Hindustan Unilever: Business Model, Earnings, Promoter Details and Shareholding Pattern

Hindustan Unilever Business Model: An Overview

HUL’s business model is rooted in the FMCG sector, focusing on delivering everyday essentials to consumers across urban and rural India. The company operates through a multi-category portfolio, leveraging a robust supply chain, extensive distribution network, and strategic marketing to maintain its market presence. Below is a breakdown of its business model components:

1. Product Portfolio

HUL’s product range spans four key segments:

• Home Care: Includes brands like Surf Excel, Rin, Vim, and Comfort, catering to laundry, dishwashing, and household cleaning needs.
• Beauty & Personal Care: Features popular brands such as Dove, Lux, Pond’s, Lakmé, and Sunsilk, targeting skincare, haircare, and personal hygiene.
• Foods & Refreshment: Encompasses tea (Lipton, Brooke Bond), coffee (Bru), health food drinks (Horlicks, Boost), and ice cream (Kwality Wall’s, until its planned demerger).
• Others: Includes water purifiers (Pureit, divested in 2024) and niche offerings.

This diversified portfolio allows HUL to cater to a wide demographic, from premium urban consumers to price-sensitive rural buyers.

2. Distribution Network

HUL’s strength lies in its extensive distribution network, which reaches over 9 million retail outlets across India. The company employs a mix of direct and indirect distribution channels:

• Direct Reach: Covers approximately 3 million outlets, primarily in urban areas, serviced through a network of distributors and stockists.
• Indirect Reach: Extends to rural markets via wholesalers and sub-distributors, ensuring penetration into remote areas.
• Project Shakti: A rural initiative that empowers women micro-entrepreneurs (Shakti Ammas) to sell HUL products, enhancing last-mile connectivity.

This hybrid model ensures HUL’s products are available in both modern trade (supermarkets, e-commerce) and traditional kirana stores, which dominate FMCG sales in India.

3. Supply Chain and Manufacturing

HUL operates over 30 manufacturing facilities across India, strategically located to optimize logistics costs. The company emphasizes sustainability in its supply chain, integrating initiatives like reducing carbon emissions and water usage. It sources raw materials locally where possible, balancing cost efficiency with quality control.

4. Revenue Model

HUL generates revenue through:

• Volume Growth: Increasing sales volumes by expanding market reach and introducing affordable pack sizes (e.g., sachets for rural consumers).
• Price Adjustments: Periodic price hikes to offset input cost inflation, particularly in categories like soaps and tea.
• Premiumization: Launching high-margin products in urban markets to boost profitability.

The company also invests heavily in advertising and promotion (A&P), with expenditures often exceeding 10% of revenue, to maintain brand visibility and consumer loyalty.

5. Innovation and Market Adaptation

HUL adapts its offerings to local tastes and economic conditions. For instance, it introduced smaller pack sizes to cater to low-income households and relaunched brands like Rin and Comfort with enhanced formulations in Q3 FY25 to stay competitive.

6. Strategic Divestitures

HUL periodically refines its portfolio by divesting non-core businesses. In 2024, it sold its Pureit water purifier business and approved the demerger of its ice cream business (Kwality Wall’s), aligning with Unilever’s global strategy to focus on high-growth categories.

Q3 FY25 Earnings: Financial Performance Analysis

Hindustan Unilever released its Q3 FY25 results (October-December 2024) on January 22, 2025, reflecting a mixed performance amid challenging market conditions. Below is a detailed analysis based on available data:

Key Financial Highlights

• Revenue: Consolidated revenue grew by 1.9% year-on-year (YoY) to Rs 15,559 crore, up from Rs 15,259 crore in Q3 FY24. Sequentially, it declined marginally by 1% from Rs 15,926 crore in Q2 FY25.
• Net Profit: Consolidated net profit surged 18.9% YoY to Rs 2,984 crore, compared to Rs 2,509 crore in Q3 FY24. This growth was driven by a one-time exceptional gain of Rs 317 crore from the Pureit divestment. Excluding exceptional items, profit after tax (PAT bei) remained flat.
• EBITDA: Earnings before interest, taxes, depreciation, and amortization stood at Rs 3,695 crore, a slight increase from Rs 3,666 crore in Q3 FY24, with an EBITDA margin of 23.5%.
• Underlying Sales Growth (USG): USG was 2%, with flat underlying volume growth (UVG). Absolute volume grew competitively but was offset by a negative product mix.

Segment-Wise Performance

• Home Care: Recorded a 6% USG, led by high single-digit volume growth in fabric wash and household care. Liquid detergents maintained double-digit growth, while Rin bar and Comfort relaunches bolstered performance.
• Beauty & Personal Care: Growth was muted due to weak urban demand, though premium brands like Dove and Lakmé showed resilience.
• Foods & Refreshment: Faced challenges from subdued seasonal demand (e.g., ice cream and winter portfolio), though tea and health food drinks saw modest gains from price hikes.

Market Context

HUL’s Q3 performance reflects broader FMCG trends in India:

• Urban Slowdown: Moderating growth in urban markets continued, driven by inflation and reduced discretionary spending.
• Rural Recovery: Rural demand showed gradual improvement, supported by small pack sales and government initiatives boosting rural incomes.
• Input Costs: Higher raw material costs (e.g., palm oil, tea) pressured margins, though HUL mitigated this through operational efficiencies.

Dividend and Shareholder Returns

HUL declared a total interim dividend of Rs 29 per share for FY25, comprising Rs 19 as a regular interim dividend and Rs 10 as a special dividend, payable on November 21, 2024. This reflects the company’s focus on delivering consistent shareholder value.

Management Commentary

CEO Rohit Jawa noted, “While urban markets witnessed moderating growth, rural recovery remained gradual. We delivered competitive performance by transforming our portfolio and maintaining healthy margins.” The company remains cautious about demand recovery while emphasizing operational rigor and innovation.