Ladies and gentlemen, good day, and welcome to Hindustan Unilever Limited conference call for the results for September quarter, ended 30th September 2023. 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 this conference call, please signal 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. Ravis hankar, Group Controller and Head of Investor Relations. Thank you, and over to you, sir.
Thank you, Neerav. Good evening, all, and welcome to the conference call of Hindustan Unilever Limited. This evening, we will be covering the results for the quarter and half year ended 30th September 2023. On the call with me is Rohit Jawa, our CEO and Managing Director, and Ritesh Tiwari, our CFO. We'll start the presentation with Rohit sharing an overview of the operating environment, our performance in the quarter, and our key focus areas. Ritesh will then cover our financial results in more detail and also share the near-term outlook. We expect the prepared remarks to take about 20-25 minutes, leaving us with ample time for Q&A. 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, Rohit.
Thanks, Ravi. Good evening, everyone. It's a pleasure to interact with all of you. Let me first start, before I begin the presentation, to share a milestone that we've crossed recently. We completed 90 years of corporate existence on 17th of October. This is a testament to the strength of our business, dedication of our people, unwavering support of all our stakeholders, and our long-held belief that what is good for India is good for HUL. It's indeed a proud moment for us to share with you. Starting now, with an overview of the operating environment. The demand trends in this quarter remained stable and were similar to last quarter. Market volumes grew in high single digits year-on-year. However, we need to be mindful that this cut came on a base period where volumes declined in mid-single digits, and hence, cumulatively, our two-year market volumes remain largely flat.
Urban and within that modern trade and large packs are leading growth for the FMCG market. On the other hand, rural demand remains subdued, with volumes continuing to decline marginally on a two-year basis. Price growth in the market is tailing off as expected, with FMCG players continuing to pass on the benefit of lower input costs to consumers. This is reflected in a sequential reduction in market price growth, with September quarter at 3% versus 8% in June quarter. Consumers are yet to experience deflation, which largely explains why the volume recovery is gradual. The other lens to look at is price growth over a three-year period, which, as you can see, is a substantial 25% increase. FMCG market continues to witness heightened competitive intensity.
As we spoke during June quarter results, we are seeing the resurgence of small and regional players in select categories and price points, many of whom have vacated the market during the peak of inflation. For instance, when you look at tea or detergent bars, smaller players are growing significantly ahead of larger players. We are also seeing a sharp increase in media intensity. Aggregate media deployment in our categories increased by over 20% versus the same period last year. In this challenging backdrop, we delivered a resilient performance in the quarter. We've scaled a new milestone by crossing INR 15,000 crore quarterly turnover mark for the first time. Our underlying sales growth was 4%, with an underlying volume growth of about 2.5%. EBITDA margin at 24.6% improved 130 basis points year-on-year.
Profit after tax before exceptional items and EPS grew 12% and 4% respectively. Talking about market share performance, our growth was competitive, with about 60% of our business winning value shares. We continue to win volume shares in more than 75% of the business, which is an important marker as we move from price-led growth to a volume-led growth. There are certain pockets of our portfolio, primarily in the mass end, where we have seen a dip in our value market shares. However, on a sustained basis, we have been winning shares in large parts of our business, leading to significant corporate share gains over the last two years. Speaking about progress made on some of our key sustainability initiatives.
As a part of our sustainability goals that we announced last year, we have net zero goals, which aim to achieve zero emission in our operations by 2030 and across our value chain by 2039. We have been decarbonizing our own operations, driven by the rapid adoption of clean energy in our factories. Nearly 100% of our electricity is from renewable sources, and we have replaced fossil fuels with biofuels for thermal energy. However, a large part of emissions comes from outside our operations through ingredients purchased from our suppliers. More than half of our Scope 3 emissions is actually in the Home Care business value chain. With an aim to mobilize actions to achieve net zero, we hosted more than 100 representatives from our Home Care suppliers across the world in our first Clean Future India Summit.
As part of the summit, we announced two major initiatives. First, World's First Near Zero Carbon Soda Ash in partnership with Tuticorin Alkali Chemicals and Fertilizers Limited. Second, the scale-up of low carbon sodium silicate in partnership with Sudarshan Silicate Private Limited. Talking about another initiative, we must be aware of our Shakti program, where we work with over 1.9 lakh women entrepreneurs to transform their lives and livelihoods. A couple of weeks back, I visited Khanjadapur, a village in South Bengal, where I met Paromita. She is one of our Shakti entrepreneurs. She has been associated with us for over 12 years. I was delighted to hear her proudly narrate her passion for sales, financial independence, and being able to provide for her family. She's an influencer in her own right.
She also spoke about amplifying HUL's nutrition awareness project, which we call Mera Poshan Mera Gaon, a reminder that she doesn't just sell HUL products in the hinterland, but she also serves as a beacon of social change and entrepreneurship in her community. Shakti entrepreneurs are upskilling, becoming digitally savvy, and restocking their products using our e-B2B app, Shikhar. We have now onboarded over one lakh Shakti entrepreneurs on the Shikhar app. Shakti continues to grow from strength to strength and is indeed a testament to our belief of doing well by doing good. As you're also aware, we were the first FMCG company which partnered with ONDC when we went live with the US hop a year back. We are further extending our partnership with ONDC by leveraging Shikhar with an intent to democratize e-commerce for small retailers.
With the help of an integrated module in Shikhar, called the Shikhar Seller app, neighborhood kirana stores can now go on live on ONDC seamlessly and sell their entire catalog of range of products online. This is now live in two cities, New Delhi and Bengaluru, covering about 60 outlets as a pilot, and we will further be scaling it based on retailer feedback. Let me shift focus from the here and now to the longer term. I'm a big believer in the India story and opportunity. We are the fifth-largest economy, with a GDP of over $3 trillion, growing at a fast pace and well-poised to become the third largest in a few years. The demographics also stack in our favor. 20% of the world's working population, over a billion, reside in India. 10 million gets added every year to the workforce, giving us a huge demographic dividend.
India is leading the digital revolution. The IndiaStack is one of its kind digital scalable public infrastructure based on identity, payments, and consent-based data sharing. Just to give you the magnitude, we have more than INR 130 crore Aadhaar card holders. In the years to come, applications based on this digital infrastructure, such as ONDC for digital commerce, ULIP for logistics, Ayushman Bharat for electronic health records, amongst others, will spur innovations and new growth. While in several other more developed nations, digitization is a privilege, in India, digitization has been democratized to reach even the grassroots levels with initiatives such as Aadhaar, Jan Dhan Yojana, and Unified Payment Interface. All these factors augur very well for our FMCG industry. Also, the huge runway for growth. India's per capita FMCG consumption, when compared to other similar economies, is significantly low, and within that, rural is highly under indexed.
Penetration levels for many of our large categories are still very low. Premiumization is bound to accelerate as India becomes more affluent and more urban. The more affluent population is expected to double by 2027. Naturally, their per capita FMCG consumption is much higher at about 1.5x-2x compared to national average. In this context, we are well-placed to win. As India's largest FMCG company, we are well-placed to lead this growth opportunity. Each of our three divisions by itself will be larger in size than most of the FMCG companies in the country. nine out of 10 households in India use one of our products. We are proudly the market leader in more than 85% of our business. We have a wide and a resilient portfolio of 50+ brands, of which 19 brands clock more than INR 1,000 crore turnover annually.
We reach about 3 million outlets directly, of which 2.3 million outlets are covered through our distributor network, and the remaining by our Shakti entrepreneurs in the rural hinterlands. While our supply chain, one of the most complex, it also gives us a significant competitive edge. To give you perspective, we manufacture and sell more than 65 billion units every year, which is about 45 units per Indian. That's the scale of our supply chain. We continue to be the employer of choice for many years in a row. And now, if you look at our track record in the last decade, we've added INR 33,000 crore top line to our turnover, growing at a CAGR of 9%, well balanced between volume and price growth.
We have improved our EBITDA margin by over 800 basis points from 15% - 23%, and a large part of this has come from our culture of savings and we're driving premiumization. Our net profit in the last decade grew at 10% CAGR. Clearly, we have a very strong business model, and our track record is reflective of that. That brings me to the key thrusts. Let me now outline the key thrust that will enable us to continue winning in the marketplace. Our core belief of what is good for India is good for HUL, and the integrated approach to sustainability remains unchanged. A lot of what we have already been doing has strengthened our business, and we'll continue to build on it while adapting to the changing consumer trends and shopping behaviors.
Our first thrust is to grow the core, which includes our 19 large brands, through product superiority and WiMI led execution. Second, we have spoken about the opportunity... build categories of the future through market development. We will do this through persuasive comms, communication, large-scale consumer contact programs, driving mental and physical reach, innovations, and formats of the future that will propel from premiumization. Third, we have a job to continue transforming parts of our portfolio through the on-trend demand spaces, especially in Beauty and Foods. Fourth, winning in channels of the future through brilliant execution and curating a tailored portfolio by leveraging our design per channel approach remains an important thrust. We will also need to structurally reset our cost base, which will help generate fuel to invest back in growing the business.
To this end, we'll continue leveraging our net revenue management and Symphony programs to drive savings across all lines of the P&L. We will further sharpen our distinctive capabilities by doubling down on WiMI and digital, by deeply embedding sustainability in our business, by building a culture of innovation, agility, and intelligent risk-taking to empower teams operating with an owner's mindset. These are, in summary, our focus areas for now as we evolve and sharpen our strategy for the next phase. I look forward to sharing more details in due course. Now let me hand over to Ritesh to cover our results in detail. Ritesh?
Yeah. Thank you, Rohit, and good evening, everyone. Let me now take you through our quarter results in detail. Rohit covered the overall FMCG market context, which remains challenging. In this backdrop, we have delivered another quarter of resilient performance. Our underlying sales growth was 4% , with an underlying volume growth of 2%. Talking about our bottom line performance, EBITDA margin at 24.6% improved 130 basis points year-on-year. Profit after tax, before exceptional items, at INR 2,668 crore, was up 12%. Net profit at INR 2,717 crore increased 4% year-on-year. The quarter numbers include the benefit of a one-off credit that we received due to favorable resolution of an indirect tax litigation. This slide explains the impact of this credit.
Excluding the one-off, our underlying sales growth would have been 3%, with underlying price growth being flat. PAT bei growth would have been 7%, with net profit declining marginally year-on-year. From a segment perspective, the benefit is entirely in Beauty and Personal Care. Talking about our margin performance, our gross margin improved 700 basis points year-on-year to 52% and is back to pre-inflationary levels. With the increase in competitive intensity, we have stepped up A&P investments by about INR 700 crore year-on-year to ensure our share of voice remains ahead of our share of market. This is a 420 basis points increase versus September quarter 2022. We will continue to invest behind our brands to protect our competitive position and ensure the long-term health of our business. Let me now look at performance across the three segment. Home Care grew 3%.
Both Beauty and Personal Care, and Foods and Refreshment grew 4%. Margins in all three segments remain healthy, with Home Care at 19%, BPC at 27%, and F&R at 19%. When it comes to underlying volume growth, the divergence between segments that we saw in June quarter continued. Both Home Care and BPC delivered mid-single-digit UVG, while F&R saw a mid-single-digit decline, primarily due to sustained input cost inflation in coffee and HFD categories. I will now dig down to talk about performance in each segment. Starting with innovations in Home Care, Comfort expanded its range with intense fabric conditioner created specifically for sportswear. A new range of Vim dishwashing liquid, Vim Pure, was launched. It is a superior 100% plant-based, paraben and phosphate-free formulation. Leveraging WiMI, Vim Liquid was relaunched with an improved formulation to suit the varying needs of consumers.
Moving on to Home Care performance in the quarter, the business grew 3% on a high base of 34% in Q2 2022. Volumes grew in mid-single-digit, led by strong performance in both fabric wash and household care. Our premium portfolio in fabric wash continued to outperform with both Surf and Comfort growing volumes in double digits. household care delivered high single-digit volume growth led by dish wash. We have taken further price reductions in both fabric wash and household care to pass on the benefits of input, lower input costs. A&P investments have been stepped up to protect our competitive position. Now, talking about Beauty and Personal Care, this has been a busy quarter for our BPC team with launch of several innovations. These actions reflect the key thrust that Rohit spoke about earlier. We are transforming skin care portfolio through innovations in evolving and on-trend demand spaces.
Pond's has extended its moisturizer range to build a hydration regime, which includes a cleanser, gel moisturizer, night gel, and a serum. Building on its strong Ayurvedic credentials, Indulekha has launched a new anti-dandruff hair oil and shampoo. Vaseline has introduced a new range of premium moisturizers for rich sensorial experience. Lakmé has introduced new Glitterati Collection for the upcoming festival and wedding season. Lakmé also launched Eyeconic Pro B rush Liner in pen format. Moving on to our performance in Beauty and Personal Care, we delivered a volume-led growth. Skin cleansing grew volumes in low single-digit, with both Lux and Hamam continuing to outperform. Body wash continues to scale up well. Hair care saw high single-digit growth, led by Clinic Plus, Sunsilk and Indulekha. Future formats such as serums and masks continue to do well.
Skin care and color cosmetics grew in double-digit, with robust performance in Vaseline and Pond's. Our focus interventions in new demand spaces such as hydration, sun protect, and in channels of the future, including e-commerce, is helping us drive growth. Oral care delivered mid-single-digit growth, led by Close-Up. Now, talking about innovations and activations in F&R, let me start with bottom half of the chart. What you see is an innovative billboard by Taj Mahal Tea. It uses raindrops that fall on the billboard to generate Indian classical music. It has won a Guinness World Record for being the world's largest environmentally active billboard. We have launched an exclusive range of artisanal ice cream called Slow Churn Ice Cream. It is made with 100% fresh cream and real fruit and is available in the e-commerce channel. I would strongly recommend you to try it. My favorite is guava.
We have extended our Horlicks Plus range with two new variants, Strength Plus for adults and Growth Plus for children in select geographies and channels. Horlicks Barsaat mein Bharosa campaign is focused on higher immunity benefits. Lipton Green Tea was relaunched in the quarter with a better-tasting blend. Talking about performance in the quarter, F&R is seeing divergent input cost trends when compared to Home Care or BPC. We continue to see inflation in this business and have therefore taken judicious price increases to offset the impact of inflation. Tea saw modest growth as the category continued to witness consumer downgrading. Coffee delivered double-digit growth, driven by pricing. Health Food Drinks delivered a mid-single-digit price-led growth. I will spend some more time on HFD performance in a subsequent slide. Fruits and ice cream both grew in mid-single digit on a high base.
Mayonnaise, as well as peanut butter, continues to see strong consumer traction, and food solutions remain resilient with double-digit growth momentum. Now in this chart, let me cover HFD performance in a bit more detail. It has been a little over three years since we acquired the business. HFD is an underpenetrated category, hence our focus has been on recruiting new consumers into the category. Through access packs, focused communication, increased distribution coverage, and doubling down on home-to-home connect, we have been able to handsomely grow penetration in this category, which was relatively stagnant for many years prior to the acquisition. We have also further strengthened our market share in the category. While recruitment of new consumers into the category has been healthy, consumption across existing users has declined over the last few years. The category was initially impacted by COVID and recently by high inflation, especially that of milk.
High milk prices create a double whammy impact for HFD. Not only it is an ingredient in the production of HFD, but typically the product is consumed with milk. Hence, the end cup cost of Horlicks and Boost saw a significant increase in past few quarters. Let me also cover in some detail what is happening on cost synergies and margin. As far as margins are concerned, we have seen two impacts. One is the inflation that I spoke about. Secondly, due to the planned strategic interventions of access pack and sachets, we have had adverse mix. When it comes to cost synergies, we have unlocked most of the planned synergies, with some more expected to come from manufacturing efficiencies over the next two to three years. These synergies have provided us the fuel for growth to invest in growing the business and countering the impact of inflation.
Consequently, the EBITDA margin for the business remains what it was at the time of acquisition, despite the significant inflationary cost. Now, I would like to use this opportunity to clarify a question which comes up in some of our discussion. You will recall that we had mentioned an underlying EBITDA of 31% for the business at the time of acquisition. I would like to remind you that this number includes the benefit of consignment selling arrangement for the OTC products of Haleon, which we had announced earlier, hence effective November 2023. The income from this business was more than INR 300 crore in the last fiscal. With that being the context, our single-minded focus on market development remains unchanged. We want to bring in more users into the category while creating more occasions for consumption and premiumizing our portfolio.
We are driving three main actions to achieve this: We've sharpened our proposition to focus on outcome-based claims and owning occasions like monsoons. Centering our science-backed credentials to recruit new users and, at the same time, premiumizing our portfolio. For instance, our plus range focuses on specialized nutrition requirements to address various lifestyle stages and conditions. And third, expanding our portfolio to new demand spaces like Mother's Plus or the new millet-based chocolate Horlicks to future-proof the portfolio. We remain confident about the long-term prospects of the category and in our ability to unlock volume-led growth through market development. Of course, as we have said before, market development takes time, and one needs to stay the course for long-term value creation. Moving on, let me quickly summarize our performance for this quarter.
Let me reiterate what Rohit said: We're delighted that we have crossed the INR 15,000 crore quarterly turnover mark for the first time. Truly a testament to the strength of brands and execution prowess of Hindustan Unilever. I've already taken you through most of the lines, but here, let me explain the movement from 9% EBITDA growth to 4% net profit growth in the next slide. Net finance income has benefited from better treasury yields, higher cash balance, and dividend received from subsidiaries. When it comes to the tax line, there are two impacts. As we had mentioned earlier, we expect regular ETR for the year to be about 26.5% versus the 26% that we had in the last fiscal. This has an adverse 1% impact on net profit growth.
Further, we had substantial gains from prior period tax adjustments in Q2 2022, as many past year assessments were concluded. Since we're lapping this, we have an adverse impact of 9% on net profit for the quarter. Lastly, net exceptional cost was marginally lower year-on-year, giving a 1% benefit. Hopefully, this explains your better understanding of the movement between profit lines. Moving on to our first half performance. Our turnover, just shy of INR 30,000 crore mark, grew 5% year-on-year. EBITDA margin at 24.1% increased 90 basis points. PAT bei and net profit grew 11% and 6% respectively. Considering our resilient performance in the first half of the year, the board of directors have declared an interim dividend of INR 18 per share for the year ended March 31, 2024.
This is a 6% increase compared to the interim dividend of last fiscal year. Let me now turn to outlook. Looking ahead in the near term, we remain cautiously optimistic. Moderating inflation and upcoming festive season should improve consumer sentiment. At the same time, we need to be watchful of heightened competitive intensity, volatile global commodity prices, as well as the impact of uneven monsoon on crop output and reserve levels. Overall, we expect volume recovery to remain gradual. If commodity prices remain where they are, we expect our price growth to be marginally negative. Our focus remains on driving competitive volume growth, stepping up investments behind our brands, and maintaining EBITDA margin in a healthy range. We will continue to manage our business with agility and take actions to ensure long-term 4G growth, growth which is consistent, competitive, profitable, and responsible.
With this, we conclude our prepared remarks, and will now hand back to Ravi to commence the Q&A session.
Thank you, Rohit, and thank you, Ritesh. With this, we will now move to the Q&A session. We request you to kindly restrict the number of questions to a maximum of two, at a point in time. In case you have further questions, feel free to join the queue again. In addition to audio, our participants do 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 the call back to Neerav to manage the Q&A session for us. Over to you, Neerav.
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 touchtone 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 the question queue assembles. Participants, you may press star and one to ask a question. The first question is from the line of Abneesh Roy from Nuvama. Please go ahead.
Yeah, thanks for the opportunity. My first question is on skin care and color cosmetics. So you have seen double-digit growth, which is a good achievement. Even Nykaa saw 20% growth in BPC business in Q2. So my question is, is this growth sustainable? And how is rural demand skin care, given general rural slowdown, is that impacting your double-digit growth in a big way? And second is, you briefly alluded to the focused intervention in the new demand spaces. Could you elaborate that more? Because, currently I understand those will be smaller pieces of your skin care business. So is that impacting overall growth in a big way?
Hi, Abneesh, how are you doing? Thank you for the question. If I understand you well, you spoke to the Beauty growth skin care. I could hear that very well, the first part.
Yes, skin care and color cosmetics, double-digit growth. Yes.
I think we feel very excited with this category because we have a set of great brands, master brands that can stretch across formats such as Lakmé, Pond's, to name a few, Indulekha, which is another rising star, and Dove, and of course, Glow & Lovely. We have a high relative market share, so we feel confident. We understand the consumer. We have brands that are stretching across the price pyramid, and we have extended all our brands now into new growth spaces and into new formats such as sun care, for instance, as benefits, or even new formats like serums, for argument's sake. So we've been mapping the market.
We also have already seeded and seen some promise in brands such as Simple, which is mainly a face wash brand, but has a full portfolio.
So we are also therefore innovating quite aggressively in this market. You spoke of Nykaa. I Nykaa, of course, is, you know, we are growing faster than this number in that platform, and I I think Lakmé is one of the top three brands in that platform, if I'm not wrong. So we feel very excited about this category, because this category is has a virtuously strong growth rate, higher profit profile where we have both the technology, R&D, and brand assets. So in some substance, this is very an exciting space, and you should see more and more of our effort going in this direction. When you spoke to the high-growth demand spaces, there are two parts of the market.
Of course, there are high-growth demand spaces, frankly, in all categories that we play in, because we are in India, which is, you know, a great market to be in, where there's promise of great future, because the per capita consumption are so low compared to other markets, that each and every category we play in, we are in a broad set of categories, as you know, are going to go through their S-curves. We've shown we can play that S-curve, for instance, in Home Care with liquid that we have done, or fabric conditioner.
Similarly, we see S-curve opportunity in new demand spaces, but we are particularly excited about new demand spaces in Beauty and in Foods, Packaged Foods, where there's a lot more new benefits and new consumer habits and new ways of shopping, such as for digital commerce, that are beginning to take place. So I'm hoping this gives you a pretty good flavor of how we're thinking about this entire space.
Thanks, Rohit. That was useful. On my question on rural demand in that part of the business that was slow in the earlier quarters, and generally rural is slow in most FMCG. So how are you seeing in this part of the business in rural?
Maybe I ask Ritesh to join in. I mean, he has really been studying rural and the trends and patterns, and I think he'll probably give you a much more richer answer. Ritesh?
So obviously, because the rural question. See, overall, if I just start with the number, rural in this quarter, I'm just talking volume growth, because we know price growth overall in FMCG has come down from the peak of 14% as an industry to 3% in this quarter. And expectation, of course, is that we further get moderated going forward, given the pricing actions that all the players are doing. But for a minute, let's just focus on volume growth of rural. So rural volumes grew at 8% this quarter, as market and in FMCG. And same period last year, we know that overall market had declined, so when overall market grew at 8%, this quarter, market had declined by 6% same period last year.
So overall, when you look at total market, it is, it has grown at 1% over two-year CAGR. If I double click within that, rural for this quarter grew at 7%, but on the back of 9% decline, same period last year. Which means on a two-year period, two-year CAGR average, rural has still not fully recovered the volume that it had before. It's at -1%. But the good news is, the -1%, two-year CAGR now is better than what we saw, -4% CAGR in the previous quarter, June quarter. So we have seen gradual recovery coming, albeit on a soft pace. Now, of course, the single biggest factor which is supporting rural recovery is inflation moderating. It leads to more disposable income, and hence, more amount of expenditure gets incurred in FMCG, for that matter.
Real rural wages, we all know that overall the wage inflation has always been higher for the last many quarters now in urban compared to rural, but, we also have seen that real rural wages have now started to get into some positive territory, which again, in my mind, is a good news. Government has continued its thrust on rural, so the heightened amount of expenditure in rural and investment for last two years, it has been maintained. And on top of that, we know also that after agriculture, the second most important area where rural people get jobs is construction. And hence, with the entire CapEx getting dialed up, that should start showing more impact in rural. Now, of course, there are watch outs. We know that overall job participation is increasing, and you also saw the MGNREGA demand.
In fact, the MGNREGA demand is higher than 2019. And, equally, monsoon has been uneven against a long period average. There's a 6% deficit on monsoon, and also the reservoir levels as we are exiting the monsoon season. So that will have some amount of knock-on impact as the kharif crop gets harvested and as the wheat gets sowed. So overall, if I summarize, we are cautiously optimistic, and we expect demand to continue to recover gradually. So that's our overall read on rural.
Sir, thanks,
Glow & Lovely, which is, you know, because rural brand is also showing better outcomes recently, which is also very encouraging. Yeah.
Sure, thanks. My second and last question is on the resurgence of small players slide, which you have put, and that has two subparts. First is on tea. Now, tea has not seen too much of deflation, and normally local players come back when there is a sharp deflation. So when you have said that local players are growing 1.4x of the two pan India players, what is driving this? Because when I see 5% decline in your F&R business, the sense I am getting is your tea business would have seen a sharper decline. So correct me if I'm wrong there. And second, in for the national tea consumers, generally, they are far more sticky to those... So your customer will be sticky.
He may downtrade within your brands, but does it happen that there will be a almost 7%-8% kind of a decline in your tea volume? He goes out of your brands, and he goes to regional brands, and what's driving that?
Yeah. So, let me kick off, and then Rohit, I'll hand over to you. So overall, it's a good area to spend some time, Abneesh. So, and again, it's only not only what has happened in this quarter, just important to see last four to six quarter, what has happened to tea. So tea, all of us know, had significant inflation, and followed by that, its price started to come down, and in fact, upon in time, the commodity year on year is also declining. In this period, what has happened, second factor apart from commodity volatility, is also decoupling of loose tea, which is basically Plainer Tea, the commodity, and the Premium Tea.
The Plainer Tea has seen more amount of price moderation because of a better crop, compared to Premium Tea, again, I'm talking commodity, which has seen little more inflation compared to the Plainer T ea. So in effect, what has happened, the price gap between the Plainer Tea and Premium Tea has widened. When this widens, so Plainer Tea, which is what, by and large, the loose tea players end up using, and Premium Tea will have over-indexed consumption into our tea basket. You have seen some amount of divergence and decoupling of the commodity trend. Now, in the overall context of inflation, to start with, not only tea, I'm seeing overall inflation. The point is, in last three years in FMCG, consumers have seen 25% inflation last three years. So that has had an impact where tea was the first category, where we saw consumers downgrading.
Downgrading more towards loose tea and hence smaller players. Within our own portfolio, exactly to your point, we've seen more amount of, let me say, traction to Taaza compared to premium teas, but market overall has also moved towards loose tea and downgraded. That has had an impact. That's one. Secondly, of course, question was overall F&R, and of course, if I look at the business that we have, 2/3 business sits between HFD and tea. And both in HFD as well, the point that you mentioned earlier, we have seen dairy inflation, which is why our growth in HFD is price led, and we have seen volume decline because of high amount of prices, and hence we had to increase our prices, though judiciously. Similarly, for coffee. Coffee has seen 60%-70% price inflation.
I'm saying commodity inflation over last two years. Again, because of that, the growth that we have in coffee is a price-led growth, with, with of course, volumes have got impacted on consumption because of the impact of high inflation. So if you look at F&R portfolio, be it tea downgrading, be it HFD, price increase, or be it for that matter, coffee, these are the reasons why volumes in F&R overall have got impacted.
Sure. My second sub part, and this is my last question. So essentially, on detergent bar, you have mentioned resurgent. The issue is you have given a very stark data. 6 Y versus Y looks like a very stark data. So could you give some real absolute numbers to understand better, to have a better understanding? And detergent powder mass end, there also, would you have seen local players grow much faster, just like detergent bars?
Yeah. So the point, Abneesh, that we quoted, you know, we used two examples and of course, there are parts of the portfolio, especially as mass end, at those price point in certain geographies, is what we have seen this behavior, and which, of course, two examples we quoted out of that, which is detergent bar and tea. And in these spaces, as commodity softened, we have seen resurgence of many small players. And which is why at an aggregate market level, these players have grown ahead of the large players. And of course, as you know, we are market leaders in these categories. So as this development happens, it has impacted to us in pockets where our market share has seen a dip.
So something very similar, we had also captured in our last quarter's narrative, and we've seen that consistently playing out. Now, of course, this reality, it is... Again, if I just go back to a little more longer history, for 2007, 2008, when we saw this happening for skin cleansing, 2012, 13, happening for tea, laundry, 13, 14, happening for tea. In each of these periods, we have seen this behavior, where when commodity price goes up, after that it comes down, volume recovery takes some time to happen. And we do have seen this behavior where, we see small players who basically vacate the market when commodity is extremely volatile, and they start participating in the market when commodity becomes benign.
For some point in time, like everything else in life, these are cyclical in nature in terms of commodity, and as price table stabilizes, market equilibrium gets established.
Thanks, that's all for me. Thanks a lot.
Thank you, Abneesh.
Thank you. Next question is from the line of Vivek M from Jefferies India. Please go ahead.
Good evening, team.
Hi, Vivek. Good evening.
Two questions. So my first question is on the slide on market share. So where you have mentioned, let's say 60% of the portfolio is winning value share, whereas over 75% is winning volume share. With all that you have explained, you know, I'm still not able to understand why would that be the case? So, you know, I would have thought that value share would have been, you know, portfolio winning. Value share would have been higher than volume share, given that there is a competition at the bottom and so on and so forth. Why do you think there is this disconnect between the two?
Yeah. I think, let me pick it up, this question, Vivek. So, I think very similar to what I just mentioned. Now, with softening input cost, small players growing at mass and faster than the larger player. And remember, as Hindustan Unilever, we are over-indexed on premium portfolio, and hence, when the mass end of the market becomes larger, because of in certain pockets like this with growth, it leads to value/volume disconnect in short term, as we're transitioning this inflationary period. And I quoted the example, Vivek, of tea. You know, take loose tea, take Taaza and take premium tea. As the market is overall downgrading. In our case as well, Taaza, for example, which again, is at the lower end of the price, will see more better growth compared to, let's say, premium tea.
So hence, overall, when you look at portfolio, which is over-indexed on premium compared to industry, and if mass is growing with higher weightage, this is a volume value disconnect which you get in short period. If you look at our volume share, more than 75% portfolio is gaining volume share. And these are the pockets where you see the volume value disconnect leading to about 60% value share gain. But this is basically the volume value disconnect in short period as market tables of pricing are getting stabilized and as this demand curves are getting into transition and getting stabilized.
Okay, so just to get it right, Ritesh, what, I mean, when there is a, you know, let's say the mid and the bottom, which is growing faster, so you are saying while that is happening, you are still gaining market share, but it's just the value?
Overall value gets impacted. See, typically as, as Hindustan Unilever, we, you know, we called it many times out. For us, mix, remember, our UVG measure is volume and mix. Mix is usually a factor which is accretive. In these times where the mix changes little bit in categories like, example I quoted on detergent bar, example I'm quoting of tea. When downgrading happens, I'm saying the overall value per ton, which industry sells, comes down, and which is the mix impact then you end up seeing, and which is why then you end up seeing a volume value disconnect.
Okay. Okay.
Yeah.
Sure. The second thing is, second question is for Rohit. So this is the first, you know, conference call where you are addressing. What... and HUL is, you know, is, you know, by far always considered to be, you know, gold standard. But what are the areas, so we know all the positives, but, you know, Rohit, what are the key focus areas from a near to medium-term perspective that you are thinking about at this point of time?
Thank you, Vivek. Excellent question. And, you know, I'm only thinking about HUL day and night, for some time now. And I think, firstly, what I'm really impressed, and I have said this before in the last, in other interactions, that we fundamentally are a very, very robust business. And I, I talked about in my presentation, the reason why I feel inspired and excited to, you know, be a part of this business today for, you know, all its deep strengths. When I look closely at even our operational health and all indicators in the moment, you know, I see that we have, very high, large part of our portfolio is growing penetration, which is a good sign.
We have our product quality being superior than competitive benchmarks, more like 60% in blind, which is very good of turnover. We have increasing assortment. Our distributor strength is strong in holding. We in fact doing very well in some parts of rural areas like Shakti, where we're seeing sustained growth. We also have a strong brand, and large majority of brands are growing brand power. There are, of course, a few fixes to be done. So on the whole, the portfolio is strong. That said, when you look at the my most important emphasis going forward, and I tried to cover that in what I call the key thrust chart, that there are parts of our strategy that must be continued because they are appropriate for the opportunity we are seeing.
As I mentioned to you, that the Indian market is at a point of inflection. I feel it's like 10, 15 years behind China, where I worked some for some years, as you know. I see similar trends, although, of course, they're not exactly the same, whether it's, you know, the big growth in affluence that one can see already in, you know, income, higher income households sort of doubling every five years. Or you see the opportunity of the digital and the hard infrastructure that's creating for consumers to access brands, both, as you know, a way how they consume the brand messages and/or buy the brands.
Also, of course, the way brands are built is changing as well, because social, for instance, has become a big deal in India already, whether it's rural or urban, because of the deep access to, for instance, cell phones and YouTube and platforms such as those. There's of course fragmentation one can see in channels, but also in benefit segments. And yet, you know, every category we are in is going to go through an S-curve, is going through an S-curve of growth, and I'm particularly excited with taking the strengths we have forward and then evolving some more to be ready for the future.
So as I mentioned to you, my priority is in the moment, and we will sharpen them as we go along and at some stage, in a few months, I would like to give you more deep color on what it means for us, and what changes it means for us. But for sure, the first thing is to drive them forward, the strategy that's working, and shape it for the future. So as I mentioned to you, it's, for me, very crystal clear that our big 19 or 20 brands, more than INR 1,000 crore, will have to be the first engine of growth and our strength in making sure they're superior in execution end-to-end across our 16 clusters of Winning in Many Indias, is the first disciplined capability I need to keep repeating.
The second is, market development, which we have shown we can do a great job within, particularly Home Care, with fabric conditioners, liquids. We replicate that in shower gels, for instance, and we replicate that in face wash and so on and so forth. We will see that is a repeatable model that we need to exercise more widely, especially for more premium formats....other segments of sun care or a new format, such as serums. We have identified, a certain set of market development bets we will stay multi-year committed to. The number three is transforming two specific parts of portfolio where we believe we can do better in terms of coverage.
Although we have a very good portfolio, which, you know, fills the price pyramid, but I think beauty care and food, and I mean, packaged food, are two areas where we can actually leverage our big brands and in fact, bring in new brands, including from Unilever, to stretch and fill all new demand spaces. That's what I mean by, you know, on-trend demand spaces. And finally, second, but last, is this whole area of winning channels. And we are very strong in general trade, and we have an above average ratio in modern trade. But, you know, there's a new ways in which consumers are shopping. They're shopping in e-commerce, like Nykaa, you, you know, one of our colleagues mentioned, Abneesh, or they're shopping in quick commerce, which is happening now as well.
And of course, Amazon's and Flipkart's customers, such as those or other, also can be established. So e-commerce, quick commerce, and of course, our B2B strength through the Shikhar app, which is an amazing asset, amazing asset, which we will actually leverage and make it even a deeper moat. So I think digitally selling to our customers and consumers and also building strengths in new channels such as quick commerce and pharma is clearly an opportunity we will not let go. And finally, we have this a very good, strong muscle of frugality and operational tightness we call Symphony Fuel for Growth. So while value creation will be... creation is more driven by top line, we do want to inch up at, you know, the margin and create fuel for growth.
That's why you see us, we will continue driving our repeatable model on Symphony, which is our end-to-end P&L, squeeze out productivity, and we're going to take it to the next level, so we can generate big funds that can go behind, you know, a big BMI or A&P that we need to fight all of these opportunities. And all of this, I want to really reinforce some existing strengths, like WiMI, and take it to the next level. In digital, we are, as I mentioned, Shikhar, we are also going to look at what we can do around consumer and the operation, and more details on this later. So our reimagining agenda taking forward. Sustainability, we are going to focus in more on things like net zero, plastics, water, and community, of course. And we will build a culture.
We have a great culture of leadership, of discipline, of rigor, of being thought leaders. We will make sure that our scale becomes an advantage and we become a big and fast scale insurgent even going forward, then we can you know make take intelligent risks. We have already 16 clusters. We have 16 small category teams. Each of them can be a operating unit, independent, on their own. So creating that entrepreneurship and empowerment so that we can really collectively move very, very fast and really tap all these opportunities culturally as well would be something that I'll be working on to take to the next level.
So I don't know if it gives you a good flavor, but this is the sort of thing that we are thinking of as a team, and we're sharpening our agenda and making sure that we sort of evolve this agenda for the next phase of HUL's growth journey. This, I hope it gave you a good sense of both the heart and the mind of really where our agenda is for HUL.
Oh, absolutely. Thank you. That was a really detailed response. We're wishing you all the very best.
Thanks, Vivek.
Thanks, Vivek.
Thank you. Next question is from the line of Arnab Mitra from Goldman Sachs. Please go ahead.
Yeah, hi. Thanks for taking my question. My first question was actually specific on the near-term outlook. So I think last couple of quarters, you mentioned a few factors, destocking in the channel due to price cuts, some rise of local competition. This quarter, of course, there's a bit of festive timing issue. So in the first two, do you believe now that those are behind or that readjustment of pipeline and around small players versus large players is something that could continue for some more time? And, in the similar line, does festive season really matter for FMCG? If yes, I mean, if you could give some flavor of how much could be the impact of that timing.
Yeah, Ritesh, if you could just pick this up for Arnab, please. Thank you.
Yeah, sure. So, Arnab, let me just talk about A, the outlook for volume to start with. I think, long term, Rohit covered extremely comprehensively about what drives FMCG and what are the kind of opportunities in the long highway for growth of the category and of course, us as Hindustan Unilever. But if I just zoom, zooming now to short term, there are factors which are supporting continued volume recovery. We had called it out that we will see, post this high inflationary period, a gradual recovery in volumes. And, what are the factors we are supporting? Three of them: A, inflation is moderating, and the full impact in this quarter as we speak, in laundry and skin cleansing, we have taken sequential price reductions.
Which is why at an overall aggregate level, you saw, HUL had a roughly flat price growth in this quarter. FMCG industry, as per Nielsen data, is still showing 3% price, which the point I had mentioned earlier, that it takes, basically a quarter or so for it to stabilize and start reflecting what manufacturers are selling at. So consumers will start seeing the impact of deflation as they start seeing the price growth going away. That's number one. Second is the upcoming festival season. Of course, there are, as you know, the phasing of festival, this time, all the days of festival lands in December quarter, unlike last year, where there were some days of festival which came in September quarter, and of course, a larger part of days came in December quarter.
This time we have all days coming into December quarter. So with inflation moderating, higher disposable income in hands of consumers urban leading growth overall in the industry for FMCG for now, and urban income more resilient and having seen better wage inflation, we see that again, as a third factor, which is helping in short term for volume recovery. Of course, as an economy, we know that between growth, inflation, and currency, the country has done an excellent job in managing the three vectors very well. So we have, on the back of it, a resilient economy. Watch outs equally like support factors in my mind will be three. A, monsoon, we all discussed the kind of uneven monsoon we had and the potential impact of that that could have in rural.
Second, of course, is global commodity prices. As we speak, crude is firming up, and it's more than $90, as we speak, and with geopolitical stability again being questioned, and as all of us know, what's happening this time around. Those factors put together are, in my mind, a short-term watch out. And hence, in summary, post a high inflation period, the gradual recovery should, in our view, continue, and which is why we are cautiously optimistic, and but equally confident of gradual volume recovery. So that, I would say, in short term, is our view, where it is.
From a pricing perspective, we had called out in our commentary that, if at all commodity prices remain where they are, we will see marginal and negative price growth, going ahead in the future.
So, Ritesh, just to clarify, so the channel destocking component and this local competition versus national competition, is that largely behind in your view, or there is a little bit more of adjustment there required, given you know where you see the market?
Yeah.
The rest of the points, of course, are there, but these two, are they kind of behind now?
Yeah. So let me first look at the channel players. So, the channel inventory overall, I think since at least if I talk about Hindustan Unilever, with all the commodities that have got moderated, we have finished doing our pricing action this quarter. And, as an industry, as doing the same thing happens, which is the 3% price growth, which Nielsen shows moves to zero, I think by next quarter, they should all be set square. So, I think that transition, in my mind, should get done unless we end up seeing more amount of commodity volatility, which brings a new story altogether. So sans that, I think we should get stabilized next quarter, number one.
In order to the small player, of course, this is something which is again, very much linked to the commodity cycle. Again, as commodity cycle starts to stabilize, in our mind, the price equilibrium will start get to, stabilize. The bigger job there would be, of course, overall demand scenario, and, demand scenario across different price point. If market does not continue to downgrade, example in tea, or for that matter, small players at a mass end, example in laundry bars, that behavior will have to change, for this equilibrium to set equal. Again, as I mentioned, we have seen in the past, this happens, and then in few quarters, it starts to then go back to the same equilibrium of competitiveness across the price point as it always is.
So yeah, so in our—I argue it's still in short term, couple of quarters.
Sure. Thanks. That's very helpful. My second and last question was on HFD. So, I think you explained the steps that HUL has taken. Obviously, you put in a huge amount of effort on every line of what you could have done to grow that business. In few quarters, we are seeing in other companies is wherever there is very high price growth, volumes are subdued, but revenue growths are very high. HFD seems to be one of those categories where even the revenue growth is just about mid-single digits with a lot of pricing. So my question really was that, could it really be a structural issue where the consumers who are reducing consumption are doing it for other reasons of other sources of nutrition?
Is there something that gives you confidence that this is purely a milk inflation-related issue, and therefore, you know, once stability is achieved there, you should get back to volume growth?
Yes.
Yeah. Yeah, right.
No, no, I just... I think if you look at the benchmark markets in four similar categories in Southeast Asia, the size and scale of such brands is very, very strong. And given that the HFD category is still penetration levels are low, and we are actually fully, you know, we have basically south and east, and we have north and west still to go to, the headroom on this category should be very, very long. And apart from the fact that it's got this market development runway, this is also a category which is good for the country, and that's why we like it so much, because it helps address the malnutrition gap that exists within our society.
So given that, or these two reasons, this is definitely a long-term bet. Now, it is possible that... No, we know that for a fact that consumers have downtrade, have titrated their consumption because the cost of each cup has gone up, and we start to see already in the last few quarters as milk prices have stabilized, and we have focused our communication on why, you know, this category makes sense, why it's so important, and we have started customizing our communication as well to different regions. We have stabilized our assortment, and our whole incentive curves on our SKUs. We start to see green shoots. Secondly, there's also a big opportunity in the premium end of this category, which is in the space of science-based supplements that are focused-...
Women, women's health, and so on, so forth, and those, those are doing quite well, and we have low share in that segment, so there's also an opportunity to do that is to grow there. And then, of course, Horlicks and Boost, and Boost, by the way, is doing very well. It's already in the double-digit levels. We do see an opportunity for us as well to also stretch these brands, you know, leveraging their strong equity. So I see many levers, or like we said in the chart, more users, more usage and more premium, many, many more opportunities to draw this category and take it to the next level. It's already a scale category for us of almost EUR 500 million or in scale.
So yeah, I think I'm optimistic, but we need to stay disciplined and patient and keep working for the long term.
Okay, thanks so much, Rohit, for your clarification. That's it on my side.
Thank you.
Thank you.
Next question is from the line of Jitendra Arora from ICICI Prudential. Please go ahead.
Hi, good evening. I just had one question, with respect to your A&P expenditure. Given the sharp growth year-over-year, I just wanted to understand the characteristics of the expenditure in the base as well as current year, if you can help me, in terms of how much would be advertising and how much would it be towards promotion? And within advertising, how much would it be, let's say, towards traditional medium and the digital medium?
Yeah. No, no, thanks, Jitendra, for the question. So yeah, so this quarter, as you've seen our results, we have 11.4% A&P expenses. Same period last year, we had 7.2%, and which is why you see a pretty strong 420 basis points year-on-year increase in A&P expenses, which is INR 700 crore and a 65% increase. Now, of course, system is the base, and, remember, again, September quarter last year, it was a peak of inflation, and then, hence, overall, the GRPs in the industry had come down, where there's a much higher price versus cost for the industry. And on that low base, of last year, same time, when you compare 11.4%, looks a substantial increase.
But even if I ignore the base, if I just look at the overall full year number, same period last year, 8.4% was our annual A&P. And that A&P number, we have gradually kept increasing from 7.2% to 8% to 8.8%, 9.9%, and then 11.4% in the current quarter. Now, for us, what are the principles for A&P resource allocation? The first ground principle is share of voice and a share of market. That determines the amount of intensity, competitive intensity, and versus that, the amount of allocation that you want to do for resource. Second, of course, your reach objective and your frequency objective. This is the amount of innovation that you want to land in the market.
That's the second driver, which then determines the absolute amount of A&P investment which you end up doing. Suffice to say, where we are at 11%, a little over 11%, between 11%-12%, that's the kind of a benchmark at some stage we had pre-inflation. And, the way I see, this number will remain firm. Given the amount of competitive intensity, this number will remain firm.
I'm sorry, Ritesh, but that does not address my question. I just wanted to understand the characteristics of this expenditure rather than why it has grown.
Yeah. So in terms of characteristics, if I look, see, overall, when we look at our total expenses, 100 pie, to your question, 1/3 is digital medium, 2/3 is traditional medium. So that's how we typically speak of expenses. Now, to your other question, sub-question, is it promotion driven? It is advertising driven? It is advertising driven.
Okay, thanks.
Yeah.
Cool. Thank you.
Thank you. Next question is from the line of Amit Rustagi from UBS Group. Please go ahead.
Yeah, good evening, team. Thanks for taking my question.
Hi.
I have just one question on the scale of three to seven or three to nine. Where do you think that our increased A&P spend will lead to on a higher volume growth for the second half of the year?
Ritesh?
Sorry, did not get the question. Can you please come again, please?
Yeah. So, like I'm saying, how confident we are on a scale of one to 10, that how, how much volume growth we can drive in the second half of the year with increased A&P spend? And, when gross margins are going to stay here, so are we going to continue with a higher A&P spend in the coming quarters as well?
Yeah. So let me take your second question first, and I, I think the first question you're trying to ask is the outlook, that we have a volume going ahead. So that's clear. See, of course, the job that we have, which is to keep driving our reflex muscles and generating overall Symphony savings, the program that we use internally in the organization called Symphony, where our objective always is to drive savings across all the lines of the P&L, be it promotions, be it advertising, be it supply chain costs, or for that matter, overhead costs. Some portion of that gives benefit in gross margin. Other element of the lines of the P&L also get benefit of the overall savings program that we drive. That effort of driving savings across all lines of the P&L will continue.
To Rohit's earlier articulation, we'll only further step it up, with full intention to ensure that we are able to invest it back in the business. Invest it back in terms of ensuring competitive levels of expenditure of A&P, which, as I mentioned, will remain firm. That's how we read. Invest it back in terms of capability building. When we do Shikhar, when we do Reimagine HUL, they all require investments to get done. And the third, when we generate sources to invest in the business. And, and see, of course, invest back in terms of, product superiority and invest back in terms of overall portfolio development. So that job of generating resources within the P&L and deploying to drive growth and that, that cycle will continue to do.
So that's how we look at when we look at the financial growth model, is to keep looking for sources of investment and then, of course, areas that we need to invest to drive growth. And then coming back to outlook is what I was responding earlier. We have seen gradual recovery of demand as high inflationary periods are stabilizing. And as we mentioned that in summary, we remain cautiously optimistic in terms of this gradual recovery of demand, as high inflationary period is hopefully behind us, and we have a more stable outlook going forward in terms of commodity and hence impact of that, in terms of positive impact of that on the demand generation overall in the industry.
Yeah, but I, I know you would love to hear a number from me, but, I can only tell you qualitatively, what are the factors, as I was responding earlier, which we see in short-term driving and supporting the growth and, be it overall inflation coming down, be it overall festival demand or the resilient economy that we have. And of course, the factors I did call out between monsoon, volatile commodity and geopolitical stability, which are the factors which might, work against as this recovery is happening. We will, of course, see when all these things put together, we will see how, how demand situation pans out. But the overall aggregate narrative is, cautiously optimistic with, continued recovery of demand outlook.
Great. Thank you. Very clear. Thanks, team. Thank you.
Thank you. Next question is from the line of Kunal Vora from BNP Paribas. Please go ahead.
Yeah, thanks for the opportunity. My first question is on pricing. At a portfolio level, how much price cut have you taken from the peak? And, how many quarters the pricing could remain negative? And, the price cuts, mostly are they in value segment, or are they broad-based?
Yeah. So, Kunal called out that the price in this quarter, that is in September quarter, there are two categories, essentially, where we have taken price decreases sequentially. Number one, we called out for skin cleansing, and second, we called out in the area of laundry soap detergent. Of course, as I mentioned earlier to Arnab's question, there are also areas where we have also increased prices, be it coffee, be it HFD, where we have seen input cost inflation. Now, of course, as we speak, to the extent where commodities are today and whatever near-term outlook we have, as far as we are concerned, we are finished doing the job in terms of price adjustments that we had to do to our portfolio.
Which is why if commodities remain where they are in short term, now, short term could be three months, four months, all depends as to where commodities end up settling in or a little longer period than a few months, all depends upon where commodity settles. So at least in short term, we do see our price growth to be marginally negative if commodities remain where they are today.
Okay, okay. And can you talk about your priority? Like, say, I mean, as the GM expands, would you like... You raised ad spends, but it looks like price cuts don't seem to be very large. Like, why prioritize ad spends and not pass on some benefits to the customers, especially with intense competition?
So we have done both. One of the factor, Kunal had mentioned that, you know, when you have such prices going up, coming down, the single most important priority is to ensure competitive price value equation of all our products across the board. Equally, when the commodity price is going up, and hence we have to increase prices, or for that matter, when commodity cost comes down, we then decrease prices. In fact, our pricing principle has been when commodity cost goes up, we take price increase in smaller chunks. When commodity cost comes down, we take decrease in larger chunks, so that we don't disrupt trade pipeline with frequent changes in pricing. So to the extent we had to take prices down judiciously to ensure competitive price value equation, that job we have done.
Of course, as that has happened and the bleed of price versus cost has come down, which is, apart from everything else that we've done to drive costs down, one of the reasons why we've seen a pretty good amount of gross margin recovery, which now is back to a pre-inflation level, where we are today at around 52%. So that's what we have done in terms of A, first port of call has been to ensure competitive price equation, and then, as we needed to invest money behind A&P competitively with the principle of share of voice, ahead of share of market, is what we've done.
But again, that doesn't mean that other elements of jobs to be done in terms of investing in product to drive product superiority, investing in capability like Shikhar, Reimagine HUL, that we kept doing, or for that matter, dialing up more amount of innovation that we want to bring to the marketplace. We spoke this quarter, we were very busy with B2C, with good amount of innovation across the board that we've landed. So the resources then, which get generated in the P&L, they get basically deployed in all of these priorities to drive all-round growth and business development.
Sorry to continue on this, but like, when competitive intensity has increased significantly, you have, let's say, portfolio is gaining less market share. Why not just take larger price cuts? When, like, why have 700 basis points margin expansion over the last one year instead of, like, maybe that could have been reinvested a bit more in pricing?
No, of course, it's a very complex set of decisions, and you can imagine business decisions are very complex. The way you deploy your entire 6 P, from development to deployment, to pricing, to promotion, to product, and this entire 6 P mix, we have to always look what will give us a competitive edge in the market. And it can never be a unidimensional view that cut price will get more growth. Only if life was so simple.
Yeah. And just one last point. Historically, has elections had any impact on the growth rates? How do you see the elections coming in?
See, no, we have seen, I'm saying our read over the last several years in this space has been when there are structural interventions that the government does, be it example, we spoke on last couple of years of heightened amount of capital expenditure that government has done, or for that matter, when you contain inflation, when infra spend goes up, we have seen those long-term measures have a higher impact on FMCG demand, and because, A, they drive disposable income, they, they drive better amount of jobs, and hence they also drive more amount of money being available to be spent. So our read has been that those macro factors developed and deployed by government has larger impact on FMCG demand. So that's where we see higher correlation.
Okay. Thank you. That's it from my end.
Thanks, Kunal. Thank you.
Okay, we are at 7:30, so we will end the session here. Before we end, let me remind you that the playback of this event will be available on the Investor Relations website, in a short while from now. If there are further questions, feel free to reach out to any of us in the IR team, and we'll be happy to address them. Once again, thanks for the participation, and have a great evening ahead.
Thank you so much for all your engagement. Really appreciate it. Thank you.
Thank you very much. On behalf of Hindustan Unilever Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.