Hindustan Unilever to split foods and refreshments business

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Mumbai: Hindustan Unilever Ltd (HUL) has decided to split its foods and refreshments business into two divisions, the company informed the exchanges on Thursday.

The country’s largest consumer packaged goods company by sales said the move is in alignment with the category structure of Unilever globally.

HUL also announced the appointment of Sudhir Sitapati as a member of its management committee with the designation executive director, refreshments. Sitapati is currently the regional category vice-president for HUL’s refreshments division in South Asia and Africa.

Geetu Verma, currently executive director for foods and refreshments, will be designated as executive director (foods) and will continue as a member of the management committee.

HUL expects that the reorganization of the two businesses will help increase focus and fully leverage growth opportunities.

In August 2014, the maker of Dove soaps, Rin detergents and Knorr soup separated its home and personal care portfolio into two segments with new executive directors for each, replacing Hemant Bakshi, who moved to Indonesia in a new role.

HUL’s beverage business has tea brands like Lipton, Taj Mahal, Red Label and coffee brand Bru. It contributes 11.6% to total revenue and 12.2% to operating profit.

The company is the second largest branded tea company in India and is growing aggressively in the branded coffee business with Bru, which became the market leader by volume and value in the third quarter of fiscal 2016. “The beverages portfolio has grown at an compound average growth rate (CAGR) of 10.6% between fiscal 2011 and fiscal 2016. The growth has been led largely by prices following the high penetration of tea consumption in India, keeping volume growth muted,” said analysts Sanjay Manyal and Parth Joshi of ICICI Securities Ltd in a 10 May report.

“The foods segment is the biggest opportunity for the future but the weakest performer in HUL’s portfolio,” they noted in the same report, while sharing that the foods portfolio posted healthy revenue growth of 18.6% annually between fiscal 2011 and 2016 but remained a drag on the earnings front.

Segmental margins have remained subdued over the years. Brands like Kissan, Knorr and Kwality Walls foods contributed 6.6% to overall revenue and 2.2% to operating profit in fiscal 2016.

On Thursday, HUL closed at Rs.868.70 per share on the BSE, up 1.62% from its previous close. The benchmark Sensex ended the day up 0.48% at 26,843.14 points.