HUL is the most valuable FMCG co. Here are five reasons why

Fast moving consumer goods behemoth HUL is a must-have stock in any balanced portfolio. The Indian arm of the Anglo-Dutch consumer major Unilever has been favoured by the Street despite its expensive valuations. Here are the five factors that have been instrumental in HUL reigning as the most valuable FMCG company:

1. Investment in brands and people: The company spent over Rs 4,607 crore (12 per cent of its FY19 net sales) on its brands. This is equivalent to the revenues earned by Colgate Palmolive or GSK Consumer Healthcare in FY19. HUL has been one of the most successful in premiumising its brands like Surf, Dove, Lakme and Brooke Bond. Besides, its investment in human resources has made it a talent ground for its parent Unilever and the Indian FMCG industry.

2. Acquisition to fill gaps in portfolio: HUL has time and again made acquisitions to respond to a threat or fill a gap in its portfolio. It acquired ayurvedic hair oil brand Indulekha, GSK Consumer Healthcare for its malted food drink brands and Adityaa Milk to beef up its ice cream portfolio. Though not all its buyouts have been successful, the strategy reflects the company’s response to take on competition.

3. Agility with focus on the core: The 85-year-old company has kept pace with changing times and consumer preferences. It has innovated, experimented and invested in new ideas and technologies. Despite that, it has stuck to its core products in home care, personal care, foods & beverages. Its response to threats from Patanjali is an instance of its agility.

4. Spelling out the strategic agenda and working towards it: HUL’s management unfailingly talks of its ‘strategic agenda of delivering consistent, competitive, profitable and responsible growth’ to the extent of it sounding cliched. But, the company’s performance in revenue and net profit terms has remained representative of the stated agenda.

5. No replication by its peers in the domestic market: The company has several inherent advantages working in its favour — global pedigree, long legacy of doing business in India and well-entrenched distribution system. Incidentally, Patanjali, the relatively new home-grown FMCG player, has targeted to unsettle HUL from its numero uno position in the Indian consumer market by FY20. HUL seems prepared to take on the challenge.