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Hindustan Unilever Limited (HUL) has unveiled an ambitious roadmap aimed at tapping into India’s rapidly growing premium consumer segment. The FMCG giant is eyeing massive premiumisation across various categories with some of its flagship brands.
The company's recent presentation to stock exchanges reveals a compelling economic backdrop for this strategy: by 2030, more households are expected to enter the $8,500–$40,000 annual income bracket, while those earning less than $4,000 annually are projected to decline.
Lloyd Mathias, a business strategist and angel investor, provides a crucial context to HUL's premiumisation push. "There has been a lot of market disruption in recent years with D2C brands catering to more evolved consumers. Unilever has the scale, deep pockets, and R&D abilities to not just match but possibly outdo these companies," he explains.
Lloyd Mathias
HUL's extensive portfolio spans more than 50 brands across categories including detergents, foods, soaps, shampoo, toothpaste, cosmetics, and ice cream. However, HUL’s premiumisation blueprint identifies premium face care, premium hair care, body wash, home care liquids, condiments and mini meals, and well-being as the critical domains where the company anticipates substantial market potential.
This comprehensive approach reflects a nuanced understanding of evolving consumer psychographics and the increasingly sophisticated purchasing behaviours of Indian consumers.
As such, HUL's strategic vision includes the identification of ten flagship brands that the company believes are optimally positioned for premiumisation. This curated portfolio includes household names that have long been synonymous with everyday consumer experiences: Surf Excel, Dove, Vim, Pond's, Lakme, Lux, Pears, Brooke Bond, Horlicks, and Kissan.
Shivaji Dasgupta, founder of INEXGRO Brand Advisory, offers his perspective on this development. "HUL has been attempting to focus only on brands that are going to be very large with high profitability," he notes.
The company's unparalleled offline distributorship—available virtually everywhere—represents a significant competitive advantage, as per Dasgupta.
Shivaji Dasgupta
HUL's aggressive expansion strategy extends beyond its existing portfolio. According to insights from Nuvama Institutional Equities, HUL is preparing to introduce several global premium brands within its beauty and wellbeing (B&W) segment over the next two years. This move signals a calculated approach to market segmentation, leveraging global brand excellence to capture the aspirational consumer demographic.
D2C brands, be wary
The categories HUL is entering (or pushing premiumisation in), especially beauty and personal care, are far from uncontested. The identified categories are already witnessing intense competitive dynamics, with a proliferation of direct-to-consumer (D2C) brands that have successfully disrupted traditional market paradigms.
Innovative players such as MamaEarth, The Moms Co., and Sugar, among others, have already carved out significant market shares.
Mathias highlights the potential impact on these smaller players. "An FMCG giant knocking on their door is definitely going to put the pressure on. The moment Unilever steps in, it will have access to superior R&D, supply chain abilities, and manufacturing capabilities that will outdo a lot of this competition."
However, he cautions that HUL's primary challenge will be maintaining nimbleness—a characteristic that has defined the success of many D2C brands. "Being a large-format and massy player, going up against brands that are able to reach individual customers could be a problem," Mathias warns.
Dasgupta offers an additional nuanced perspective on premiumisation. "For a brand like HUL, this strategy can be tricky."
"Their legacy of mass-market products might conflict with premium positioning. The logical approach would be repackaging, with minimal product modifications, leveraging HUL's extensive marketing muscle," he explains.
Strategic implications and market potential
From a macroeconomic perspective, HUL's strategy reflects broader trends in the Indian consumer market. The rising middle class, increased digital penetration, and growing consumer sophistication are creating unprecedented opportunities for premium brand positioning.
Mathias sees this as an opportunity to target niche, booming categories that can help improve overall corporate performance. "The moment you up your premiumisation, it's a good way to tell investors that margins are going to increase," he notes.
The condiments and mini meals category presents another fascinating dimension to HUL's strategy. As urban consumers increasingly seek convenience without compromising on quality, this segment represents a significant growth opportunity.
The next two to three years will be crucial in determining the success of this strategic gambit. HUL will need to balance its established brand credibility with the agility and innovation demonstrated by its D2C competitors.
In Dasgupta's words, HUL has "all the resources to disrupt these spaces, and it's not a pleasant sight for these smaller D2C brands"—a sentiment that encapsulates the potentially transformative nature of this strategic move.