In addition it rejigged the profile of several brands. Clinic Plus was now marketed as a five-in-one brand that had five clear advantages over competition. Surf Excel which earlier could remove stubborn stains too saw a change. Now that all detergents can do that Surf was billed as a product that can reduce water consumption by half. And HLL's R&D team has evolved a new formula for Rin Supreme that does away with the usage of all chemicals. "These are relevant innovations and we're sure they will drive our growth in the future," states the HLL spokesperson.
HLL's management has also grappled with strategic changes. Not too long ago, HLL decided to reduce its portfolio and focus on a few "power brands" on the lines of its parent company. But pushing them required huge sums as is evident from the increase in advertising and promotion expenses by Rs 60 crore in Q2 2004 compared to the same period last year. "Over the last three years the company has invested Rs 400 crore in power brands," admits a senior HLL manager. Thanks to this, there's been a sustained growth in mega brands like Lifebuoy, Fair & Lovely, Wheel and Brooke Bond. "We only have to ensure that the execution of the strategy is flawless across all brands," he adds.
But surely there's a realisation that this won't be enough. That may explain why HLL announced a major change in management structure.Now a team headed by chairman M. S. (Vindi) Banga is in place to oversee operations. The earlier five divisions have been reduced to just two to hasten decision-making. And a churn is on. This is probably why a section of retail and institutional investors are still confident about the scrip. Meet Mark D' Souza, 51, a former employee who holds 6,000 shares and says he'll never sell the stock in panic. His sentiments are echoed by Danny Mendonca, 58, who says, "I'll leave the shares as an inheritance for my children," and is confident that the stock will start moving northwards by the next quarter.
Fund managers like Amitabh Chakraborty, vice president and head (research), Kotak Securities, feels the recent drop in the scrip price was a knee-jerk reaction to the bad Q2 results. But he thinks the stock has bottomed out and this is the time to buy. "The restructuring process is in place and economies of scale can be appropriately exploited. The new food business will be the engine for growth," he explains. Gul Tekchandani, chief investment officer, Sun F&C, also likes the scrip and asks: "Has anyone sat and thought how a transparent company of that size is able to make money on a Re 1 satchet?" He too has faith in the scrip bouncing back in the near future.
For such analysts the downturn in fmcg and particularly in the home and personal care (HPC) segment will come to an end in the next few quarters. The growth in HPC in India is likely to be faster than per capita income growth. The other good news is that India's per capita HPC consumption as a percentage of per capita gdp is around 0.9 per cent which is less than the 1.2 per cent average of a sample of emerging markets. In other words, the industry could grow at more than 8 per cent over the next seven years. There are signs that the current downturn is over with competing firms like Colgate and p&g repositing improved financials. If this is replicated across other segments and other companies, it could be a win-win for all—consumers, companies and the shareholders.
