Hindustan Unilever Limited · NSE:HINDUNILVR
Hindustan Unilever — Citigroup India Investor Conference 2008
50 slides from Hindustan Unilever's conference presentation, Mar 12, 2008
Slide 1: Hindustan Unilever Limited
Hindustan Unilever Limited Investor Presentation Citigroup India Conference S Srinivasan VP Treasury M&A & Investor Relations Hindustan Unilever Ltd. 11th & 12th March, 2008
Slide 2: Safe harbour statement
2 Safe harbour statement This Release / Communication, except for the historical information, may contain statements, including the words or phrases such as ‘expects, anticipates, intends, will, would, undertakes, aims, estimates, contemplates, seeks to, objective, goal, projects, should’ and simila
Slide 3: Agenda
3 Agenda Overview India Opportunity HUL - Uniquely Placed Financials & Summary
Slide 4: Agenda
4 Agenda Overview India Opportunity HUL - Uniquely Placed Financials & Summary
Slide 5: Hindustan Unilever – a 75year history
5 Hindustan Unilever – a 75year history ~ 15,000 employees Population 1027 Mln • ~ 1,200 managers 5,545 Towns 2.5 Mln outlets • • ~ 2,000 suppliers & associates • 6,38,000 Villages 5.0 Mln outlets • • • ~ 75 Manufacturing Locations • ~ 45 C&FAs, 4,000 Stockists • • • • • • ~ Total Coverage 6.3 Mln O
Slide 6: Leadership across Diverse FMCG Categories
6 Leadership across Diverse FMCG Categories Market Leader Strong No. 2 67.5 57.3 59.7 48.8 54.3 54.5 47.8 44.0 39.1 37.5 30.3 29.5 28.1 23.7 22.7 20.8 13.6 14.5 9.7 8.7 7.4 3.4 Fabric Personal Dishwash Skin Shampoo Talcum Packet Coffee Jams Toothpaste Ketchups Wash Wash Powder Tea HUL – Market Share
Slide 7: Financial Overview 2007
7 Financial Overview 2007 Mn $ Turnover 3473 EBIT 499 EBIT % 14.4% PAT (bei) 448 Reported Profit 487 EPS 21c Market Capitalisation ~11500 Operating Cash Flow 419 Personal Products Soaps and 26% Detergents Exports Processed Breverages 46% 10% Foods 11% 4% Others Icecreams 2% 1% * Figures based on FY
Slide 8: Agenda
8 Agenda Overview India Opportunity HUL - Uniquely Placed Financials & Summary
Slide 9: Opportunities & Challenges
9 Opportunities & Challenges z India and its consuming class z Increasing per capita income drives FMCG growth z Opportunity to grow consumption and penetration z Large scale potential to grow Foods z Evolving trade structure
Slide 10: India: Leading Emerging market Economy
10 India: Leading Emerging market Economy 10.0% 10.0% 9.0% 8.4% 12.0 1200 9.7 8.0% 10.0 9.0 8.9 1000 7.9 8.4 7.0% 6.5% 8.0 6.9 800 6.0% 6.0 5.4 600 4.5 5.0% 4.5% 4.20% 3.9 4.0% 4.0 400 4.0% 3.0% 2.0 200 3.0% 0.0 0 2.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 1.0% 0.0% GDP Growth Per Capita Inco
Slide 11: Favourable Demographics
11 Favourable Demographics C ountry People in 15-64 Additions to population in 15-64 age group 55 (%) Population below 25 years age group (m) during 2005-2020 (m) 45 India 691 198 C hina 934 58 35 Japan 85 (10) 25 Indonesia 147 31 Brazil 123 24 15 US 200 20 Europe US C hina World India Europe 497 (2
Slide 12: India - 2013
12 India - 2013 2003 2013 181 mn hhlds 231 mn hhlds Rich Classes Top End Business 3 Affluent 11 Changing attitudes 46 Aspirers 124 Aspiring Classes Trebling Credit Culture 131 Strivers 96 Striving Classes B.O.P Opportunity The shape of India is going to change… from a pyramid to a diamond Source : N
Slide 13: Evolving trade structure…
13 Evolving trade structure… Modern Trade General Trade Year Modern Trade General Trade 2007 5% 95% 2010 10% 90% 2025 25% 75%
Slide 14: HPC Spend Per Capita (USD)
14 Increasing per capita income drives FMCG growth Disposable income per capita vs HPC spend per capita HPC Spend Per Capita (USD) 500 R2 = 0.8627 400 300 200 100 India 0 0 5000 10000 15000 20000 25000 30000 35000 Per Capita disposable Income (USD) Per capita incomes drive consumption Source: Euromo
Slide 15: Opportunity to grow consumption
15 Opportunity to grow consumption Per Capita Consumption (US $ ) Detergents Shampoo 7.5 Mkt Size Mln. $ 542 6.7 Mkt Size Mln. $ 2247 22.9 6.0 16.6 12.1 1.0 1.0 1.4 2.2 1.9 0.3 India India China Indonesia Brazil Germany USA India India China Indonesia Brazil USA Germany Ice Creams Skin care 49.4 36.
Slide 16: Opportunity to grow penetration
16 Opportunity to grow penetration Penetration %* Category All India % Urban % Rural % Deodorants 2.1 5.5 0.6 Toothpaste 48.6 74.9 37.6 Skin Cream 22.0 31.5 17.8 Shampoo 38.0 52.1 31.9 Utensil Cleaner 28.0 59.9 14.6 Instant Coffee 6.6 15.5 2.8 Washing Powder 86.1 90.7 84.1 Detergent Bar 88.6 91.4 87
Slide 17: Foods Opportunity…
17 Foods Opportunity… Bln. $ 196 6.6 HPC Market Size z Packaged Food Market $14 Billion Food Market 138 5.2 Ratio of Food Market to HPMC Market z Largely Urban (80%), rapid historical 3.8 growth: 13% 75 2.3 37 z Poised to accelerate: Income Elasticity 21 19 6 14 of 1.33 Eastern Europe Latin America
Slide 18: Agenda
18 Agenda Overview India Opportunity HUL - Uniquely Placed Financials & Summary
Slide 19: HUL – Uniquely Positioned to Create Value
19 HUL – Uniquely Positioned to Create Value z Our Strategy z Competitive Strengths z Innovation and R&D capabilities to straddle the pyramid z Versatile distribution network z Strong Corporate Responsibility and Governance z Strong Local talent base
Slide 20: Our vision
20 Our vision To earn the love and respect of India, by making a real difference to every Indian.
Slide 21: Our Strategy
21 Our Strategy z Grow ahead of the market by leading market development activities z Leverage positive impact of growing Indian economy on consumer spending z Grow a profitable foods and Top end business z Grow the bottom-line ahead of top line z Strong commitment to sustainable development
Slide 22: An unmatched brand portfolio
22 An unmatched brand portfolio 6 MEGA BRANDS ~ $ 150 to 200 mn each, 53% FMCG portfolio
Slide 23: Portfolio straddling the pyramid across categories
23 Portfolio straddling the pyramid across categories Particulars Laundry Soaps Shampoo Skin Toothpaste Tea Coffee Market Size - $ mln 2247 1658 542 698 691 1113 177 HUL Share 37.5% 54.3% 47.8% 54.5% 29.5% 22.7% 44.0% Nearest Competitor 13.6% 9.7% 23.7% 7.4% 48.8% 20.8% 39.1% Affluent Aspiring Striv
Slide 24: Category Leadership: Laundry
24 Category Leadership: Laundry Laundry Market Shares 37.5 37.0 36.5 35.2 34.5 34.6 34.1 34.3 Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 Q2-07 Q3-07 Q4-07 Affluent Aspiring Striving
Slide 25: Strong Global Brands: Dove Hair Care
25 Strong Global Brands: Dove Hair Care PR Top 23 Cities Modern Trade 12 5 4.5 10 4 8 3.5 3 6 2.5 4 2 1.5 2 1 0 0.5 7 7 07 7 7 7 7 7 0 l'0 '0 '0 '0 '0 '0 '0 n' ov ay ec g p ct Ju Ju Au Se O N M D May'07 Jun'07 Jul'07 Aug'07 Sep'07 Oct'07 Nov'07 Dec'07
Slide 26: Building Category: Ponds Top End
Building Category: Ponds Top End 26 • Superior Product - Well trained Beauty Advisors - Product Knowledge - Skin Analysis methodology •98+% feel Ponds - Creating Age Miracle has Awareness made a visible difference to them among the target •Gained ~1.5% consumer market share in 6 months post launch
Slide 27: Building category- Processed Foods
27 Building category- Processed Foods Large snacking … but low ketchup Chatakdaar moments penetration Snacking incidence Hhld Panel Penetration Ketchup 17% Conversion Snack % HHlds North from home Potato Chips 37 21% made dips in ethnic snacking Mixture 43 West Metros East 16% 31% 25% occasions Bhaj
Slide 28: Growing ‘Out of Home’ Opportunity
Growing ‘Out of Home’ Opportunity 28 Growing incidence of Out of Home consumption Creating a Large &Growing Market – 58% LSM 8+ consumers work between 9 a.m. to 6 p.m. – Market in Premium channel estimated at 1500 cr. Growing at 23% p.a. HUL uniquely poised to unlock the opportunity – Dominant prese
Slide 29: Amaze: Brain Food
29 31 Amaze: Brain Food Protein Iodine Iron • What Scientist say: Zinc – The school-going period is a critical Omega-3 period for a child’s brain development Vitamin A – Functions like reasoning, problem Vitamin B2 solving, planning, memory develop at this age. Folate Vitamin B6 Vitamin C Vitamin B1
Slide 30: Water
30 Water ~ 220 Mln Households, where safe drinking water in short Context supply Proposition: ‘as safe as boiled water’ without hassles of boiling no harmful virus, bacteria, parasites, pesticides Works without electricity & piped water Business model based on sale of consumables Affordable price: C
Slide 31: Opportunity from increased penetration
31 Opportunity from increased penetration Unique innovations & promotions to drive category penetration Rural shampoo penetration : % households bought once/quarter 45 42 42 42 39 40 39 40 35 SSK Black 8m 35 Rural plan 31 30 27 23 25 21 Rollout of Rs 1 (2 cents) 20 and Rs 0.50 (1 cent) sachets 15 MQ
Slide 32: Innovation and R&D capabilities
32 Innovation and R&D capabilities z HUL leads global research in Oral, Skin and Laundry z Some achievements: • Single Shot Soap making process • Skin Lightening Cream • Non Soap Detergent Bars • Poly coated Dish Wash Bar • Drinking water purifier (Pure-It) • Amaze
Slide 33: Winning with “Go to Market Approach”
33 Winning with “Go to Market Approach” Total population Distribution Strength 1.1 (In Bln.) Direct coverage – 1milllion outlets Number of Retail Brands reach – 6.3 million outlets 7.74 Stores (Mlns) Strong IT capability, end to end FMCG Market connectivity 16448 (Annual, $ Mln)* Urban : Rural Ratio
Slide 34: New Channel Initiatives
34 New Channel Initiatives Channels HUL Programs Family Grocer s SVS/ FLO Chemis t Unicare Fancy Beauty zone Kiosk K- LINE Rural Superstar & Shakti Wholes al e Vijeta/ Sambandh
Slide 35: What sets us apart - Reaching Shoppers
Toothpaste Tooth brush Dish Wash Jams, Squashes Soap Custards and jelly LAUNDRY DAIRY Sanitary napkins Skin Hair DIAPERS DEO Paper pdts Coffee Tea SOUP MEAT SEASONINGS SAUCE OIL CHECKOUTS PASTA SAUCE DRESSINGS SNACKS Ice cream BAKERY What sets us apart - Reaching Shoppers WINE DELI Cosmetics 35
Slide 36: Organized retail - A source of competitive advantage
36 Organized retail - A source of competitive advantage HUL 90 Market Shares in Modern Trade 80 70 60 50 40 30 20 10 0 Toilet Washing Detergent Hand Hair Tooth Skin Tea Instant Soaps Powders Cakes Dish Wash Paste Coffee Wash GT MT HUL Modern Trade (MT) Shares are higher than its General Trade (GT) s
Slide 37: Project Shakti- Enabling direct rural reach
37 Project Shakti- Enabling direct rural reach z To Reach: z Small, scattered settlements and poor infrastructure make distribution difficult z Over 500,000 villages not reached directly by HUL z To Communicate: z Low literacy hampers effectiveness of print media z Poor media-reach: 500 million Indi
Slide 38: Shakti
38 Shakti Three Shakti initiatives z Shakti entrepreneur; currently ~ 44000 women cover 1,25,000 villages z Shakti Vani: one-to-many communication for category growth z iShakti: customized interaction with remote consumers Impact on community z Business and social impact can go together z Partnershi
Slide 39: Capabilities :Leveraging IT for Growth
39 Capabilities :Leveraging IT for Growth Planning Hub Supplier Kirana Distributor C & FA Factory Daily Daily Daily Daily Hand – held Dist Mgmt Central Unify - Prod. Plan – wkly terminal System - Despatch - Daily - On shelf availability - Sales - Stocks - Stocks - sales - Prices, Invoicing 35 Brands
Slide 40: Corporate Responsibility – Aiding in the Development of the Country
40 Corporate Responsibility – Aiding in the Development of the Country z Lifebouy Swasthya Chetana - Health & Hygiene z Shakti – Empowerment of women through micro-enterprise Opportunity z Yashodadham - Relief and Reconstruction in Gujarat's Kutch district z Asha Daan - Happy Home actively supported
Slide 41: Agenda
41 Agenda Overview India Opportunity HUL - Uniquely Placed Financials & Summary
Slide 42: Key Financials
42 Key Financials 2007 2006 2005 Reported Growth 13.3% 9.4% 11.4% Continuing sales growth* 13.5% 10.0% 11.5% EBIT/ Sales % 14.4% 14.1% 13.3% EBIT Growth 15.4% 16.2% 1.1% Operating cash flow* $419 Mn $365 Mn $489 Mn * Before restructuring, disposal As per audited financial statements of the company;
Slide 43: Robust FMCG growth
43 Robust FMCG growth HUL FMCG Sales growth % 14.5 12.7 12.8 12.9 4.8 3.7 3.6 -0.5 0.3 2000 2001 2002 2003 2004 2005 2006 FH 07 SH 07 As per audited financial statements of the company; accounting as per Indian GAAP; Sales growth is worked out on a continuing basis i.e. after adjusting the base for
Slide 44: EBIT Margins
44 EBIT Margins EBIT Margins 20.1% 19.3% 15.5% 14.7% 14.1% 14.4% 13.2% 13.3% 2000 2001 2002 2003 2004 2005 2006 2007 As per audited financial statements of the company; accounting as per Indian GAAP. Sales for the above calculations is Net sales (Gross Sales- Excise Duty)
Slide 45: Earnings per Share
45 Earnings per Share Figures in US $ cents HUL Earnings per Share 21.4 20.6 19.7 19.9 18.3 15.7 14.6 13.3 2000 2001 2002 2003 2004 2005 2006 2007 As per audited financial statements of the company; accounting as per Indian GAAP Earnings per Share= Net Profit (aei) /No. of Shares; Calculations in co
Slide 46: Return On Capital Employed
46 Return On Capital Employed 79.4 68.7 67.0 64.6 62.4 59.4 60.2 45.9 2000 2001 2002 2003 2004 2005 2006 2007 As per audited financial statements of the company; accounting as per Indian GAAP ROCE= PBIT/Closing Capital Employed 2007 ROCE is calculated on Weighted Avg. Cap employed
Slide 47: Return On Net Worth
47 Return On Net Worth 82.8 80.1 68.1 61.1 57.2 52.7 53.9 48.4 2000 2001 2002 2003 2004 2005 2006 2007 As per audited financial statements of the company; accounting as per Indian GAAP RONW= Net Profit (aei) / Closing Net Worth 2007 RONW is calculated on Weighted Avg. Net worth
Slide 48: Summary
48 Summary z 3rd consecutive year of accelerated growth in FMCG portfolio. Growth broad based and across all categories z FMCG markets expected to maintain current growth levels z Successfully implement the Foods strategy z Build momentum to the Water Business z Build on competitive capabilities acr
Slide 49: Thank you
Thank you
Slide 50: Hindustan Unilever Limited
Hindustan Unilever Limited Investor Presentation Citigroup India Conference S Srinivasan VP Treasury M&A & Investor Relations Hindustan Unilever Ltd. 11th & 12th March, 2008
Hindustan Unilever — Citigroup India Investor Conference 2008 on 6ix