Hindustan Unilever Limited

Company Profile
Publication Date: 9 Oct 2009

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TABLE OF CONTENTS

TABLE OF CONTENTS
Company Overview..............................................................................................4 Key Facts...............................................................................................................4 SWOT Analysis.....................................................................................................5

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Company Overview

COMPANY OVERVIEW
Hindustan Unilever Limited (HUL) is a packaged mass consumption fast moving consumer goods (FMCG) company based in India. It offers foods, beverages, home care and personal care products. The company primarily operates in India. It is headquartered in Mumbai, India and employed more than 15,000 people. The company recorded revenues of INR202,393.3 million (approximately $4,549.8 million) during the financial year ended March 2009, an increase of 48% over FY2008*. The operating profit of the company was INR30,504.4 million (approximately $685.7 million) during FY2009, an increase of 40.5% over FY2007.The net profit was INR24,964.5 million (approximately $561.2 million) in FY2009, an increase of 29.7% over FY2007. *The company changed its financial year end from December to March.Therefore, FY2009 reporting includes 15 month period financials of the company.

KEY FACTS
Head Office Hindustan Unilever Limited Hindustan Unilever House 165/166 Backbay Reclamation Hindustan Lever House Mumbai 400 020 IND 91 22 3983 0000 91 22 2287 1970 http://www.hul.co.in

Phone Fax Web Address

Revenue / turnover 205,170.5 (INR Mn) Financial Year End Employees Bombay Ticker March 15,000 500696

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SWOT Analysis

SWOT ANALYSIS
HUL is one of the leading fast moving consumer goods (FMCG) company in India. It has developed a strong brand image through a portfolio of brands across 20 consumer product categories. Some of the company's popular brands include Lux, Lifebuoy, Rexona, Dove, Surf, Rin, Wheel, Fair & Lovely, Pond's, Close-Up, Sunsilk, Taj Mahal, Lipton, Knorr, Annapurna, Kissan, and Kwality Wall's. A strong brand image enables the company to increase market share and boosts its revenue growth. However, the proliferation of counterfeit goods and cosmetics is adversely affecting the sales of the company's products. Strengths Diversified product base Strong brand image Robust sales and distribution network Strong financial performance Opportunities Growing Indian FMCG market Project Shakti Growing cosmetics market in India Weaknesses Weak employee productivity

Threats Increasing competition Counterfeit goods Changing consumer trends towards beauty products

Strengths

Diversified product base HUL is a FMCG company, offering foods, beverages, home care and personal care products. The company has a strong presence in personal care segment through products in oral care, skin care, hair care, deodorants, talcum powder and color cosmetics. Further, HUL offers a range of soaps for personal use and detergents in various forms and at price points. The company's food segment comprises of beverages, processed foods and ice creams. This category offers products like tea, coffee, oil and fats, branded staples, culinary products and frozen deserts. In addition, the company also caters to global demand through export business segment, which includes sales of marine products, leather products, castor as well as sales of soaps and detergents, personal products, beverages and foods in Asia (other than India), Australia, Africa, North America and Europe. Also other than FMCG sector the company also has presence in plantations, chemicals, agriculture seeds, property development, water business and Ayush ayurvedic products.

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SWOT Analysis

As a result of having a broad product portfolio, HUL has a diversified stream of revenues. For the FY2009, soaps and detergents segment contributed 48.2% of the total revenues, followed by personal products (26.2%), beverages (11.2%), exports (7.7%), foods (4%), ice creams (1.1%) and other operations (1.7%). A broad and diversified business portfolio of services not only enhances market share of the company but also limits its exposure to the risks associated with a particular segment. Strong brand image HUL enjoys a strong brand image.The company has a portfolio of brands spread across 20 consumer product categories. Some of the company's popular brands in home and personal care segment include Lux, Lifebuoy, Rexona, Dove, Surf, Rin, Wheel, Fair & Lovely, Pond's, Close-Up and Sunsilk. In the food segment, the company's brand portfolio includes Taj Mahal, Lipton, Knorr, Annapurna, Kissan, and Kwality Wall's. Many of the company's brands have a strong position in their respective markets. For instance, In the Brand Equity Most Trusted Brands 2008 survey (conducted by AC Nielsen ORG MARG) featured 16 HUL brands among Indias 100 most trusted brands in 2008. Further, the company received more than 34 awards at India Star Awards for outstanding innovation in packaging concepts and systems across foods and home and personal care brands. Strong branding ensures repeat purchase which is an important driver for revenue growth in the FMCG market. Also, a strong brand image enables the company to grab market share and boosts its revenue growth. Robust sales and distribution network HUL is supported by a strong network of sales and distribution across India. The company operates through its direct sales channel network, Hindustan Unilever Network (HUN). The company has about 7,00,000 consultants-all independent entrepreneurs, trained and guided by HUN's managers. HUN covers over 6.3 million retail outlets including direct reach to over 1 million. The company serves over 2,000 retail customer groups with over 700 million consumers. The company operates its national sales network in 4 metros. Further, HUL's IT-powered system supplies stocks to redistribution stockists on a continuous replenishment basis. This catalyzes HUL's growth by ensuring that the right product is available at the right place in right quantities. For this, stockists have been connected with the company through an Internet-based network, called RSNet, for online interaction on orders, dispatches, information sharing and monitoring. The company's strong sales and distribution network improves its efficiency and reach, and improves its brand image further. Strong financial performance HUL recorded strong financial performance in the previous financial year (FY2009*). The companys revenues increased at a rate of 48% from INR 136,754.4 million (approximately $3,074.2 million) in FY2007 to INR202,393.3 million (approximately $4,549.8 million) in FY2009. The profitability of the company also improved significantly during the FY2009.The operating profit of the company increased at a rate of 40.5% from INR21,718.3 million (approximately $488.3 million) in FY2007 to INR30,504.4

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SWOT Analysis

million (approximately $685.7 million) in FY2009. The net profit of the company also increased at a rate of 29.7% from INR19,254.7 million (approximately $432.8 million) in FY2007 to INR24,964.5 million (approximately $561.2 million) in FY2009. The strong financial performance of the company would support the companys future growth plans and result in better performance. *The company changed its financial year end from December to March. Therefore, FY2009 includes the 15 month period financials of the company.

Weaknesses

Weak employee productivity The company's employee efficiency, measured by total revenues per employee, is low as compared to the global majors like Colgate-Palmolive, and The Procter & Gamble. For the financial year ended on March 31, 2009, the revenue per employee of the company stood at INR13.7 million (approximately $30,332) with total revenues of $4,549.8 million and 15,000 employees. While, the revenue per employee of Colgate Palmolive stood at $41,885 for the financial year ended December 2008. Similarly, the revenue per employee of Procter & Gamble stood at $60,509.4, significantly higher to the revenue per employee of Hindustan Unilever. Low revenues per employee compared to global majors indicate relatively lower employee productivity of the company.

Opportunities

Growing Indian FMCG market The Indian Fast Moving Consumer Goods (FMCG) industry is likely to witness strong growth in the future. According to the Federation of Indian Chambers of Commerce and Industry, Indias FMCG sector grew consistently during the last three to four years, reaching a size of INR1,200,000 million (approximately $25,000 million) at retail sales in 2008. Further, the rising income levels among the Indian population would attribute to the strong growth in the business. As a result, the industry is poised to grow at 10-12% for the next 10 years to reach INR2,060,000 million (approximately $43,000 million) by 2013 and INR3,550,000 million ($74,000 million) by 2018. This growing consumer market would provide an opportunity for the company to expand its business operations and its market share. Project Shakti In order to better tap the potential consumer demand in 627,000 villages in India, HUL started Project Shakti in 2001. Through Project Shakti HUL uses self-help groups to directly cater to 1 million homes every month in villages where traditional distribution systems cannot hope to enter. After a slow start, Project Shakti has gained momentum. By the end of the year 2008, Shakti network had grown to more than 45,000 Shakti Ammas covering 100,000 plus villages across 15 states in the country

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SWOT Analysis

and reaching over 3 million homes. Project Shakti Shakti is built on Shakti Entrepreneurship program and Shakti Vani program. The entrepreneurship program offers help the local entrepreneurs to build up strong base to sell the companys products across the rural areas. While, Shakti Vani program helps on building awareness about health and hygiene in the rural community.This project is expected to benefit the company immensely in the long run by tapping the rural FMCG demand. Growing cosmetics market in India The Indian cosmetic market is expected grow significantly in the coming period. The Industry has recorded a rapid growth in the last couple of years, growing at a CAGR of around 7.5% between 2006 and 2008. Further, the demand for cosmetics and personal grooming products has been on the rise because of the increasing popularity of beauty contests, increasing disposable incomes coupled with the boom in the Indian fashion industry. According to Indian Cosmetic Sector Analysis, the cosmetics market in India is projected to grow at a CAGR of around 7% during the three year period (200912). HUL offers a range of color cosmetics for lips, face and eyes under its market leading brand, Lakme and also operates Lakme Beauty Salons. In August 2009, Lakme Salon, the companys business arm launched Lakme Studio in New Delhi to offers an array of new skin care and designer services, bringing the skin experts and hair designers together. HUL is therefore, well poised to gain from the positive market outlook.

Threats

Increasing competition HUL faces intense competition in all of its segments. For instance, ITC, its prime competitor, has many market leading brands in segments like processed food, confectionaries and other household products. Backed by strong sales and distribution network through out the country and especially in the rural markets, ITC gives stiff competition to HUL. In addition, the company is facing increasing competition from other multi national companies such as Revlon, P&G and Colgate-Palmolive in the personal care and household care segments. Intensifying competition could adversely affect the company's margins and market share. Counterfeit goods Trade of counterfeits and pass-offs products is negatively affecting the growth of FMCG companies like HUL. Pass-offs are look-alike products that resemble the original products, mainly through misspelling of the trademark. According to AC Nielsen India, a subsidiary of global marketing research firm AC Nielsen, the fake products accounted for 10-30% of the FMCG market in India in 2008. The counterfeits account for a revenue loss of INR50,000 million ($1,124 million) $80,000 million ($1,798.4 million) annually. The top two brands within any category be it cosmetics, detergents, or soaps are effected the most by counterfeiting and pass-offs. Besides revenue losses, counterfeits and pass-offs also affect the company's brand as they are unsafe. Moreover it could hit the customer confidence as the fake product does not give the desired results promised by the brand.

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SWOT Analysis

Changing consumer trends towards beauty products Beauty consumers are increasingly taking refuge in new technologies such as advanced dermatology, cosmetic surgery, hair and organ transplant and other treatments to enhance their beauty. The results from these treatments are instantaneous and long lasting. Therefore, increasing popularity of these new technologies could reduce dependence on traditional beauty aids such as creams and lotions, which could lead to a fall in demand for the skin and hair care products of HUL.

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