Under attack for a stagnant growth in the face of increased competition forcing it to enter a price war, FMCG major HLL has chalked out a strategy to rebuild its margins through lower costs and competitive pricing.
Admitting that high social costs and price positioning in some categories as also complex supply chains affected the performance during the year gone by, the company said its threats included 'aggressive price competition from local and multinational players' and 'grey imports.'
The company suffered negative growth in its flagship soaps and detergents division and virtually all other business areas but an improved performance on the personal products front helped it notch a marginal increase in total turnover.
Recognising the problems faced by the company on account of increased competition, HLL Chairman M S Banga informed his shareholders that every step would be taken to defend and build market position for the long term.
"We are witnessing a heightened degree of competition and will continue to take steps to defend and build our market position for the long term. The higher investments required for our brands and fighting competition require us to focus relentlessly on cost reduction" Banga said.
The intense competition saw the company's profits witness a marginal 4.2 per cent rise in 2003 to Rs 1,804 crore (Rs 18.04 billion) against Rs 1,731 crore (Rs 17.31 billion) in the previous year. Sales, excluding other income, were almost stagnant at Rs 11,096 crore (Rs 110.96 billion) against Rs 10,951 crore (Rs 109.51 billion) in 2002.
The flagship soaps and detergents business saw sales dropping to Rs 4,379 crore (Rs 43.79 billion) against Rs 4,385 crore (Rs 43.85 billion) in 2002, while the fall was also witnessed in the beverages, foods and ice cream divisions where sales stood at Rs 1,184 crore (Rs 11.84 billion), Rs 602 crore (Rs 6.02 billion) and Rs 93.39 crore (Rs 933.9 million), respectively.
Exports also dropped to Rs 1,246 crore (Rs 12.46 billion) in 2003 against Rs 1,256 crore (Rs 12.56 billion) in 2002. The saving grace for the company came from the personal products segment where sales grew 15 per cent to Rs 2,410 crore (Rs 24.10 billion).
The company said 'sluggish market conditions' and significant rise in oil prices coupled with firming up of international cargo rates led to the tough conditions in the soaps and detergent segment.
In the personal products segment, the company looks to sustaining the growth momentum by focussing on sachets and low-priced bottle packs in the hair-care category where it sells brands like Sunsilk and Clinic. However, it said deodorant sales in this segment continued to be 'severely impacted' by the huge presence of imported grey products in the market.
HLL said it looked to market and brand growth through increased penetration, especially in rural areas. Also, it expects growing consumption in the 'Out-of-Home' categories.
On the export front, HLL is aiming to establish itself as a sourcing hub for Unilever companies in various countries.
Currently, a majority of the company's exports are to Unilever companies.
For greater focus and to address future opportunities, HLL has integrated its businesses into two divisions Home and Personal Care and Foods. HPC Division comprises detergents, personal products and HPC export businesses and foods division comprises the beverages, processed foods, ice cream, confectionary and beverage export businesses.