Profitability of FMCG major Hindustan Unilever's Lakme salon business has been hit by the coronavirus pandemic but the venture holds huge potential, company Chairman and Managing Director Sanjiv Mehta asserted on Tuesday.
Addressing HUL's annual general meeting virtually, Mehta said the salon business has "a clear robust impact on brand Lakme, which is a market leader in cosmetics in the country." Responding to a shareholder's query on the rationale behind the continuation of the salon business considering the losses it has incurred, Mehta said, "The profitability of Lakme (Lever Pvt Ltd) has definitely been impacted by COVID outbreak. Very clearly, this got impacted because of lack of mobility." Lakme Lever Pvt Ltd is a 100 per cent subsidiary of HUL and has over 485 owned/managed and franchisee salons. It also operates a manufacturing unit at Gandhidham where it makes toilet soaps, bathing bars and detergent bars.
Mehta asserted that HUL is "absolutely clear that the Lakme salon business is a fabulous business with huge potential and it has a clear robust impact on brand Lakme, which is a market leader in cosmetics in the country." "So we should always evaluate the business on a total basis and not just on the parts...," he added.
HUL, in its annual report for 2020-21, had said that the profitability of Lakme Lever Pvt Ltd for the year was largely impacted on account of the COVID-19 outbreak.
"After a stringent lock down which disrupted operations in the first half, the company in the second half of the year has sequentially improved performance to almost previous periods revenue backed by the relaunch of the 'Runway Rewards' programme and a stronger focus on products," the report said.
The company continuously tracks consumer behaviour through its data centre -- combining social listening with traditional research.
"We continuously focus on Market Development Initiative, which is creating categories of the future and this is how we intend to remain relevant for the Indian consumers and remain retain our leadership in the FMCG sector," said Mehta Replying to questions on whether HUL is planning for online sales or home deliveries, Mehta said: "Now, we are fully leveraging the opportunity posed by e-commerce and taking lots of steps to cater to the demand across various models of e-commerce." It also has direct-to-consumer platforms for businesses like Lakme and the water business and has collaborated with last mile delivery partners like Swiggy and Zomato to provide home delivery solutions for its ice cream products.
"All our products are available on all the e-commerce platforms and they are directly delivered to the consumer homes and we are very conscious about continuing to build our e-commerce muscle," said Mehta.
In his AGM speech titled 'Winning in the New Decade', Mehta said the effects of the pandemic are just a pause in India's consumption and growth story.
"With a growing middle class, one of the youngest populations in the world and rising internet penetration, India is poised for unprecedented growth," he said.
