Hi,
Hope you don’t mind me hijacking this thread with my experiences.
I’m in direct equity since late 2016, but cashed out in mid 2017 with some gains, as I wanted to make more informed choices while investing. I reentered during May this year and has been increasing allocation steadily to various picks. Throughout this journey I got rid of many mental blocks: e.g. earlier I used to invest only in smaller mcap companies, lower PE companies etc.
I got invested in Nestle earlier despite it having 1000 bil INR mcap, as the categories it is present has less penetration and Nestle has visibly upped its aggression. However, I didn’t touch HUL 1) because of its 4000 bil INR mcap, and 2) the categories it is present are supposed to be saturated with multiple players contesting to get a foothold. TBH, since I choose to ignore it based on a gross assumption, I didn’t even study it any further.
I was rather invested in Jyothy Labs, which have similar segments as HUL. They have got good quality products which we use daily, but I am still annoyed by the lack of availability of some products in our region: Margo Glycerine, Ujala IDD etc. Also, they have been talking about brand extensions which they are doing pretty slowly or taking those to market very slowly and I also hardly see any promotions of their products. Only recently I realized that the benchmark I was using to judge Jyothy Labs’ promptness was HUL’s. I was impressed by the aura of the promotions that HUL was doing for its products and the ready availability of their products in all channels.
The last bump came from my sister-in-law who is a fashionista. While vising her place I came across various brands: TRESemmé, Aviance and also saw some unique product of Dove (Dove Elixir Hair Oil). I was shocked to see that these brands are from the house of the age-old HUL. Being curious I started digging and discovered that the household brands from HUL, Vaseline, Lifebuoy, Close-up all has gotten a number of new variants, also the fabric care brands like Sunlight, Surf Excel has gotten in categories like liquid detergents.
So, after scuttlebutt, and scouting for various media reports and official documents, I came to see that HUL is creating a distinction in each segment it is present: be it promotion, packaging, new categories or anything. Despite all the potential of Dabur being the torchbearer of Naturals boom after waning of Patanjali threat, Lever Ayush has scaled up much faster and has gotten much wider acceptability.
My rough assumption is that, given the number of brands HUL have (compare that with other FMCG players) and the number of new categories they are creating by acquiring new brands (like Indulekha, Adityaa Milk) or brand extension, HUL still has a huge runaway ahead. Also, their WiMi / Localization push will ensure that they will reach even hinterlands. And, premiumization push will ensure better margins.
HUL used to be present in all segments during 2000, and faced steep competition from local agile companies like Marico, Dabur etc. These has paused their volume growth. That along with the entry of Patanjali, gave HUL a reality check and they started to restructure their business, strengthen brands during those periods. They had gotten rid of lower margin products such as Hair Oils (Nihar), Breads (Modern) etc. Probably they realized that competing in the low end is not their forte. They are masters of advertising and they’d better use that strategy to push premiumization as the country has gotten rising level of affluent class of people. They later entered hair oils but with premium range (Dove Elixir, Indulekha).
So, now my thesis of HUL is similar to Nestle. They both have products which are premium or have lesser penetration. Product range of HUL is much more than Nestle and also their Advertising push is better than Nestle, only the distribution push is similar, but that is understandable because HUL is almost 3.5th the size of Nestle.