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

On volume drivers - after the GST price cuts six months back, what is actually happening in terms of consumption? Over the last three months / six months, what are the drivers of UVG - is it more tonnage, more mix, etc.?

I will break this up into a few parts. The first is we are doubling down behind market development and market making. For HUL, this has always been the largest part of our volume-led growth. Just to give you an example, we talked about liquids. Liquids in Home Care has now become Rs. 4,000 crores, growing at strong double-digit. This is all mostly volumetric. The second is really in terms of, our core brands and getting penetration gains on our core brands in terms of share gains. Overall, we are turnover weighted gaining shares, and this is both volumetric and value, but even volume-led share gains. The channels focus is the third bucket where across channels we have built our capabilities and that's beginning to bear fruit.

On elasticity gains post GST cuts - are gains being reinvested for even faster growth? Is that the right takeaway?

That is absolutely the right takeaway. So there are more macro factors which are resulting in the right favourable conditions. But Manoj, what I am saying is we are doubling down behind our capability and initiative so that we are able to really benefit from favourable conditions, but it's really about our stepping up our competitiveness and doubling down behind market development across the channels and really improving our channel capabilities and footprint.

On the turnaround in Lifestyle Nutrition - to get to double-digit growth, the core has to really fire. Can you spell out a couple of drivers and your confidence about sustaining double-digit growth over the next one year and beyond?

Three, four buckets of what are the actions behind it. The first is an improvement in our pack-price architecture. The second is we have relaunched Horlicks in the South of India with the Horlicks Superfoods mix with a new technology. The early signs of that have been extremely positive for us. And the third bucket is the new areas which Horlicks has entered. We have entered into RTDs, we have doubled down behind biscuits, and we have just launched Horlicks Protein. So very early start to the protein. So, you are absolutely right, Manoj, that it's firstly the core and the new segments are beginning well, but they are still small and huge headroom for us to grow those new segments. Our focus will be to first roll out the Superfoods launch across the country. I also want to give a mention to Boost, which continues to perform very well for us.

On Lifestyle Nutrition - whenever milk is inflationary, Horlicks and Boost suffer in demand because a large part of consumption is linked. Now in an El Nino year, generally we see fodder availability being impacted and that does drive up milk prices. Would you see that as a big challenge to growth recovery? Can this derail, say in H2?

Abneesh, actually Horlicks gets drunk both in milk and in water. Yes, it gets drunk with milk, but it also in the East of the country, in fact, mostly it is put into water. The second thing is I actually think we are in a time in which nutrition is actually a key trend. So, our focus and that's what we are doubling down behind, which is to remind consumers of the nutritive benefits of Horlicks and Boost. The third is the new modern areas in which we are expanding the brand, whether it is RTD, whether it is protein, and we are only just beginning honestly.

On overall macro - El Nino challenge mostly H2 rural demand will get tested, H1 obviously inflation is there, post May 4th the petrol-diesel price hike is extremely likely and FMCG price hikes are happening. How confident are you that FY'27 can still be better than FY'26 for you and maybe for the sector also?

While we have all seen the rainfall forecast and the monsoon forecast for the country at 92% and below normal, it's important to look at other factors as well, including the reservoir levels in the country. The reservoir levels in the country are at significantly above the normal levels of last year. So that sort of bodes well for the country as well. We remain positive that, in the end, even if there is more inflation in the country overall, we are still talking about headline inflations of 4% to 5%, which as a staples company, we believe that our products are relatively low elasticity on price in comparison with other categories. So, we remain quite confident about that.

Follow-up from Niranjan on H1 inflation and H2 rural income demand pattern.

If we look at the H1 inflation, Abneesh, as you pointed out, the answer is the elasticity. And if we talk about H2, which is more rural income-based demand pattern that we are talking about, just to again reiterate that what we have seen is there are three counter-factors to the El Nino effect this time. We talked about reservoirs being 10% higher, then MSP, 5%-6% higher. Apart from that, the grain stocks which are with the government because of the last two years' record production, they are also at a record high. So as of now, given the reservoirs, given the grain stocks, and given the MSPs, we don't expect, unless the rainfall is like below 85%, we don't expect any impact on the rural demand on the H2 as of now.

Volume growth is the top priority and you have retained margin guidance. How do you plan to manage especially in the context of volatility in input prices? Brent has crossed $120, rupee depreciated below 95. How do you get that margin confidence?

The way we are navigating this space, as I said already, is that we have seen a cost inflation of around 8% to 10% so far on our material cost base. Against that, we have already taken a price increase to the extent of 2% to 5% depending on portfolio to portfolio. The Brent going up to $120 on a single day, as you know, nobody can forecast because they are not fundamentals of demand and supply that are guiding the Brent prices or the currency right now. So, they are fluctuating in a wide range. But we will continue to navigate and take appropriate pricing. The second, of course, is the accelerating the savings funnel. So, we have said a band of 22.5% to 23.5%. Now that band allows us to operate at sometimes a higher end of the band when things are favourable in terms of cost scenario, and maybe lower end of the band when things are not so favourable.

Can you elaborate on what you are planning to do under Quick Commerce and this Rs. 2,000 crores capex towards premium formats?

The capex is essentially focused on premium formats, liquids across Home Care, Personal Care, and Beauty. So, it's a Rs. 2,000 crores capital investment that we are making towards growth of these formats, which is in line with our strategy and our big bets. On Quick Commerce, our Quick Commerce organization we created is focused on driving capability building for what is right for that channel. It is focused on both the demand generation side in terms of how we market, availability, supply, technology, and really the end-to-end go-to-market. We shared last quarter that our customer availability has gone up almost 1,400 basis points.

On Quick Commerce - because you will have more dedicated resources, does that also mean that you would be open to bolt-on small acquisitions wherever white spaces are there?

In line with our strategy, we have always maintained we are open to bolt-on acquisitions, Vivek, and that continues.

On top line and market share - did you come across any pre-buying from channel partners ahead of anticipated price increases in some of your categories which you took in March and April? And are you witnessing trends of smaller players finding it difficult to operate amidst supply disruption and raw material availability which is aiding market share gain momentum for you?

In terms of pre-buying, we did not witness any pre-buying from traders in the quarter. As regards, what we are witnessing whenever there have been challenges and disruptions, in volatile times, organizations and we have a strong position. Let's take categories in which we have a strong position like Home Care. We are well-positioned because of both our overall financial position, we operate in premium parts of Home Care, we are well-positioned because of the scale in which we operate to really navigate volatility. We will also double down behind costs which doesn't matter to consumers.

On Personal Care - this vertical has continued to see volume decline. How should we think about your confidence in growth returning here?

Overall Personal Care for us, soaps has been inflationary over now almost a year. It has been an inflationary commodity and therefore we have taken up prices as has the industry. And we continue to get therefore USG growth. Our focus has been on really premiumizing our portfolio. So, Dove and Pears are growing strong double-digit. In Bodywash again, not only have we grown strong double-digit, but we have also gained almost 400 basis points of share in Bodywash, so it's now becoming very material for our Personal Care category. We are also doubling down behind Lux, which is our core brand in mass.

On Home Care - in post-Ukraine FY'23 year, HUL had taken high double-digit price increases almost immediately after input cost inflation. This time the price hikes are a lot more modest. Is the input cost inflation not yet hit you to that extent, or is something different in the operating environment - liquid detergents in the category or competitive situation - why the price hikes are lower this time?

These are two different situations actually. When you looked at the previous situation of the increased inflation, that was more structural and therefore more longer-term. As far as the current situation is concerned, it's not one-way street, it's very volatile. We have already seen crude going up to $110, moving down to $85, moving up, moving down. It's a very short-termish situation as of now, which is not dependent on structural demand or supply issues. It's based on the geopolitical war issue that's happening. And that is why we have to be measured in the price increases that we take and therefore we are taking in steps. Of course, we are also helped by the covers that we have.

Will you take price if crude inflation continues?

If your question is will we take price if, crude inflation continues? Yes. Simply we will take price because we operate at the premium end of Home Care and we have strong brands; they are relatively low on elasticity. And we will of course do it judiciously always between price, costs, as we have always done. But if, we find that this becomes more structural, we continue to take price.

On Home Care - in this inflationary environment, what is your experience normally in terms of how the volume growth behaves in the category and premiumization? Are you able to typically gain share from local or regional players in this environment?

Overall, in these moments, the strength of our portfolio that it spans across the pyramid right from Wheel at the bottom to Surf excel Liquid, Fabric Conditioners at the top, sort of helps us navigate the volatility. The second is the strength of our brands and the fact that we have pricing power in these categories versus, other players. And the third is that our financial operating sort of agility, which allows us to navigate this volatility, puts us as we believe in a very strong place to navigate the times, we are in.

What has weighed on the mass skin care segment and any actions to offset these pressures?

First I want to put colour totally on our Beauty & Wellbeing business. Our Beauty & Wellbeing business grew USG at 8%. Remember that the USG does not include at this moment Minimalist, which lies at the revenue line, not yet in the USG line. And underlying level our overall Beauty & Wellbeing business will be growing double-digit. Within that, in Skin Care the skin care market is premiumizing and we are seeing now very strong double-digit growth and market share gains in our premium skin care portfolio across formats. Our premium skin beauty portfolio is now operating between Minimalist, Simple, OZiva, and Nexus at an ARR of close to Rs. 1,400 crores. Within the mass skin care portfolio, it was subdued both on Glow & Lovely and especially on talcum powders because talcum powders in March quarter given the seasonality had a very weak quarter.

So the industry structure demands that we focus more on the premium end and that is why some of it is natural, some seasonal, this whole change witnessed in Skin Care of Beauty - is that the right understanding?

That's absolutely right. That's how the way consumers are behaving in the category is consumers add more products to their Skin Care regime. And therefore, by nature that's what happens in Skin Care, the market tends to grow through addition of new formats, new benefits, and that's really where our focus is, in line with how consumers are moving.

On 8% to 10% cost inflation - is there any low-cost inventory in that? And if one is to strip that out, what is the kind of cost inflation that you are seeing?

This 8% to 10% cost inflation is on our material cost, accounting for our normal covers that we have. So that's the cost inflation that we see and that's the way we see. Of course, there may be players who may be facing more than that depending on how efficient or non-efficient their buying's are on the market. But we do have an efficient procurement system, based on which we are seeing 8% to 10% material cost increase. We are operating with normal covers.

On rewiring go-to-market capabilities - is this confined to only quick commerce? Which categories have seen the most change and benefit?

Our steps in terms of rewiring our GTM are not just in quick commerce, but across the channels. One of the areas we have invested in is in GT specialist stores. So, these are open format stores, chemist and cosmetic stores where we are investing to create a specialized force and drive up our assortment. So, our investments are not just in quick commerce, which we have invested, but also in general trade. And we continue to invest, of course, in modern trade, where we have a strong business. So, it's across the channel. So, it's really this omnichannel portfolio. So, I don't want to say it's affecting one category more than the other, which is why you've seen a more holistic result across our segments.

On Beauty & Wellbeing growth rate - mass is dragging Skin Care growth which is led by premium, but mass is a very large category that needs to be crowded out by newer brands. So, do you need to aggressively build more brands or benefit spaces? Is the pace you are comfortable with?

The biggest opportunity for us in Skin Care is to democratize formats that are today very niche at the top end of the portfolio. So, if you take, for example, sunscreen, you take light moisturizer, you take even face washes, the penetration of these categories is still low. We have launched Lakme Sun Gel in the quarter. It's at a Rs. 10 price point for a sun gel. It's a 2% penetration format. The first format in a hot country like India is sunscreen and sun protection is required, and therefore, educating and making them accessible. We have launched now across Vaseline, Pond's, light moisturizers, and these are what we are scaling up. We have launched Vaseline Gluta-Hya, which is a format which is designed for an Indian humid, hot kind of condition versus thick heavy moisturizer.

Was there any restocking effect in the quarter given that we had some destocking and channel effect in the previous quarter? On tea, we have seen softer volume growth - anything specific in this quarter impacting tea? And on the 400 basis point market share gain in Bodywash - is this based on Nielsen data?

As far as restocking is concerned, we actually had alluded to that there's been no restocking as far as our March quarter is concerned. So, these are the underlying sales as you see. On tea, there's no specific reason for this one. More importantly, it's more around the deflation that year-on-year that you see on pricing, which has impacted the sales growth as far as tea is concerned. But there's no fundamental reason for tea volumes. The third, which is the market share, which is Bodywash, yes, it's based on Nielsen data, but we also know from overall that across the all the channels we are able to grow Bodywash faster.

Unilever globally is moving away from foods, yet HUL is doubling down on Horlicks, Boost, and Coffee. How aligned is HUL's food strategy with the global direction and do we read more in this?

The HUL Foods business is very distinctively different from the Unilever Foods business. Our business of HUL is firstly a Beverage business in Tea and Coffee, a Lifestyle Nutrition business, and in Foods, Kissan is our large brand, a very different local brand, very well entrenched in the segments in which it operates. And as you know, we have launched into chutneys and extended the brand recently. So therefore that, combined with the opportunities that exist in India in Foods, is the reason why Foods is outside the perimeter of the Unilever transaction that we have done, and Foods continues to be a very important area and focus of strategy for HUL.