12-quarter-high USG (7%) delivered.

On the beverage portfolio - Pricing in Tea based on replacement cost. Tea buying is a multi-month phenomenon. What are the risks involved? Do you use this strategy in other categories? Coffee cost has crashed 30% - is there a similar strategy? Is next one year of tea RM taken care of?

Tea buying season is typically between June and September-October. We had two choices - price at consumption cost or at replacement cost. We made a choice of pricing to replacement to ensure that we are competitive. Tea is a category going through a downgradation cycle, where consumers are downgrading and hence it is a very price sensitive category. For Home Care with crude oil exposure and increased pricing agility, decision making depends on what happens to crude oil. For coffee, over a couple of years, coffee has seen 70%-80% cumulative inflation. As commodity price reduces, first we allow for the price versus cost gap to start getting normalized. The bottom-line principle always remains competitive right price-value equation.

On the two acquisitions - first year post acquisition is generally tough. Minimalist has done a good start with double-digit sales growth. What is the confidence level on the balance three quarters? On OZiva tripling in one year - distribution scale up, how much from Kirana?

OZiva and Minimalist put together is a Rs. 1,000 crore portfolio, added to existing Rs. 2,000 crore portfolio in Beauty & Wellbeing. The Rs. 3,000 crore portfolio, which is digital first, organized trade indexed is growing at more than 25%. OZiva is almost three times the business now. OZiva's footprint even now is still by-and-large digital and digital first. Offline expansion will be done at a later point in time. Minimalist business has grown strong double-digit in the quarter. Four elements of synergy: R&D and innovation, supply chain synergy, offline distribution, and leveraging the network of Unilever for international expansion.

Across modern trade players, private labels in liquid detergents are happening. Consumer up-trading from powder to liquid detergent will happen. In terms of pricing growth - 1 kg powder detergent versus 1 liter liquid detergent, is the time of usage similar because pricing has almost converged?

We started building liquid detergents almost more than a decade back. We built close to almost Rs. 3,000 crore portfolio in Home Care liquids. As the cost per wash gets closer to powder, the transformation to or upgradation from powders to liquids starts to accelerate. We are seeing Surf excel as a brand getting new users in and brands like Rin getting people to essentially increase the share of requirements. Liquids contribute to only under 10%, and we expect many, many more years of conversion from powders to liquids.

On the Foods business - largest swing in UVG from negative mid-single-digit to positive mid-single-digit. Is it Tea or Nutrition driving this growth? Is it sustainable?

Tea has seen a high single-digit growth, driven both by volume and price. Coffee has seen double-digit growth. Total Beverages have seen a double-digit growth in the quarter. Packaged Foods, Kissan, Knorr portfolio - mid-single-digit growth performance. Boost has given good growth in the quarter. Horlicks - we have seen improvement compared to that position. The business is still declining in the quarter, but lesser, but we have seen improvements sequentially. So that's indeed the composition of total growth, which adds up to 5% growth for Foods business.

On overall growth outlook - your data or Nielsen data doesn't show a significant growth acceleration in industry. Are you getting a sense that there is actually some pickup starting to happen on the ground? Last time you had a comment saying gradual improvement as the year goes ahead. This time you don't have that comment. Anything to read into that?

What we see is gradual recovery led by rural that is sustaining. We see urban growth coming back in the market. The growth uptick is coming from small cities and e-commerce, especially quick commerce. We see gradual recovery that is sustaining. It's volume led in most categories except Foods. We expect this kind of growth to stick. There's no magic shift that's likely to take place, but we do expect sustained and gradual recovery to remain in place.

On Skin Care - this quarter we saw positive low-single digit growth after two quarters of muted growth. Premium portfolios are doing better, but how is the mass portfolio doing? Is it still in negative territory? What is confidence in driving growth in skin care to high-single digit range?

This quarter, we're beginning to see the benefit of shifting our portfolio to faster growth spaces in modern, e-commerce channels in more premium areas. Pond's has done very well. It's been a double-digit quarter for Pond's again. We have gained market share in e-commerce and in modern trade. Where we do have more work to do is Glow & Lovely. We can see that we are near flat this quarter. Excluding Glow & Lovely, we, in fact, have a near double-digit quarter for Beauty & Wellbeing.

On Beauty & Wellbeing margins - this segment has seen margin decline. Is it just higher A&P spends or is there a channel mix impact as you've gained market shares on quick commerce and e-commerce?

The margin we made in this quarter for Beauty & Wellbeing is 28%. It's a pretty healthy margin. The role of B&W is to be growth accretive to Hindustan Unilever. If we have to invest more in B&W, we will invest more. Investments are across multiple lines of P&L - on e-commerce, on modern trade, working with the customer. Digital media, last 12 months now, is more than 50%. This quarter is more than 60%. You will see medium to long term, some amount of dilution in Beauty & Wellbeing margin, but we're completely okay with it.

On Skin Cleansing - revenue growth improvement to mid-single digits. It could possibly be because of pricing. But on volume growth trends - in coming quarters does the base ease out? Comments on market share trends?

We're very happy with our Skin Cleansing performance. We have had an all-round strong quarter. It's driven by price because the input costs have been quite high. We have seen very good robust growth on the premium part of the portfolio, Dove and Pears, and on the liquids. Our Lux brand is quite strong and robust and is gaining market shares. We do have work to do on Lifebuoy. Excluding Lifebuoy, Skin Cleansing business would have been close to double-digit.

On the macros - texture, color in whichever form of the volume part and the mix part of UVG? What is your portfolio telling, because you are a large player?

This quarter we have spoken about 4% UVG growth and 5% total growth, alluding to 1% pricing. In this 4% UVG growth, our volume growth, which is tonnage growth is ahead of the UVG growth. The mix being negative was material a few quarters ago, that gap will reduce. There's a convergence happening between UVG growth and tonnage growth. The only thing different compared to last 5-10 years is the pricing growth component. Growth continues to be volume led, and price remains a small component.

On Skin Cleansing - example of Rs. 10 price point with grammage price interplay - would the volumes have grown on the non-Rs 10 price point off soap bars?

Skin Cleansing is one of the categories which is sensitive to price increases and is elastic. When you have such material inflation overall for commodity, which leads to price increase, it always impacts overall volume - in different formats, volumes of single packs, multi-packs, and grammage changes. Whenever the deflation happens, you've seen tonnage to volume picks up. That's the impact you see in this quarter as well. As we keep lapping the price changes, the impact of volume declines for the category keeps reducing.

On operating context - rural numbers industry trends seems to be going down in terms of growth whereas urban is picking up. Other than low base, do you genuinely think things are picking up on the ground? Especially worried about the rural bit?

Rural is one third of the business that we have. We have seen basis Nielsen data and our own internal read an uptick in rural. Rural is still ahead of urban even when adding e-commerce to urban. Rural had got impacted - cumulative inflation was nowhere getting compensated by the income level increase. Now with substantial easing on inflation including food inflation, continued government support on schemes, good agriculture last year and a promising monsoon this year, we have seen improvement in income levels in the rural areas including the non-farm income. The signs we are seeing is overall recovery in the industry coming from rural as well.

On Minimalist - how do you think HUL portfolio - the online one particularly can benefit from Minimalist? Do you think there is no upside for your base portfolio by acquiring these Digital-first or D2C brands?

Rs. 2,000 crore portfolio in the six big bets within Beauty & Wellbeing was by-and-large organized trade heavy and more e-commerce and Digital-first. That Rs. 2,000 crore business now becomes Rs. 3,000 crore with OZiva and Minimalist. This Rs. 3,000 crore portfolio, like-for-like, is today growing at more than 25%. Growth portfolio is important but equally business model is important. This Rs. 3,000 crore business makes double-digit margins and has a sustainable business model. There are many things HUL adds in terms of scale, capability to these businesses. Equally there is reverse learning from both OZiva and Minimalist.

With platforms becoming more demanding, is there a case of going aggressive and buying out more D2C given good experience with OZiva and Minimalist? Smaller brands complain about higher take rates - you can negotiate better against platforms?

We look at it more as a portfolio play. We have 4 levers of building a portfolio - acquisitions, build a new brand like Novology, launch a global Unilever brand like Simple or Love Beauty and Planet, or extend our core brand. So Ritesh's Rs. 3,000 crore digital-first portfolio has been sourced from exactly these four levers, now growing at 25%. We don't always have to go ahead and buy a brand to create scale. We have many more levers than acquisition to create that portfolio play. That doesn't take away from our openness to constantly scout the market.

Skin is fragmenting because of large benefit spaces emerging - architecture needs more plethora of brands. Do you see any Unilever brand which could come to India or is it possible you acquire a brand outside with intention to bring to India?

We acknowledge that you need more than just a few big core brands, which is why we have Core, Future Core and Market Makers mindset especially for B&W. We have built brands for the market like Novology. We have brought brands like Simple from Global Unilever into India, expanding fast with more than Rs. 100 crore ARR. We have brought in the global brand Liquid I.V. and Nexxus this year. We have full intentions of bringing the prestige brands from the global stable into India. There will be a few core big brand equities and then satellites serving several small need spaces.

On Glow & Lovely - sequentially done better, largely flattish. A lot of portfolio action happened in early part of year. Is portfolio reshaping complete? What other actions on promotion and distribution and reaching out are pending for turning into growth?

We are doing three main actions. One is to renovate the Core to make it contemporary - new proposition of renewing cells, a new pack which is more modern, even sensorial. We have changed the way the product feels on skin, less sticky, less heavy. We have new advertising. What's already working for us is our extension to a lighter sensorial Glass Bright product with a jar. We are also entering new formats like serums and sunscreens. Distribution reach of both media and availability are under our spotlight. We are very focused on this Core business and are making sequential progress.

On detergent's portfolio - decline in ASP, how much driven by price competitiveness in liquids portfolio? In response to higher competitive intensity in detergent space - in powders, who's driving competitive intensity? Other large MNC, national player or small regional players?

On Home Care we have grown high-single digit in volume and Underlying Sales Growth was 4% which means we had negative pricing. Pricing actions were done for two reasons - deflation in commodity (crude basket and soda ash) and competitive reason. The area which has seen more commodity decline is crude oil and crude basket, that impacts more on laundry powders and detergent bars. For liquids, palm oil and palm oil derivative linked active detergent - we have seen inflation. For competitive reasons we reacted to price in liquids and laundry bars. By and large, powders have been more commodity linked.

In Skin Cleansing, last few quarters Lux doing much better and Lifebuoy lagging. After relaunch, is Lifebuoy more or less growing in line with category growth or not yet?

Lifebuoy is clearly not yet growing in line with the total business, but our intention there is for it to gain share of the hygiene segment. We can't go against the consumer shifts. Consumer shifts are going more and more towards upgrading to new formats, more beauty, more skincare etc. The hygiene segment is clearly, after COVID, under more pressure and within that we want Lifebuoy to gain market share. It is doing better than its peers in that segment, but there's more work to be done.

On Gross Margin - gap between NMI and UPG widened this quarter. Palm oil prices started to become inflationary again. How to triangulate sequential improvement in Gross Margin with low pricing led growth? Will GPM improvement be driven by cost efficiencies and better mix?

Price versus cost gap is more transitory in nature with three reasons - Tea pricing to replace not consumption, Home Care commodity benefit pass-through and competitive pricing, and Horlicks pack-price architecture correction. Going forward from next quarter onwards we should start seeing improvement in Gross Margin levels. Improvement will come from smaller price versus cost gap, improved mix as we drive more sales of Beauty & Wellbeing, and driving net productivity across all lines of P&L. EBITDA margin outlook remains 22% to 23% as we will invest back the improvement in Gross Margin into other lines of the P&L.

On ad spends - lower raw material prices usually lead to higher competitive intensity. Are you sensing competitive intensity going up? With economy opening up, how should one think about new digital brands mushrooming and hurting growth of legacy brands?

A year back in deflation, we had seen heightened intensity. Regardless of higher or lower heat, our principle is share of voice ahead of share of market. This quarter we spent sequentially 40 bps more - Rs. 150 crores more. The composition is changing - last 12 months we have crossed more than 50% media investment going into digital compared to traditional, in latest quarter even higher. As intensity happens, we are very clear that driving competitive volume led growth is first priority. We have a large agenda of portfolio transformation and dialing up more growth in demand spaces.