Hindustan Unilever Ltd

NSE:HINDUNILVR

Earnings Call Analysis

Recovery and Strategic Resource Allocation

The company stays focused on operating efficiency, driving savings across the P&L under its Symphony program to bolster gross margins and reinvestment capabilities. A gradual demand recovery is seen as high inflation stabilizes, fostering cautious optimism. Pricing adjustments have been made, with expectations for short-term price growth to be marginally negative if commodity prices hold. Investments prioritize competitive pricing, advertising, and promotions, along with product superiority and innovation, to maintain market competitiveness and drive growth.

Robust Business Model with Decade of Growth

A company with a strong foundation, boasting a diverse portfolio of over 50 brands, has demonstrated its resilience and competitive strength over the last decade. The company has achieved consistent revenue growth with a CAGR (Compound Annual Growth Rate) of 9% and has significantly enhanced its EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) margins by over 800 basis points, elevating from 15% to 23%. Additionally, its net profit has grown impressively at a 10% CAGR, testifying to a robust and effective business model.

Focus on Market Development and Premiumization

To cement the company's winning streak, the focus remains on expanding the core offerings, particularly the 19 large brands, through superior product quality and execution. Along with aiming for category leadership, the company is keen on market development to fuel growth by optimizing product communications and catering to evolving consumer needs with innovative formats. This strategy, in combination with a sturdy culture of innovation and a drive for premium product offerings, lays down a roadmap for future expansion and sustained growth.

Quarterly Performance Amid Market Challenges

Despite a challenging FMCG (Fast Moving Consumer Goods) market environment, the company has delivered resilient quarterly results with an underlying sales growth of 4% and volume growth of 2%. While the EBITDA margin saw an impressive increase to 24.6%, the bottom line reflects a 12% increase in Profit After Tax before excess items. However, adjusting for a one-time credit, sales growth comes down to 3% with a marginal decline in net profit. The company's successful management of margins and strategic price adjustments to counter competitive intensities has resulted in balanced segment growth across Home Care, Beauty & Personal Care, and Foods & Refreshment.

Investments in Branding and Innovation

To maintain its competitive edge, there has been a deliberate increase in Advertising & Promotion investments, focusing on brand strength. Launching new innovations across the Home Care segment with environmentally friendly products and enhancing the Beauty & Personal Care lineup with new launches in skincare and hair care reflects the company's commitment to staying relevant and addressing emerging consumer desires. In the Foods & Refreshment division, the company continues to develop new variants and campaigns designed to address changing dietary patterns and preferences.

Market Development as a Long-term Value Creator

The company upholds market development as a key strategy, determined to grow the user base while orchestrating a premiumization trend across the portfolio. By centering on outcome-based products and continuous innovation like the new specialized nutrition range and millet-based chocolate Horlicks, the company reiterates its confidence in unlocking long-term, volume-led growth and solidifying market leadership.

Outlook: Cautious Optimism and Agility

Looking ahead, the company takes a cautiously optimistic stance amidst potential challenges, including volatile commodity prices and competitive pressures. There is an expectation that volumes will recover and continue to grow reasonably. With possibly a slight negative trend in price growth given current commodity prices, the focus is set on driving competitive volume growth while striving for long-term, sustainable growth across various dimensions. The company's agility will be key to enduring in a fluctuating market landscape.

Managing Volume-Value Dynamics and Future Strategies

The company carefully manages the volume-value dynamics, with an emphasis on the mix of products that usually enhances overall value. By adapting its strategies to deal with market downgradations and maintaining a focus on market share growth, the company positions itself to capitalize on new opportunities in digital and e-commerce channels, while evolving its portfolio to meet upcoming consumer demands and shopping behavior shifts.

Earnings Call Transcript 2024-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to Hindustan Unilever Limited Conference Call for the results for September quarter ended 30th September 2023. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Ravishankar, Group Controller and Head of Investor Relations. Thank you, and over to you, sir.

[A. Ravishankar, executive]

Thank you, Nirav. Good evening all, and welcome to the conference call of Hindustan Unilever Limited. This evening, we will be covering the results for the quarter and half year ended 30th September 2023. On the call with me is Rohit Jawa, our CEO and Managing Director; and Ritesh Tiwari, our CFO. We'll start the presentation with Rohit sharing an overview of the operating environment, our performance in the quarter and our key focus areas. Ritesh will then cover our financial results in more detail and also share the near-term outlook. We expect the prepared remarks to take about 20 to 25 minutes, leaving us with ample time for Q&A.

Before we get started with the presentation, I would like to draw your attention to the safe harbor statement included in the presentation for good order sake. With that, over to you, Rohit.

[Rohit Jawa, executive]

Thanks, Ravi. Good evening, everyone. It's a pleasure to interact with all of you. Let me first start before I begin the presentation to share a milestone that we've crossed recently. We completed 90 years of corporate existence on 17th of October. This is a testament to the strength of our business, dedication of our people, unwavering support of all our stakeholders and our long-held belief that what is good for India is good for HUL. It's indeed a proud moment for us to share with you. .

Starting now with an overview of the operating environment. The demand trends in this quarter remained stable and were similar to last quarter. Market volumes grew in high single digits year-on-year. However, we need to be mindful that this came on a base period where volumes declined mid-single digits and hence, cumulatively our 2-year market volumes remain largely flat. Urban and within that modern trade and large packs are leading growth for the FMCG market.

On the other hand, rural demand remains subdued with volumes continuing to decline marginally on a 2-year basis. Price growth in the market is tailing off as expected, with FMCG players continuing to pass on the benefit of lower input costs to consumers, this is reflected in a sequential reduction in market price growth with September quarter at 3% versus 8% in June quarter. Consumers are yet to experience deflation, which largely explains why the volume recovery is gradual.

The other lens to look at is price growth over a 3-year period, which as you can see, is a substantial 25% increase. FMCG market continues to witness heightened competitive intensity. As we spoke during June quarter results, we've seen the resurgence of small and regional players in select categories and price points, many of whom had vacated the market during the peak of inflation. For instance, when you look at tea or detergent bars, smaller players are growing significantly ahead of large players. We've also seen a sharp increase in media intensity, aggregate media deployment in our categories increased by about 20% versus the same period last year.

In this challenging backdrop, we delivered a resilient performance in the quarter. We have scaled a new milestone by crossing INR 15,000 crores quarterly turnover mark for the first time. Our underlying sales growth was 4% with an underlying volume growth of about 2.5%. EBITDA margin at 24.6% improved 130 basis points year-on-year. Profit after tax before exceptional items and EPS grew 12% and 4%, respectively.

Talking about market share performance. Our growth was competitive with about 60% of our business winning value shares. We continue to win volume shares in more than 75% of the business, which is an important marker as we move from price-led growth to a volume-led growth. There are certain pockets of our portfolio, primarily in the mass end where we have seen a dip in our value market shares. However, on a sustained basis, we have been winning shares in large parts of our business, leading to significant corporate share gains over the last 2 years. .

Speaking about progress made of some of our key sustainability initiatives. As a part of our sustainability goals that we announced last year, we have net zero goals, which aimed to achieve zero emission in our operations by 2030 and across our value chain by 2039. We have been decarbonizing our own operations driven by the rapid adoption of clean energy in our factories. Nearly 100% of our electricity is from renewable sources, and we have replaced fossil fuels with biofuels for thermal energy. However, large part of emissions comes from outside our operations through ingredients purchased from our suppliers. More than half of our Scope 3 emissions is actually in the Home Care business value chain.

With an aim to mobilize actions to achieve net zero, we hosted more than 100 representatives from our Home Care suppliers across the world in our first Green Future India Summit. As part of the summit, we announced 2 big initiatives. First, world's first near zero carbon soda ash in partnership with Tuticorin Alkali Chemicals and Fertilizer Limited. Second, the scaleup of low-carbon sodium silicate in partnership with Sudarshan Silicate Private Limited.

Talking about other initiatives, we must be aware of our Shakti program where we work with over 1.9 lakh women entrepreneurs to transform their lives and livelihoods. A couple of weeks back, I visited Kanchanpur a village in South Bengal, where I met [indiscernible]. She's one of our Shakti entrepreneurs. She has been associated with us for over 12 years. I was delighted to hear her proudly relate our passion for sales, financial independence and being able to provide for our family. She's an influencer in her own right. She also spoke about amplifying issues, nutrition awareness project, which we call Mera Poshan Mera Gaon, a reminder that she doesn't just sell HUL products in the hinterland, but you also serve as a beacon of social change and entrepreneurship in her community. .

Shakti entrepreneurs are up skilling, becoming digitally savvy and restocking their products using our e-B2B app Shikhar. We have now onboarded over 1 lakh Shakti entrepreneurs on the Shikhar app. Shakti continues to grow from strength to strength and is indeed a testament to our belief of doing well by doing good. As you're also aware, we were the first FMCG company, which partners with ONDC, when we went live with UShop a year back. We are further extending our partnership with ONDC by leveraging Shikhar with an intent to democratize e-commerce for small retailers. With help of an integrated module in Shikhar, called the Shikhar seller app, neighborhood kirana stores can now go on live on ONDC seamlessly and sell their entire catalog of range of products online. This is now live in 2 cities, New Delhi and Bangalore, covering about 60 outlets as a pilot, and we will further be scaling it based on retailer feedback. .

Let me shift focus from here and now to the longer term. I'm a big believer in the India story and opportunity. We are the fifth largest economy with the GDP worth $3 trillion, growing at fast pace and well poised to become the third largest in a few years. The demographics also stack in our favor. 20% of the world's working population over 1 billion reside in India. 10 million gets added every year to the workforce, giving us a huge demographic dividend. India is leading the digital revolution. The India stack is one of its kind digital scalable public infrastructure based on identity payments and consent-based dealer sharing.

Just to give you the magnitude, we have more than INR 130 crore Aadhaar card holders. In the years to come, applications based on the digital infrastructure, such as ONDC for digital commerce; ULIP, for logistics, Ayushman Bharat for electronic health records amongst others will spur innovations and new growth. While in several other more developed nations, digitization is a privilege; in India, digitization has been democratized to reach even the grassroot levels with the initiatives such as Aadhaar, Jan Dhan Yojana and unified payment interface. All these factors are augur very well for our FMCG industry, offer the huge runway for growth, India's per capita FMCG Consumption when compared to other similar economies is significantly low and within that rural is highly indexed.

Penetration levels for many of our large categories is still very low. Premiumization is bound to accelerate as India becomes more affluent and more urban. The more affluent population is expected to double by 2027. Naturally, their per capita FMCG consumption is much higher at about 1.5 to 2x, compared to national average. In this context, we are well placed to win. As India's largest FMCG company, we are well placed to lead this growth opportunity. Each of our 3 divisions by itself will be larger in size than most of the FMCG companies in the country. 9 out of 10 households in India use one of our products. We are proudly the market leader in more than 85% of our business. We have a wide and a resilient portfolio of 50-plus brands, of which 19 brands clocked more than INR 1,000 crores turnover annually.

We reached about 3 million outlets directly, of which 2.3 million outlets are covered through our distributor network and the remaining by our Shakti entrepreneurs in the rural hinterlands. While a supply chain, one of the most complex, it also gives us a significant competitive edge. To give you perspective, we manufacture and sell more than 65 billion units every year, which is about 45 units per Indian. That's the scale of our supply chain. We continue to be the Employer of Choice for many years in a row.

And now if you look at our track record in the last decade, we've added INR 33,000 crores top line to our turnover, growing at a CAGR of 9%, well balanced between volume and price growth. We have improved our EBITDA margin by over 800 basis points from 15% to 23%. And a large part of this has come from a culture of savings and were driving premiumization. Our net profit in the last decade grew at 10% CAGR. Clearly, we have a very strong business model and our track record is reflective of that.

That brings me to the key thrusts. Let me outline the key thrusts that will enable us to continue winning in the marketplace. Our core belief of what is good for India is good for HUL and the integrated approach to sustainability remains unchanged. A lot of what we have already been doing has strengthened our business and we'll continue to build on it while adapting to the changing consumer trends and shopping behaviors.

Our first thrust is to grow the core, which includes 19 large brands through product superiority and winning-led execution. Second, we have spoken about the opportunity to build categories of the future through market development. We will do this through persuasive comms, communication, [indiscernible] consumer contact programs, driving mental and physical reach, innovations and formats of the future that will propel premiumization. Third, we have a job to continue transforming parts of our portfolio through the on-trend demand spaces, especially in beauty and foods. Fourth, winning in challenge in the future through brilliant execution and curating a tailored portfolio by leveraging our design for channel approach remains an important thrust.

We will also need to structurally reset our cost base, which will help generate fuel to invest back in growing the business. To this end, we'll continue leveraging our net revenue management in Symphony programs to drive savings across all lines of the P&L. We will further sharpen our existing capabilities by doubling down on WIMI and Digital, by deeply embedding sustainability in our business, by building a culture of innovation, agility and intelligent risk-taking through [ empower ] teams operating with an owner's mindset. These are in summary, our focus areas for now as we evolve and sharpen our strategy for the next phase. I look forward to sharing more details in the due course.

Now let me hand over to Ritesh to cover our results in detail. Ritesh?

[Ritesh Tiwari, executive]

Thank you, Rohit, and good evening, everyone. Let me now take you through our quarter results in detail. Rohit covered the overall FMCG market context, which remains challenging. In this backdrop, we have delivered another quarter of resilient performance. Our underlying sales growth was 4% with an underlying volume growth of 2%. Talking about our bottom line performance. EBITDA margin at 24.6% improved 130 bps year-on-year. Profit after tax before excess items at INR 2,668 crores was up 12%. Net profit at INR 2,717 crore increased 4% year-on-year. .

The quarter numbers include the benefit of a one-off credit that we received due to favorable resolution of an indirect tax litigation. This slide explains the impact of this credit. Excluding the one-off, our underlying sales growth would have been 3% with underlying price growth being flat. PAT bei growth would have been 7% with net profit declining marginally year-on-year. From a segment perspective, the benefit is entirely in Beauty & Personal Care.

Talking about our margin performance. Our gross margin improved 700 bps year-on-year to 52% and is back to pre-inflationary levels. With the increase in competitive intensity, we have stepped up A&P investments by about INR 700 crores year-on-year to ensure our share of voice remains ahead of our share of market. This is a 420 bps increase versus September quarter '22. We will continue to invest behind our brands to protect our competitive position and ensure the long-term health of our business. .

Let me now look at performance across the 3 segments. Home Care grew 3%, both Beauty & Personal Care and Foods & Refreshment grew 4%. Margins in all 3 segments remained healthy with Home Care at 19%, BPC at 27%, and F&R at 19%. When it comes to underlying volume growth, the divergence between segments that we saw in June quarter continued. Both Home Care and BPC delivered mid-single-digit UVG. While F&R saw a mid-single-digit decline, primarily due to sustained input cost inflation in coffee and HFD categories. .

I will now click down to talk about performance in each segment. Starting with innovations in Home Care, Comfort expanded its range with intense fabric conditioner, created specifically for sportswear; a new range of Vim dishwashing liquid, Vim Pure was launched. It is a superior 100% plant-based paraben and phosphates free formulation. Leveraging WIMI, Vim liquid was relaunched with an improved formulation to suit the varying needs of consumers.

Moving on to Home Care performance in the quarter. The business grew 3% on a high base of 34% in SQ '22. Volumes grew in mid-single digit, led by strong performance in both Fabric Wash and Household Care. Our premium portfolio in Fabric Wash continued to outperform with both Surf and Comfort growing volumes in double digits. Household Care delivered high single-digit volume growth led by dish wash. We have taken further price reductions in both Fabric Wash and Household Care to pass on the benefits of input -- lower input costs. A&P investments has been stepped up to protect our competitive position.

Now talking about Beauty & Personal Care. This has been a busy quarter for our BPC team with launch of several innovations. These actions reflect the key thrust that Rohit spoke about earlier. We are transforming our skin care portfolio through innovations in evolving and on-trend demand spaces. Ponds has extended its moisturizer range to build a hydration regime, which includes a cleanser, gel moisturizer, night gel and a serum. Building on its strong ayurvedic credentials, Indulekha has launched a new anti-dandruff hair oil and shampoo. Vaseline has introduced a new range of premium moisturizers for rich, sensorial experience. Lakmé has introduced new glitterati collection for the upcoming festival and wedding season. Lakmé has also launched Eyeconic Pro Brush liner in pen format.

Moving on to our performance in Beauty & Personal Care, we delivered a volume-led mid-single-digit growth. Skin cleansing grew volumes in low single digit with both Lux and Hamam continuing to outperform. Bodywash continues to scale up well. Hair care saw high single-digit growth led by Clinic Plus, Sunsilk and Indulekha. Future formats such as serums and mask continue to do well. Skin care and color cosmetics grew in double digits with robust performance in Vaseline and Ponds. Our focused interventions in new demand spaces such as hydration, sun protect and in channels of the future, including e-commerce, is helping us drive growth. Oral Care delivered mid-single-digit growth led by Close Up.

Now talking about innovations and activations in F&R. Let me start the bottom half of the chart. What you see is an innovative billboard by Taj Mahal Tea. It uses rain drops that fall on the billboard to generate Indian classical music. It has won a Guinness world record for being the world's largest environmentally active billboard. We have launched an exclusive range of [indiscernible] ice cream called Slow Churn ice cream. It is made with 100% fresh cream and real fruit and is available in the e-commerce channel. I would strongly recommend you to try it. My favorite is [indiscernible]. We extended our Horlicks Plus range with 2 new variants, Strength Plus for adults and Growth Plus for children in select geographies and channels. Horlicks [Foreign Language] campaign is focused on higher immunity benefits. Lipton Green Tea was relaunched in the quarter with a better tasting blend. .

Talking about performance in the quarter, F&R is seeing divergent input cost trend when compared to Home Care or BPC. We continue to see inflation in this business and have therefore taken judicious price increases to offset the impact of inflation. Tea saw modest growth as the category continued to witness consumer downgrading. Coffee delivered double-digit growth driven by pricing. Health food drinks delivered a mid-single-digit price led growth. I will spend some more time on HFD performance in a subsequent slide. Foods and Ice cream both grew in mid-single digit on a high base. – Mayonnaise as well as peanut butter continues to see strong consumer traction and food solutions remain resilient with double-digit growth momentum.

Now in this chart, let me cover HFD performance in a bit more detail. It has been a little over 3 years since we acquired the business. HFD is an underpenetrated category. Hence, our focus has been on recruiting new consumers into the category through access packs, focused communication, increased distribution coverage and doubling down on home-to-home connect, we have been able to handsomely grow penetration in this category, which was relatively stagnant for many years prior to the acquisition. We also further strengthened our market share in the category. While recruitment of new consumers into the category has been healthy, consumption across existing users has declined over the last few years.

The category was initially impacted by COVID and recently by high inflation, especially that of milk. High milk prices created a double whammy impact for HFD. Not only it is an ingredient in the production of HFD, but typically, the product is consumed with milk. Hence, the end cup cost of Horlicks and Boost saw a significant increase in past few quarters.

Let me also cover in some detail what is happening on cost synergies and margin. As far as margins are concerned, we have seen 2 impacts. One is the inflation that I spoke about. Secondly, due to the planned strategic interventions of access pack and sachets, we have had adverse mix. When it comes to cost synergies, we have unlocked most of the planned synergies with some more expected to come from manufacturing efficiencies over the next 2 to 3 years. These synergies have provided us the fuel for growth to invest in growing the business and countering the impact of inflation. Consequently, the EBITDA margin for the business remains what it was at the time of acquisition despite the significant inflationary cost.

Now I would like to use this opportunity to clarify a question which comes up in some of our discussions. You will recall that we had mentioned an underlying EBITDA of 31% for the business at the time of acquisition. I would like to remind you that this number includes the benefit of consignment selling arrangement for the OTC products of Haleon, which we had announced earlier, hence effective November '23. The income from this business was more than INR 300 crores in the last fiscal.

With that being the context, our single-minded focus on market development remains unchanged. We want to bring in more users into the category, while creating more occasions for consumption and premiumizing our portfolio. We're driving 3 main actions to achieve this. We've sharpened our proposition to focus on outcome-based claims and owning occasions like monsoons. Strengthening our science-backed credentials to recruit new users and, at the same time, premiumizing our portfolio. .

For instance, our plus range focuses on specialized nutrition requirements to address various lifestyle changes and conditions. And third, expanding our portfolio to new demand spaces like Mother Plus or the new millet-based chocolate Horlicks to future-proof the portfolio. We remain confident about the long-term prospects of the category and in our ability to unlock volume-led growth through market development. Of course, as we have said before, market development takes time and we need to stay the course for long-term value creation.

Moving on, let me quickly summarize our performance for this quarter. Let me reiterate what Rohit said. We're delighted that we have crossed the INR 15,000 crore quarterly turnover mark for the first time. This is truly a testament to the strength of brands and exhibition prowess of Hindustan Unilever. I've already taken you through most of the lines. But here, let me explain the movement from 9% EBIT growth to 4% net profit growth in the next slide. Net finance income has benefited from better treasury yields, higher cash balance and dividend received from subsidiaries.

When it comes to the tax line, there are 2 impacts. As we had mentioned earlier, we expect regular ETR for the year to be about 26.5% versus the 26% that we had in the last fiscal. This has an adverse 1% impact on net profit growth. Further, we had substantial gains from prior period tax adjustments in SQ '22 as many past year assessments were concluded. Since we're lapping this, we have an adverse impact of 9% on net profit for the quarter. Lastly, net exceptional cost was marginally lower year-on-year, giving a 1% benefit. Hopefully, this explains your better understanding of the movement between profit lines. .

Moving on to our first half performance. Our turnover just shy of INR 30,000 crore mark, grew 5% year-on-year. EBITDA margin at 24.1% increased 90 bps. PAT bei and net profit grew 11% and 6%, respectively. Considering our resilient performance in the first half of the year, the Board of Directors have declared an interim dividend of INR 18 per share for the year ended 31st of March 2024. This is a 6% increase compared to the interim dividend of last fiscal year.

Let me now turn to outlook. Looking ahead, in the near term, we remain cautiously optimistic. Operating inflation and upcoming festive season should improve consumer sentiment. At the same time, we need to be watchful of heightened competitive intensity, volatile global commodity prices as well as the impact of uneven monsoon on crop output and reservoir levels. Overall, we expect volume recovery to remain rational. If commodity prices remain where they are, we expect our price growth to be marginally negative. Our focus remains on track in competitive volume growth, stepping up investments behind our brands and maintaining EBITDA margin in a healthy range. We will continue to manage our business with agility and take actions to ensure long-term 4G growth, growth which is consistent, competitive, profitable and responsible.

With this, we conclude our prepared remarks, I will now hand back to Ravi to commence the Q&A session.

[A. Ravishankar, executive]

Thank you, Rohit, and thank you, Ritesh. With this, we will now move to the Q&A session. We request you to kindly restrict the number of questions to a maximum of 2 at a point in time. In case you have further questions, feel free to join the queue again. In addition to audio, our participants do have an option to post the questions through the web option on your screen. We will take these questions just before we end. .

With that, I'll hand the call back to Nirav to manage the Q&A session for us. Over to you, Nirav.

[Operator]

[Operator Instructions] The first question is from the line of Abneesh Roy from Nuvama.

[Abneesh Roy, analyst]

My first question is on the Skin Care and Color Cosmetics, so you have seen double-digit growth, which is a good achievement. Even Nykaa saw a 20% growth in BPC business in Q2. So my question is, is this growth sustainable? And how is rural demand in skin care given general rural slowdown, is that impacting your double-digit growth in a big way?

And second is you briefly alluded to the focused intervention in the new demand spaces. Could you elaborate that more, because currently I understand those will be smaller pieces of your overall Skin Care business. So is that impacting overall growth in a big way? .

[Rohit Jawa, executive]

Thank you for the question. If I understand you well. You spoke to the beauty growth of Skin Care. I couldn't hear that very well. The first part .

[Abneesh Roy, analyst]

Yes. Yes. Skin Care and Color Cosmetics double-digit growth. Yes. .

[Rohit Jawa, executive]

Yes, I think the -- we are -- we feel very excited with this category, because we have a sort of great brands, master brands that can stretch across formats, such as Lakmé, Ponds to name a few, Indulekha, which is another rising star, Dove and of course, Glow & Lovely. We have a high relative market share. So we feel confident we understand the consumer. We have brands that are stretching across the price pyramid, and we have extended all our brands now to new growth spaces and into new formats, such as sun care, for instance, has benefits of even new formats like serum for argument's sake. So we are -- we've been mapping the market. We also have already seeded and seen some promise in brands such as Simple, which is mainly face wash brand, but has a full portfolio. So we are also, therefore, innovating quite aggressively.

In this market, you spoke of Nykaa. Nykaa of course is -- we are growing faster than this number in that platform. And I think Lakmé is one of the top 3 brands in that platform, if I'm not wrong. So we feel very excited about this category. This category has a virtuously strong growth rate, higher profit profile, where we have both the technology, R&D and brand assets. So in terms of [indiscernible] this is really an exciting space, and we should see more and more of our effort going in this direction.

When you spoke to the high-growth demand spaces, there are 2 parts of the market. Of course, they have high-growth demand spaces, frankly, in all categories that we play in, because we are in India, which is a great market to be in where this promise of great future because per capita consumption are so low compared to other markets each and every category we play and we are in a broad set of categories we know are going to go through their S curves.

We've shown we can play that S curve, for instance, in Home Care with liquids that we have done or fabric conditioner. Similarly, we see score opportunity in new demand spaces, but we are particularly excited about new demand spaces in beauty and in foods, packaged food, there's a lot more new benefits and new consumer habits and new business shopping, such as for digital commerce that are beginning to take place. So I'm hoping this gives you a pretty good flavor of how we're thinking about this entire space. .

[Abneesh Roy, analyst]

And on my question on rural demand in that part of the business that was slow in the earlier quarters and generally rural is slow in most FMCG. So how are you seeing in this part of the business in rural?

[Rohit Jawa, executive]

Maybe I ask Ritesh to join in. I mean he has really been studying rural and the trends and patterns, and I think he'll probably give you a much more richer answer.

[Ritesh Tiwari, executive]

So Abneesh, I will pick up the rural question. See, overall, if I just start with the number, rural in this quarter, I'm just talking volume growth, because we know price growth overall in FMCG has come down from the peak of 14% as an industry to 3% in this quarter and expectation, of course, is that will further get moderated going forward given the pricing actions that all the players are doing. But for a minute, just focus on volume growth of rural. So rural volumes grew at 8% this quarter as market and in FMCG. And same period last year, we know that overall market has declined. So when the overall market grew at 8 percentage this quarter, market had declined by 6 percentage same period last year.

So overall, when I look at total market, it has grown at 1% over 2 years CAGR. If I double click within that rural, rural for this quarter grew at 7 percentage, but on a back of 9% decline in same period last year, which means on a 2-year period, 2-year CAGR average, rural has still not fully recovered the volume that it had before. It's at minus 1 percentage. But the good news is the minus 1, 2-year CAGR now is better in what we saw minus 4% CAGR in the previous quarter, June quarter. So we have seen gradual recovery coming, albeit on a soft base. Now of course, the single biggest factor, which is supporting rural recovery is inflation moderating. It leads to more disposable income and hence, more amount of expenditure gets incurred in FMCG for that matter. .

Real rural wages, we all know that overall the wage inflation has always been higher for the last many quarters now in urban compared to rural. But we also have seen that real rural wages have now started to get into some positive territory, which, again, in my mind, is a good news. Government has continued its thrust on rural. So the heightened amount of expenditure in rural and investment for the last 2 years, it has been maintained. And on top of that, we know also that after agriculture, the second most important area where rural people get jobs is construction. And hence, with the entire CapEx getting dialed up, that should start showing more impact in rural.

Now of course, there are watch out. We know that overall job participation is increasing. And you also saw the MGNREGA demand. In fact, the MGNREGA demand is higher than 2019. And equally, monsoon has been uneven against a long period average, there's a 6% deficit on monsoon and also the reservoir levels as we are exiting the monsoon season. So that will have some amount of knock-on impact as we have the kharif crop gets harvested and as rabi gets sold.

So overall, if I summarize, we are cautiously optimistic, and we expect demand to continue to recover gradually. So that's our overall read on rural.

[Rohit Jawa, executive]

Glow & Lovely, which is our biggest rural brand is also showing better outcomes recently, which is also very encouraging. .

[Abneesh Roy, analyst]

My second and last question is on the resurgence of small players slide, which you have pulled. And that has 2 subparts. First is on tea. Now tea has not seen too much of deflation and normally local players come back when there is a sharp deflation. So when you have said that local players are growing 1.4x of the -- to pan-India players, what is driving this? Because when I see a 5% decline in your F&R business, the sense I'm getting is your tea business would have seen a sharper decline. So correct me if I'm wrong there?

And second, for the national tea consumers, generally, they are far more sticky to those -- so your customer will be sticky, he may down trade within your brands, but does it happen that there will be almost 7%, 8% kind of a decline in your tea volume, he goes out of your brands and he goes to regional brands and what's driving that?

[Ritesh Tiwari, executive]

Yes. So let me kick off and then, Rohit, I will hand over to you. So overall, it's a good area to spend some time, Abneesh. So -- and again, it's only -- not only what has happened in this quarter, just important to see last 4 to 6 quarters what has happened to tea. So tea all of us now had significant inflation. And followed by that, it prices started to come down. And in fact, a point in time the commodity year-on-year is also declined. In this period, what has happened second factor apart from commodity volatility is also decoupling of loose tea, which is basically plainer tea, the commodity and the premium tea.

The plainer tea had seen more amount of price moderation because of a better crop, compared to premium tea, again, I'm talking commodity, which had seen a little more inflation compared to the premium tea. So in effect what has happened, the price table between the plainer tea and premium tea has widened. When this widens, so plainer tea, which is what by and large the loose tea players end up using. And premium tea will have over-indexed consumption into our tea basket. You have seen some amount of divergence and decoupling of the commodity trend.

Now in the overall context of inflation to start with, not only tea, I'm seeing overall inflation, the point is the last 3 years in FMCG, consumers have seen 25% inflation in the last 3 years. So that has had an impact where tea was the first category where we saw consumers downgrading more towards lose tea and hence smaller players. Within our own portfolio, exactly to your point, we've seen more amount of, let me say, traction to Taza compared to premium teas. But market overall has also moved towards loose tea and downgraded. That has had an impact. That's one.

Second, your, of course, question was overall F&R. And of course, if I look at the business that we have, 2/3 business sits between HFD and tea. And both in HFD as well, the point that you mentioned earlier, we have seen dairy inflation, which is why our growth in HFD is price led and we have seen volume decline, because of high amount of prices, and hence, we had to increase our prices though judiciously.

Similarly for coffee. Coffee has seen 60% to 70% price inflation, and I'm seeing commodity inflation over the last 2 years. Again, because of that, the growth that we have in coffee is a price-led growth which, of course, volumes have got impacted on consumption because of the impact of high inflation. So if you look at the F&R portfolio, be it tea downgrading, be it HFD price increase or be for that matter of coffee, these are the reasons why volumes in F&R overall have got impacted.

[Abneesh Roy, analyst]

Sure. My second subpart and this is my last question. So essentially, on detergent bar, you mentioned resurgence, the issue is you have given a very stark data, 6Y versus Y looks like a very stark data. So could you give some real absolute numbers to understand better -- to have a better understanding? And detergent powder mass end, there also would you have seen local players grow much faster just like detergent bars?

[Ritesh Tiwari, executive]

Yes. So the point, Abneesh, that we quoted, we used 2 examples. And of course, that are parts of the portfolio, especially as mass end had those price points in certain geographies is what we have seen this behavior and which, of course, 2 examples we quoted out of that, which is detergent bar and tea. And in these spaces as commodities softened, we have seen resurgence of many small players. And which is why at an aggregate market level, these players have grown ahead of the large players. And of course, as you know, we are market leaders in these categories. So as this development happens, it has impacted to us in pockets where our market share is seen a dip. So something very similar, we had also captured in our last quarter's narrative, and we've seen that consistently playing out.

Now of course, this reality, it is -- again, if I just go back to a little longer history for 2007, 2008, when we saw this happening for skin cleansing. 2012, '13 happening for laundry, '13, '14 happening for tea. In each of these periods, we have seen this behavior where when commodity price goes up, after that, it comes down volume recovery takes some time to happen. And we do have seen this behavior where we see small players, who basically vacate the market when commodity is extremely volatile and they start participating in the market when commodity becomes benign. And for some point in time, like everything else in life, these are cyclical in nature in terms of commodity and as price table stabilizes, the market equilibrium gets established.

[Operator]

Next question is from the line of Vivek M from Jefferies India.

[Vivek Maheshwari, analyst]

Two questions. So my first question is on the slide on market share. So where you have mentioned, let's say, 60% of the portfolio is winning value share, whereas over 75% is winning volume share. With all that you have explained, I'm still not able to understand why would that be the case? So I would have thought that value share would have been portfolio gaining value share will have been higher than volume share given that there is the competition at the bottom and so on and so forth. Why do you think there is this disconnect between the 2?

[Ritesh Tiwari, executive]

Yes. Let me pick it up this question, Vivek. So I think very similar what I just mentioned, with softening input cost, small players growing faster than the larger player. And remember, as Hindustan Unilever, we are over-indexed on premium portfolio. And hence, in the mass end of the market becomes larger because in certain pockets like this with growth, it leads to value volume disconnect in short term as we're transitioning this inflationary period. And I quoted the example, Vivek, of tea. Take loose tea, take Taza and take premimum tea, as the market is overall downgrading, in our case as well, Taza for example, which again is at the lower end of the price, we'll see more better growth compared to like we say, premium tea.

So hence, overall, when you look at portfolio, which is over indexed on premium compared to industry, and if mass is growing with higher weightage, this is a volume value disconnect which you get in short period. If you look at our volume share, more than 75% of portfolio is gaining volume share and these are the pockets where you see the volume value disconnect leading to about 60% value share gain. But this is basically the volume value disconnect in a short period as market tables of pricing are getting stabilized and as these demand curves are getting into transition and getting stabilized.

[Vivek Maheshwari, analyst]

Okay. So just to get it right, Ritesh, what -- I mean, when there is, let's say, the mid and the bottom, which is growing faster. So you are saying while that is happening, you are still gaining market share, but it's just the value?

[Ritesh Tiwari, executive]

Overall value gets impacted. See, typically, as Hindustan Unilever, we called it many times out. For us, mix, remember our UVG venture is volume and mix, mix is usually a factor which is accretive. In these times where the mix changes a little bit in categories like, example, I quoted on detergent bar, example, I'm quoting of tea, when downgradation happens, I'm saying the overall value per tonne, which industry sell comes down, and which is the mix impact that you end up seeing and which is why you're not seeing a volume-value disconnect.

[Vivek Maheshwari, analyst]

Okay. Okay. Sure. The second thing is -- second question is for Rohit. So this is the first conference call where you are addressing and HUL is, by far, always considered to be gold standard. But what are the areas -- so we know all the positives, but, Rohit, what are the key focus areas from a near- to medium-term perspective that you're thinking about at this point of time?

[Rohit Jawa, executive]

You make excellent question. And I'm only thinking about it daylight for some time now. And I think firstly, what I'm really impressed and I have said this before in the last -- in other interactions that we're fundamentally a very, very robust business. And I talked about in my presentation the reason why I feel inspired and excited to be a part of this business today for -- one is the strength.

When I look closely at even our operational health and all indicators in the moment, I see that we have a very high -- a large part of our portfolio is growing penetration, which is a good sign. We have our product quality being superior than competitive benchmarks more than 60% in blind, which is very good of turnover. We have increasing assortment. Our distributor strength is strong in holding. We're, in fact, doing very well in some parts of rural areas like Shakti, where we're seeing sustained growth. We also have a strong brand and large majority of brands are growing brand power. There are, of course, a few fixes to be done. So on the whole, the portfolio is strong.

That said, when you look at the -- my most important emphasis going forward, and I try to cover that in what I call the key thrust chart that there are parts of our strategy that must be continued because they are appropriate for the opportunity you're seeing. As I mentioned to you that the Indian market is at a point of inflection, I feel it's like 10, 15 years behind China, where I worked some -- for some years as you know, I see similar trends, although of course they're not exactly the same, whether it's the big growth in affluence that one can see already and higher income households sort of doubling every 5 years. Or you see the opportunity of the digital and the hard infrastructure that's creating for consumers to access brands, both how they consume the brand messages and or buy the brands. .

And also, of course, the way brands are built is changing as well, because social, for instance, has become a big deal in India already, whether it's rural or urban because of the deep access to, for instance, cell phones and YouTube and platforms such as those. There's, of course, a fragmentation one can see in channels, but also in benefit segments. And yet there's every category we're in is going to go through an S curve, it's going through an S curve of growth and I'm particularly excited with taking the strengths we have forward and then evolving some more to be ready for the future.

So as I mentioned to you, my priority is in the moment, and we will sharpen them as we go along in. And at some stage, in a few months, I would like to give you more deep color of what it means for us and what changes it means for us. But for sure, the first thing is to drive and forward the status that's working and shape it for the future. So as I mentioned to you, it's for me very crystal clear that our big 19 or 20 brands, more than INR 1,000 crores will have to be the first engine of growth and our strength in making sure they're superior in execution end-to-end across our 16 clusters of winning in many [indiscernible] is the first disciplined capability, I need to keep repeating.

The second is market development, which we have shown we can do a great job within particularly Home Care with Fabric editions, liquid, we replicate that in shower gels, for instance, and we replicate that in face wash and so on and so forth. We will see that is a repeatable model that we need to exercise more widely, especially for more premium formats whether it's benefit segments of sun care or the new formats such as serums, we have identified a certain set of market development bets, we will stay multi-year committed to.

The number 3 is transforming 2 specific parts of the portfolio where we believe we can do better in terms of coverage, although we have a very good portfolio, which fuels the price pyramid. But I think beauty care and food, and I mean packaged foods are the 2 areas where we can actually leverage our big brands and in fact, bring new brands, including from Unilever to stretch and fill all new demand spaces that's sort I meant by on-trend demand spaces.

And finally, second but last is this whole area of winning new channels, and we are very strong in general trade, and we have above average facial and modern trade. But there's a new ways in which consumers are shopping. They're shopping in e-commerce, like Nykaa, one of our colleagues mentioned, Abneesh, or they are shopping in quick commerce, which is happening now as well. And of course, Amazon's and Flipkart's customers such as those or other also can be established e-commerce, quick commerce and of course, our strength through the Shikhar app, which is an amazing asset, amazing asset, which we will actually leverage and make it even a deeper moat.

So I think digitally selling to our customers and consumers and also building strength in new channels such as quick commerce in pharma is clearly an opportunity, we will not let go. And finally, we have a very good, strong muscle of frugality and operational tightness, we call Symphony, fuel for growth. So while our value creation is more driven by top line, we do want to inch up at the margin and create fuel for growth. And that's why you see us we will continue driving our repeatable model on Symphony, which is our end-to-end P&L squeeze out productivity and we're going to take it to the next level, so we can generate big funds that can go behind a big PMI or A&P that we need to find all of these opportunities.

And all of this, I want to really reinforce some existing strengths like WIMI and take it to the next level. In digital, we are, as I mentioned, Shikhar, we're also going to look at what we can do around consumer and the operations in more details on this later. So our reimagining agenda taking forward. Sustainability, we are going to focus in more on things like net zero, plastics, water and community of course. And we will build a culture. We have a great culture of leadership of discipline of rigor of being thought leaders. We will make sure that our scale becomes an advantage, and we become a big and fast, so scale insurgent even going forward, then we can make -- take intelligent risks.

We will -- we have already 16 clusters. We have 16 small category teams, each of them can be operating unit independent are on their own, so creating that entrepreneurship and empowerment, so that we can really collectively move very, very fast and really tap all these opportunities culturally as well would be something that we'll be working on to take to the next level. So I think it gives you a good flavor, but this is a sort of thing that we are thinking of as a team, and we're sharpening our agenda and making sure that we see to evolve this agenda for the next phase of HUL's growth journey. I hope it gave you a good sense of both the heart and the mind of really where our agenda is for HUL.

[Operator]

Next question is from the line of Arnab Mitra from Goldman Sachs.

[Arnab Mitra, analyst]

My first question was actually centered on the near-term outlook. So I think last couple of quarters, you mentioned a few factors destocking in the channel due to price surge, some rise of local competition. This quarter, of course, there's a bit of festive timing issue. So on the first 2, do we believe now that those are behind on that readjustment of pipeline and small players versus large players is something that could continue for some more time? And in the similar line, does festive season really matter for FMCG this year? I mean, if you could give some flavor of how much could be the impact of that timing?

[Rohit Jawa, executive]

Yes, Ritesh, if you could just pick this up for Arnab, please? Thank you.

[Ritesh Tiwari, executive]

Sure. So Arnab. Let me just talk about, a, the outlook for volume to start with. I think long term, Rohit covered extremely comprehensively about what drives FMCG and what are the kind of opportunities and a long highway for growth of the category, and of course, us at Hindustan Unilever. But if I just zoom in now to short term, there are factors, which are supporting continued volume recovery. We had called it out that we will see post this high-inflationary period, a gradual recovery in volumes.

And one of the factors is supporting 3 of them: a, inflation is moderating and the full impact in this quarter, as we speak, in laundry and skin cleansing, we have taken sequential price reductions, which is why at an overall aggregate level, you saw HUL had roughly flat price growth in this quarter. FMCG industry, as per Nielsen data is still showing 3% price, which the point I had mentioned earlier, it takes basically a quarter or so for it to stabilize and start reflecting what manufacturers are selling at. So consumers will start seeing the impact of deflation as you start seeing the price growth going away. That's number one.

Second is the upcoming festival season. Of course, there are -- as you know, the phasing of festival at this time, all the days of festival lands in December quarter, unlike last year, where there were some days of festival, which came in September quarter. And of course, a larger part of days came in the December quarter. This time, we have all days coming into December quarter. So with inflation moderating, higher disposable income in hands of consumers, urban leading growth overall in the industry of our FMCG for now and urban income more resilient and having seen better wage inflation, we see that, again, as a third factor, which is helping in short term for volume recovery. Of course, as an economy, we know that between growth, inflation and currency, the country has done excellent job in managing the 3 vectors very well.

So we have, on the back of it, a resilient economy. Watch outs equally like support factors, in my mind, will be 3. A, monsoon, we all discussed the kind of uneven monsoon we had and the potential impact of that, that could have in rural. And second, of course, is global commodity prices. As we speak, crude is firming up, and it's more than 90 as we speak. And with geopolitical stability, again being questioned and as all of us know what's happening this time around. Those factors put together are, in my mind, a short-term watch-out. .

And hence, in summary, post the high inflation period, the gradual recovery should, in our view, continue and which is why we are cautiously optimistic and -- but equally confident of gradual volume recovery. So that's, I would say, in short term is our view where it is. From a pricing perspective, we had called out in our commentary that if at all commodity prices remain where they are, we will see marginally negative price growth going ahead in the near term.

[Arnab Mitra, analyst]

Sir, Ritesh, just to clarify, so the channel destocking component and this local competition versus national competition. Is that largely behind in your view? Or there is a little bit more of investment there required given where you see the market? The rest of the points, of course, are there, but these 2, are they kind of behind now? .

[Ritesh Tiwari, executive]

Yes. So let me first pick up the channel players. So the channel inventory overall, I think since at least if I talk about Hindustan Unilever, with all the commodities that have got moderated, we have finished doing our pricing action this quarter. And as an industry, assuming the same thing happens, which is the 3% price growth, which Nielsen shows moves to 0, I think by next quarter, they should all be set square. So I think that transition in my mind, should get done. Unless we end up seeing more amount of commodity volatility, which brings a new story all together, so sans that, I think this should get stabilized next quarter, number one.

Number two, a small player, of course, this is something, which is again very much linked to the commodity cycle, again, as commodity cycle starts to stabilize, in our mind, price equilibrium will start get to stabilize. The biggest job there would be, of course, overall demand scenario and demand scenario across different price points. If market does not continue to downgrade, example in tea or could it matter small players at a mass end, example in laundry bars, that behavior will have to change for this equilibrium to set equal. Again, as I mentioned, we have seen in the past, this happens. And then in few quarters, it starts to then go back to the same equilibrium of competitiveness across the price point as it always is. So yes, in our view, it's basically short-term couple of quarters.

[Arnab Mitra, analyst]

My second and last question was on HFD. So I think you explained the steps that HUL has taken. Obviously, you've put in a huge amount of effort on every line of what you could have done to grow that business. In -- what you're seeing another company is wherever there is very high price growth, volumes are subdued, but revenue growth are very high. HFD seems to be one of the categories that even the revenue growth is just about mid-single digits, with a lot of pricing. So my question really was that could it really be such an issue where the consumers, who are reducing consumption are doing it for other reasons or other sources of nutrition? Are you -- is there something that gives you confidence that this is purely a milk inflation related issue, and therefore, once the stability is achieved there, you should get back to volume growth? .

[Ritesh Tiwari, executive]

Yes, Rohit.

[Rohit Jawa, executive]

Yes, I just -- I think the -- if you look at the benchmark market on our 4 similar categories in Southeast Asia, the size and scale of such brands is very, very strong. And given that the HFD category is still -- penetration levels are low. And we are actually fully -- we have basically South and East, and we have North and West still go to, the head space on this category should be very, very long. And apart from the fact that it's got this market development runway, this also a category, which is good for the country, and that's why we like it so much, because it helps address the [ malnutrient ] gap that exists within our society. So given that -- or these 2 reasons, this is definitely a long-term bet.

Now it is possible that we know that for a fact that consumers have down trade -- have titrated the consumption because the cost of each cup had gone up, and we start to see already in the last few quarters as milk prices have stabilized, and we focus our communication on why this category makes sense. Why -- and we have started customizing our communication as well to different regions. We have stabilized our assortment and our whole incentive curves and our SKUs, we start to see green shoots.

Secondly, there's also a big opportunity in the premium end of this category, which is in the space of science-based supplements that are focused on adults, on women's health and so on and so forth. And those are doing quite well. And we have low share in that segment. So there's also an opportunity to do that is to grow there. And then, of course, Horlicks and Boost and Boost by the way is doing very well. It's already in the double-digit levels. We do see an opportunity for us well to also stretch these brands, leveraging their strong equity. So I see many levers like we said in the chart, more users, more usage and more premium, many, many more opportunities to draw this category and take it to the next level. It's already a scaled category for us, almost EUR 500 million in scale. So yes, I think I'm optimistic, but you need to say discipline and patient and keep working for the long term.

[Operator]

Next question is from the line of Jitendra Arora from ICICI Prudential.

[Jitendra Arora, analyst]

I just had one question with respect to your A&P expenditure. Given the sharp growth year-over-year, I just wanted to understand the characteristics of the expenditure in the base as well as current year if you can help me in terms of how much would be advertising? And how much would it be towards promotion? And within advertising, how much would it be, let's say, towards traditional medium and digital media?

[Ritesh Tiwari, executive]

Thanks, Jitendra for the question. So yes, so this quarter, as you've seen in our results, we have 11.4% A&P expenses. Same period last year, we had 7.2% and which is why you see a pretty strong 420 bps year-on-year increase in A&P expenses, which is INR 700 crores and a 65% increase. Now of course, to some extent, the base, and remember, again, September quarter of the last year, it was a peak of inflation. And hence, overall, the GRPs in the industry had come down where there's a much higher price versus cost gap for the industry. And on the low base of last year, same time, when you compare 11.4% looks a substantial increase. But even if I ignore the base, if I just look at the overall full year number same period last year, 8.4% was our annual A&P. And that A&P number we have gradually kept increasing from 7.2% to 8% to 8.8%, 9.9% and then 11.4% in the current quarter.

Now for us, what are the principles for A&P resource allocation. The first ground principle is share of voice ahead of share of market. That determines the amount of intensity, a, competitive intensity and this is that the amount of allocation that we want to do for resource. Second, of course, you reach objective and your frequency objective, this is the amount of innovation that we want to land in the market. That's the second driver, which then determines the absolute amount of A&P investment, which you end up doing. Suffice to say where we are, at a little over 11%, between 11% to 12%, that's the kind of a benchmark at some stage, we had pre-inflation. And the way I see this number will remain firm. Given the amount of competitive intensity, this number will remain firm.

[Jitendra Arora, analyst]

I'm sorry, Ritesh but that does not address my question. I just wanted to understand the characteristics of this expenditure rather than why it has grown.

[Ritesh Tiwari, executive]

Yes. So in terms of characteristics, if I see, overall, when we look at our total 100 pie, to your question, 1/3 is digital media, 2/3 is traditional media. So that's how we typically speak of expenses. Now to your other question, subquestion, is it promotion-driven, it is advertising-driven, it is advertising driven.

[Operator]

Next question is from the line of Amit Rustagi from UBS Group.

[Amit Rustagi, analyst]

I had just one question on the scale of 3 to 7 or 3 to 9. Where do you think that our increased A&P spend will lead to on a higher volume growth for the second half of the year?

[Rohit Jawa, executive]

Ritesh?

[Ritesh Tiwari, executive]

Sorry, I did not get the question. Can you please come again, please? .

[Amit Rustagi, analyst]

So like I'm saying how confident we are on a scale of 1 to 10, that how much volume growth we can drive in the second half of the year with the increased A&P spend? And when gross margins are going to stay here, so are we going to continue with the higher A&P spend in the coming quarters as well?

[Ritesh Tiwari, executive]

Yes. So let me take the second question first. And I think the first question I'm trying to ask is the outlook that we have a volume going ahead. So that's clear. See, of course, the job that we have, which is to keep driving our reflex muscles and generating overall Symphony savings, the program that we use internally in the organization called Symphony, where our objective always is to drive savings across all the lines of the P&L., be it promotions, be it advertising, be it supply chain costs or for that matter overhead cost. Some portion of that gives benefit in gross margin. Other element of the lines of the P&L also get benefit of the overall savings program that we try. That effort of driving savings across all lines of the P&L will continue. .

And to Rohit's earlier articulation, we'll only further step it up with the full intention to ensure that we're able to invest it back in the business. Invest it back in terms of ensuring competitive levels of expenditure of A&P, which, as I mentioned, will remain firm, that's how we read, invested back in terms of capability building. When we do Shikhar, when we do Reimagine HUL, they all require investments to get done. And the third, when we generate sources to invest in the business. And see, of course, invest back in terms of product superiority and invest back in terms of overall portfolio development. So the job of generating resources in the P&L and deploying to drive growth and that cycle will continue to do. So that's how we look at -- when we look at the financial growth model is to keep looking for sources of investment and then, of course, areas that we need to invest to drive growth.

And then coming back to outlook is what I was responding earlier. We have seen a gradual recovery of demand as high inflationary periods are stabilizing. And as we mentioned that in summary, we remain cautiously optimistic in terms of the gradual recovery of demand as a high inflationary period is hopefully behind us, and we have a more stable outlook going forward in terms of commodity and hence, impact of that in terms of positive impact of that on the demand generation overall in the industry.

Yes. But I know you would love to hear a number from me, but I can only tell you qualitatively, what are the factors as responding earlier, which we see in short-term driving and supporting the growth and be it overall inflation coming down, with overall festival demand or the resilient economy that we have. And of course, the factors I did call out with monsoon, volatile commodity and geopolitical stability, which are the factors which might work against as this recovery is happening. We of course see when all these things put together, we will see how demand situation pans out. But the overall aggregate narrative is cautiously optimistic with continued recovery of demand outlook.

[Operator]

Next question is from the line of Kunal Vora from BNP Paribas.

[Kunal Vora, analyst]

My first question is on pricing. At the portfolio level, how much price cuts have you taken from the peak? And how many quarters the pricing could remain negative? And the price cuts mostly are they in value segment? Or are they broad-based?

[Ritesh Tiwari, executive]

Yes. So, Kunal, called out that the price in this quarter that it was in the September quarter, there are 2 categories essentially where we have taken price decreases sequentially. Number one, we called out was skin cleansing and second, we called out in the area of laundry soap detergent. Of course, as I mentioned earlier to Arnab's question, there are also areas where we have also increased prices, be it coffee, be it HFD, where we have seen input cost inflation.

Now of course, as we speak, to the extent where commodities are today and whatever near-term outlook we have, as far as we are concerned, we are finished doing the job in terms of price adjustments that we had to do to our portfolio, which is why if commodities remain where they are in short term, now short term could be 3 months, 4 months, how it depends as to where commodities end up settling in or a little longer period than a few months, all depends upon where commodity settles. So at least in short term, we do see our price growth to be marginally negative if commodities remain where they are today.

[Kunal Vora, analyst]

Okay. Okay. And can you talk about your priority like say, I mean as the GM expands, would you like -- you raise ad spends, but it looks like price cuts don't seem to be very large. You also have increased competitive intensity. Like why prioritize ad spends and not pass on some benefits to the customers, especially with intense competition?

[Ritesh Tiwari, executive]

So we have done both. One of the factor, Kunal, we've mentioned that when you have such prices going up, coming down, the single most important priority is to ensure competitive price value equation of all our products across the board, equally when the commodity price is going up, and hence, we have to increase prices, or for that matter when commodity cost comes down, it then decrease prices. In fact, our pricing principle has been when commodity cost goes up, we keep price increase in smaller chunks. When commodity cost comes down, we take decrease in larger chunks, so that we don't disrupt rate pipeline with frequent changes in pricing.

So to the extent we had to take prices down judiciously to ensure competitive price valuation, that job we have done. And of course, that has happened and the bleed of price versus cost has come down, which is apart from everything else that we've done to drive cost down is one of the reasons why we've seen a pretty good amount of gross margin recovery, which now is back to a pre-inflation level where we are today at around 52 percentage. So that's what we have done in terms of, a, first quarter call has been to ensure competitive price equation. And then as we needed to invest money behind A&P competitively with the principle of share of voice ahead of share of market is what we've done.

But again, that does mean that other elements of jobs to be done in terms of investing in product to drive product superiority investing in capability like Shikhar, Remagine HUL that we kept doing or for this matter dialing up more amount of innovation that we want to bring to the marketplace, we spoke this quarter, we were very busy with BPC with a good amount of innovation across the board that we've landed. So the resources then, which get generated in the P&L, they get basically deployed in all of these priorities to drive all around growth and business development.

[Kunal Vora, analyst]

Sorry to continue on this, but like when competitive intensity has increased significantly, you have like, say, portfolio is gaining less market share. Why not just take larger price cuts? When like why you have 700 bps margin expansion over the last 1 year instead like maybe that could have been reinvested a bit more in pricing? .

[Ritesh Tiwari, executive]

No, of course, it's a very complex set of decisions. And you can imagine, business decisions are very complex. The way you deploy entire 6P from development to deployment, to pricing, to promotion to product. And this entire 6P mix, we have to always look what will give us a competitive edge in the market. And it can never be a unit dimensional view that cut price will get more growth, only if life was so simple.

[Kunal Vora, analyst]

Sure. And just one last point. Historically, has elections had any impact on the growth rates? How do you see the elections coming in?

[Ritesh Tiwari, executive]

See, we have seen, I am saying, read over the last several years in this space has been into structural interventions that the government does. Big example we spoke on last couple of years of heightened amount of capital expenditure that government has done. Also that matter when you contain inflation, when infra spend goes up. We have seen those long-term measures have a higher impact on FMCG demand. And because, a, they drive disposable income, they drive better amount of jobs and hence, they also drive more amount of money being available to be spent. So our read has been that those macro factors developed and deployed by government has larger impact on FMCG demand. So that's where we see higher correlation.

[A. Ravishankar, executive]

Okay. We are at 7:30. So we will end the session here. Before we end, let me remind you that the playback of this event will be available on the Investor Relations website in a short while from now. If there are further questions, feel free to reach out to any of us in the IR team, and we'll be happy to address them. Once again, thanks for the participation, and have a great evening ahead.

[Ritesh Tiwari, executive]

Thank you so much for all your engagement. Really appreciate it. Thank you.

[Operator]

Thank you very much. On behalf of Hindustan Unilever Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.