Presentation at ICICI Securities - India Unlimited Third Annual Investor Conference Overview
Hindustan Lever. India s largest & leading FMCG company Ice Creams 1% Foods 6% Exports 12% Others 4% Soaps & Dets 43% Beverages 12% * Based on FY2003 segmental revenues Personal Products 23% Turnover $2.2 Bn Source : A.C,Neilson ORG Marg Market Leader Strong No. 2 Hindustan Lever Lead player across FMCG Categories HLL - Category Market Share (%) Fabric Wash 38 Personal Wash 58 Packet Tea 31 Skin 58 Hair Wash 54 Talcum Powder 62 Dishwash 59 R&G Coffee 49 Deodrants 62 Jams 75 HLL - Market Share (%) Toothpaste 33 Instant Coffee 38 Ketchups 30 #2 Market Share (%) 18 11 19 7 15 13 11 8 11 7 #1 Market Share (%) 48 62 44
Hindustan Lever. India s largest & leading FMCG company US $ Mn Turnover 2238 Growth% (Cont. Businesses) 4.3% EBITDA (Operational) 477 EBITDA Margin % 21.3% Net Profit (bei) 398 EPS 18c * Figures based on FY2003 Audited Results Surplus Cash Generated 361 EVA 315 Market Capitalisation 8547 The India Opportunity
More than 1 Billion Consumers Growing Disposable Income The India Opportunity Young age profile : 45% less than 20 years* Low levels of Per Capita Consumption Growing aspirations fuelled by media * Statistical Outline of India (2002-03) Growing Prosperity : Consuming Class Households to Treble Nos Indicate Mn Households 2003 2015 3 Very Rich 11 46 Consuming Class 124 74 Climbers 79 33 Aspirants 9 24 Destitutes 181 Total 231 8 Income Range per HH Income Class HH (US$ p.a) Very Rich >4,675 Consuming Class 975-4675 Climbers 475-975 Aspirants 350-475 Destitutes <350
Growth in Per Capita Income Per Capita Income (US$ / Annum) 1150 ** 1020 * 556 * India - 2003 India - 2015 China - 2003 * Source : Euromonitor ** Source : BRICs Report - Goldman Sachs Market Size Expected to Treble FMCG Market Size $Bn 33.4** 11.6* India - 2003 India - 2015 * Source HH Panel Data ** Estimated based on China s current per capita consumption
Opportunity to Drive Penetration Category Toothpaste Skin Hair Wash Talcum Powder Dishwash Ketchups Total Penetration (%) 43.5 24.7 23.3 45.1 24.4 4.2 Source : Indian Readership Survey 2002 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 India 1.2 0.4 0.6 Source : Euromonitor
Challenges 22% FMCG Sector Growth slows and declines 18% 14% 17.1% 10% 6% 2% 4.3% 6.7% -2% -6% -10% -1.2% -5.0% -5.8% '98 '99 '00 '01 '02 '03
A Transitional Phenomenon? 3 Poor Monsoons Structural change in consumer spending Easier financing options Increase in HH infrastructure & Utility spends New Consumption Categories Intensified Competition Low Price Players International Companies
Strategy HLL - 2001 Three Pronged Strategy Focus the company : Secure future of Non - Core Businesses Improve profitability of Foods Grow through focus on POWER BRANDS
Strategy Update Non Core Businesses Divested DIVESTED AFS Quest Adhesives Nickel Catalyst Seeds Diversey Lever Oils & Fats Non Core Business TRANSFER Leather Transferred to subsidiaries for potential JV / disposal Mushrooms Generating Excellent Value for Shareholders We now have... a very focussed portfolio % Sales contribution Others 26% Branded Exports Others 8% 8% 6% Branded Exports FMCG 68% FMCG 84% 1999 2003
Strategy Update Foods : Improved Profitability Bps change in Gross Margins 2000-03 1610 1280 610 770 Beverages Processed Foods Ice Creams Total Foods Fuel for growth less isless is more Strategy Update Focus : Power Brands 110 Brands 35 Power Brands 2000 2004
HPC Power Brands Lead Growth 2003 Growth% 6.5 Growth% 6.5 4.6 3.2-4.9 HPC Market HPC Sales HPC Power Brands 2003 Growth% 8.8 Foods Power Brands Lead Growth Growth% 8.8-0.1-9.0-11.1 Foods Market Foods Sales Foods Power Brand
Power Brands Growths & Declines % Contribution to Power Brands Turnover 31% 26% 23% 21% >15% 5% to 15% 0% to 5% <-5% Growths Declines Our Challenge : To grow the entire Portfolio 2003 Growth Drivers
Personal Products Lead Growth Growth% 1.1 14.8 Across Quarters Across Categories Across Brands Volume Led Growth- Across Brands FAIR & LOVELY 19.9 LAKME 53.8 PONDS 11.6 NIHAR 17.5 18.6 7.6 0.1 1.0 CLINIC 2.8 SUNSILK 15.6 CLOSEUP 9.6 PEPSODENT 12.5-6.4-15.8-23.9-4.6
Growth% Processed Foods : Changing gears Moving into growth 19.7 Across Quarters Across Categories Across Brands Volume Led -6.7 Growth- Across Brands Kissan 21.3 Knorr 47.6 Annapurna 12.4 45.7-5.4-22.7
Brand Successes : Some Cases Indexed Sales 100 91 111 Lifebuoy Innovation led Success 134 17.8 17.6 17.6 16.8 16.8 16.7 15.5 15.8 Lifebuoy Market Shares 2000 2001 2002 2003 MQ'02 JQ'02 SQ'02 DQ'02 MQ'03 JQ'03 SQ'03 DQ'03
Indexed Sales Fair & Lovely Innovation led Success 166 200 140 100 FY'00 FY'01 Sales Doubles in 3 years in a flat market FAL Fairness Soap FAL Ayurvedic FAL Anti - Marks FAL Deep Skin FAL Big Nose Sachet Building Capabilities for Growth
Technology Focus 1 out of 4 Unilever Global Research Centres 5 Global Innovation Centres >100 Scientists Innovation Culture HPC : Innovation Drives Growth Lakme :54% Lifebuoy : 20% FAL : 20% Nihar : 18% Sunsilk : 16% Pears : 13% P dent :13% Ponds: 12% CloseUp : 10% Wheel : 7% Lux : 5% * Group Basis
Foods : Innovation Drives Growth Kissan : 21% Knorr : 48% Bru : 27% * Group Basis Annapurna: 12% Brooke Bond : 6% Investments in Brands : Quality Improved performance & sensorials Lifebuoy Lux Hamam Rexona Superior wash within budgets Rin Shakti Double Whiteness - No Mud Rin Supreme Wheel Active Wheel
Accessible Price to drive Penetration & Consumption Lux Dove Lifebuoy Vaseline FAL Ponds Rs.5 Rs 25 Rs 2, Rs 4.50 Rs 4 Rs 5 Rs 5 Surf Excel Rin Shakti Rin Supreme Pepsodent Rs 5 Rs 10 Rs 20 Rs 40 Ponds Rs 5 Rs.1.50 Rs.1 Rs.5 Taaza Rs 5 Clinic Plus Sunsilk Rs 0.50 Rs 5 Clinic Plus Reaching out & Winning consumers World Class Advertising
Reaching out & Winning consumers Alternative Media Visual demonstration of product superiority On the Streets Reaching out & Winning consumers Lifebuoy Rural Health & Education Program 20 Mn homes contacted in one year
Winning the Customer & Channel Focus Partnering with Modern Trade Deepening Rural Distribution Creating New Channels Direct Selling : HL Network Project Shakti Out of Home
Creating New Channels : HL Network Direct Selling Product Range Lever home range Male grooming Oral Care Ayurveda Personal Wash Reach - 1400 towns 2,36,000 consultants Sales increases more than 4 fold in 03 Creating New Channels : Project Shakti Rural selling through SHG s Extended into 4 major states Over 14,000 villages covered Touching 20 mn rural lives Plans ot cover 1,00,000 villages Target : 100 mn rural lives.
Leveraging Scale & Technology Leveraging Concern Scale Media Buying, NPI, Packaging Simplification through Shared Services Supply Chain for Competitive Advantage New units to leverage fiscal incentives Manufacturing flexibility enhanced Project LEAP : end to end connectivity Connectivity with HLL Stockists Fuel for growth and focus on customer service
New Business Opportunities Herbal Health & Beauty Max Confectionery HL Network WATER Power House of Talent Preferred employer across functions and levels. Day 1 - Slot 1, Employer on all campuses Focus : Key Skills & Competencies Building effective teams Developing inspirational leaders Excellent Talent Pool with a passion for winning
Building an Enterprise Culture Building Leadership Increased Diversity Performance Culture Values Action Courage Caring Truth - Code of Business Principles Our confidence in our future comes from In Summary Big Opportunity to grow Penetration & Consumption Unmatched Assets of HLL Strong Brand Equities Robust Business Capabilities Enterprising Talent
Thank You