Management Speak: Hindustan Unilever (Outperformer) - Building capabilities ahead of peers!

We present key takeaways of our management interaction at Hindustan Unilever Ltd’s (HUL) annual analyst meet. Management re-iterated its strategy to strengthen core portfolio, as also ramp up innovation in order to continue premiumizing and building presence in emerging categories (naturals, breakfast mix) and new channels (digital, e-commerce). Moreover, HUL is significantly investing in building capabilities by leveraging technology and data analytics for successful execution of its strategy. We believe these initiatives will strengthen HUL’s capabilities across the value chain and enhance the company’s competitive positioning versus peers, thereby aiding ahead of industry growth. We maintain our Outperformer rating on the stock with a target price of Rs1,732.

Leveraging data analytics and technology to improve execution – HUL is investing towards building capabilities (LIVEWIRE, People data centre, SMARTPICK and Project MAXIMA) to leverage technology and data analytics across its value chain to enable actionable decision making. The tools/initiatives will enhance capabilities of CCBTs, ensure faster and precise decision making at a lower cost and increase HUL’s competitiveness versus peers over the long term.

Creating an efficient supply chain – Apart from data analytics, HUL is extensively using technology to reshape the company’s supply chain and enhance customer development. Initiatives that the company is taking in this regard are a) scaling up Shikhar retailer app to enhance salesman productivity, b) investing in robotised warehouses and introducing Project Shogun to reduce overall stock delivery time to drive cost efficiencies and c) leveraging technology to improve shelf presence.

Upping the ante in the Naturals and driving innovation – HUL continues to scale up presence in naturals not only through Ayush and Indulekha but also through variant launches across segments (Lifebouy Turmeric, Lakme natural range, Vim Pudina). Moreover, the company is using Naturals as a proposition to enter a newer breakfast category (has launched Ayush breakfast mix). Further, entry into surface cleaners in the e-commerce channel (Cif), building an affordable portfolio in toilet cleaners, entry into air purifiers through Pureit clearly showcases HUL’s efforts towards innovation, which remains a core thrust area for the company, apart from strengthening the core.