HUL to hike prices by 3-5% as input costs rise 8-10%; bets on low elasticity to protect volumes

Hindustan Unilever will implement calibrated price increases to manage a fresh round of cost pressures, even as it leans on low elasticity in essentials to protect volumes and sustain growth.

“Overall, it is stable” and has an increasing trend in the March quarter, CEO and MD Priya Nair said on the demand environment during a post-results briefing, signalling that the company is not yet seeing a slowdown that could derail pricing actions.

The FMCG major posted revenue of ₹16,207 crore in the March quarter, up 8% year-on-year, with 7% underlying sales growth driven by 6% volume growth. Profit after tax (PAT) rose 20% to ₹3,002 crore, aided in part by exceptional gains, while EBITDA margin improved to 23.7%.

Cost pressures drive pricing, but volumes remain key

The company is navigating cost inflation of 8 to 10%, against which it has so far taken around “3 to 5% price increase”, CFO Niranjan Gupta said. The strategy now is to push through further calibrated hikes while balancing volume growth.

“We will take calibrated price increases. We will also focus on savings across the lines of the P&L and really ensure that we do the best in terms of leveraging both our financial stability as a company, but our operating scale and use that to ensure that we navigate this short-term challenge while staying focused on long-term growth,” Nair said.

Gupta added that the company does not see a risk to volumes at this stage. “So, given low elasticity, we do not see a cause as of now to see any adverse effect on some balancing of price and volume,” he said.

To offset rising costs, the company is working across multiple levers. “There are multiple layers of optimisation and savings that we are driving” to ensure the “right pricing” from a consumer standpoint, Gupta said.

Pricing actions will not be uniform across categories. “Home care gets impacted far more, followed by personal care and beauty. That would be the order,” he said, indicating where the sharpest increases could come.

Alongside price hikes, the company is also adjusting promotions and costs. “It’s a combination of all of that that we are using to offset the increase,” Gupta said, referring to spending on discounts, media efficiencies and overhead controls.

The March quarter marked the company’s highest growth in 12 quarters, with home care growing 9% and beauty and wellbeing delivering 8% underlying sales growth. Personal care and foods segments grew 5% each.

For the full year, HUL reported turnover of ₹63,763 crore, up 5%, with underlying volume growth of 4%. Annual reported profit stood at ₹10,652 crore.

Balancing pricing, demand and competition

The broader FMCG sector is grappling with a 15 to 20% surge in raw materials and crude-linked packaging costs, prompting companies to consider price hikes of 2 to 5% and even smaller pack sizes.

On shrinkflation, Gupta said the company is taking a balanced approach to protect value perception for consumers.

On demand drivers, he pointed to structural tailwinds from tax changes. “As far as FMCG is concerned, it is more of a long-term benefit compared to other sectors. Unlike discretionary products, where demand responds immediately, here we do not see any short-term positive or adverse impact from the pricing changes,” he said.

Nair emphasised that scale remains a competitive advantage. “We straddle the pyramid. That allows us to create, manage and titrate towards where consumers are going. That allows us to stay competitive, depending on how the times unfold,” she said.

Rural demand continues to hold up, with the company seeing no immediate concerns from weather-related risks. At the same time, rural markets are currently ahead of urban demand in offline channels, while urban growth is being driven by e-commerce, creating a shifting consumption mix.