base three, it is likely this might have to be scaled down in near term. Foods grew on a strong base led by jams and ketchup. We are very pleased to see that our recent foods innovation, Kissan butter and Hellmann's mayonnaise, are gaining traction with consumers. Ice cream had a very strong quarter, delivering two-year CAGR in high teens. This has come on the back of some very impactful innovations, as the Kwality Wall's 50 car and gradually worked its way up, and effective activation around 50 people. Let me now give you a snapshot of our performance from a portfolio lens. As you can see, all parts of the portfolio have performed strongly.
Health, hygiene and nutrition, which is 85% of the business, continue to grow at a very healthy pace with a double-digit two-year CAGR. With a resumption in mobility in the quarter, the stationary and out-of-home categories have rebounded strongly and are above pre-pandemic levels. As you heard from Sanjiv, inflationary headwinds were sustained in this quarter. Palm oil and its derivatives, which are used in our skin cleansing and hair categories, have seen prices climbing further. Our expectation is for global prices to remain supportive in the near term. Crude and its derivatives are key inputs for our laundry and household care category. As you know, Brent crude has been firm at $80 levels, and inflation of over 70% was sustained here last year. Packaging materials, both plastic and paper and board, continue to be at very high levels.
We have spoken earlier about price inflation and impact from supply chain disruptions which have impacted certain raw materials. All of these put together impact two-thirds of our portfolio. After factoring in all buying efficiencies which we deliver through our procurement capabilities, our material cost per ton has still inflated more than 30% compared to the levels we had in FY 2020. This was also up sequentially compared to Q1 2021. In the face of such unprecedented and widespread inflation, our dynamic cost financial management has held us in good stead. If you look at our EBITDA margins across the last four, five quarters, we have kept it in a very healthy range. There are few key elements in our model to manage this. The first is keeping a hawk eye scrutiny on the price versus cost equation.
We continue to step up pricing through calibrated actions using net revenue management or the science of pricing, as we call it. This is also reflective of the strength of our brands. We drive savings harder across all lines of the P&L with an intent to reduce costs that don't benefit our consumers and customers. Through this action and with an improving mix, we have been able to optimize our COGS percentage and bring it back to below 50%.
We have also maintained that advertising and promotion is a much needed investment for the long-term health of our brands. We continue to ensure competitive levels of A&P sit behind our brands with our share of voice ahead of our share of profit. We also want to make it clear that it does not mean that we put in same levels of A&P spend every quarter.
What we're doing is to dynamically manage and optimize the spend to ensure competitive levels of investment while maximizing returns. In times of such high inflation, it is imperative to look at growth from the lens of competitiveness. Here we're doing a fantastic job, and Sanjiv has already spoken in much detail about the progress we have made on expanding our competitiveness. The key point I want to add is that we have got this balance very nicely stitched up, as we have expanded our competitiveness while ensuring margins remain healthy. Looking forward, I don't see an immediate respite from commodity headwinds. In fact, we are witnessing sequentially more inflation in Q compared to PQ. Hence, we continue to dynamically manage the business on the same principles as before. Now from a segment lens, all three divisions have performed well.
Our operating margins in all three divisions are very healthy, and we expect gross margin sequentially in all three segments. In summary, our performance has been strong both on top line and bottom line. I've already covered most of the lines in detail. Let me pick up a couple of more things to elaborate. The first is on employee expenses in the quarter, where you see a 30 basis points year-on-year adverse impact. We have trued up our defined benefit pension liability with an actuarial estimate due to a change in pension rules. We also have impact of true up and true down of variable shift. This is normally done in December quarter with its full calendar year performance, and has therefore one-off impact in both years and current quarter. The second is on our effective tax rate.
Our ETR for the quarter was 26%, which is a similar level as previous quarter. Including the prior year adjustment we received in June quarter 2021, we expect our financial year ETR to be around 25%. This slide gives you a quick snapshot of the three-quarter performance of financial year 2021. Our reported turnover grew 11% to INR 77,146 crores with a broad-based growth across all three divisions. EBITDA margins at 25% remained very healthy. Net profit was at INR 6,491 crores. Profit and EPS grew 12% year-on-year. I also wanted to take this opportunity to update you regarding approvals we have received under the Production-Linked Incentive Scheme from the Government of India. We have received this approval in two segments, ready-to-cook, ready-to-eat, and processed fruit and vegetables.
For us, this includes categories like ice cream, jams, ketchup, soups, mayo, et cetera. The scheme, which is for six years, is subject to meeting certain committed investments and defined incremental sales threshold. We will be reporting this in other operating income. There is no impact in this quarter. I would also like to be clear that we intend to use these incentives to further grow these categories at a quick pace by investing in our business and in creating capabilities. Now let me summarize the key messages from what we have presented in last 30-odd minutes. We had a solid quarter with double-digit growth and significantly ahead of the market. You have seen that our two-year growths are also very robust with sequential step-up over the earlier quarters.
Our dynamic financial management has enabled us to deliver EBITDA margins in a very healthy range while we have continued to invest towards the long-term health of our brands. We have further strengthened our leadership position, and our market share gains are highest in a decade. Looking forward, the operating conditions remain challenging in the near term, with further frequency commodity inflation in March quarter 2022. The strength of our brand, our very clear strategy, and our execution prowess gives confidence that we will be able to manage our business with agility, delivering competitive growth, and maintain margins in a healthy range. With this, we complete our prepared remarks, and we can now hand over to Ravi to commence our Q&A session.
Thank you, Sanjiv. Thank you, Ritesh. With this, we will now move on to the Q&A section. In addition to the audio, as always, our participants have an option to pose the questions through the web option on your screen. We will take these questions just before we end. With that, I'll hand over the call back to Faizan to manage the next session for us. Over to Faizan.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while your question queue assembles. Reminder to the participants, anyone who wishes to ask a question may press star and one at this time. The first question is from the line of Avi Mehta from Macquarie. Please go ahead.
Hi, team. I just have two questions. You have talked extensively about rising input cost inflation. Could you share if you've taken any further price hikes which will flow into in 1Q and offset this in sequential lines?
Okay. Hi, Avi. It's Sanjiv here. Yeah, if we look at it the way we have been playing the game whenever there is commodity price inflation, the kind of which we have been seeing in the last three quarters, we always look at first optimizing on our lines. Yeah, and seeing that, where can we drive further scale benefits or the productivity benefits. Over the last couple of years, we've had a good rhythm of cost savings. The cost savings have ranged between 7%-8% of the turnover, and now we have timed it so that we reach 10% of turnover. That's the first thing we do. The second is we try to protect the price point back as far as possible.
We look at it from a volume lens, and we try to see that where there is much more flexibility for us to take a price increase. Our primary objective, Avi, under these circumstances are twofold. One is to ensure that we continue to gain market shares, both volume and value. The second is we protect our business models so that our margin remain within a certain range. If the reality is we are seeing that in the mass play also, there will be commodity price further increase, and we will keep doing calibrated price increase based on the principles that I have articulated.
Okay. Maybe I'm clear on this part. What I was trying to appreciate or understand, would it be that the you know, a lot of the load of offsetting these pressures would fall on playing the lines of the P&L or would it, we have some pricing still in our. That is what I was trying to kind of appreciate or understand.
First is, if I look at the brand power, just to give you a perspective, brand power has been absolutely scaling. Our brands have never been stronger. The brand power, which is the other bit very important, which is product superiority. In half our portfolio we have got very clear product superiority, and that gives you even much more strength to take the kind of decision we have to take when it comes to pricing. We are cognizant about India, about the population we have and the brands, which kind of population it caters to. Where there is flexibility to take price increase, we don't hesitate to take the price increase.
Yeah. Okay, perfect. Just second bit, Sanjiv, just wanted to kind of get your thoughts on when do you expect to start changing the playbook from, you know, the competitive kind of focusing growth to more volume-led. Would it be fair to expect this in second half of the current fiscal year?
That's a good question. You know, one is of course when do the commodity prices start tapering. If we have to, without doing crystal ball gazing, but looking at some of the fundamentals, I think the factors which have come into this in the price increase are more supply-led than demand-led. The second important bit is a certain area, certainly like crude oil and all, that in recent times there has not been as much capital investment as there ought to be. Now, whenever the demand surges, the capacity comes back and it requires a ramp up in capacity, et cetera. These are all cyclical products. Our feeling is that in the second half of the calendar year, we should start seeing first the flattening of the curve, then the tapering of the curve.
The other important variable is the money in the hands of consumers. We hope that the government continues with the relief that they've given to the stressed and rural area and if we can extend it to urban area and outlays like MGNREGA and all should not only be continued into 2022, but perhaps even the outlay should go up. Those are the two factors which will start driving more money in the hands of people, as we often say, and the flattening of the commodity price inflation. That is where we will start making that switch back to volume-led profitable growth. Under these circumstances, yeah, market shares and protecting the business model remains the two most important imperatives.
Perfectly clear. Perfectly clear, Sanjiv. Just one more thing, if I may. Just on the GSK or the nutrition business, could you give us a sense on what is the level of sales integration and, is that more or less done and hence-
Yes. A large portion of the integration has been done. I would say, Ritesh, am I right if I say that it's about 85%?
[crosstalk] Definitely more. It's above 90.
About 90, yeah. That integration is done. The good bit is that we're starting to see now penetration and market share gains come back into HPC. Now it is all about the market development. Market development with the right kind of environment, and we should start to see good growth coming back. The good bit is penetration and market shares are up.
Perfectly. Perfect. Thanks a lot, Sanjiv. Wish you luck for this quarter.
Thank you, Avi. Take care.
Thank you. The next question is from the line of Abneesh Roy from Edelweiss. Please go ahead.
Abneesh, how come you did not open the mic today?
There was a clash with one more company.
I see. Okay.
Sanjiv, firstly congrats on the good quarter numbers. My first question is on market share. Decadal high market share expansion. A decadal high inflation is also there. This is always there in FMCG. Whenever sharp inflation happens, a leader gains market share. The question is the sharpest gain in products where the raw material was most insensitive, for example, is it in soaps and tea? Second follow-up is in tea after sharp inflation, sharp deflation is happening and what we are picking up at the lower end, smaller players, regional players are getting extremely aggressive. How are you feeling that on the lower end?
That's a good question. Yeah. First is, you know, when we are talking about market share gains, and this is the year-over-year gains that we're talking about, this is the highest we have seen in more than a decade. Not even a decade, more than a decade. Yeah. This is across the portfolio, across the three divisions, across mass, popular, and premium. That gives us comfort that these are not something which is just because it is, you know, more organized players are there, so that's the reason we are getting better. As there is more formalization of the economy, that's the reason we are getting. No, even at the mass end, we are gaining market shares.
I think a lot of the market shares, we must understand, is based on the strength of our brands, the brand power that people have. Like I was explaining to Abneesh a while back, it is also backed by a huge amount of product superiority. We have been investing to gain product superiority. All this, you know, when the times are tough, the consumers veer towards trusted brands, and you cannot afford a brand which hasn't given you or lives up to the promise that is made to the consumer. From that perspective, again, it is something that we remain very proud of. Once we gain market shares, we are very clear that we will retain them and not be losing them again.
Right. Any clarification on the lower end?
Lower end, that's what I'm saying. Even at the mass end, we are gaining market share.
Right. I think the follow-up there is essentially in haircare, your market share is at a 15-year high and very sharp gain versus the number two player, only YOY basis. The top two of the top three brands are yours, and the third one is Pantene. Any learnings from haircare which you could take to other categories, or is it unique to the category where you are seeing?
Thank you, Abneesh, for this question. It is not related just to haircare. You look at haircare, you look at laundry, fabric care, yeah, it is a very big category, and what a fabulous performance it's having. No one here. We have been galloping our market shares and strengthening our brands across the pyramid. Look at tea. We not only took leadership on value, then we took on the leadership on volume, and now we keep increasing our lead. It is across a large part of the portfolio that we have strengthened our market position over the last few years.
Do you believe these market shares are getting affected by the impact of the DTC startups? Why I'm asking this is, you are servicing 15% of your demand digitally, 78% coming from e-commerce. When I see, for example, Mamaearth, WOW, SUGAR Cosmetics, everyone is claiming anywhere from, say, INR 100 crores- INR 700 crores, INR 800 crores kind of numbers. Where is that coming from? Because in retail we saw huge disruption by startups.
Yeah. You know.
FMCG is.
You know, Abneesh, if you look at the total market, total industry, FMCG industry, yeah, direct to consumers is still a very small part of the total mix. Yeah. The biggest part is still, non-online, which is the biggest part of the game. Now, you must understand this is a INR 50,000 crore business. If you grow at 10%, you know, on a per annum basis, we are adding INR 10,000 crore. You know, you always look at INR 100 crore, INR 200 crore, INR 300 crore. In a year, we are adding INR 10,000 crore.
Right. Any learnings or any disruption can happen here because these are pureplay and they can take losses also.
See, the way it is, you know, we anticipate disruption. Abneesh, let me give you my perspective of things. First is, across the world, the big brands are growing and growing fast. Yeah. It is not that the world has veered away from the big brands. Second is, yes, there are e-commerce players, DTC brands who have done a great job. That is the reason why also we have set up, you know, things like our premium business unit to compete in that area. Yeah, premium business unit is giving us absolutely brilliant traction. We have great talent over there. We are building capabilities. The third is, you would recall that we started investing in e-commerce capabilities much ahead before it reached the point of inflection.
Last question is.
I think we are ready for it.
Last question on the 2% impact on volume because of damage. Consumer behavior-wise, when rate of purchases is over at home, is the ask presently increased because you are pricing, when, during festival season prices have been cut, right? Now this season will become well increased. Will you see recovery there?
Yeah. You know, absolutely. You know, what we do, Abneesh, when it comes to price point packs is we. When there is hyperinflation, we penetrate the volume into those packs because we try to protect the price point as far as possible. When the commodity prices go down, we restore the fill. We improve the grammage. Yeah. You know, we have to understand a bit about the dynamics of India, where average income is $10,000. If you look at the bottom 50% of the population has only 10, 15% of total consumption.
These are people who would be very conscious about their money outlay, and they would be tightening the volume to protect their wallet because the wallet is so small and so limited. Whereas why we are saying also at the same breath that premiumization continues to happen, because there are many consumers in India, many consumers of premium products for whom FMCG is a small share of their budget. Even when there is a price increase, yeah, it does not impact the volume to that extent. The growth keeps happening over there.
Sure. That's very helpful. Thanks a lot, Anand. Thanks.
Thank you.
Thank you. The next question is from the line of Arnab Mitra from Credit Suisse. Please go ahead.
Hi, Arnab.
Thanks for the opportunity, Sanjiv. My first question was on the nutrition business. Now that the GSK integration is complete and you've also, you know, done the price point intervention, growth still looks a little anemic here compared to your overall growth. Do you see lot more interventions required from your side to get this effect or the actual effect to take effect? Or would you think in the next one year at some stage, you know, the cost efficiency you've already done would start getting you into the double-digit kind of ambition that you have?
Yeah. That's a good question, Arnab. You're asking me why. We should remain completely unchanged. I think in the last 20-odd months, we have done very good interventions. The first is the integration that happens. It was the feeding integration. Perhaps had there been no conflict, the feeding integration could have happened about six-nine months earlier than when it happened. Yeah. The third is if you look at the fundamentals of our marketing, we have strengthened our brands. The communication has changed. We have increased the intensity of our communication. Our innovations have been very good, and the plus range is getting good traction. Now, there is also an environment under which we are operating. You know, our schools have been opening intermittently.
One of the big consumers of some of our variants of Horlicks are the school kids. When kids don't go to school, yeah, there is very clear evidence we have that the consumption of Horlicks doesn't go as much as it is when the kids go to school, while they are home, because the mothers have other options rather than just giving Horlicks. For us, the most critical bet, Arnab, is going to be market development. In market development, we have to profit. We know that we have the expertise, and we know how to do that. It may take a few quarters here and there, but I'm very confident that we'll get the return. The good news for me is that the penetration is back and the market shares are back.
Okay. In terms of just to follow up on that, in terms of market development, is it like a long-term call or you know, it's something which you would expect would start giving results over the next 12-18 months also?
Well, absolutely. You know, you look at the categories that we have been focusing on, conditioners, for instance, or the premium skin, for instance, or the liquid. You know, just look at the way in which our liquid business has been growing in home care, for instance. Yeah, this is all based on the market development efforts that we have. Or the baby food, skin, green tea. Yeah, green tea, we were a very small player a few years back till we started the market development activity. We've not only grown, but we've become clearly number one leaders in this space. So market development, we know it, and it is not a one-year phenomenon. Market development in HC. You know, we have been growing categories where the penetration is near universal.
HC is a category where the penetration is in mid-20s%. The runway is there and market development, you know, not just me. My successor's successor will also keep talking about market development in HFD. This is going to continue for a long period of time, and that is how we are going to build this category into a real big category. At the end of the day, in a country like India, nutrition is a big issue. Malnutrition is a big issue. You know, many people do not have the micronutrients they need. Vitamins is a issue. This category is going to play a big part. High science range is another thing where we are going to play in a very big way.
Thanks. Thanks for that. My next question was just related to the previous answer you gave on e-commerce. My point is that, you know, the turnover of these businesses are quite small compared to actual turnover. They are all in those categories which you consider categories of the future. A lot of this incremental turnover in those categories is going to come through the other e-com platforms. Is it at all a concern that, you know, your premium range grows in line with let's say the 40% GMV growth that a Nykaa has? Do you need to have lots more interventions to have your fair share in that incremental pie?
Yeah. You know, first is I would be wrong in saying that, you know, at the premium end or at the luxury end, we have stitched all our portfolio. No, we have work to be done, and that is the reason why we set up this premium business unit. In the last one year since it's been in operation, we have seen absolutely good traction. Let me give you from another lens. You know, we talk about market development, and these are all mainly the premium end of the portfolio. This is about 20% of our portfolio, and this is a portfolio which is growing at an average of 1.5x-1.7x the normal growth rate of the company. Yeah. You know, even 20% of our portfolio of INR 50,000 crore is a pretty large portfolio.
There we are getting 8% growth rate.
Right. Right.
Please also understand that a large part of the growth that is coming from many of the e-commerce players are not consumer growth. They are channel shift growth.
Okay. Got it.
Yeah.
I like that central perspective. Thanks so much. Thanks so much for your time.
Thank you, Arnab Mitra.
Thank you. The next question is from the line of Alok Shah from Ambit Capital. Please go ahead.
Yeah, hello, sir. Thank you for giving me this opportunity. I have two questions. Firstly, in terms of the distribution side, while a lot has been reported, just wanted to hear your views on, you know, why this sort of general conflict, and, you know, what is it that the companies like yours will change by, you know, relying more on this channel. Any internal ratios that you would have as a company in your mind to not have an exposure to this channel in whatever percentage. Also the terms of trade, if you can talk a bit more on this. That's my first question.
Hello. Firstly, from our lens, it was much ado about nothing. There was a lot of news items and you know, this was not a distributor standoff as it has been made out to be. We have got over 3,000 distributors, and we have a very long-standing relationship with them. Most of our distributors in the state of Maharashtra, which was the lead in this, overwhelmingly conveyed to us that they would continue to meet the needs of our shoppers and consumers in an uninterrupted manner. You have to understand that many of our distributors are third generation distributors, yeah. For us, we treat them as partners integral to the company. Any issues that we have with them, we discuss it and address it bilaterally.
For us, it is very important to ensure that our distributors are strengthened and, importantly, the return on investment which we have committed to them, we ensure that they earn, because that's how they remain in business. Now, there is a federation of distributors, which where all the news came, the noise came and the press. Now, our representatives they wanted to engage with us, and we were very happy to engage with them. When we engaged with them, we have been talking about things which are macro issues. These are not bilateral issues. Issues about technology, issues about manpower, issues about credit in the market. Those are the things which we talked with the distributors.
I think it's good that the distributors have an association because they also need to bring very clearly aligned interests together. As far as our distributors are concerned, this is all about bilateral issues which we keep talking. Now, let me give you one example why we remain so committed to our distributor. Take Shikhar, for instance. We have got now over 7 lakh retailers who have adopted Shikhar, and every month the sales from Shikhar keeps going up. Now, this sales is not serviced directly by us. This sales is serviced by the distributors. We've been investing in technology to help our distributors. We are not circumventing the distributor. That is the reason why our distributors were very clear in telling us they're completely with us. I
f you were to ask me that, is this a big issue for us? Personally, not. We have been looking after our interest and protecting the interest of our distributors. To our distributors, the game is not about margin, the game is about return on investment. In return on investment, there is a numerator and a denominator. You could be playing on both to ensure you get a fair return.
Correct. Just a follow-up to that, you know, because you know, it is commonplace given that, you know, the share is only gonna go up. So would it be, you know, kind of to tell us how the terms of trade would be different? Because if you see what will happen is that today the distributor share could be X, but, you know, maybe potentially in the long run that could be 0.9X, depending on how margins or how market pans out. So, you know, for us to factor in a long-term scenario, for your company.
Yeah. Let me give you a little perspective. You know, this is very similar to when cash and carry came into India about a decade back. Yeah. They also serviced the retailers. We were very clear that cash and carry is going to supplement our existing distribution setup. It is not about either or. For us it is and. There are certain exclusives because, you know, at the end of the day we have 10 million outlets. We would be having the largest separately directly covered outlets, but still there is a large number of outlets which are serviced through wholesale. There could be better ways of servicing them and serving them better. That's the kind of role which cash and carry played.
We ensured that importantly the business runs in a manner that we protect the paramountcy of the general trade and the distribution business. They are still our largest channel, and even in 10 years from now, they will still remain the dominant channel. That's the reason we are investing in technology for them.
Right. You know, [inaudible]
Very similar to the modern trade. When modern trade came in, people were alluding to the same things. Now, we must understand that the kind of shoppers who are there are different than those who go to a general trade. That also implies that the assortment we sell over there are different than what we sell over there. From our perspective, you know, we will can't always endeavor to ensure that there is a right return on investment. You know, there was a time when all the salesmen were directly on the payroll of the distributor. Now, to ensure that we get better salesmen over there, we add another agency on whose payroll the salesman moves. Now, that does not mean that we are eliminating the distributor.
That cost has come out from the distributor, but we have still seen that the return on investment remains constant. There will be areas where we will bring in productivity and efficiency, and there will be areas where we will invest more to ensure that we have made an investment.
Fairly clear. Thank you very much. My second question, maybe while, of course, you know, we've touched upon D2C and, you know, you briefly talking about this premium division that you have set up. Are we looking at more disruptive innovations and, you know, because some of the innovations that, you know, we've been discussing, to me seems more as efficiency rather any disruptive innovations which will counter D2C. What can we expect, you know, specifically in which category, whether that be D2C or one of them?
See, now, when we look at innovations, and when we look at it from a perspective of disruptive innovations could be in many ways. It could be in products, it could be in business model. Yeah. Whether it is route to outlet or whether it is any other way, or it could be disruptive in processes which give you massive savings. Now, as a company which is high on innovation, we look at it from all angles. Now you may find sometime that certain trends are captured by some companies before us, so be it. Not all the trends would be captured first always by us. Yeah. But look at the way, you know, the way we have grown the liquid business in home care.
It's been absolutely fabulous. Look at the way we are now growing our air and fabric conditioner business. It's absolutely been fabulous. Look at the way we have, over the years, grown the color cosmetics business. We do innovate. Sometimes we are not first, but so be it. We will come second and still be better.
Got it. Lastly, you know, just squeezing one more. You know, I was concerned on the rural, while, you know, you were supposed to call out in the previous quarter. Somewhere, you know, that has reported very heavily and, you know. When I talk to construction pickup, infra pickup. Where in this whole curve of rural distress or talking of rural market stress you think we are in, and by when potentially, you know, you think we could be talking about more of a revival from rural?
You know, thank you for that question. You know, what also has happened that there are certain sectors during the COVID period have been impacted severely. If you look at restaurants, we do the Unilever Food Solutions service to the restaurants, about 30% of the restaurants across the country are shut down. If you look at tourism, hotel industry, they have been impacted severely. A lot of people have gone back to their hometowns and rural areas. That is the reason why the utilization of MGNREGA is higher than the pre-COVID years. The benefit, and what I believe, Alok, during the intervening period before the private capital investment kick-starts, which in turn would depend on private consumption moving at a much higher rate, government will have to play a big part.
That is the reason we believe that in this budget, the government of India should not be radically bringing down the fiscal deficit. They will have to play that big part and investments play a big part because it has a multiplier effect over many industries, creates jobs and it results then in the growth coming back. They would have to play a part. Right now, I think the government should also increase outlay on MGNREGA. If it's touched close to one lakh crore, perhaps it could be higher getting into the new year. Also the benefits being provided to the rural stressed and rural poor perhaps should continue for more time till the economy completely stabilizes.
Because think of it, Alok, at the end of this fiscal year, the economy would be at the same size as 2019, two years back. We have virtually as a country lost the nominal growth rate for two years. It's a recovery underway. Recovery has not yet fully happened.
Got it. Absolutely. I guess now that the state government also are now their spending.
Yes, absolutely.
Yeah. Okay. Thank you for my time and, Sujat, for the intrigue also.
Next question is from the line of Vivek Maheshwari from Jefferies. Please go ahead.
Hi. Good evening, Sanjiv and team.
Hi, Vivek.
Hi. A few questions just continuing with the earlier ones. One of the slides in your presentation where you had given decent market growth in volume terms, of course rural is negative. During this period, is it that urban is also not growing to actually being negative, Sanjiv?
Yeah. You know, urban volume growth is about stable, if you look at the last three months. again, you know, urban is not a homogeneous entity because there are also urban low-end consumers, and there are the high-end consumers which are much more resilient from a pricing perspective. the impact on rural is much more acute when compared to the urban volume growth numbers.
Got it. While you have explained, you know, right at the beginning as well as to the previous participant, but as I heard you know, it looks like that, you know, rural may still take time to recover. Will that be fair, you know, a fair conclusion?
You know, rural in our country depends on many factors. Yeah. One is, of course, the harvest has to be good. Thankfully the sowing has been good, so I see no reason why the harvest should not be good. The second is also the price, the role which was played by MSPs, etc. Because over the years, the wage rate inflation has been pretty low in rural area. The third is, you know, one aspect we should not forget that, in rural while the volume growths are negative, the value growth was still positive. Yeah. It's not reached the stage. If you look at the two-year calendar basis, then the value growth in rural would be looking even a bit better, but albeit 2019 was a soft year for rural areas.
A lot of dynamics are at play, but the consumption is not something which changes overnight. If you were to ask me, Vivek, will the February month result in the consumption changing? It doesn't happen. It turns around. It slows down also over a period of months, and it picks up also over a month. I think in many ways, the volume growth would be linked to the softening of the commodity prices. Yeah. The other variable is money in the hands of rural consumers. These are the two things which will play when you start seeing the volume growth come back. That's the reason during this period, our focus is on ensuring that we keep growing the market share and keep protecting our business model. Now, this is unprecedented.
We have not seen this kind of inflation in multiple commodities all coming together. That's the set of hands we have got, and importantly is how do we adapt to this hand and still play a game and come out as winners.
Sure. Got it. You know, Sanjiv, you made a comment that, you know, March quarter inflation on a sequential basis, you know, you are still or is going to be still higher. If I, you know, let's say marry this with the price hikes that you are taking, does it still mean that, you know, margins on a sequential basis may be, let's say, flat to 2%± here and there? Or do you think that, you know, because the portfolio is, you know, continuing to see price hike, and I'm guessing with this kind of inflation that you will have to still take up prices. So from a margin standpoint, should we see, let's say, stable given take?
Let me bring in my very capable CFO to give you a perspective.
Sure. Thanks for the question. See, what we have called out are very clearly two elements. In times like this when inflation is very firm, and as you mentioned that in March quarter 2022, we do expect sequential inflation further. What happened in the September quarter will happen in September quarter. Our decision will be very similar, and our action will be very similar to what we articulated in Q2. Number one priority is to ensure that we're able to grow our consumer franchise, and hence competitiveness and market share remains first of the call in terms of KPI that we want to deliver. The second KPI is of course to protect the business model, which means we want to ensure that as inflation further picks up, we want to maintain our EBITDA margin in a healthy range.
You see, last four or five quarters, we've seen inflation of a very high order, and we did that. Every time we have very consistent narrative that when inflation happens, we will drive very hard premium, we will maintain competitiveness, and we will maintain our margins in a healthy EBITDA range. This is exactly what we want to do to gain consumer franchise and keep protecting the business model.
Got it. One related question. You know, I was just reading recently, I mean, just like, you know, in the last couple of days, Indonesia is talking about, you know, in some ways tightening exports of palm. Do you have any views on, you know, its implication either on from a pricing standpoint or supply standpoint, for Hindustan Unilever?
See, overall palm as you know, which, you're right, Indonesia is our largest market, where palm is produced and sold along with Malaysia. We have not seen as yet any amount of implications on supplies of palm which comes in. Of course, lot of palm comes in the country. As you know, we use PFAD, which is, a byproduct which comes out in the processing and refining of the oil which happens. There's enough amount of supply of PFAD in the country. We don't see. As we speak now, we don't see any impact of supply issues with palm. Of course, these commodities are cyclical in nature. We do expect it to further firm up in March quarter and it remains, prices will be supported.
As we get into season and depending upon how the production takes place and if you also know what happened at the peak of COVID, when there were labor issues, availability of labor in palm plantations in Indonesia, production took a beating. It was not the agriculture output which was an issue, but labor was an issue. We do hope that with world coming out much better with far better vaccination and infection being not as severe as we've seen in earlier days, we should expect to see very good labor availability. And hence, hopefully the season is good, we should see good palm production. Now those variables we will only know as we get into season.
As we speak now, we don't see any stress in terms of volume availability, but yes, prices are supported in short term and hence we do see prices will remain supported in March quarter. Now, of course, the second variable is crude for us, which impacts for us home care business, impacts plastics. As you've seen at 80+ levels, crude has remained supported. That brings in a dynamics of price inflation across home care and across personal care as well, be it in personal care because of [inaudible] in plastics. Now the strategy remains exactly as I mentioned earlier, which is to keep balancing competitiveness and keep protecting the business model, and we will do that consistently.
You know, Vivek, I find this a bit counterintuitive, Indonesia curtailing supply because look at it from this lens, that Indonesia is not that they're going through a great economic cycle. They're going through tough times as well. Palm is one of their big export commodities. In fact, they will try to maximize their exports and help the economy rather than curtailing supply.
Sure. Sure, Sanjiv. The last question finally, which is a small one, but you have already spoken about Horlicks, Sanjiv. Horlicks is a powerful brand, but any plans to make it a platform or an umbrella brand and, you know, get into newer categories? Because you only spoke about HFD, but, you know, if you take a three-five year view, do you think Horlicks extending into newer segments?
You know, we are working on a huge number of innovations, and our first objective is to do the integration, get the fundamentals of the brand right, get the growth going in the core of the HFD, and then we will be looking at a different view. You're right, this category, this brand and the technology behind it is creating, giving us huge room to look at it in many different ways. I would say watch this space for me.
Got it. On that note, thank you and wish you all the very best.
Thank you, Vivek.
Thank you very much.
Thank you. The next question is from the line of Vishal Punmia from Nirmal Bang. Please go ahead.
Thank you for the opportunity. The question is on the volume growth. Similar to the domestic consumer sales, where you have mentioned for the two-year CAGR are excluding acquisitions. If you can also help with the UVG on a two-year CAGR basis, and also for the same number from previous quarters to basically understand the trend of UVG on a two-year CAGR basis excluding the acquisitions.
Yeah. Vishal, sorry. Vishal, you know, as a case we go by more volume terms. But in principle, if I may tell you that if you look at it whether from a market lens or whether you look at from our own company lens, the categories which are most impacted on volumes are those which have raw material input price rises going up much more. So these would be categories like surface cleaning. This would be categories like skin cleansing. And if you look at a two-year period, too, where the price would have gone up significantly. These are where the volumes for reasons that we have explained have been impacted, whether it's the market or whether it is our business. Yeah, Ritesh, anything else you would like to add?
No, Sanjiv. I think that's a good summary.
Would that trend be similar for Q2 and Q2 in terms of a two-year CAGR number? Or would it be declining or slightly higher in Q2?
Ritesh, any perspective on that, please?
See what has happened, one of the things which we called out earlier, that the composition of growth, typically in the past if you would have a composition where two-thirds growth would come from volume and one-third would come from price. That equation has evolved with significant inflation that we have seen, and we've gotten some serious levels of inflation. One of the charts we talked about, that the total material costs against the baseline of financial year 2020 is 30% increase. This is for all materials put together at total ACH level. A 30% inflation is a scale that we have not experienced in the past.
What has happened in last few quarters that the equation has changed where the growth is more price-led and volume, as you've seen, as we have reported. Last quarter we talk about UVG of 4%, current quarter we talk about UVG of 2%, that has got impacted. The balance has been more towards price compared to volume. This is also the case with the market as we saw in the market chart, where volumes in the market have taken more impact. Plus, you remember what we called out earlier, which impacted the price-point packs.
Where we take price increases on our INR 1, INR 2, INR 10 by reducing grammages, that impacts our volume. We called out in this quarter, for example, 16% was the impact of volume impact because of the price that we have done using grammages in that part of the portfolio. That should give you a little flavor between how the evolution is happening between price and between volume. Any specific, the question is, can you pick up with Ravi and Saurabh later for price.
Sure. Thank you for the answer. Thank you. That's all from my side.
Yeah. I'm just conscious of the time that we have, just a few minutes. Can you pick up two more questions and then we pick up some questions online as well, please?
Thank you. The next question is from the line of Percy Panthaki from IIFL. Please go ahead.
Hi, team. My question is on the demand front. While the volume growth in the demand scenario has remained lackluster in Q3, I think at least the recent data suggests that within Q3, sort of, December has been sort of a decelerating trend. Just wanted to understand if you think we've seen the bottom as far as demand is concerned or sort of Q4 can see even further pressure compared to what we saw in Q3.
Thanks, Percy. Percy, in fact, the December numbers of market growth are not very different from the last three months of NielsenIQ data.
Okay. I see. My mistake then.
Yeah.
Basically, there is no reason to believe that there is a further deceleration in demand scenario versus what we've seen in Q3 going ahead.
Yeah. As the data shows.
Okay. Secondly, I just wanted to ask your take on this. Are you concerned about the loss of wallet share of FMCG in the overall consumer spend? Because what I see is non-FMCG companies results as they are getting reported, be it more niche companies like let's say a Titan or a Godrej where the number of customers it serves are lesser. Even let's say something like Page where it's even at the low income level, et cetera. The top line growth accounted by the non-FMCG segments seems to be robust. In that sense it seems that FMCG overall is losing wallet share with the consumers. Is that a cause for concern? In your view, what is the reason behind this phenomenon?
Yeah. You know, firstly, I don't think so. Yeah, these are very different consumer occasions, very different consumer choices. In many of these cases there would also be different demand phenomena. Yeah, there would be a period during the COVID period where people would have spent less on household items like house painting, and now they would have engaged in painting. The flash is not keeping. I don't think this is a concern. I don't think from a mid to long-term basis there should be any concern about the robustness of the market of FMCG in the country.
Okay. Because, I look at all these companies and obviously I'm adjusting for the pent-up demand angle.
Yeah.
I still see that the demand there is much stronger compared to FMCG. While within FMCG you're doing well, you're gaining market share, the overall FMCG industry itself not doing as well compared to other areas of consumption spend was a little bit of a concern I had.
No, Percy, if you really look at it, even during the worst period of COVID, FMCG still grew, right?
Yeah.
There was a quarter or so where because of supply chain constraints, the demand did not disappear. Yeah, discretionary took a hit because people were not going out. There will be items which would be impacted because the school children are not stepping out. Those would be there. Fundamentally, I don't think there has been any reshaping of FMCG from a mid to long-term basis. Even now, the value is still there. Yeah, even when you look at 6%-7% value growth happening in the market, it is still there even during this tough situation. We should not get clouded by volume because, you know, volume gets cyclical when the costs go up, when the prices go up significantly.
Right. Just one hygiene question in terms of methodology. When NielsenIQ gives out market share and calculates market share, does it consider digital or e-commerce sales in the market share calculation?
NielsenIQ, now they have started picking up, right? Yes. That's right. They have started picking up. Not every D2C we can capture. Yeah. Of course, the pickup is there across channels now. It is still thin outside GD, but the pickups are slowly improving with trade giving more scale in other channels.
Right. Okay. That's all from me. Thank you for all the best, [Nifty].
Thank you. The next question is from the line of Latika Chopra from JP Morgan. Please go ahead.
Yeah. Hi. Thank you for the opportunity. You know, and thanks for all the insights.
Hi, P-
Hi. Hi, Sanjiv. Hi, Ritesh. I just had two, you know, quick clarifications on comments that you made earlier. One was the 2% impact on volume in the quarter. What was the similar kind of impact in Q2? Or what is 2% an incremental impact on volume sequentially?
If I just pick up, Latika. Yesterday we called out that in current quarter we had 2% impact of the price point back. It was a very similar range, maybe lesser, but in a similar range in the previous quarter as well, September quarter.
All right. Second question to you, Sanjiv. You know, I heard your comments on the D2C space. But as a leader in this beauty and personal care category, I just wanna hear your thoughts. Do you think, you know, evaluating, introducing, you know, Indian specific brands, you know, new brands with differentiated positioning could help cater to the niche segments better, you know, versus introducing variants under your well-known established brands or, you know, bringing some of your brands here? Also in this regard, would you want to participate here incrementally only organically via your premium business unit that you've talked about? Or would you be open to consider an M&A route a little more actively here as well?
You know, let me answer it in many ways. First is, you know, when we hear a lot of prominence being given to disruptors, we often forget the power of the whole brand. One should never forget that the incumbent's power through big brands is a very powerful force. The second important bit is you are absolutely right. When we look at the premium business unit, it's not just existing brands. We've brought in Love Beauty and Planet, we've brought in Simple, and those are doing exceedingly well. You're absolutely right also that there are Indian brands which have a great space to be expanded, and one of the brands we are looking at very clearly is in the makeup, for instance. Watch this space what happens on makeup going forward.
You have seen over the years, we are never averse to M&As. We always look at M&A from a lens of strategy, the value that we can create, and the timing at which we would like to get in. You know, just when we would not also like to go in and acquire a proposition which has not been proven in, and which has just got sales by throwing in a lot of money behind consumer. If there is not a distinctive property, then we also know it will not sustain in the long run. We are very circumspect, but we are looking at all options, and we are very clear we are the market leader in personal care, and we are not going to give up this space.
Sure. Thank you so much, Sanjiv and Ritesh for the answers.
Thank you.
Thank you.
Thank you. The next question is from the line of Jaykumar Doshi from Kotak. Please go ahead.
Hi. Thanks for the opportunity. My question just got answered, so I have just one request. Would it be possible for you to share some data points, something as per D2C that allows us to assess your progress on, in the D2C space or progress of DNVB first business unit, data point, maybe market share, maybe growth or the scale as a percentage of revenues, maybe specific to D2C?
You know, I leave it to Ritesh. Ritesh, your thoughts on this?
Yeah. What we have done is, Jaykumar, as you saw that we had activated innovation, we started covering the D2C space and D2C plus brands in our conversations. We'll continue to do that as more action keeps happening in that space. You will get from us regular updates on our business progress of D2C plus brands. For that matter, the way we are evolving our digital sales through multiple channels of B2B, D2C. Even the progress that we have done on D2C sales, you will keep getting updates from us.
Got it. Thank you so much.
Thank you.
Thank you. The next question is from the line of Mihir Shah from Nomura. Please go ahead.
Yeah, hi. Thank you team, and thank you for the opportunity. Just wanted to understand ad spends a bit better. While we have seen moderation this quarter on an absolute and a percentage of sales, the share of voice has been maintained versus share of market. Now, would this be because the market spends have moderated? If so, would higher sales from digital be a key reason? You know, as we understand, sales from digital may not require a similar quantum of ad spend versus other channels.
Ritesh, you do want to take this?
What we do for our incentives and sales promotion, there are two or three parameters which determine the amount of investment we do in a quarter. A, of course, the amount of innovations and activations we have that determine the level as to how much we want to invest in a quarter. The second important element is the competitiveness. Ultimately, what we do, as you saw also in the chart that we spoke about, is our share of voice, which means the amount of money we spent in relation to the industry, has been more than our share of market. We have maintained that in this quarter as well. Now, of course, what has happened given very high amount of cost inflation and price escalation across FMCG industry, we have seen different levels of investment across categories.
Our very clear strategy has been to ensure that we maintain healthy investments across our brands and driving market development across the portfolio. We have not pulled back on any of those. The absolute amount of money then gets, of course, determined by the total amount of investment that happens in the category and in the industry. A very clear call-out, as I mentioned, that our share of voice has remained above our share of market.
Understood. Okay. I will have another follow-up on this, but I'll take it offline. Second question I wanted to check with you, which was, you know, the detergent mix has seen higher single digit volume growth this time after quite some time flat all along the entire last year. Safe to assume this is because of improving mobility? Would it be a reasonable assumption that other impacted categories, which were impacted by mobility, can see a similar pickup in trend?
Oh, absolutely, Mihir Shah. You know, you would have seen, replacement cut by you know, more discretionary items and the health, nutrition and hygiene portfolio. Clearly, the more discretionary item, as mobility improved, the sales went up.
Thank you. No, that is very clear. That's all from my side. Thank you so much.
Thank you.
Thank you.
Thank you. The next question is from the line of Kunal Vora from BNP Paribas. Please go ahead.
Yeah. Thanks for the opportunity. Just two quick questions. First is, if you can help us understand the financial resources for [inaudible] , what should we expect over five-six years? What will be the industry mix from your side, and what are the benefits we are expecting? Second, I also wanted to check on coffee here. International prices have really shot up, while like in India we've not really seen any major increase in prices from especially in the consumer end. If I look at your sales, it's only about high single digits. Can you help us understand how the procurement was? What is your pricing strategy? Then can you pass on the same?
Okay. Can you hear me please? Let me be the first issue. On PLI, there are two clear conditions, Kunal. A is investment condition, and B is the growth that we bring in these categories. Over next six years, the way we are able to invest in these categories and the kind of growth we will end up garnering will determine the absolute amount of investment we end up making. If this can help you with a ballpark number, it will be INR 300 crore-INR 500 crore over next six years, including, as you know, from current financial year when scheme starts. It is INR 300-INR 500 crore range.
Let me also elaborate with the same breadth that our intention is to use these resources to invest in these categories to drive market development and to drive capabilities, so that we are able to move with good pace growth in these categories.
Just a follow-up on that. Will this come immediately or it'll be backended?
Well, as I mentioned, we should be linked, of course, say first of all, for this financial year as we speak, we are already in third quarter of this financial year. The way we get timed out is the rhythm of investment and rhythm of growth. I will not be able to give a timing year-wise, but suffice to say it'll be in the ballpark of INR 300-INR 500. What we're also going to do is we'll report this in other operating income. That's the line in which this revenue, this investment will get reported. You will begin to see as we keep reporting our information year-on-year, we will give more amount of insight into numbers.
Yes. My second question was on coffee, sorry.
Yeah. Can you repeat your second question? I had a little bit of static.
Yeah, sure. The question was that the international prices have moved up sharply. It may be a high, maybe highest in the decade. While in India we have not really seen any major increase in MRPs of coffee. Your own growth is in high single digits, which implies that there is not really much of an element of pricing or volume growth there. If you can help us understand how you are pricing and what kind of cost inflation you are seeing in coffee, and whether you will pass on this to the consumer.
For coffee we are seeing inflation in commodities in India as well, and but not of a scale which we have seen anywhere near to what kind of inflation up and down which we've happened to see. It's in a smaller narrow range compared to what we've seen in other commodities. I would not say something very substantial for us to talk about. It'll be important for us to see in quarters ahead how that pans out. I would not say it's something substantial for us to call out.
Is there a disconnect between India and global international price? Because internationally prices have moved sharply.
Okay. You saw that, yeah, sometimes there's a lag between how different geographies react. Commodities, the way we have seen, coffee also is a global commodity, it will catch up to international price trends. There might be a lag in this quarter or so, but it won't be more than that in my mind.
Understood. Nothing further. Thank you.
Kunal, you know, just to your question, if you look at the tea industry, it's not, for instance. It does not always move in tandem with the prices in Kenya or Sri Lanka or global prices.
Mm-hmm.
Yeah. Because these are many times, tea for instance, we are one of the largest producers, but we are also the largest consumer. If it is not much of interaction when we don't import large amounts of coffee or export to them, then many times it does not move at the same speed.
Understood. I see. That's all.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. A. Ravishankar for closing comments.
Thank you, Faizan. With that, we will now come to the end of the Q&A session. If there are still unanswered questions, please feel free to reach out to any of us at the IR team here, and we'd be happy to answer them. Before I end, let me also remind you that the playback of this event will be available on the investor relations website in a short while from now, and you can go back and refer to it. A copy of the results and the presentation, if not already with you, is on the website, and you can go back and refer to that as well. With that, we would like to draw this to a close. Thank you everyone for your participation, and have a great evening ahead. Stay safe, stay well. Thank you.
Thank you. Ladies and gentlemen, on behalf of Hindustan Unilever Limited, this concludes this conference call. Thank you for joining us. You may now disconnect your lines.