Hindustan Unilever Limited (HUL), one of India’s largest fast-moving consumer goods (FMCG) companies, has significantly cut its advertising and promotion (A&P) expenditures for the second quarter (Q2) ending 30th September 2024. The company reported a year-on-year (YoY) reduction of 14.88% in its A&P spend, with a total outlay of Rs 1,464 crore for the quarter, down from Rs 1,720 crore in the corresponding period last year. Additionally, HUL’s advertising spending saw a quarter-on-quarter (QoQ) decline of 10.95%, falling from Rs 1,644 crore in the first quarter of FY2024.
The reduction in advertising expenses comes as part of HUL’s ongoing efforts to optimize its costs during a challenging period. As economic pressures continue to impact consumer spending and market demand, the company has taken steps to manage its expenses, including tightening its promotional budgets. This strategic shift marks a significant change in how HUL is navigating the current economic climate.
Revenue Growth Despite Advertising Cuts
Despite the notable decrease in ad spending, Hindustan Unilever Limited reported a marginal increase in its revenue from operations for Q2 FY2024. The company’s revenue rose by 1.5%, reaching Rs 15,508 crore, compared to Rs 15,276 crore during the same quarter last year. This slight growth in revenue indicates that HUL’s core operations remain steady, even as it reduces its marketing and promotional investments.
However, this modest rise in revenue was overshadowed by a decline in HUL’s standalone net profit. The company’s profit dropped by 4%, from Rs 2,717 crore in Q2 FY2023 to Rs 2,612 crore in the current quarter. The decline in profitability highlights the ongoing challenges HUL faces in balancing operational costs and sustaining growth in a competitive market.
Ice Cream Division to Separate
In addition to its financial performance, Hindustan Unilever Limited’s Board of Directors recently made a significant decision regarding its Ice Cream division. Following a recommendation by an Independent Committee formed on 6th September 2024, the Board announced on 23rd October 2024 that the company would separate its Ice Cream business. This move marks a strategic shift in HUL’s portfolio, allowing the company to focus on its core product segments while giving the Ice Cream business greater independence to pursue its own growth path.
As the company navigates through economic headwinds and shifts in consumer behavior, this decision could position Hindustan Unilever Limited to enhance its overall market presence. The separation of the Ice Cream division may help streamline operations and potentially unlock new growth opportunities for both the core business and the Ice Cream unit.
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