Hindustan Unilever Ltd. plans to step up spending on its business, raising productive capital expenditure to 3% of turnover from around 2%, as the FMCG major looks to accelerate growth and expand into newer consumer categories.
The company, in its investor presentation, said the higher capex will be part of a broader capital allocation framework that also includes portfolio reshaping and shareholder payouts, while maintaining its focus on 100% cash conversion. HUL has already reshaped its portfolio through moves including the disposal of Pureit, the demerger of its ice cream business and the divestment of Nutritionalab.
At the same time, HUL is keeping bolt-on acquisitions on the table as a way to enter high-growth areas. The company said it will look at new spaces through a combination of existing brand extensions, Unilever brands and acquisitions. Potential categories identified by HUL include male grooming, masstige skincare, fragrances, vitamins and minerals, healthy snacking, protein, hydration, ready-to-drink products and functional deodorants.
Three Filters For Categories
HUL said it will assess new categories based on three filters: right to win, size of the profit pool and sustainable growth. This suggests acquisitions will be targeted at areas where the company believes its brands, distribution and capabilities can create a meaningful advantage, rather than being pursued simply to add scale.
HUL said its premium brands receive twice the investment, while more than 60% of media spending is digital. It is also investing in specialised channels to reach consumers differently. The increased investment comes as HUL targets volume-led growth through four levers: driving greater consumption, premiumisation, bringing more consumers into categories and expanding into new spaces.
The strategy builds on HUL’s recent acquisitions of OZiva and Minimalist, which the company has included as part of its portfolio reshaping and push towards higher-growth spaces.
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