HUL food business for FY17 drops 49%

The food business of Hindustan Unilever Limited (HUL), the country’s largest consumer goods company, shrank sharply during the last financial year.

According to HUL’s latest annual report for the financial year 2016-17 (FY17), the company's food business was down to 3 per cent of net revenue (~34,487 crore), compared to 6.6 per cent in 2015-16 (FY16). HUL’s FY16 net revenue stood at ~31,987 crore. In absolute terms, this works out to ~1,035 crore in FY17 versus ~2,111 crore a year ago, a drop of 49.02 per cent over the year-ago period.

While the Kissan brand maintained its leadership position in ketchups and jams, and Knorr expanded its soup portfolio, the company said the business slowed down in FY17 owing to category and market challenges. “The company continued its focus on improving the profitability of the Annapurna business (branded commodities) by driving efficiencies across the value chain,” HUL said. Parallelly, HUL scaled up experiential marketing initiatives in foods as the pressure to improve on-ground sampling to grow sales increased.

The company also said it saw temporary transition challenges during the shift to the goods and services tax (GST), but added it was prepared for it. While soaps and toothpastes have been slapped with an 18 per cent GST rate, detergents and much of personal care are in the 28 per cent tax bracket. Home care, personal care and refreshments constitute 33 per cent, 48 per cent and 14 per cent, respectively, of FY17 net revenue for HUL, according to the annual report. But, while home care and personal care categories are not comparable, since the company undertook portfolio changes in FY17 clubbing soaps (personal wash) with personal care and bunching the water purifier business with detergents under home care, the refreshments business is comparable over last year.