India’s largest fast-moving consumer goods player Hindustan Unilever (HUL) has said its consumers will see prices of soaps, detergents, and shampoos coming down over the next few weeks. HUL also said it had increased volume for some products in the form of free soaps, adding more grams to soap, or more powder to a pouch of detergent.

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In an exclusive conversation with CNBC-TV18, HUL’s Chief Financial Officer Ritesh Tiwari said for large categories like laundry and skin cleansing, commodity prices have significantly come off in the last couple of quarters and the company has started passing the benefit "meaningfully" to consumers.

“There's always some lag between a price reduction and its benefit on consumption benefit a consumer takes, which is why there's some lag in volume recovery. Also, cumulative inflation is still high over two year period and that still bites the consumers. Volume recoveries will take some time, but growth will still be volume led for the next few quarters,” Tiwari said.

"There's always a little more for the job to be done but also depends upon how commodities will further incrementally pay off in the next few quarters. A large part of the price cut we have started invoicing, we have put in the market. But consumers should take a few more months to fully experience the price cuts that we have done.”

Tiwari said volume-led growth would return by the second half of FY24 as inflation cools off. He said price growth would start to taper off and, going forward, he doesn’t see price getting into the mix in terms of adding to total growth.

However, the Health Food Drinks (HFD) category, which includes Horlicks and Boost, has seen price increases due to inflation in milk, cereal and barley. This, even as the business, being a discretionary item, stood impacted by the pandemic and inflation.

“In the short term, the commodity outlook is not really very different for HFD, there is going to be inflation for the next few quarters. Since we acquired the business, we have more than doubled the direct distribution. So penetration is building up, but consumption is not. We now want to see consumption per household going up, which will follow,” Tiwari said.

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HUL recently forayed into the health and well-being category by acquiring a majority stake in Oziva and a minority stake in Wellbeing Nutrition. Tiwari said that while the company would continue to evaluate more strategic investments in the space, it would also look at bringing some brands from the global stable of Unilever to the country.

Another area that HUL is betting on for possible acquisitions is the masstige beauty segment. This is the segment within the beauty and personal care that sits slightly above the premium segment at a Rs 250-plus price point.

HUL has already launched five brands in the space including the likes of Novology and Love Beauty Planet, which is Unilever’s brand that it brought to India.

“Though its niche and small today, we see the market growing very well. This is why we launched five different brands in that space. But if there is a fabulous brand externally, which we think adds value and can do a good job with a portfolio, we're always open for bolt-on acquisitions as well,” he said.

For the FMCG industry, two-thirds or 65-70 percent of the growth typically came from volumes and the remaining from price. However, with high levels of inflation in the past 1-1.5 years, growth had been price led, with volumes largely on a declining trend. For instance, for FY23, the FMCG industry as a whole grew 8 percent with - 4 percent volume, which means 12 percent was the price increase. This balance, Tiwari said, would now start moving to a period of volume-led growth.

Rural recovery too, Tiwari said had bottomed out and macro-economic factors like MSP increases, the government’s focus on capex, along with inflation cooling off, is aiding rural recovery.

“Important to see a few variables that will start triggering a better version of growth in rural areas. Got to see how El Nino, the quality of rainfall, the quantity of rainfall, and the resilience of the rural infrastructure play out. Will have a better read in a few months’ time on overall impact to agriculture - weather and monsoon related,” he said.

However, urban markets will continue to drive overall FMCG growth for the next few quarters, Tiwari said, given they’re more resilient in the face of inflationary periods.

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First Published:Jun 5, 2023 2:13 PM IST