NEW DELHI: Hindustan Unilever, the country’s largest consumer products company, is unlikely to become the largest food company despite its acquisition of GSK Consumer business including Horlicks, because it still operates only in a small part of the overall food pie, industry experts say.
HUL is the market leader in tea, ketchups, soups and jams and is the second largest player in ice-cream and coffee. However, the entire market size of all these segments put together is roughly Rs 25,000-30,000 crore. In comparison, biscuits or packaged snacks alone is as big, experts said. GSK Consumer business, which HUL acquired last week, is the largest player in the malted beverages space, but the category is relatively small at Rs 7,000 crore, they pointed out.
“The biggest problem with HUL is that their existing categories are small and will remain so even in the future,” said Abhijit Kundu, vice president, research-consumer and retail, Antique Broking. “Despite being leaders in several categories, they have no play in large segments like snacking, biscuits or dairy. With their current portfolio, they can never be the largest food company in the country.”
HUL is aware of that. Sudhir Sitapati, head of foods and refreshments (F&R) at HUL, had last week pointed out that the company’s share in India’s value-added foods — which is less than 10% of the Euro 500-billion (Rs 40.6 lakh crore) food market —was “very small at 5%”. “The problem that we face is we are actually playing for legacy reasons, and bulk of our foods businesses is tea where we play in 15% part of the market,” he had told investors.
For parent Unilever, foods and refreshments segment is essentially four distinct businesses — packaged food, ice-cream, which are about Euro 7 billion each, tea that had revenues of Euro 3 billion, and food solutions business with a size of Euro 2.5 billion. These account for roughly 41% of Unilever’s annual sales. In India, the F&R division that sells Knorr soup, Kissan jam and Lipton tea accounted for sales worth Rs 6,328 crore, or less than one-fifth of HUL’s overall sales in FY18. And the division contributes only 13% to HUL’s profit.
In comparison, the revenue generated from ITC’s foods business is a little less than Rs 9,000 crore. But the company operates in a significantly wider market that includes staples, spices, biscuits, confectionery, snacks, noodles, dairy and readyto-eat meals, that all put together is over Rs 1 lakh crore in size at present. HUL said it is trying to upgrade loose tea consumers to packaged tea as well as drive penetration in its ice-cream business.