Ladies and gentlemen, good day and welcome to Hindustan Unilever Limited conference call for September quarter 2020. 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 signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Amit Sood, Group Controller and Head of Investor Relations. Thank you, and over to you, sir.
Thanks, Aman. Good afternoon and welcome to the conference call of Hindustan Unilever Limited. We will be covering this afternoon the results for quarter ended 30th September 2020. On the call from HUL end is Mr. Sanjiv Mehta, Chairman and Managing Director, Srinivas Phatak, Chief Financial Officer, HUL. We hope that you are staying safe and healthy. Given the exceptional circumstances created by COVID-19 outbreak, we are presenting the results to you from our respective homes, so please bear with us if there is any technical glitch. As is customary, we will start the presentation with Sanjiv sharing his perspective on market and an overview of how we are navigating the current environment. Then Srinivas will share with you our performance for the quarter with category highlights and our outlook for future.
Before we get started with the presentation, I would like to draw your attention to the safe harbor statement included in the presentation for good order's sake. With that, over to you, Sanjiv.
Thank you, Amit, and good afternoon, everyone. Thanks a ton for being in the call, and I do hope you and everyone that you love and cherish are safe and healthy. I think before I get into the results and give you my perspective, which I would be remiss if I don't express my thanks and gratitude to every member of HUL and extended value chain, especially our frontline heroes in factories and sales, for the outstanding commitment and hard work they've shown in these most difficult circumstances. We're also in equal measure humbled and honored to serve the everyday needs of Indian consumers. We also express our gratitude to all the frontline heroes in our country who are in a very commendable manner managing this pandemic.
On behalf of everyone at HUL, we also extend our deepest sympathies to all those who are struggling to cope with the crisis and who have most unfortunately lost a loved one. Our strategy is serving us well. For the last six months, cooped up at home, it has felt as if the world has come to a standstill. However, when we look beyond the headlines of COVID, the pace of change has been immense, be it in respect to consumer behaviors, digitization, creation of new business models, as well as destruction of long-standing ones. In these most demanding times, our performance in the September quarter has shown the true strength of HUL. We have demonstrated resilience in our portfolio of interventions, in our consistent setup of operational excellence, and in our financial strength.
We have unlocked new levels of agility in responding to the unprecedented fluctuations in demand, coupled with complex challenges in the supply chain. All of this has been possible because of the strength and grounding that we draw from a consistent strategic agenda, a multi-stakeholder model, five growth fundamentals. We continue to progress the purpose-led and future-fit agenda and reimagining HUL's digital transformation program, which has become even more critical after the pandemic. Our agenda to deliver consistent, competitive, profitable, and responsible growth remains unchanged. Our five growth fundamentals are crucial to building a strong and long-term business with excellent execution. At the same time, they remain extremely relevant for the short term and are proven helpful in keeping the business focused.
For example, there is no better time to focus on things such as product superiority, physical availability of our brands to demonstrate the positive contributions to society. And I'll take you through some of these in detail in the course of this call. The next chart, please. This quarter has seen operating environment improving progressively. Initially, the vertical lockdowns in different parts of the country posed multiple challenges to our supply chain. With sequential easing of lockdowns, increased mobility, and measures taken by the government and Reserve Bank, we have seen a step-up in economic activities. Major macroeconomic indicators are showing improvement from the unprecedented trough the economy had hit in April, May.
Normal monsoon, increased MSPs, increased MGNREGA outlays, and demand shift from urban to rural because of the shifting of people is ordering well for rural, and we are seeing rural markets as well as smaller towns perform relatively better. On the other hand, demand in metropolitan cities continues to be muted. Hence, while the worst may be behind us, we believe that as a consumption-driven economy, it is vital to get the consumption going so that the economy gets into a virtuous spiral. Next, coming to the commodities and currencies, we are witnessing unprecedented inflation peak. While crude has been benign, palm oil continues to remain at elevated levels. We believe the inflation in select categories is likely to continue in the near term. The next chart.
The health, safety, and well-being of our people is and will remain our utmost priority, and not just people who are on our rolls, but the entire ecosystem that works with us. We have implemented tiered operating protocols based on global best practices, WHO guidelines, and government requirements. We have set in place a comprehensive medical resilience plan with full-time doctors appointed in remote factories and 100% of our sites having active partnerships with hospitals for medical care and observation. We are doing proactive medical testing in high-incidence factories as per our tiered protocols and partnering with local authorities and communities to contain the impact of the pandemic. All our 20,000-plus employees are covered by the company medical plan, which includes support for COVID-19. We have further extended COVID insurance coverage to over 24,000 people in our outer core.
Even before COVID-19 hit the world, ensuring holistic employee well-being was very important for us at HUL. We were one of the first corporates to design a one-of-a-kind initiative, which is a well-being quotient, which enables employees to self-assess their state of well-being and get customized well-being support suited to one's own needs. The pandemic has redefined the importance of well-being. Hence, during this period, we have activated 6,000-plus hours of well-being initiatives for employees. We customize the frequency and intensity of solutions using a segmented approach, creating a bouquet of solutions to meet the exact needs of employees, such as expert-led sessions, role modeling by leaders, webinars conducted targeting specific challenges such as sleep, ergonomics, stress management, etc. Recently, we commenced the World Mental Health Week on 5th October with a day of thanks to all our employees.
The day was marked holiday for all employees as a token of gratitude. We planned the entire week on the theme "Care for myself, my team, and us all," and ran sessions with trained experts and partners touching over thousands of employees and their families, and have crafted personalized well-being programs for employees. We also rolled out a mental health champion program where we have built the capability of employees to be mental health champions and encouraging peers to reach out in case of them facing difficulty on mental well-being. As a result of all this, we are seeing record levels of 90% employee engagement at the UniVoice Anonymous poll that took place a few weeks back. Let me highlight a couple of extraordinary achievements here. The first one is that we have received the highest scores from our frontline heroes on taking pride in Unilever.
In the current environment, our frontline heroes have done tremendous hard work, and this high engagement level is a testimony to our investment in people. Other key highlight is that 94% of nutrition employees that came on board are taking pride in working for HUL. It's a testament to the flawless integration that took place. 91% of our employees are energized with purpose, inspiration, and a growth mindset. This year has been like no other, and keeping up energy engagement and morale has been very critical. Holistic well-being continues to be a high focus as we move ahead, and it will be intertwined with the leadership and people strategy. Our philosophy is very simple, ladies and gentlemen. We look after our people so that they look after our business. Organization agility quotient has never been this fast.
100% of our factories and depots are now operational during the last six months despite being hit by COVID-induced challenges. We have successfully signed eight-way settlements, including the nutrition factory. Disrupted supply lines in the nutrition business are now fully restored. Our supply service levels are back to pre-COVID normal. This is despite the challenges we faced due to strict and unplanned localized vertical lockdowns in many geographies. An important part of this responsiveness has also been building flexibility and supply security across the supply chain. This was achieved by actions such as identifying 120-plus alternate suppliers and approximately 90 approved and tested flex formulations. Again, I would like to thank my supply chain colleagues for their amazing work. Our supply chain today is well-positioned both on just-in-time and just-in-case requirements.
The environment demanded that we move at tremendous speed, and we have taken decisive actions to sharpen the execution edge. Let me give you a few examples. We stepped up our direct coverage by 10% sequentially and are now back to our pre-COVID levels. We increased our assortment offerings substantially from June quarter. Assortment levels at exit of September were 70% higher than June exit. While pandemic saw e-commerce reach inflection points, yet in many ways, it has also marked the renaissance of the humble next-door grocer. The general trade is now much more open to the adoption of technology, and therefore, digitizing and modernizing this channel is a big opportunity. At HUL, we have always worked with and for the Kirana stores. Our traditional trade ecosystem is defined on three pillars: demand capture, demand fulfillment, and demand generation. Technology is the backbone of these pillars.
Shikhar, our B2B ordering app, is now available in 2.7 lakh stores. We've also joined hands with SBI to enable credit extension in a seamless manner to the retailers within our ecosystem at attractive interest rates through the Shikhar app. Coming to e-commerce channels. With the cocooning effect and preference for everything online, there are clear tailwinds for e-commerce business. Online shopping, especially online grocery, will not revert to pre-COVID level once social restrictions are no longer in place. We initially focused on availability in the lockdown's early stages. We then partnered with retailers with category expertise and achieved a higher share of assortment. As a result, when countries started to unlock, within a month, our online availability was back at 80% of normative levels. This set us up for accelerating momentum.
We predicted sharper trends and category shifts and accordingly designed portfolio and communication specifically for the channel, which enabled us to perform competitively. As a result, we have gained shares from pre-COVID levels. E-commerce channel contribution for us has doubled on a year-on-year basis. Sequentially, the growth momentum has picked up significantly, and our growth in the channel is now 2x versus the June quarter of 2020. It has never been more relevant for brands to demonstrate their positive contribution to society. So we are investing in communication which are explicitly purposeful in consumer relevance. Lifebuoy and Domex are communicating the hygiene message and in doing so, they're also spreading awareness and providing relevant information for staying safe. Hamam, known for championing safety for women, with its Go Safe Outside campaign, spread the message of handwashing hygiene to stay protected at home.
Red Label extended its long-running Taste of Togetherness campaign through a simple but contemporary message of we can be socially connected even while we are physically distant. We have also repurposed communication across our hair care portfolio. For instance, Clinic Plus is creating relevance of hair wash with clean and strong proposition. Dove, on the other hand, is talking about damage repair. You may have to twist, tug, and pull hair to do what's needed, but with Dove, you don't have to worry about damage. That's the message. COVID, among many other things, has interrupted childhood as children are forced to be at home. Surf Excel's new communication, Paso Aao , nudges all the parents to restore childhood by becoming the children's friends and encourages active play between parents and the kids. We know that purposeful brands stand out, drive consumer choices, and perform better in the long run.
This, we believe, is true earlier, as well as during and after the crisis. Consumer behavior has changed radically in response to COVID-19 lockdown. We see the mega trends of clean living, preventive immunity, and home consumption are sticking with consumers. During the crisis, we have been focusing on the innovations that are consumer and contextually relevant. We have accelerated our innovation pipeline and launched more than 100-plus SKUs in the last six months. Our teams have reacted very quickly to capture the new growth opportunities that this crisis has presented. We brought into market a range of hygiene products in Lifebuoy, right from an army of sanitizers to germ-kill spray and wipes to laundry sanitizer. Within the newly acquired VWash portfolio, we launched an access pack in this quarter to build affordability and value in intimate hygiene categories.
In the home care division as well, we did a number of launches to take away consumers' home hygiene-related worries. Domex had disinfectant sprays, Domex Wipes, Surf Excel Anti-Germ Wash, Wheel, and Vim Anti-Germ Bar. In addition to good hygiene practices, we also need to have a healthy diet that builds the body's natural defense mechanism, and we are delighted to support our consumers in this journey with our immunity-boosting products with added zinc, which was launched in April just after we took over this business. The COVID-19 crisis has aggravated challenges faced by the vulnerable and underprivileged communities. To come out stronger, governments, business, and society must come together. As a responsible business, we have committed INR 100 crores. In the last six months, we have deployed nearly 70% of our commitment as a purpose-driven business. We have donated 14 million soaps to the vulnerable sections and essential workers.
We are supporting the hospitals with medical testing kits and equipment like ventilators, distributing soaps and sanitizers to health workers, police, sanitation workers, etc. We have upgraded medical facilities for COVID patients as well as provided them with protective gear and also after-death to the public health authority. We are supporting the nutritional needs of our frontline health workers. We are utilizing a pan-India reach to distribute food to needy people both in urban and rural India. Finally, we are a marketing company and have expertise in changing consumer behavior. So we have partnered with UNICEF to create campaigns encouraging people to adopt the right behavior. We partnered with BMC to create a public awareness campaign, Corona Se Daro Na, and our campaign, Break the Chain, Virus Ki Kadi Tod, has reached over 600 million people delivering simple but powerful messages on social distancing, handwashing, and generosity.
The next slide, please. We have delivered a competitive and profitable growth. Reported turnover growth stands at 15%, and domestic consumer growth, excluding the impact of merger of GSK and acquisition of VWash, is 3% for the quarter. From a competitive lens, we sustained our strong fundamentals. As per Kantar, 70% of our business is gaining penetration on a relative basis in March-August 2020. In the absence of other stable data, we used Kantar panel to look at volume shares as a surrogate measure, and more than 90% of our business is winning volume share. If you look at our performance sequentially, our business has picked up momentum. From the declines we saw in March and June quarter, we have accelerated to a positive growth trajectory. The 3% growth at an overall level marks the big positive we are seeing in the health, hygiene, and nutrition portfolio.
This portion of the business, constituting about 80%, has grown at 10%. The growth of this portfolio has almost doubled sequentially. This performance reflects our focus on portfolio interventions, channel-specific strategies, agility in operations, and execution problems. Looking forward, while we are cautiously optimistic about the near-term outlook, we are confident of the medium to long-term growth prospects of the FMCG sector. We will focus on competitive volume-led growth, absolute profit, and cash delivery. We remain committed to further strengthening our portfolio of brands through bigger and better innovations and unblinking defense of our strong market leadership position. The fundamental drivers of growth continue to be the three principles driving our execution, and we remain focused on delivering superior long-term financial performance through our sustainable business model. With this, let me now hand over to Srinivas, who will cover the details of our quarter's performance.
Srini, over to you, my friend.
Thank you, Sanjiv. Good evening, everyone, and I hope all of you can hear me. Sanjiv gave you a very good perspective about the overall economic environment and how we have progressed. Let me do a bit of a deep dive into some of the results and clarify some of the specifics. Obviously, the operating environment has improved progressively during the quarter as lockdowns have eased and the economic activity slowed. Agility and execution progress across the value chain enabled us to unlock the growth momentum and hence really deliver a competitive and a profitable performance. Our reported turnover stood at 16%, including the nutrition business as well as acquisition of VWash. On a like-for-like business, excluding the impact of M&A, our domestic consumer business in September quarter 2020 grew by 3% with a positive UVG of 1%.
Within this construct, 80% of our business, which comprises health, hygiene, and nutrition, actually did well with 10% USG. The discretionary and out-of-home categories, while they have improved sequentially as the restrictions have eased, but given that the consumers continue to stay at home and consume cautiously, have got impacted, and I will talk about them when we move into the other slides in detail. With respect to bottom line, our EBITDA at INR 2,869 crores registered a 30 basis points increase, but if I give you a bit of a flavor, our base business, which is excluding the acquisitions, actually had a decline of 60 basis points, whereas we got a benefit of 90 basis points coming from the nutrition business, which therefore translated into a 30 basis points increase on an overall basis.
Our profits after tax but before exceptional items grew by 11%, and our net profit at INR 2,009 crores grew by 9%. Some key exceptional items during the quarter include restructuring expenses of INR 69 crores in our supply chain, our M&A-related cost of INR 17 crores, which was net off by about INR 5 crores of surplus from sale of property. You would also recollect that the changes to the tax legislation in the form of the corporate tax cut were effective September 2020. That's in the base period. So therefore, if you really look at our base, there was one additional quarter of benefit from our corporate tax. This, in a manner, explains the difference between the PAT BI and the net profit to that extent.
When I look at, let's say, our divisions, it's fair to say that, look, Foods & Refreshments have accelerated, whereas home care and BPC have stabilized. Our F&R business has grown at 19%, and I think it's important to understand some of these numbers on a sequential basis. In June quarter, BPC had a negative growth of 12%, and F&R was negative 4%. From that perspective, we have now had BPC at a flat growth, and Foods & Refreshments accelerating at about 19%. Let's deep dive a little bit into the businesses and give you a flavor of the performance. Within home care, household care has delivered a strong double-digit growth, really led by penetration gains. Our Domex range now is going national, and as also Sanjiv talked about it, we have also expanded into some of the other categories and segments such as wipes and other benefits.
In fabric wash, as you are well aware, we have seen an easing in the crude prices, and given our long-lasting principles on how we manage this business, we have actually taken down prices in parts of our portfolio to actually pass on the benefits to the consumers. This is a structural and a fundamental way we run the business, and this we believe will serve us well in due course. Having said that, the category consumption of laundry has been adversely impacted due to confined living. A lot of people actually remain in home, and therefore some of the top-up purchases that we used to see when people used to step out have not come through to the levels that they should have. But we are confident that this is going to get corrected as the country continues to open up, and we'll unlock the opportunities.
Keeping in focus the clean living needs of the consumers, we have stepped up our innovation intensity with a number of launches like Surf Excel Anti-Germ Wash Booster, Vim Anti-Germ Bar, Vim Scrubbers, Domex Wipes, etc. In beauty and personal care, I think the heartening news is that skin cleansing, oral care, and hair care have all performed well with double-digit growth. Performance in Lifebuoy continues to be stellar on the back of penetration gains. With the purpose-led communication, Lifebuoy has been spreading awareness around the frequent handwashing habit, which is also a deterrent against the infection spread. It's also pleasing to see that Lux has started to deliver a good performance in the quarter, and this positions us well. Oral care delivered double-digit growth led by Closeup. We also had strong performance in hair as we repurposed the brands and focused innovations to help drive salience.
Sanjiv spoke about some of the campaigns, which included Suns ilk basically using Your Shine as an unstoppable campaign, which is encouraging young girls to find their shine even in dullest of days. So overall, hair care grew in double digits. When we look at skin care, the essential parts of skin care are resilient and are growing well, while the winter portfolio selling was impacted due to some muted trade sentiments and liquidity constraints. This, we believe, is more of a pipeline adjustment issue. Of course, you would realize that in this environment, liquidity is constrained. There is limited space on the shelf from a retailer point of view, and they would actually like to see a bit of an onset of winter before they start to order.
So what we believe is that this is more of a phasing issue which is going to come in, and no reason to see it as a structural issue at this stage. Both Glow & Lovely and Glow & Handsome are successfully on the shelves. Mera Glow Kona Roko campaign is encouraging girls to choose their identity, and this is really positioning us very well with the biggest change and transformation that we have done to a brand in our recent history. In Foods & Refreshments, I think we have really hit the sweet spot of leveraging the in-home consumption, and this is really helping us both from a foods point of view as well as beverages. In foods, both Kissan and Knorr have seen strong consumer traction, and foods have grown in double digits. Performance in tea was particularly stellar, with all our brands really growing in double digits.
As many of you would be aware, there has been unprecedented tea inflation ranging anywhere between 50%-70%. We have actually been very judicious in pricing across our portfolio. We are doing this dynamically, really leveraging our balance sheet strength. I think when we do this sensibly, I think it gives us a big opportunity to actually gain from the unorganized players and strengthen our competitor performance. And if it means that in the short term, we will actually take a bit in the gross margins, we are absolutely comfortable to do that because I think this gives us a massive opportunity to structurally reshape the market and gain competitively. Coffee continues to perform well through volume-led growth. Our nutrition business has been a second quarter, and we are actually quite pleased with the overall integration.
But as Sanjiv has spoken about, while our growth has been competitive, that is, we have been gaining shares as per Kantar panel, we did have supply chain issues. Two of our key sites, Rajahmundry and Nabha, were impacted because of COVID-19 and IR issues. This basically impacted the output that we could get. While from a secondary point of view, consumers were not impacted, but from a primary point of view, our pipelines had gone down. The good news is now these have all been sorted out, and we have all resolved them. So therefore, given the context of these disruptions, if you were to use GSK as a base, our growth would have been flat. But for the supply chain disruptions, we would have seen similar levels of growth as we saw in the previous quarter. Having said that, we have had many exciting innovations.
Boost has gone national. Horlicks actually has come back with a very powerful communication that celebrates the confidence that empowers children. With supply issues behind us and with an innovation funnel which is looking quite strong, we hope to see much better growth rates, and we are actually quite confident about the growth potential coming from the next quarter, and we should see the trajectory to move up. As I said, we have seen a sequential improvement in out-of-home consumption and ice creams. But given that we still are not fully out into the open, these businesses have seen an impact, albeit the loss has been lower than where we saw previously. I think this is a chart which we used, which is contextual. We used it in the previous quarter, and we want to actually repeat it this quarter.
It's giving really the flavor of the business through the lens of health, hygiene, and nutrition, discretionary, and out-of-home. Of course, this excludes the impact of the M&A portfolio, and therefore this is a construct which is explaining the 3% growth. 80% of our business has grown in 10% with a high contribution of underlying volume growth, and this is actually up from the 6% of previous quarter. When you look at 15% of our business, which comes from skin, color, and cosmetics, has registered a decline of 25% versus 45%, which was in June quarter. We saw sequential improvement as some parts of the essentials of the portfolio started to come back.
Colors and deodorants remain impacted, and they will take some time, and we need to see a bit more of the opening up of the economy and people coming more to work for these segments to really pick up. The out-of-home category is contributing about 5%, which is proportionately impacted. These declined by about 25%, but this compares to a 69% in June, so it's fair to say that we are seeing a sequential improvement, and that's also reflected in our base business, which has actually moved from minus 7 to a positive 3, or the reported growth, which has moved from 4% to 16% if you were to compare sequentially. From a P&L point of view, I think the headline statement summarizes it well. I think we will leverage all lines of P&L to continue to protect our business model and deliver a profitable growth.
And what you see on the chart is a whole host of measures. As I talked to you already about tea, we have been quite judicious, notwithstanding the inflation. We are looking at full net revenue management to manage this. And in line with our principles, I think prices during an inflationary period will be calibrated, will be judicious. But I think the big difference is that I think this time we will have a very differentiated approach to really gain competitively and actually gain from the unorganized segment. Crude prices continue to be benign, and to that extent, we have actually passed on some of the benefits in our home care portfolio by lowering the prices. The aspect and how we really run the savings agenda is well known to all of you. We have also moved down the path of trying to make more of our costs variable.
You've also seen that we are making some very good progress from a nutrition perspective. I think the important callout for us is that, look, we are continuing to invest and invest well behind our brands to remain competitive. We are also focusing both on reach as well as SOVs, given the higher intensity with respect to advertising. And on a sequential basis, our advertising spends are up INR 342 crores. I think it's also important to understand that we have also found we also had benefits of rate savings coming to the quarter, which in a manner, if you were to compare on a YOY basis, actually means that we have spent much more from a GRPs and a reach point of view. If I look at now the segmental performance, I think the numbers are fairly, fairly, fairly clear.
And from a segmental point of view, Foods & Refreshments here is not a comparable growth but includes the acquisition. Our margins continue to be quite healthy across all the three divisions, and I think this really gives us the good balance sheet and the P&L power to continue to drive our business. Therefore, when you see, I think September quarter performance has been a good step up in terms of sequential growth, and sequential margins have also been maintained. I think just a quick callout here. We have also had some prior period adjustments, which have had a favorable impact on our tax and the interest lines. In tax, approximately, we've got about INR 35 crores as a prior period, which also has a base of about INR 15 crores on INR 50 crores. And on the interest line, we have seen a benefit of about INR 17 crores.
I think this starts to help you to understand some of the movements between PBT, PAT, and net profit. A quick snapshot view of the first half performance. While the reported growth is at 10%, the domestic consumer growth still is at about negative 2%. Our EBITDA margins are up 8% on a YOY basis. Taking into account the performance of the company, I'm pleased to inform you that the board of directors have actually recommended an interim dividend of 14% per share for the year ended 31st March 2021. Looking ahead, and I think Sanjiv spoke about it, while the outbreak of COVID-19 has disrupted businesses massively, we believe that the worst is possibly behind us from an economic standpoint. And therefore, we are cautiously optimistic about the prospects of the business looking ahead. Rural growth is looking ahead.
Rural has been growing ahead of urban for various reasons, and I'm sure we will talk about it, and that we need for it to sustain. Urban is still looking a little uncertain for the various factors. In these circumstances, while it may be a little difficult to estimate market growth or recovery, I think it's fair to say that we will start to see good traction from here on, and hence the reason for us to be really cautiously optimistic. Inflation in select categories such as tea is likely to continue. While we will play all levers which are available to us, this could mean that gross margins will remain under pressure in the short term. But as I spoke to you, I think this is the right thing for us to do, is actually to focus on competitive volume-led growth.
And if it means that some of the margin expansion is not at the desired levels or the levels we would like to be, it's absolutely okay with us. We will invest to really drive growth, and I think we have enough levers for us to actually come back to our usual rhythm of competitive and profitable growth the way we have done it for some time now. I think the organizational strengths in this context remain unchanged, which is brand portfolio, which is talent and capabilities, and our organizational speed and agility. With these strengths and experience in our fold, we are placing our trust on driving competitive volume-led growth. Our focus for some time will be on absolute profits and cash delivery.
We are quite confident that we'll come out, and we are, and we will come out further stronger from this crisis, and we'll also remain confident of the medium to long-term prospects of the FMCG sector. Thank you for hearing us out, and we are very happy to take any questions at this stage. Over to Amit and the operator.
Thank you, Sanjiv. Thank you, Srinivas. With this, we will now move to the Q&A section. In addition to the audio, as always, our participants have an option to post questions through the web option on your screen. We will take those questions just before we end. Before we get started with the session, I would like to remind you that the call and Q&A session is only for institutional investors and analysts.
And therefore, if there is anyone else who is neither an investor nor an analyst but would like to engage with us or ask us a question, please feel free to reach out to the investor relations team. With that, I would like to hand back the call to you, Aman, to manage our next session.
Sure. Thank you very much. Ladies and gentlemen, we will now begin the question and answer session for the audio participants. Anyone who wishes to ask a question may press star and one on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use hands up while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question is from the line of Abneesh Roy from Edelweiss. Please go ahead.
Yeah, congrats, Sanjiv, on good performance and recovery. My first question is on the two brands which are being taken national. So Domex and Boost. So what is the thought process currently on both brands being taken national? Is it largely because of the COVID-19 opportunity, or do you think that there are other parameters which have been met? And so now finally, this is the time to take it to the next level. It could give more color to why you think this is the right time for both the brands.
Yeah, thank you, Abneesh. Let me talk about Domex. Yeah, Domex is a brand which we have been growing the roots in the southern part of the country for the last many years.
And you would recall we had also come out with powder Domex about two years back, which is doing reasonably well for Indian kind of squat toilets. So we were very clear that this is something which is a long-term play for us. And with COVID, one of the behaviors which is very clearly apparent is the fetish for cleanliness, disinfectant, and hygiene everywhere. And we have extended the range of Domex. Yeah, it is hypochlorite-based, and it kills immediately the germs and viruses. And it could not have been a more opportune time than now that after having sown the seeds in South India to take it national. Boost, we were very clear that it's a great brand, and there are pockets where it has huge potential. Keeping that in perspective, even before we consummated the deal, we were absolutely clear that we are going to take it national.
It is great heritage, great saliency, and it's now all about extending it. Abneesh and the team, at an opportune time, we will share with you the fabulous work that is happening on innovation in the HFD portfolio, which will really strengthen our presence and make the brand grow faster and taller and longer when it has come into our portfolio.
Sanjiv, on Boost, you see Horlicks saw 4x, 5x jump in sales once you took over in the next few years. So in Boost also, is that the thought process that this is a much lower hanging fruit versus scaling up Horlicks because it's not a pan-India presence?
You know, it is like this.
If you look at the markets and you map out the markets, there are markets which are white, there are markets which are brown, and there are markets where there is a very clear plan that Boost can play a much bigger game. And that is the reason why we have launched and taken it across the country. Earlier, it was only in certain pockets in the country. So I would say that after acquiring the GSK business, we are now even more confident about the growth potential of this business and also about the cost synergies that we'll bring forth in this business. And the wonderful bit has been, Abneesh, that the integration, despite all the constraints, has been near flawless.
The people who have come over to our fold are extremely delighted to be part of the journey which you would have seen from the Uni Voice scores.
Right. Sanjiv, my second question is on Foods. In Q1, if you see, biscuit players did amazingly well, and you also grew double digits. Now in Foods portfolio, you have again grown double digits, and in fact, you have called out acceleration. While biscuit has seen a significant slowdown from a 21% volume growth to just a 9% volume growth. So I wanted to understand consumer behavior here. Is it a more proactive step from you, which has prevented a slower growth quarter on quarter?
See, Abneesh, our Foods & Refreshment portfolio has, excluding the HFD, the nutrition part of the business which we acquired from GSK, has grown by 19%.
It's been a very impressive growth, and we have seen growth across the portfolio. Tea, we have been on a very good rhythm. Yeah, you've seen it over the years. Even after taking over leadership, we have kept strengthening our portfolio. Coffee has grown very handsomely. The entire foods range, whether it is Knorr, soups, whether it is Kissan range, the entire portfolio has grown majestically. Part of it, of course, is linked to the fact that people are at home. They are not going out to restaurants, and so the consumption has gone home. To an extent, it has also been offset by the fact that our out-of-home business, which included the vending business, has been impacted. Yeah, on an overall basis, I think Foods has delivered exceptional growth.
My last question is essentially on skincare.
Essentials have seen a resilient performance and, in fact, growing. What I could not understand was the winter selling wherein your percentage is lower.
No, let me explain on winter. You know, winter, what happens is generally the trade would start purchasing in the month of September. Yeah? This year, the trade has been a bit cautious, which is for understandable reasons. And they say, "We will pick it up not in September, but when the winter comes in." Yeah? And I perfectly understand because of the sentiments not only in our country but across the world that they did not want to lock in the inventories ahead of time. But as soon as you see the whiff of winter coming in, I'm certain they will start purchasing it.
But Sanjiv, I have a question. There's a lead time before customer can get it, trade stocks it first.
So won't it be a bit late when trade starts stocking when winter actually sets in? Because earlier years, we have seen that.
You know, winter runs for normally two, three months. Yeah, it starts in November, and not even three months, really, till the time of Holi, the winter products keep selling it. And so it may be at best a week's time. Our direct distribution will cover it in a week's time. Our indirect, it may take two weeks' time. And I'm sure that as the winter, as the temperature drops in the northern part of the country, this will pick up. So I'm not much very worried at this stage about the winter products. I believe that the offtake will happen, and the trade has been for reasons which one can understand why they have been circumspect in not picking it up earlier.
I think the only element to add to this, Abneesh, Abneesh, the only element to add is I think the amount of speed and agility at the back end from a supply chain point of view and go-to-market. I think we have also made significant step-up and improvements there, which will actually help us even if, let's say, some of the service time could be a little less than what we had earlier. So there is enough which has been done at our back end to cater to that.
And just to understand it fully, essentials in skincare is a bit difficult to understand for outsiders. Is winter, most of the winter products considered essentials by consumers as per you, or is it?
The way we articulated, it's about core of some of the portfolio.
So for example, if you look at Glow & Lovely and some of the key packs there, they've all done well. Yeah? So more than about two-thirds of that portfolio has actually started to see some decent growth. It's really the skincare part, which is linked with, sorry, the winter part, which is where we have called out as saying there's a bit of a phasing issue there.
Okay. Thanks a lot, panel . Thank you.
Thank you. The next question is from the line of Latika Chopra from JPMorgan. Please go ahead.
Hi, Sanjiv and Srini. I had two questions. The first one was I wanted to check on two aspects: promotional intensity and consumer downtrading. Are these trends evident over the recent months, and any specific categories you may want to call out where you would have come across these shifts?
First, there are two behaviors, Latika, which are very apparent. One is that in big cities, consumers are going in for larger packs, which also provides more value, but it also means less frequency of buying. And in smaller cities, there is more frequency of buying because they're more concerned with outlay. As far as downtrading is concerned, there is not one call that we could say which would be applicable across the categories. Yeah? For instance, most households have got a repertoire of brands. Yeah? If you are into a laundry category, then you would be having not just Surf Excel, but you would many times carry Rin and many times also carry Wheel, and you use it for different purposes.
But if you use Surf Excel for cleaning your children's clothes or your husband's clothes when they work out, and if they don't go out, then to that extent, you may not have the same level of consumption of the Surf Excel brand. Now, laundry, very clearly, which we have also indicated, has been impacted by the fact that with confined living, yeah, it is not something which is dramatic. It is not like out of home, but to an extent, it has been impacted. And I believe that when people start coming out, they would get back to it. So there has been no dramatic shift as far as downtrading is concerned.
Sure. And just on your point on laundry, clearly, hair care has come back to double-digit levels. We used to talk about part of skincare portfolio also doing well.
So as you exited the quarter with lockdowns easing and people stepping out more, did we see a sequential improvement even for laundry offtake?
It has remained consistent because the first, the June quarter and September quarter may not all be comparable because June quarter was also having an impact of pipeline fill-in against the pipeline shedding which happened during the March quarter. So I would say that it is not anything which is of a serious concern for us. Yeah? We have very strong portfolio brands, and they're all purpose-led brands, and we have a history of sustained high performance, and we'll get back to growth. We are seeing now very clearly things like liquids and all, things like fabric softeners or conditioners picking up speed. So I would believe even the mainstay of cleaning will also pick up.
Great.
Just the last one was on Glow & Lovely placement. Is the placement now done nationally? Is there still more room to cover here from a distribution perspective? And I'm not sure, but any sense on initial response from consumers regarding the transition feedback?
I would not like to declare victory at this stage. Yeah? But we are pleased with the performance.
Sure. And from a distribution perspective, have we covered it nationally as you intended to?
Yeah. Yeah. As we speak now, it has been covered.
Sure. Thank you so much.
Thank you. The next question is from the line of Percy Panthaki from IIFL. Please go ahead.
Hi. Good evening, team. My first question is on the 80% of your portfolio, which has done very well, and congratulations to you for that. It has grown at 10%.
But if I break this up a little further, see, this 80% includes home care and within that, detergents. And detergents have seen a decline this quarter. And despite that, the 80% portfolio has seen a 10% growth, which means excluding that detergents portfolio, the rest of the businesses have actually grown at some maybe 16%-17%. Now, if that is true, what really drives this growth, and is this a sustainable growth? Because is it just that there is, although your distributor inventories might not have changed, is it that the retailer inventory has changed? There's an upstocking at the retailer level or even at the consumer level, which is driving a 16%-17% growth? Or have you gained a huge amount of market share, and therefore the 16%-17% growth is not due to any kind of pipeline in any link of the distribution chain?
If you can just help me understand this number, I would be grateful.
Sure. Percy, obviously your math is very good. Yeah? If we look at Foods & Refreshment, like you said, has grown at 19%. Household care, yeah, that is home and hygiene, that's done brilliantly. Skin cleansing has done very well. All double-digit I'm talking about. Oral care has done very well. Hair has done very well. All these are in double digits. And when it comes to trade loading, in fact, we have cut down on our TTS spends. Yeah? So the question of loading the trade doesn't arise at all. And then there are two yardsticks that we look at from our perspective to look at the health of our business. One is penetration, which is so key for us.
In 70% of the business, despite the economic slowdown that is happening, we have gained penetration, relative penetration. The second aspect is while the normal using of Nielsen shares is still not available for us, but we look at a surrogate measure, which is the volume shares coming out of the Kantar household panel. In over 90% of the business, we are gaining handsome volume shares. Yeah? Kantar, as you know, is not trade. It is home consumption.
The only element I'll add, Percy, to what Sanji v has covered is, again, tea as a category. Given the levels of inflation that they have been and our ability to be judicious and our ability to manage it given our balance sheet strength also means that we are gaining handsomely versus unorganized.
And therefore, that's also a clear translation of share gain, which also means growth for us. And that's the only additional call out to what Sanjiv has added.
Understood. Understood. And if I basically look at your 10% growth of the 80% portfolio, would you be able to give some color on how that 10% would be broken up between urban and rural?
Yeah. I'll tell you what has happened today. Urban has been impacted because a lot of our business of out-of-home and discretionary, like the Lakme business, like the Dove business, and most of the out-of-home were all urban business. The other is one should also understand that there have been shifts of people from metropolitan cities to rural areas, yeah, with all the workers going back. They, at the end of the day, were also consumers of our goods, and they are pretty large substantive in numbers.
But the other is, of course, because people are not stepping out, channels like Modern Trade, etc., have been impacted, which is also very apparent. But suffice to say, and also one more fact, that rural is also coming from a low base. If you recall, Percy, that last year around the same time, we used to be worried about the rural consumption because that was slowed down. So they're coming from a low base, but suffice to say that rural is growing in the 80% of the portfolio much ahead of urban.
I see. Okay. So basically, rural, even in that 80%, if that 80% is 10, rural is much higher than that 10% number.
Yeah. Because it's confined living, urban, which has impacted consumption.
Right. Right. Understood. And finally, if I might ask on Fair and, sorry, Glow and Lovely now, basically, whatever weaknesses we've seen, yeah?
Sorry? I said get used to the new name, my friend.
Yeah. So in Glow & Lovely, whatever weakness we've seen, obviously, there is a COVID impact to that. But has the weakness been accentuated by the fact that it is undergoing a complete change in packaging, name, etc., etc., or there's no incremental effect of that over and above the COVID impact? So what I'm trying to say is that if the name change did not happen and the new product sort of, I mean, the entire relaunch did not happen, would you have seen similar sales performance of the brand or not?
See, the concept of Glow, the proposition of Glow, got thoroughly tested during the last relaunch. So I'm absolutely confident that we won't have an issue. And then when you look at it, our relaunch, the new stock started going in in September.
So in the September quarter, we have not seen the full impact of primary placement also of Glow & Lovely, but it would be more seen during the entire thing would be felt during the October-December period. But then you look at discretionary, which was running at -45% in the June quarter, has come down to -25%. So I am, but like I was telling Latika, I would not like to declare victory, but I am very confident that Glow & Lovely will be a big success.
Sure. Sure. That's it from me. Thanks. Thanks a lot and all the best.
Thank you.
Thank you. The next question is from the line of Vivek Maheshwar i from Jefferies. Please go ahead.
Hi. Good evening, everyone. A couple of questions again on this Fair & Lovely to Glow & Lovely migration.
First is this A&P spends, which have moved up quite a bit in the context of still pressures in out-of-home and discretionary. So would there be some of these spends which will be essentially because of the brand transition, something which will kind of reverse or will even out as we head into maybe third and the fourth quarter?
Srini, do you want to take this, please? Hi, Vivek.
So yeah, hi, Vivek. So will there be some spends related to Glow & Lovely transition? Absolutely, yes, because it is one of the biggest changes and launches. So we have spent in September quarter to an extent. We will also do it in December quarter.
I think the important aspect to also call out is as the country is opening up, yeah, and the focus shifts completely from a supplies point of view to really demand generation, which also therefore necessitates that you continue to invest behind your brands and make them competitive. Because if you really look at what had happened in June quarter, we had also pulled down spends quite a bit because there was an availability of stock and the country was disrupted. So clearly, from that point of view, I think there is a job of demand creation, and we have invested across all our categories. And therefore, you would see a step up in spends, whether it's home care or in beauty and personal care. The second aspect also is that, look, the same opportunity as we are seeing, many others are also looking at that.
So overall, if you see from an advertising point of view and media, spends have gone up. Clearly, in line with our principles, I think we are focusing on reach. We are focusing on getting the right SOVs. And therefore, we have spent. And if I look at December quarter, our objective would be to continue to invest further behind our brands. Yes, in due course, we will see some of the spends that we are doing on Glow & Lovely will start to taper down because there is a certain burst that you will do from a transformation and a transition point of view.
But that's more likely to come towards the March quarter, where we would have at least spent a few months in terms of building the awareness from a consumer's point of view, and then you'll start to see a bit of taper down, specifically to Glow & Lovely. But overall, I think it is the right time to continue to invest, and we are comfortable to invest to really drive demand generation.
Got it. And the other aspect is, I don't know whether it makes as much sense, but let's say Fair & Lovely was, in which ways, was a huge brand.
But let's say the fact that Fair & Lovely transforms into Glow & Lovely, does the word, as you move from, let's say, fairness to Glow, does that also change the dynamics in some ways that, let's say, fairness was targeting a particular subset within the skin portfolio, whereas in case of Glow, there is a bigger canvas to play with. Is that something which is possible in your view?
Sanjiv, any thoughts from your side?
Sorry, sorry. Say that again. I missed the question.
So Sanjiv, what I'm saying is, let's say, Fair & Lovely, in which ways, has been a huge brand, but it targets a particular, let's say, particular problem and a solution, which is essentially around fairness, which means the usage within the skincare is, so to speak, restrictive. Does Glow & Lovely, therefore, have a bigger canvas to play because it takes basically?
Absolutely.
The entire intention, Vivek, is not only to take the existing consumers along, but to take consumers who were hitherto not in Fair & Lovely into Glow & Lovely. And that is the reason why we first launched with the Glow proposition last year, and we talked about the blemish-free, the Glow, and that worked wonderfully well. We never had the kind of penetration increase what we saw last year in recent times. And that's the reason our intention is to not only carry the existing ones, but take more people onto this brand. But we are absolutely clear that we are not going to leave the existing consumers behind.
Sure. Sure. And just one more bit before I ask my last question.
So is there also a risk that some of the competitors, because fairness has been an important part of that skincare market, and now that effectively you are vacating that big market, there can be actually a rising competition from, let's say, locals or whoever, and that actually becomes a problem?
That is the reason we are reframing the market. Yeah? It is not that the consumers would not be getting the benefits that they got when they were using Fair & Lovely. They would be getting that benefits, but some of the other consumers who were earlier not in Fair & Lovely and want to get into it, they wouldn't be coming in because that's what the brand delivers also. So we would be reframing as a market leader. I think the strength lies in us to reposition the market, and that's what we would be doing.
Got it. And lastly, Sanjiv, let's say right from February or March of this year, the initial phase of entire COVID bit was around lockdown and supply chain, which gradually has kind of stabilized. But the way in which you have articulated about winter and some of the risks, does that mean, let's say, third quarter will be more supply-led because there is, let's say, a latent demand, supply chain-related issues?
So I understand that you use the. No, I don't expect, Vivek, that unless there is a severe second wave and then again country goes to a hard lockdown, yeah, and if that doesn't happen, I don't think there would be supply-led constraints because we have suffered.
Sanjiv, sorry, my specific question is just around your winter portfolio because that's a very.
Well, winter portfolio, Vivek, is more stemming from, I think, shopper sentiments, the trader sentiments.
Yeah, it's stemming more from that. Yeah, normally when the environment is bullish and buoyant, yeah, people are willing to pick up the stocks before the winter arrives. This time, they feel that, okay, let the winter come, but during the period, let us focus on what is essential today. That's been the trade sentiment.
So, and I think in a manner, it's quite intuitive to understand, Vivek, if you see today, there is a certain liquidity constraint and there is a certain mood and sentiment. So each shop is trying to actually turn over their stock as many times as they can. So clearly, there is a lot of traction for health, hygiene, nutrition, which is buying in and selling out very quickly.
Obviously, with winter taking a little bit of time, I think just in a bit of a wait-and-watch mode, and at the slightest onset of winter, the stocks will then start to completely fly. So I don't think it is such an alarming issue, and I think I just want to calm all of you and make that absolutely clear. It's a phasing issue of a few weeks rather than anything which is structural. And it's important to understand that it's not uncommon. We've also seen this in the past. This tends to happen in the current environment, which is quite logical. Just put yourself in the shoes of a retailer, and it actually starts to make inherent sense. And it's an industry-wide piece. It's not so particularly specific to HUL. It's the same thing which you see across the board, across all manufacturers.
Got it. Got it. All right.
Thank you very much, Sanjiv and Srini. Wish you all the very best.
Thank you.
Thank you. The next question is from the line of Aditesh Soman from Goldman Sachs. Please go ahead.
Hi. Good evening. So my question was that while we've seen overall growth or volume growth being flattish, there have been some categories that have done exceptionally well and grown much faster than one would have envisioned, and then some have seen the other impact on the other side. So once the dust settles, I mean, where would you expect growth overall to settle down? I mean, would it be sort of mid to high single digits where we were earlier, or is sort of a low single digit number the new normal?
And how do you think to, I mean, because obviously in some of these categories where you've had very high growth, those would normalize and vice versa.
Okay. So basically, you're talking about what's the scenario for mid to long term, right? That's what essentially you're meaning. Now, yeah, now look at our last 10 years' history. In the last 10 years' history, despite GST, despite rural stress because of the lack of rains, because of demonetization, as a company, we have grown at 9%. Yeah. And when you look at the per capita consumption of FMCG in the country, it's just about $40. And I always talk about it that Indonesia is 1.5x and China is 3x India. So there is massive headroom to grow.
We have a history, and I believe our portfolio and our brands are much stronger today than they were in the beginning of the last decade. Yeah. So that should give you, and also our capability. So that should give you some insights into what you need to look at when you portray the mid to long term for others. And I'm also very bullish on the Indian economy. I feel sooner or later we'll get back a rhythm, sooner rather than later.
No, fair enough. I think that's clear. And in terms of, I think you talked about Shikhar and that doing quite well. So what is the main selling point for the retailer in signing up for Shikhar, especially post-COVID, where I'm assuming that there are several players trying to tie up local Kirana shops?
First, very simple, that we would be having amongst the branded, we would be the single largest player for a grocery. Yeah. So that is the big thing. Second is our relationship. Yeah. Third is the capability. And people who are joining up for Shikhar, adopting Shikhar, it is not that we have stopped selling salesmen. But the trader knows that in between a salesman's visit, or if a salesman can't come, he can still place an order and we will service it. Yeah. And on top of it now, we are also bringing in the benefit of the SBI agreement that we have entered into. So that would become a very potent combination.
No, fair enough. That's good.
And just in terms of from a retailer's perspective, when they tie up with Shikhar, would they then need to tie up with, say, a separate agreement for Colgate or for P&G? So the question being that would you need then multiple apps for different companies? Because while we are clearly a market leader in some categories, there would be other players that are leaders in others.
Yeah. So I don't know whether Sanjiv caught that question. So look, Shikhar today is designed as from an HUL perspective, yeah, because it's retailers really ordering stuff from our distributors. And therefore, along with comes the package of complete services, whether it is the retailer credit, whether it is servicing within 24 hours. Clearly, I think our opportunities to scale this up very quickly, scale this up fast. Because in a manner, if you do that, the retailer benefits.
Even today, if you see, he's got multiple salespeople calling them in. What this is doing for us is actually digitizing it, making it a clearer demand signal, reduces the need for a retailer to keep a lot of inventory because it's closest to the demand, and whatever they order then for that starts getting serviced within 24 hours and 48 hours. And on top, you're able to offer the credit facility through our partnership with SBI. I think if you do all of this well, and I think the retailers really value on-time service, what they want, and if they get it in time, I think that's still going to be a big USP. So that's really where we are focusing on. And in due course, we will start to look at other alternatives like we have done, whether it is POS solutions to using data and analytics to Shikhar.
It's a combination and suite of solutions that we are bringing in for the benefit of the retailers. I think that will be our strategy to actually play and win in the segment.
Thanks, Sanjiv and Srini. I think that's clear. Very helpful. Thanks.
Thank you. The next question is from the line of Arnab Mitra from Credit Suisse. Please go ahead.
Yeah. Hi. Thanks for the opportunity. The first question I had was regarding Horlicks. So if I heard Srini rightly, I think you mentioned that you've been flat year on year, but if the supply disruption had not happened, maybe you would have grown somewhat like 5%. So my question was that in the current environment, isn't that a bit of an underwhelming growth for Horlicks, a brand which is focused on health, nutrition, immunity, and with the added distribution muscle of HUL?
So is there any reason why you would expect this brand not to be in the better part of your bucket in hygiene, health, and nutrition, and any other points which could have maybe prevented that kind of an upsurge in the current quarter?
You see, let me take this question. Yeah. First is in the first six months, we were integrating the business. And we have still not gone to a stage where we have used our distribution muscle to widen the distribution. Yeah. And the second is the entire innovation pipeline, we are going to unveil it, and that's not yet unveiled. So I would say watch the space. But looking at the business, we remain absolutely pleased that we are glad we acquired this business.
So no, maybe just adding to what Sanjiv has said.
Look, you also have to interpret health, hygiene, and nutrition, and today it operates at different segments as far as consumers think. Anything which is, for want of a better word, anything which is an instant gratification and immediate attention, obviously there is more demand. And therefore, certain spaces in terms of hygiene, whether it's handwash, today the traction is a lot more. Nutrition and immunity is absolutely a right need space, and there is a certain demand which is coming through. So therefore, again, when you look at this, again, that's why the reason what he said is that one aspect is when you start to think about the white powders and brown and how do you go further on brown. That's one area of opportunity. Second is today, there is a certain segment that we are talking about, which is kids and young adults.
And therefore, that's really repositioning the communication there to make it more relevant and drive more traction. The third is, Sanjiv, as he said, is wait and watch for the innovation funnel, which will come and therefore address the other needs groups. I think that's going to give a different gamut of growth. And the final piece, and I think we have said that in the past, and I think I want all of you to understand this well, is to get the full might of the Unilever and HUL distribution, you need to have systems fully integrated. So today, because that's when you have the power of the algorithm and the power of planning, which comes down to a micro level, which comes in.
Today, we are actually trying to capture the low-hanging fruit, whereas the big act will really come when we get the end-to-end system integration, which is more likely to be around January and February when we merge the systems and a few weeks thereafter, or a few months thereafter. Actually, I love this question because in many manners, people actually have enormous amounts of challenges in the first six months of integration. I think we're really having a very good and a reasonable shift.
Yes, you would like to see more growth.
Yes, we would like to see more growth. But definitely watch the space, and I think the trajectory only then starts to get better from here on.
Sure. Thanks so much. And my last question was on this, again, going back to the discretionary personal care portfolio, which has declined 25%.
So, I think you've given your perspectives on how you think this would recover, but does it look like a long haul relative to, let's say, something like a fabric wash? Because this is seen as a bit of a more category which plays on socialization. People are still going to be wearing masks when they're going out. Does this look like a much more longer recovery curve than some of the other segments which are recovering faster?
If you see quarter on quarter from -70%, it has come down to -45%, it's come down to -25%. So yeah, it will be to an extent linked to not just wearing masks, but I think primarily people stepping out. Yeah. Once you step out, you would invariably want to dress up well, want to use the makeup, want to use the deo.
And I would believe this should then pick up. If I look at what's happening in the Western world, yeah, these categories have picked up speed pretty fast with the opening up of the economy and people stepping out.
Okay. Thanks, Sanjiv and Srini. All the best.
Thank you.
Yeah. Hi. Conscious of time, so maybe one more person, and then we'll also start looking at some of the calls on the web link.
Sure. Sir, thank you. The next question is from the line of Shirish Pardeshi from Centrum Broking. Please go ahead.
Hey, hi, Sanjiv and Srini. Thanks for the opportunity. I have a few questions. The first question is purely coming from the observation that in the current scenario, we have seen that modern trade has not come back to its full potential.
So there are actually two questions that in your understanding, how much the retrieval has happened in modern trade? And the other question which I have related on that is that the alternate channels have grown much faster. So is that there will be a modern trade consolidation will happen, and that will be the next game changer for us?
Consolidation is a different thing. Here, modern trade has been impacted by the simple fact that people have not been stepping out and going to the store. Yeah. For a long period of time, modern trade stores which were in malls were not even allowed to function. So this is really people's willingness to move out and access to the stores which has impacted modern stores.
I don't think from a long-term perspective, the demand for or the shift towards modern trade is going to stop because it gives consumers a much better shopping experience. There is a bigger assortment. There is very clearly the theater impact inside the stores. And people like the ambience. That's the reason they go. And in many small towns, it is very clear that this is a family outing, going out to a mall and then going out to a store. So I don't think it will. So this is on modern trade. Consolidation is different dynamics. It happens in different industries depending on how strong people are and how fragmented it is. And so from our perspective, yeah, we h ave built capabilities. And as you would be knowing, our shares in modern trade are higher than general trade. And our shares in e-commerce are higher than modern trade.
So we built over the years a lot of capabilities, and we have very sound strategic relationships with the modern trade players.
The reason why I was asking is that the traditional trade has done better in the absence of not many everyone is using e-commerce channel or digital platform, and from that perspective, I thought that modern trade is one of the laggards, and I think if that is the positiveness or that's the point which you have said, I think we can expect the normalcy will also drive the higher growth for us in the modern trade channel because we have a dominating share.
Oh, absolutely. GT did well, is because of proximity. People suddenly realize it's much easier to go to a nearby store and pick it up rather than go to a modern trade store where you may find many people.
So there are many stories coming out of it. First is don't write the obituary of GT. Yeah. Over the years, there would be a secular shift towards modern trade and e-commerce. It's bound to happen. But even after 10 years, I would believe India would be a country where GT would still be the biggest channel, but it will be a GT which has adopted technology, it is connected, and would have adopted the science of retailing.
Okay. Okay. My last question is to Srini. And this goes back to the first April conversation on the integration part. And you said that once after the integration is done, maybe in the mid-year. And I'm pushing you, if you can tell us what are the further synergies which you have drawn after integration.
Is that the number which you have indicated to us stands or whether there's a change in thought going forward? And the second part, which in your closing remark, you said that there is a pressure on margin. And maybe if you can elaborate, what are the pressure points we are expecting on margin other than the ad spend?
So quick comments. So first, no change to the outlook on. Can you hear me? Yeah. Yeah. No change to what we had shared with you with respect to the synergies on nutrition, be it our growth aspirations, ambition, or the unlocking of the P&L. And you've already started to see that we are realizing some of them faster than our plans.
Second, if you receive it from a gross margin point of view, look, category mix is something which will continue to be a bit of an adverse one, not very well on many parts of our portfolio. There is an adverse component when it comes to on the discretionary side. Discretionary side by nature is also a bit profitable. I also talked to you about the levels of inflation that we are seeing in tea, somewhere between 50%-70%. And one needs to be judicious in terms of how you manage that. But let's say these are two big callouts which can continue to be headwinds for some time. And these need to be managed well. And I think there are very tried and tested principles that in case of inflation, you need to be calibrated, you need to be judicious.
If you do that, you will capture significant growth. I think the current environment gives us a great opportunity to do that, especially with reference to tea. We will do that. If it means that our gross margins are slightly diluted or under pressure, that's completely all right. Second point on BMI, to me, I think we need to invest behind brands. I disagree that BMI is something discretionary and therefore you dial it up and dial it down based on where your P&L shape is. I think Sanjiv has spoken about this many times. We've invested even during the quarters of demonetization or GST. This is again the right kind of time to actually start spending behind your brands to make them more relevant and salient. If it means that we have to dial up to communicate, we will.
If it means that we need to spend to be more competitive, we will. I think at about 25.5% operating margin, I think it's a very good shape and it actually gives us the ammunition to navigate these challenging times better than anyone else. Hopefully, that gives you a full context. I think the overall model of competitive growth and profitable growth, absolutely the right place to be in. We are committed to that. But I think the way you navigate out of these times, we'll have a slightly different approach. And if it means a bit of gross margin dilution, that's absolutely all right.
That's really helpful, Srini. And thanks. All the best to you. And let's have the next round of conversation next quarter. Thank you.
Thank you.
Thank you. To the next question, that is from the line of Harit Kapoor from Investec. Please go ahead.
Yeah. Hi. So just had two questions. So you obviously explained on the gross margin part fairly well, but I just wanted to get your sense on while the mix continues to probably sequentially improve, and probably you have seen the worst on the tea price inflation already in this quarter, shouldn't sequentially or gradually the gross margin trajectory start to look up a little bit?
I'd say it will, and it should. For example, if you see already in two of our divisions, sequentially, because YOY is a slightly different picture with many ins and outs and what's happened to it. Sequentially, if you start to see already the picture is a bit better in home care. Sequentially, it's already a bit better in Foods & Refreshments. Sorry.
Home care and beauty and personal care. So clearly, we have seen an improvement there, including even if you see even from a nutrition point of view, sequentially, it's better. There are parts of our business which are still being a case in point where I think sequentially, it's not where we would like it to be. Even mix for that matter, sequentially has got a bit better. So there are many things which are trending right. And therefore, when we make the comment about gross margins being under pressure, it's also with a lens of where you were a year or a year ago. And while you're sequentially getting better, it's not back to where you were about a year ago.
Yeah. Fair point. Fair point. And on the margin side again, in your outlook statement in the presentation, you spoke about competitive growth, absolute profits, and cash generation.
The modest margin expansion thought process is, that something that you should continue to expect, maybe not on a quarterly basis, but even on an annual basis, that's something that you still abide by, right?
Yeah. So fundamentally, look, that has not changed for the last 10 years. And I don't think there's any reason to change that now. So the model of competitive growth, profitable growth, sustainable growth, and it is absolutely responsible growth as we have committed to. Yes, there are periods of time where you have seen significant margin expansion, more than modest. And at a certain point in time, we had difficulty even explaining modest to you guys. These are the times where I think we need to be actually, if you call it a slightly modest, and do what is right for consumer and right to protect the business model.
If we get that going, I think to get back to a normal rhythm where the growth is competitive ahead of the market and a modest margin expansion will completely come back. I think it's a bit of a timing issue and a phasing issue, but not of a fundamental approach or strategy and how we'll implement it.
Thank you.
Srini, should we now move to the Q&A questions if that's okay?
Yeah. I'm also conscious that again, at 6 o'clock, we also have a Prime Minister's webcast. I think many of us would be keen to view that. So what I will do is that I'll pick up some of the web questions quickly.
The first question is from Paritosh Adalja from Parag Parikh Financial Advisory Services and what's the volume growth in September quarter?
I think we have already answered that both from a USG/UVG point of view, where we said that USG is 3%, UVG is one. But even within that, there are many ins and outs. And I think it's important for people to understand. So when we talked about 80% of our business actually growing in 10%, you'll again see a very good and a sizable component of volumes within that. But because then you start getting hit on discretionary and when you start getting hit on out-of-home consumption, that everything tends to be a volume hit. And that's why you will aggregate and end up at a USG of three and a UVG of one. I hope that really clarifies. Vikas Maheshwari just calls himself an investor. Not sure whether he's an institution or an individual.
What's the breakdown of Foods & Refreshments revenue of GSK and HUL, and what's the volume growth?
We're not splitting this up, but you can simply understand and do the math. It's quite simple because we have spoken to you about 19% on a comparable basis and about 83% FNR on its aggregate. The difference is obviously what is nutrition. I also told you that nutrition is flat year on year. I think that gives you a real good sense of where we are. I've already addressed the volume growth question.
I think Aditesh Soman from Goldman Sachs has asked a question, but I think Aditesh, you also had a chance to speak subsequent to this question. And I think we have already answered the questions relating to sequential improvement key categories and the near-term growth drivers. I'm moving to Tejas Shah from Spark Capital.
If you can share the initial feedback from trade partners on Shikhar app in HUL's B2B, and how should we see the role of distributors and stockists in the value chain?
I think it's a bit early to be talking about a very clear and a specific feedback. I think where people have adopted it and used it for a few months have found it extremely valuable, given that it gives them an opportunity, it gives them flexibility, it gives them to order when needed, as needed, and it is giving them flexibility of deliveries within 24 and 48 hours. And more importantly, as we go down the path of using the SBI partnership to give them credit and linking it to Shikhar app, it will only enhance the value proposition.
Today, the distributors and stockists continue to be very relevant because all that we are doing through the B2B retailer app is connecting the retailer to a distributor, which is therefore enabling the servicing of the order, and therefore there is no fundamental change to any of our partners' roles today, whether it's in terms of demand capture, demand generation, or demand fulfillment.
The next question is from Ishaan Jethwani , who is an individual investor.
As a principle, we do not; just this forum is not for individual investors, Ishaan, and we request you to connect with our investor relations and corporate communications department, but having said that, I think in the course of your call, the reasons for sales growth and net profit growth have already been explained.
Ketan Sangvi from Klethuno Investment Advisors, congratulations on a good set of numbers.
What would be the impact of drag on tea in the tea segment? What would be the impact?
Well, I think there has got a few percentage points to it. I'm not giving you a specific number because I think it also gives us the advantage and the ability to manage portfolios across divisions, across categories. So we have no intentions of calling that out. Suffice it to say that our margins from an F&R segment at 17% are fundamentally attractive. They were about 19 or 20 in the previous quarter. But as we have always said, given in the 17%-18% range, I think it gives us enough ammunition to continue to invest to grow. And I think that's the way we will really approach our category margins to really drive growth.
Then we have the Sameer Singh from Haitong.
Are rising margins putting pressure on top-line growth or overall COVID situation?
Not entirely clear, but I think we've had a comprehensive discussion on growth on margins. Hopefully, Sameer, and that's answering your question in a manner that you asked for it.
There is Anubhav Sahu from Emkay Research. Emkay Research, his question is, it appears to be a strategic shift when we are talking about taking a dip in gross margins to gain market share. It's unlike earlier we've had limited competition and the limited need to compromise. What is the underlying factor for the shift?
First and foremost, there is no underlying strategic shift that we are talking about. So I want to make it amply clear. I think you need to go back to the principles through which we have run this business.
When prices go lower, when commodity comes off, you need to move very swiftly and pass on that drop in commodity to consumers. There you need to make dramatic big moves. If you don't, others will, and you'll lose your consumer franchise. Tried and tested again is that when there is significant inflation, and today what we are talking about between 50%-70% is the kind of inflation which no one has seen in this category over a decade. When you have such a situation, you will absolutely be calibrated in terms of how you will take up pricing, and you will do that, and that's exactly what we are doing. On top of it, I think what it gives you is today a fundamental and a structural opportunity.
I think rather than a strategic shift, you need to think about a structural strategic opportunity for us that if we actually play this game well with the strength of our brands, with the agility of our portfolio, and our balance sheet strength, this is a great opportunity to actually drive conversion from the unorganized sector into the organized sector of tea. Because the important element to highlight here is that all put together today, organized sector is only half of the market. And I think that is a fundamental shift that we want to drive. And if you're able to do that successfully and retain even a certain amount of people who make that upgradation, you fundamentally change the trajectory of this category. And in due course, with prices correct and about when the next crop comes in, you will normalize the business.
So I think it's a strategic way to actually drive upgradation and continue to run a business model which is attractive. And I think finally, the brass tacks still hold. Every business needs to have a right fundamental business model, and tea does have that. There's no shift there.
The next question is again from Anubhav Sahu on oral care. We've talked about oral care for some time now. He's saying, "Wanted your views on oral care, and do you see revival in oral care is sustainable, or there is more to be done in terms of launches? Has naturals taken a backseat given the general downgrading sentiment?"
I think Sanjiv has clarified that there are no structural changes to whether it's premiumization or naturals as a fundamental trend.
I don't think that should be that it's not impacted in any manner, and I don't think we should really read it from the current environment that we are passing through. I think you've heard for some time now that Close-Up as a brand for us has continued to do well and has been gaining traction. I think we are well positioned to do that. On Pepsodent, I think it's a bit of work in progress, and that will continue to take time for us. But for now, I think we're quite delighted with the way our oral care business led by Close-Up is progressing, and it's grown in double digit.
Quick one from Latika. She wanted to get a margin expansion sense on home care, personal care, and foods. If you would talk through that.
I think Latika have already spoke about this when I answered a prior question in terms of what's happening both on a sequential and a YOY basis. And from a BMI perspective or an advertising stance, we have stepped up sequentially spends in home care and in beauty and personal care. We continue to invest quite well in nutrition. On some of our tea and other businesses, we've actually calibrated down some of our advertising, given that we are offering great value in terms of pricing, and we are taking a calibrated approach to how we manage it.
The next question is again from Latika from JPMorgan. With supply chain distributions being restored and Boost taken nationally and with the added benefit of Horlicks, do you think the nutrition portfolio growth can revert back to its prior double-digit growth with strategic interventions which you have planned for this portfolio?
Latika, we've spoken about it. Sequentially, we definitely expect the growth trajectory to start building up. With the benefits of portfolio innovations and distribution coming through in due course, you will start to realize the full opportunity. I think, as we have reiterated, while there could be some here and now challenges given the growth and the environment, into the medium term, I think the ambition and our plans to get to double-digit growth are absolutely on track, and that's something that we will continue to drive.
The next question is from Hemant Patel from Axis Capital. How has the GSK portfolio done from a revenue and a market share perspective in quarter two and half one?
Hemant, we have already answered this, so in interest of time, I will not repeat my answer.
The next question is from Vishal Punmiya from Nirmal Bang.
The question is on the laundry portfolio as markets start to open up, leading to a near washing of clothes on higher frequency due to hygiene concerns, which along with the rising price action will lead to better recovery in the portfolio from next quarter.
Definitely, with all of this happening, we should start to see the improvement coming in. The pace and the speed of recovery, we will have to wait and watch. But fundamentally, as country opens up and people start to move out, start to get on with their jobs, yes, they will wash more clothes, and that will actually augur well. And I think Sanjiv has actually explained that quite in detail.
Nirav Savai from Antique Stock Broking is asking a question about clarity on treatment of goodwill and intangibles post the GSK merger.
Nirav, this was covered quite comprehensively after the merger, and we did a special session on the intangibles and the treatment. It's available on our website. I'll request you to please access that and also go through the transcript. You will have all your answers there.
If I take the next question from Sandeep Patodia from Fundsmith, what have you done to ensure that the company maintains the culture with people working from? How do you measure this? Sanjiv, can I ask you to at least share your reflections on the people and the cultural aspects, given that you feel passionately about this topic?
Sorry, the question? Excuse me.
They want to understand how are we what are the work that we're doing to maintain culture for the people as they're all continuing to work from home, and how do we measure this?
I think that's a very good question as to what have we been doing to in some very simple ways. We need to bring in empathy for our people. Yeah, that's so important. Look at it from this lens. I never have a meeting except save and except with my very close team beyond what would be normally a business hour. One is also very sensitive to commitments people have that say family sensitive. Then we have also allowed flexibility for people's personal needs. We never ask people or what I would say is we always support the not camera ready times. Yeah, if people don't want to come on camera, that's absolutely fine. We will never ask them to do that. It is about kind. It is about setting boundaries. We have to ensure that you do not have video conferencing fatigue.
Very importantly, the focus that we have given on learning, yeah. This is an opportunity for people to get future fit, to build their capabilities, and the focus on well-being. Yeah, that has made a material difference to the morale of the people, I would say.
Yeah, Srini, anything you would like to add?
No, no, no, no, no. Absolutely. I think Sanjiv makes the point. I think the whole space about the connect is the whole space of focus on individual and collective well-being. It's the focus on giving people the space to really grow and be the best that they can be in this environment and a continuous human factor to our engagement and reiterating the HUL values. I think that's something which has been consistent and proud that we work for leaders such as Sanjiv and the management committee who set the tone from top.
And even our Thanks Day was one way of really giving it back to the people. And I think that's where when you really look at all the dimensions, when we measured on UniVoice, it completely resonates. And I think so far we have done a good job. Yes, I think this is a space we continue to need to watch, especially on the culture piece, because today I think we're all able to manage and do well. But there will come a certain point in time when new people join us, and if they miss out on that physical and human interaction, it's something that we need to address. But I think we will take it step by step. I think we are pleased where we are now.
And definitely on record, I want to thank Sanjiv and the rest of my colleagues on the MC who really set the example and done a fabulous job.
Look, I think we need to really end on that note. I think really talking about people and culture is really, I think, what makes a difference. And if I refer back to what Sanjiv said, I think you really take care of the people, and they take care of the business, comes through in this quarter and into the future. And I think we are blessed to have the talent that we do. There are a few questions which we couldn't take on the web, conscious of time. And I'll request you to get in touch with our investor relations team, and we'll make sure that we'll try our best to answer those questions.
So over to you, Amit, and to close the call.
Thank you, Srini. So with that, we now come to the end of the Q&A session. Before we end, let me again remind you that a replay of the event and the transcript will be available on the investor relations website in a short while, and you can go back and refer to it. A copy of results and presentation, if not with you, is already available on the website, and you can refer to the same as well. With that, we would like to draw this call to a close. Thank you, everyone, for your participation, and have a great evening. Stay safe and stay well. Thank you so much.
Thank you very much. Ladies and gentlemen, on behalf of Hindustan Unilever Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.