Hindustan Unilever Limited · NSE:HINDUNILVR
Hindustan Unilever — Kotak Investor Conference September 2005
45 slides from Hindustan Unilever's conference presentation, September 2005
Slide 1: Kotak Investor Conference
Kotak Investor conference September 2005 Kotak Investor Conference September 2005
Slide 2: Contents
Contents Growth India agenda Opportunity Overview 2005 FMCG Scenario markets & strategy
Slide 3: Contents
Contents Growth India agenda Opportunity OVERVIEW 2005 FMCG markets & Scenario strategy
Slide 4: HLL - India's Largest FMCG Company
HLL - India’s Largest FMCG Company 16,000+ employees * 1,200+ managers India 2,000+ suppliers & Population 1027 Mln associates 3,800 Towns 80 company factories • 0.9 Mln outlets 45 C&Fas, 7,000 Stockists 6,27,000 Villages Direct Covera
Slide 5: HLL - India's Largest FMCG Company: Trailing 4 Quarters Sales
HLL - India’s Largest FMCG Company 100 Trailing 4 Quarters Sales Index : HLL’s Sales = 100 24 23 16 12 10 9 9 9 9 5 4 * HLL Nirma Nestle Britannia Dabur Colgate Marico Tata Tea P&G GSK GCPL Gillette *Estimated Kotak Investor Conference September 2005
Slide 6: Financial Overview
Financial Overview 2004 Mn $ Turnover 2,268 Others Exports 3% Soaps & 12% Operating Profit 360 Detergents Ice Creams 44% 1% Operating Margin % 15.9% Foods 3% Net Profit (bei) 275 Beverages EPS 13c 12% Surplus Cash Generated 265 Personal Products Market Capitalisation 8,547 25% * Figures based on FY2
Slide 7: Leadership across categories
Leadership across categories HLL - #2 Category Market Market Share (%) Share (%) Fabric Wash 38 17 Personal Wash 55 10 Dishwash 56 11 Market Leader Skin 59 4 Hair Wash 48 22 Talcum Powder 62 4 Packet Tea 30 20 Jams 75 7 HLL - #1 Market Market Share (%) Share (%) Toothpaste 33 47 Strong No. 2 Instant
Slide 8: HLL Shareholding Pattern
HLL Shareholding Pattern Others 20.5% Unilever 51.6% Domestic FIs 13.9% FIIs 14.0% HLL Equity Capital - 50 Mn $ Market Capitalization - 8,547 Mn $ * Shareholding pattern as on 30th June’05 ++Market Capitalization as on 2nd September’05 Kotak Investor Conference September 2005
Slide 9: Contents
Contents Growth INDIA agenda OPPORTUNITY Overview 2005 FMCG Scenario markets & strategy
Slide 10: Economic Outlook
Economic Outlook Growth% 2002-03 2003-04 2004-05 2005-06 # * Agriculture (5.2) 9.1 1.1 3.0 Industry 6.2 6.7 6.8 8.5 Services 7.1 8.7 8.0 7.5 GDP 4.0 8.2 6.2 6.8 Source : CM IE # Est imat es, * Forecast Positives Concerns • Strong GDP Growth • Oil Prices • High Forex Reserves • Inflation • Growing Ex
Slide 11: The India Opportunity
The India Opportunity • More than 1 Billion Consumers • Growing per capita income • Future of FMCG in India • Opportunities to drive Consumption • Value upgradation opportunity • Growth opportunity in Modern Trade Kotak Investor Conference September 2005
Slide 12: Disposable income per capita vs HPC spend per capita (2004)
Disposable income per capita vs HPC spend per capita (2004) 400 2 R = 87% 350 HPC Spend Per Capita (USD) 300 250 200 150 100 50 - 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 Per Capita disposable Income (USD) • Per capita incomes in the long term drives consumption • High R-squared for develop
Slide 13: Per Capita FMCG Expenditure
Increasing Per capita income drives FMCG growth • Correlation of above 0.8 between FMCG consumption and PCI • Growth in income is a good indicator of growth in FMCG consumption. • As India’s real income continues to grow at 7% + levels FMCG will benefit. 16.1 Per Capita FMCG Expenditure 13.8 CHANDIG
Slide 14: Opportunity to grow consumption
Opportunity to grow consumption Per Capita Consumption (US $ ) Fabric Wash Toothpastes Shampoos China 1.7 0.8 1.1 Indonesia 2.0 1.1 1.2 Thailand 4.7 3.0 3.7 India 1.2 0.4 0.6 Source : Euromonitor Kotak Investor Conference September 2005
Slide 15: FMCG Modern trade stores
FMCG Modern trade stores Thousands 2.5 2.4 % 2.1 5 2 1.8 4 1.5 1.2 3 1.1 0.9 1 0.8 0.7 2 1 0 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Source : AC Nielsen Stores % contribution to FMCG • FMCG modern trade stores increasing at a CAGR of 15% in the last 5 years • They account for 3% of FMCG
Slide 16: FMCG Modern trade stores
FMCG Modern trade stores India U&R 3 Urban India 4 23 metros 9 South metros 20 0 5 10 15 20 25 Source : AC Nielsen Percentage contribution to FMCG sales • Modern trade accounts for 9% of FMCG in metros, 20% in South Indian metros Kotak Investor Conference September 2005
Slide 17: Retail industry outlook
Retail industry outlook • One Big Bazaar to open every fotnight • Wal-Mart keen to open stores as soon as FDI is allowed • BPCL to open 700 convenience stores every year • Metro to spend $400 mn in the next 5 years • 22 new malls to open up in Mumbai this year ! • Barista to open 1000 outlets by 201
Slide 18: HLL view
HLL view HLL’s market share % significantly higher 60 55 in MT 48 channel in 38 key competitive 40 33 35 30 categories 20 0 Toothpaste Tea Fabric Wash Overall market share MT channel market share HLL is uniquely positioned to take advantage of bringing in the Unilever worldwide best practices in MT
Slide 19: Contents
Contents Growth India agenda Opportunity Overview 2005 FMCG Scenario MARKETS & STRATEGY
Slide 20: HLL: Three Pronged Strategy
HLL : Three Pronged Strategy 2000-2004 Grow through focus Rationalization completed on “POWER BRANDS” from 110 to 35 power brands 1300 Bps improvement in Improve profitability foods gross margins of Foods Portfolio focused: Share of Secure future of Non Non FMCG down from 24% - Core businesses to 8%
Slide 21: FMCG Markets
FMCG Markets 20-25% >10% 3.4 2002 2003 Q1'04 1994-1996 1997-1999 2001 -1.1 -2.5 -2.8 From Double Digit growth rates to declines Source : AC Nielsen ORG Marg Retail Audit Kotak Investor Conference September 2005
Slide 22: Challenges
Challenges •Price Led Local Competition •Increasing competition for share of wallet (durables,homes, auto,services) •International companies seeking market position •Driving Penetration & Consumption Down-trading in most FMCG categories Kotak Investor Conference September 2005
Slide 23: FMCG Markets: Steps and Actions
FMCG Markets Steps Actions •Drive growth agenda •Laundry : Price Reduction •Take competitive challenges •Shampoos: Value Improvement head on & Lower Price Points •Financial commitment for •Toothpaste: Value Corrections long term value & SKU rationalization $ 115 mn brand investments in 4 years 45% i
Slide 24: Investments behind Brands
Investments behind Brands Innovation & Superior quality Family - safe Petal-soft Pimple Quick wash - 50% Rin from germs reduction Water & effort saving Advanced Perfect Radiance “5 in 1” hair Total Care Velvety Whiter Fresher health benefits soft teeth breath Kotak Investor Conference September 2005
Slide 25: FMCG Markets 2004 - Revival after 2 years of decline
FMCG Markets 2004 - Revival after 2 years of decline 6.1 Total FMCG Market Growth% 5.8 4.0 2.0 0.8 '02 '03 Q1'04 Q2'04 Q3'04 Q4'04 Q1'05 Q2'05 -1.1 -2.5 -2.8 Rural FMCG Market Growth% 2.2 Urban FMCG Market Growth% 9.9 8.5 1.0 2002 2003 Q1'04 0.1 Q3 Q4 5.1 Q2'04 Q1'05 Q2 3.8 -1.2 -0.8 1.2 -1.9 2002 0
Slide 26: FMCG Markets
FMCG Markets •New equilibrium after choice explosion •Higher levels of brand investments and innovations •Revival largely urban led •Rural no longer declining Kotak Investor Conference September 2005
Slide 27: Contents
Contents Growth India agenda Opportunity Overview 2005 FMCG markets & SCENARIO strategy
Slide 28: 2005 - Scenario
2005 - Scenario •High input cost escalation particularly in chemicals & packaging materials impact laundry most •Aggressive cost savings and judicious price increases to partly offset cost pressure •High brand building investments will continue Kotak Investor Conference September 2005
Slide 29: 2005 Highlights: Double digit topline growth
2005 Highlights Double digit topline growth 10.3 6.9 0.7 JQ’04 SQ’04 DQ’04 MQ’05 JQ’05 -1.9 -1.2 Volume growth at 7% Kotak Investor Conference September 2005
Slide 30: 2005 Highlights: Growth ahead of market
2005 Highlights Growth ahead of market FMCG (HLL Categories) Market Growth% 11.9 HLL (FMCG) Growth% 7.1 6.1 5.8 4.0 2.0 0.8 1.0 -0.3 JQ'04 SQ'04 DQ'04 MQ'05 JQ'05 -2.3 Kotak Investor Conference September 2005
Slide 31: Current Performance: Fabric Wash
Current Performance Fabric Wash Actions taken Fabric Wash Volume Shares 27.9 27.3 26.4 26.6 •Price reduction 25.3 25.5 26.4 •Additional investment JQ'04 SQ'04 DQ'04 MQ'05 Apr'05 May'05 Jun'05 in quality Fabric Wash Value Shares 38.4 38.7 38.0 •Higher A & P spends 37.7 37.9 37.6 37.5 •Brand repositio
Slide 32: Current Performance: Shampoo
Current Performance Shampoo Volume Shares Actions taken 52.8 53.3 •Price reduction - bottles 51.7 51.6 51.6 51.7 49.4 •Value Improvement - Sachets •Innovations JQ'04 SQ'04 DQ'04 MQ'05 Apr'05 May'05 Jun'05 •Sunsilk 49.8 Value Shares 48.2 •Clinic Plus 48.9 47.5 •CAC 47.1 47.0 46.8 •Higher A & P spends
Slide 33: Contents
Contents GROWTH India AGENDA Opportunity Overview 2005 FMCG markets & Scenario strategy
Slide 34: Key agenda will continue to be
Key agenda will continue to be •Topline Growth •Competitiveness of brands and business systems Kotak Investor Conference September 2005
Slide 35: Delivering Consumer Value
Driving the growth agenda Delivering Consumer Value Brand Superior Strategic Relevance Quality Pricing Ten Point Program to provide fuel Kotak Investor Conference September 2005
Slide 36: Strategic Pricing
Strategic Pricing Rs Rs 10 Rs 2 5& 2 Rs 4 Rs 5 Rs 5 Rs 5 Rs 10 Rs.5 Rs 25 Rs 2, Rs 4.50 Rs 20 Rs 40 Rs 5 Rs 5 Rs.1.50 Rs.1 Rs.5 Rs 0.50 •Increasing Accessibility : Lower price points •Driving Affordability : Strategic Price Reductions Kotak Investor Conference September 2005
Slide 37: Technology Focus
Technology Focus • India is a base for • 1 out of 4 Unilever Global Research Centers • 5 Global Innovation Centers • >100 Scientists Kotak Investor Conference September 2005
Slide 38: Channel Architecture
Channel Architecture Channels Prioritized in 2004-05 Self-service store where there is room Supermarkets for shoppers to browse and interact with the products. Over the counter store mainly for Family Grocer monthly household shopping. Direct coverage 1 mn outlets A tiny over the counter store, easi
Slide 39: Channel Structure - Current
Channel Structure - Current Supermarkets RS Family Grocer RS Kiosk CSP CRS Supply Chain Wholesale CSP Evolved Separate Distribution System for each Channel, Differential Terms of Trade Kotak Investor Conference September 2005
Slide 40: Initiatives in channel & customer management
Initiatives in channel & customer management •New sales organisation in place. •Greater focus on activation and point of sale demand creation •Segmented approach to general trade and modern trade •Improved customer service: · Continuous replenishment operational · Lower trade stock · Improved stock
Slide 41: New Ventures and channels: Water
New Ventures and channels Water • Launched ‘PUREIT’, the most advanced in-home water purifier in the world. • Only purifier that gives water that is ‘as safe as boiled water' > without boiling COST > without needing electricity 17 paise per liter > without needing continuous tap water supply or 260
Slide 42: New Ventures and channels: Rural Marketing - Project Shakti
New Ventures and channels Rural Marketing - Project Shakti – Challenges in Rural Markets • Accessibility • Viability • Media Dark – Rural selling through SHG’s • Benefits Improving product reach Facilitating Brand-Communication • Extended into 12 major states, 336 districts • Over 61,000 villages co
Slide 43: New Ventures and channels: Direct Selling
New Ventures and channels Direct Selling Product Range • Lever home range • Male grooming • Oral Care • Ayurveda • Personal Wash • Foods Reach - 1400 towns (Largest in India) Consultant base - 330,000 Kotak Investor Conference September 2005
Slide 44: In Summary
In Summary • India : A buoyant economy with huge opportunity • Big Opportunity to grow Penetration & Consumption • FMCG markets are reviving • Input cost escalations presents an important challenge • Strong brands : Rationalization completed • Initiatives in channel and customer management • Strong
Slide 45: Thank You
Thank You Kotak Investor Conference September 2005
Hindustan Unilever — Kotak Investor Conference September 2005 on 6ix