HUL rejigs top deck as D2C players chip away at FMCG strongholds

Hindustan Unilever's (HUL) recent leadership rejig, particularly across its Beauty and Personal Care and Foods & Refreshments businesses, clearly signalled that Chief Executive Officer Priya Nair has recognised the scale of disruption reshaping India's FMCG market, as nimble D2C companies steadily chipping away at the legacy brand's market share.

For the beauty and personal care portfolio, Nair largely relied on internal leadership, appointing HUL veterans such as Sunanda Khaitan as Chief Marketing Officer and Abhinav Ravikumar as CMO-Personal Care. She has also brought in an external perspective for foods by roping in Rajneet Kohli, former CEO of Britannia Industries, as Executive Director, Foods.

Rahul Shah, co-founder of WalkWater Talent Agency, said the leadership mix allows HUL to preserve institutional culture while importing fresh thinking from competitors and adjacent industries. "It’s a deliberate strategy to stay ahead in India’s fast-evolving FMCG market," he said.

Industry experts argued that the disruption confronting HUL is not cyclical but structural. "The emergence of small D2C players, lower barriers to distribution, and social media-led marketing have levelled the playing field," said K Sudarshan, Managing Director- India & Regional Chair - Asia at EMA Partners, pointing to structural shifts disrupting the sector.

"Consumption has not declined-consumers are still buying the same categories, but demand has shifted channels. Traditional advantages such as last-mile distribution and mass TV or outdoor advertising are no longer decisive".

In March 2022, Unilever announced a shift to a matrix structure organised around five business groups-Beauty & Wellbeing, Personal Care, Home Care, Nutrition, and Ice Cream- to improve growth. However, between FY2023 and FY2025, HUL’s revenue CAGR remained modest at around 2.15%. Revenue from the Beauty & Personal Care segment has stayed largely flat since FY2023, while the Foods & Refreshment business grew at a slower pace than other categories, posting a CAGR of about 2.8% between FY2022 and FY2025, rising from Rs 14,105 crore to Rs 15,294 crore.

"The market conditions were not conducive earlier, but the ecosystem is improving now. If performance doesn't pick up even in this environment, that could raise concerns," said Naveen Trivedi, Senior Vice President and Research Analyst–Consumer & FMCG at Motilal Oswal Financial Services.

"It will be interesting to see how numbers shape up from Q3 onwards. Sometimes, new ideas and fresh energy help. From a macro standpoint, Nair is also fortunate that there are no major headwinds".

HUL is scheduled to announce its third-quarter earnings on 12 February.

The FMCG major, which has built 19 brands each generating over Rs 1,000 crore in annual turnover, has outlined four priorities to drive volume-led growth. These include refining brands, channels, and media strategies to target three consumer cohorts- Power Spenders, Premiumisers, and Democratisers; reimagining core brands, strengthening online brand discovery, and pursuing disproportionate investments behind select bets.

"As we reimagine our brands, they need to be more modern and youthful," Nair said during the company's Q2 investor call.

"This spans packaging, proposition, and products. It will involve renovating the core while also pushing premium innovation. Bold brand transformation is critical as India and the consumers in India are changing".

Notably, last year, Unilever CEO Fernando Fernandez, speaking at a fireside chat with JPMorgan's head of consumer staples Celine Pannuti, reiterated his "100% trust" in Nair and underscored continuity at the helm of the India business.

Meanwhile, sales growth in India's FMCG sector slowed to 5.4% in volume terms during the September quarter amid disruptions from the GST rate changes, although value growth accelerated to 12.9%, according to data analytics firm NielsenIQ.

With inflation easing, the outlook for consumption remains optimistic, "Large FMCG firms will find a way through this disruption," Sudarshan added. "They have deep product insights and invest billions of dollars in research and development, capabilities that smaller players lack. This is a phase, and they are likely to bounce back".