Hindustan Unilever Limited (HUL) reported a modest 1.4% growth in the December 2024 quarter, with revenue reaching ₹15,408 crore compared to ₹15,195 crore in the same period last year. However, net profit surged 19% to ₹3,001 crore, primarily driven by an additional gain from the sale of its Pureit business. HUL’s CEO and MD, Rohit Jawa, highlighted that urban markets witnessed a sharper-than-expected decline in demand due to stricter household budgets and rising inflationary pressures.
Previously, larger packaging products dominated sales in urban areas. However, consumers are now increasingly opting for smaller packs, a trend observed even among premium product buyers. On the other hand, smaller packs have always been popular in rural markets. This shift in urban buying patterns can be attributed to high food inflation and tighter household budgets.
During the December quarter, HUL’s total sales stood at ₹15,195 crore, marking a 2% growth compared to ₹14,928 crore in the same period last year. While the company increased product prices to offset high commodity inflation, this move negatively impacted urban sales.
In rural markets, where budget constraints are already a norm, smaller pack sizes have historically performed well. However, the shift in urban consumer preferences presents a new challenge. Whether this trend in the FMCG sector is temporary or permanent remains unclear. HUL attributed its net profit growth primarily to the sale of its Pureit business.
Financial data highlights that smaller packs have gained traction over larger packs in urban markets. HUL recorded a net profit of ₹3,001 crore this quarter, compared to ₹2,525 crore last year, with revenue rising to ₹15,408 crore from ₹15,195 crore.
This shift clearly indicates that high food inflation has driven consumers toward more affordable and smaller alternatives. To align with their budgets, consumers have deprioritized larger packs in favor of smaller ones. If inflation eases in the future, this trend may reverse, with consumers returning to larger pack purchases.
The performance in the December quarter underscores the necessity for FMCG companies like HUL to continuously adapt their products and strategies to evolving market preferences. The rising demand for smaller packs in both urban and rural markets demonstrates that customers are prioritizing affordability. HUL has managed to sustain growth despite these challenges and can strengthen its position further by aligning with these trends in the future.
