Hindustan Lever Limited Morgan Stanley India Summit March 2006

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Hindustan Lever LimitedMorgan Stanley India
SummitMarch 2006
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Contents
Overview
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Contents
OVERVIEW
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HLL - Indias Largest FMCG Company

• India
• Population 1091 Mln
• 3,800 Towns
• 0.9 Mln outlets
• 6,27,000 Villages
• 3.3 Mln outlets

• 16,000 employees
• 1,200 managers
• 2,000 suppliers
• associates
• 80 company factories
• 45 CFAs, 4,500 Stockists
• Direct Coverage - 1 Mn outlets

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Financial Overview2005
Mn
Turnover 2,464
PBIT 328
PBIT 13.3
Net Profit (bei) 302
EPS 14c
Surplus Cash Generated 441
Market Capitalisation 11,976

Figures based on FY2005 Audited Results
Market Capitalization as on 3rd March 06
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Leadership across categories
HLL - MarketShare ()
2MarketShare ()
Category
Fabric Wash
38.0
16.5
Personal Wash
54.9
9.5
Dishwash
55.6
10.8
Market Leader
Skin
58.1
5.3
Shampoo
48.2
22.4
Talcum Powder
61.0
5.0
Packet Tea
30.9
21.1
Jams
73.6
5.7
Source A.C Neilsen - ORG Marg Quarter Ended
Dec 2005 Value shares
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HLL Shareholding Pattern
Others
19.8
Unilever
51.6
Domestic FIs
14.8
FIIs
13.8
HLL Equity Capital - 50 Mn
Market Capitalization - 11,976 Mn

Shareholding pattern as on 31st Dec 2005
Market Capitalization as on 3rd March 2006
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Contents
INDIA OPPORTUNITY
Overview
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Economic Outlook
Growth
GDP expected to grow at 8.1 in 2007

• Concerns
• Oil Prices
• Inflation
• Fiscal Deficit
• Monsoons

• Positives
• Strong GDP Growth
• High Forex Reserves
• Growing Exports
• Focus on
• Rural Infrastructure

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Opportunity to grow consumption and penetration
Per Capita Consumption (US )
Very low penetration levels in personal product
categories
Source Euromonitor
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India - 2013
2003 181 mn hhlds
2013 231 mn hhlds
Rich
11
3
124
Aspirers
46
Strivers
96
131
The shape of India is going to change from a
pyramid to a diamond
Source NCAER
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HLL Uniquely Placed
Large portfolio of brands across segments and
categories
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India - 2013

• Consumer
• Top End

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• Channel
• Modern Trade
• Rural

124
96

• Categories
• Deodorants
• Processed Foods
• Water

(Numbers in Mln HHs)
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India - 2013
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The Top End

• In 5 years,
• Number of affluent consumers will treble
• More than a million households will earn gt Rs 4
  mln p.a.
• More affluent consumers than population of
  Switzerland
• Younger, prosperous consumers who indulge more

Source KSA Technopak study on India luxury
trends 2005
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India - 2013

• Consumer
• Top End

• Channel
• Modern Trade
• Rural

• Categories
• Deos
• Processed Foods
• Water

In Mln HHs
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Evolving trade structure
25 of the turnover to come through organized
retailing

• 25 of turnover to come through organized
  retailing

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Modern Trade share
Fabric Wash
Packaged Tea
HLLs market share significantly higher in MT in
key categories
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India - 2013

• Consumer
• Top End

• Channel
• Modern Trade
• Rural

• Categories
• Deos
• Processed Foods
• Water

In Mln HHs
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The Big Indian Romance

• Rural Indian population larger than Europe (800
  million)
• Growth in rural expenditure 11 p.a. since 2001
• Rural income explosion Rural employment grants
  Rs 400,000 mln

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Rural Marketing - Project Shakti

• Challenges in Rural Markets
• Accessibility
• Viability
• Media Dark
• Rural selling through Self Help Groups
• Benefits
• Improving product reach
• Facilitating Brand-Communication
• Extended into 12 major states, 340 districts
• 19000 Entrepreneurs
• Over 80,000 villages covered
• Touching 85 mn rural lives

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India - 2013

• Consumer
• Top End

• Channel
• Modern Trade
• Rural

• Categories
• Deodorants
• Processed Foods
• Water

In Mln HHs
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Opportunity beckons Example Deodorants

• Indonesia in 5 years, has grown by 5 times
• India - Opportunity beckons

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Processed Foods - Key Drivers

• Urbanization 16 growth in urban population
  over the next 5 years
• Growth of Modern trade
• Per Capita Income high income elasticity

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Pureit - A Breakthrough Innovation

• Proposition as safe as boiled water without
  hassles of boiling

• Assured safety
• no harmful virus, bacteria, parasites, pesticides
  
• Works without electricity piped water
• Great taste, clear odour-free water
• Aspirational styling
• Affordable price Rs 1500

COST 17 paise per liter or 260 liters of pure
water for 1
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Pureit - A Breakthrough Innovation

• Test marketed in Chennai in 2005
• Encouraging results
• High consumer satisfaction scores

Roll out beyond Chennai in 2006
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Contents
Overview
FMCG MARKETS STRATEGY
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FMCG MarketsGrowth momentum accelerating

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FMCG Markets

• New equilibrium after choice explosion, market
  growth expected to continue
• Price led local competition
• International companies seeking market position
• High inflation in key raw materials
• Higher levels of brand investments and
  innovations
• Both rural and urban markets grow well

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Strategy

• Strategic intent to sustain market leadership
  and grow market positions across our brands and
  categories
• Invest behind our brands and deliver consumer
  value
• Drive topline growth with profitable and
  sustainable margins
• Focus on innovations, product quality and
  competitiveness of our distribution system
• Achieve cost leadership across the extended
  supply chain margin improvements to come by
  winning in market place, judicious price
  increases

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Contents
Overview
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2005 Highlights Topline growth momentum sustained

FMCG Volume growth at 6.3
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2005 Highlights

• Double digit topline growth (11.4) after a gap
  of 6 years
• Fabric wash - Market shares maintained in a
  highly competitive scenario
• Personal wash - Strong performance by Lux in its
  75th year
• Shampoo - Strong volume led growth All brands
  grow well
• Skin - High double digit growth powered by all
  brands
• Tea - Good performance in declining markets
  falling commodity prices
• Icecream business turns around. Poised for
  profitable growth

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Contents
Overview
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Capability building Initiatives in channel
customer management

• New sales organisation is functioning
  effectively One HLL Customer development
  organisation in place for 2006
• Segmented approach to general trade, modern trade
  and top-end channels
• Modern trade structure being strengthened to
  leverage market opportunities
• Consolidation of customers
• Improved customer service
• Continuos replenishment operational
• Lower trade stock
• Improved stock freshness
• Front-end IT capabilities being enhanced -
  Uniform IT system across customers
• For effectiveness in decision support,
  harmonization and collaboration

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Capability building Few examples

• Key customer measures improve by 35
• Distributor stocks reduction achieved - 15
• Continuos Replenishment System (CRS) cover 100
  of our business
• In Beverages, Household Care, Popular Detergents
  categories, over 85 of customer orders serviced
  within 1day
• Target - To achieve gt 90 of orders for the
  entire portfolio within 1 day
• Consolidation leading to 20 reduction of
  distributors
• Uniform billing package implemented at 50 of our
  distributors

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Capability building New organisation

• New Management Committee (MC) effective from 1st
  March 2006
• Replaces the existing National Management
  structure
• MC consist of CEO, Vice Chairman, Finance
  Director, MD - Foods and Executive Directors for
  Sales and Customer Development, Home and Personal
  Care, Supply Chain Specialty Exports
• Business directors have PL responsibility for
  their businesses
• Single chain of command through the CEO to
  leverage synergies across businesses

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In summary

• India A buoyant economy with huge opportunity
• Big opportunity to grow Penetration Consumption
• FMCG market growth expected to continue
• Market share gains - Key focus area further
  strengthening our competitive position in
  strategic categories
• Continued investments behind innovation / brands
• Cost pressures, particularly in Laundry expected
  to continue to be managed by cost effectiveness
  programs and judicious price increases
• Building capability for long term value creation
  - Top priority
• New organization to leverage One HLL and One
  Unilever

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Thank you