Are HUL's best days behind it?

When we say you know our Huals best is behind it, what we mean is you know Huals ability to sort of run circles around its comparators. Right? Consistently outperform the FMCGPR set. Okay. Which it did in the 2010s, right? You look at Dravini, you look at the stock performance, right? Despite Huals size, it kept growing at a faster clip than its comparators. Right? People started asking these really difficult questions on you know analyst calls of rivals. Like this is a whatever I mean is a 30,000 crore company, right? Its volume growth is higher than yours. You're a 6,000 crore company. Right? You can't now say that, oh there is demand is tepid. You know people are cutting down on spends, right? How the hell is this company selling so much? Right? So my question is, will they be able to consistently do that in the future as they have in the past? This is structural issue. And it's it's Hual is not idiosyncratic here. It's it's actually a structural problem that's affecting FMCG growth and FMCG brand building throughout the industry. What we are seeing is it's just symptoms. Can they provide enough space for an acquisition like say minimalist or if tomorrow they bring an ID into the fold? And they provide a arms length distance for that brand to grow the exact same way as they had been doing before with one minor change, which is wherever they had been facing problems with their wastage and supply chain economics, you need a work and step in and solve the problem for them, right? It's that is viable and doable. Then they just need that one brand to go through the value of death and get to the scaling point after which you need to know exactly what to do with it. So a couple of weeks ago this journalist shares this very interesting chart from a report by HSBC on social media and the chart like charts very often do ended up in our office Slack channel. PGK, do you know what I'm talking about? I mean, I vaguely remember it. This was actually it was a very catchy title. I think it was basically this chart that had all the brands from HUL and its growth rate as compared to what was the last five years or 10 years? The decade. Last decade, right? So over the last 10 years. So it was where there were 10 years ago and where they are today. And if I'm not wrong, most of the brands were either flat or just they just barely, barely grow. Correct. So this chart essentially listed out some of Hindustan Unilever HUL's biggest brands, right? So Ponds, Lux, Rim, Life Boy, Kissan, Surf, Glow and Lovely, Wim, Brue, Lux, again, all of these are brands that we all know and are probably used at some point in our lives. But like PGK said, turns out most of them other than very few exceptions. In fact, I think there are just two, Brue and Wim have barely grown in the last 10 years. Now the reason that we're talking about this is because that's a pretty damning start for a company that's supposed to be the gold standard of brand building in India for what feels like forever. HUL is literally one of India's biggest FMCG companies and it has been one of India's biggest FMCG companies for a long, long time. This is a company that understood India better than almost anyone else, right? It was basically kind of like India's consumption barometer. But now something has shifted. It starts as the brands that you and I and I don't just mean PGK or the wonderful guests who I will introduce you to, of course, in the studio with us today. I mean all of us, even the listeners tuning into this episode, the brands that we actually get excited about today aren't HUL brands anymore, right? More often than not, there are these YAPI D2C brands that technically should not stand a chance in front of a Bay Mac like HUL. So today we want to understand why that is. We are going to try and answer a very simple question today. Are HUL's best days behind it? We have two wonderful guests with us today. One of them is my colleague, Sita Ramann Ji. He is deputy editor of the Ken and he has been on this podcast several times already. He actually wrote a wonderful newsletter recently about HUL. He used that term which is called Trade Tricks. We link it in the show notes. It's titled is HUL still the envy of the FMCG world and it's followed by this very short HIPITI strap that gives the answer away. Sita says, "Short answer?" No. I think that's a great place to start. Sita, why not? No, I think though the chart that you talked about, right at the start, right? That's just one factor here. I think that chart talked about the contribution of all these brands to HUL's revenue in 2016 and 2024. Some brands have grown their contribution to the top line. Some have it. I talk about that in the piece which have managed to up their share and which have it. There have been a bunch of other things. For instance, when I met an FMCG CEO a while ago and he was talking about the slowdown in consumption. Everyone was talking about FMCG growth was really bad for a few quarters and people were talking about urban and rural and all of that. He made a very interesting point. He said HUL is suffering more than any other company because it has consumers across Trata. Every LAM you could be using the cheapest detergent or surfExa liquid which is premium liquid detergent or you could be using DAV or a really cheap soap from the HUL stable. It has consumers of all kinds as opposed to companies like Sitaada consumer products or GoDrage which target a certain demographic. Which is why those companies which cater to largely affluent customers were not as badly affected as HUL. You can see this in HUL's volume growth which at one point was consistently higher than any rivals despite HUL being considerably larger than probably I think it's larger than the next two or three rivals put together. That is not playing out anymore. Even when the overall industry is affected HUL is affected more than the other players. A company that was always an outlier. At least ever since I started writing about retail and FMCG it was consistently an outlier. But I don't think that's quite true anymore. Interesting. I would love to bring in our second guest. We are also joined by Sandeep Nair who's a return guest actually on this podcast much like Sita as well. He is the co-founder of David and Hulu which is a marketing and branding consultancy firm. Sandeep's actually, he knows this world really well. He's worked at PNG, he's worked at Reckett, he's also worked at Swiggy before going on to build Challenger brands himself. Thanks Rahil. Thanks for having me back on the show. Always a pleasure. And all of what you just said is true and yet doesn't pay in the full picture. For me the entire problem rests on a simple narrative which is centered around how you are looking at time preference. If you have a very high time preference you're going to start optimizing for everything which is a quarter to quarter kind of code. And unfortunately Unilever is in that space. And it is a bell for everything that is FMCG in India. So as Sita mentioned anything great happens. It's the credit goes to all the startups who are flashy and brilliant. Anything wrong happens in the overall industry. Hul is the first one to get hit. So yes, short answer. I think Hul is not having a great time. But there is something that I would like to come back to probably a bit later in the conversation where I don't think a lot of the shade that's being thrown on Hul is very relevant or should be done. But having said that it is a structural issue. And it's it's Hul is not idiosyncratic here. It's actually a structural problem that's affecting FMCG growth and FMCG brand building throughout the industry. The growth problem stems from within the org the way it is structured and how brand building can happen in an organization or in a country like India right. Can I jump in here? I'm going to have heard this. for a while, this is nice. I have a very simple question that I guess the starting point of this entire discussion is, is H.O.L's best days behind us? Isn't that the question you asked? What's the answer? I would say that it is because from what you're describing, you're saying H.O.L's best days are behind it? Sita, are H.O.L's best days behind it or not? He was in my strap. Say it. You're saying H.O.L's best days are behind it? Sandeep, are H.O.L's best days behind it or not? No. Okay, great. Now we can start. So now we are basically saying, you're saying H.O.L's best days are behind it? Sita, you're saying H.O.L's best days are behind it? Why? Sita, let me ask you that question. H.O.L's best days behind it? I actually think no. I think H.O.L's best days are ahead. I'm actually with Sandeep. But I'm not just saying that because Sandeep is, Sandeep and I went to college together and Sandeep is of course doing brand strategy now, which I have very little respect for Sandeep, FYI, because as everyone knows, right now the only thing that matters is Danda and sales, right? I appreciate all the stock about Brad. We'll get to that. But I feel like H.O.L's best days are absolutely not been so here. You are, I am with you man. 100%. Let me understand why. Sandeep, let me start with you because you also said people are being way too harsh on H.O.L. when we didn't really get to start. Before we get to why we have all learned everyone speak. So I'm going to ask Sita because Sita wrote about this. You wrote about this in your trade tricks and Sita, you're saying that it's best days are behind it. I know that that cost a little bit of a flutter. A lot of people I think some subscribers also wrote back and who basically said, oh my god, how can you say this about H.O.L. So help us understand. Suppose I asked you to like qualified in like two or three sentences. Why are H.O.L's best days behind it? Yeah, H.O.L has been really good at getting consumers to spend more on a certain product. For instance, once they realize that say almost all homes use soap, bars. Now how do we get these guys to give us more of their disposable income? Here is body wash. Just buy this. The same thing happened with detergent, which is probably their sort of greatest success in the last 20, 30 years. I just want to don't want to talk about it in the abstract. I'm just going to read out some of the brands because I don't think we have done this. We're talking about H.O.L in this abstract. I'm going to read out some of the organic brands that H.O.L has. So that our listeners also know about this. Ponds, Kisan, close up, Lipton, clinic plus, Lackmay, Brookborne Red Label, Brue, Lux, Wim, Life Boy, Rin, Dav, Glow and Lovely, Veal, Surf. These are all brands that we have known and seen for such a long time. These are the brands you're talking about. And you're right. I agree with you see that which is that they create a certain category. And of course, and Sandeep and I we went to be school together. We were batch minutes sitting in the same brand management class where it's basically about this thing called is it called laddering Sandy? To an extent, yes. Yeah. So what do you do is that you basically start up with the category like say soap. And then you create a new category called say what body wash and body wash doesn't exist. And they're like, oh, this is this new thing that we are creating. And then they create this other category called body lotion. Then that is pre-shower lotion. Then that is so you creep creating these new and new categories and you creep creating this new needs and aspirations for different. I'm sure there is some technical term for this. Use cases. Use cases. Use cases. Not so technical. That is a that is a tech thing. I'm saying it's something like saying you know the life style. More irrelevant is one of the reasons why you why people think brand strategy is stupid. Fantastic. Okay. Thank you. Okay. That's a short tech. But I'll take it. Okay. So it's something like say it's a my it's a myself as well. Fair enough consumer life cycle and consumer touch points etc. But sorry Zida. Go on. So you see Hule was good at that. Right. Yeah. I mean it's still very good at that. But I think a company of Hual size tends to have certain blind spots. Like for instance, you're talking about a home of four five people. Right. Say your dad uses light boy, you know mom uses dark whatever. Right. But the kids obviously want nothing to do with those brands. But Hual does have something for them as well. Right. But there are a bunch of other products also that they use. Right. Say say the kids use supplements for instance. Right. Where Hual had nothing or I don't know if they had anything then they acquired this brand of Ziva. Okay. I think now they've bought all of that brand. I think recently the world bought 49 50% of the brand for 800 crore. Okay. So sorry. So your finger Hual does have brands for the younger people in the family or they don't have? No. I think they have these blind spots. I think by the way, we realized that you know this can't be built to be bought. Yeah. The only option is to buy. Sure. Right. So my thing is, you know, so now you have to wait for such brands to emerge. Right. And the thing is it's not just Hual. Right. Everyone wants to buy these brands. There is ITC, Tata consumer bought soulful and organic India from Fab India. Right. Marikov has bought some five or six brands. Right. And now you had, you know, a still order buying forest essentials. Right. Right. So everyone is looking for these brands. Right. As opposed to building something on your own, you can't say that Hual has the money. So why can't it buy it? But Hual has not the only one interested in buying. Right. But Hual. I agree. But Hual is the biggest. So clearly it has the bigger watches than all of these other people. So it can clearly outbite them and buy it. No, but I don't think so, but it doesn't make sense for Hual to just pay like, you know, 300 times sales. Right. You have to still go back to your investors and sell them on this. Right. If you tell them that, you know, I paid like, you know, 10,000 crore for a brand whose revenue is 80 crore. That's not going to go down well with analysts. Right. It's a listed company going back to what Sandeep mentioned. Right. It's quarter on quarter. Once you announce an acquisition, you're going to have an analyst call and they're going to ask you all kinds of questions about why they paid X for this particular deal. Right. So correct. And even if it has a lot of money, it just can't use that to buy it any valuation. So correct. And also for D2C brands, something that I found out recently, even for D2C brands, their private valuations are kind of crazy. Like even for like, they're approaching like tech startup kind of value. What was Hual truth? Hual truth raised money recently. Right. I think it was a series C or a series D or something. Yeah. And if you look at their valuation and you look at their revenues, I mean, I do know the multiple. Do you remember it off the top of your head? No. Someone can just look it up. I think Dantika is just looking this up while we'll continue talking. But I know that it was a crazy multiple. So you're right that even because you talked about whole truth, even if you want to buy brands and that fair, they're going to be really expensive and you have to go back and talk about that. Okay. Fair. Sandeep, tell us why do you think Hual's best days are not being and whatever you say, I'll support you. Awesome. So first of all, let's define what we mean when we say Hual's best days are behind them. They are a 60,000 crore company. They're not going to go under tomorrow morning. And as PGK mentioned, it's not about the brand. It's about Danda. Then they're not going to stop being the behemoth of Indian FMCG industry anytime soon. So if by saying their best days are behind them, what we actually mean is that their capability to build brands in house, which is what help them grow and become unilever and then Hindustan unilever later on. Sorry to interrupt. I think when we say you know, our Hual's best days behind it, what we mean is you know, Hual's ability to sort of run circles around its comparators. Right. Consistently outperform the FMCG peer set. Okay. You look at driving you, you look at the stock performance, right? Despite Hual's size, it kept growing at a faster clip than its comparators. Right. So people started asking these really difficult questions on, you know, analyst calls of rivals. Like this is a whatever. I mean, it's a 30,000 crore company. Right. Right. You can't now say that. Oh, there is demand is tepid. You know, people are cutting down on spends, right? Right. Got it. Why I think about that, Sandeep, let me just tell our listeners that I'll just go back to the whole truth example. So, whole truth basically last raised a series D, which is just a couple of months back. They raised around 51 million dollars, valuing the startup at somewhere around 350 million to 400 million dollars. So if you look at and their revenue was the previous year was something like say 216 crores. So their valuations are around 3600 crores. So that means that their multiple is close to like 1617X, which is like, you know, I would imagine that FMCG is like what? 528. It's not a tech company. Yeah. Less than 10 is what's usually given. Yeah. And here it is 16X. And of course, you can assume, oh, well, it's a protein thing. It's going to have high aspiration to show narrative. Narrative. My brother narrative. We'll come to that. Okay. So, correct. I agree. Okay. But I think that I'm just making the point about the valuation part that Sita earlier said that these are the kind of brands that everybody is gunning for. And the ones that everybody wants, not only is the competition very high to acquire them, but also that they're trading at a multiple that is, I mean, if you take whole truth as one indicative example, that is quite high. So that's definitely like ups the game even more, right? So fair. I get the point. Sorry, something. Go on. So I would say that fine. Ability to run circles around the competition is something that actual has not markedly displayed over the last, say, five years, I would say. At least not since COVID. I would say in the grandest game of things, it's still cyclical. right, what makes us believe that it can be cyclical. There are, and I will undercut my own argument with two things. One is people and the other bit is the processes that's in within the system. So and since I have spent half of my career within these companies and a lot of my friends are in those companies, where I would tend to agree with Sita in is the factor on processes. The people in these companies are still wickedly smart. Right. There's no denying that example is CEO, a unit in this time, Unilever in fact is has this free has this is known as the CEO factory. Right. There are a lot of people who have left Unilever and build their own company. So the people part is not the issue. Processes are not that. Sorry, we're talking about the cyclical part. Can you explain the cyclical part because if I just take a slightly longer lens, you say that there is a cyclical part which is, you know, there are like large FMCG companies have periods where they kind of like go down and they come up. What is this? Is it like two years, three years, five years, ten years? What is it in your experience? What are the last two, three cycles that played out? So again, there is no science to this. So I'm not going to be able to give you an exact. No, I'm just asking for just asking what happened in the past. That's all correct. It's usually a function on the economic growth. And the internal thought process. Now, if the internal thought process is actually running ahead of this economic growth, then yes, you will get a point where within two or three years, the company bounces back. Unfortunately for Unilever, a lot of both, they got the worst of both worlds for some time over the last decade. For a long time, Unilever globally had this entire mandate of we are going to have make or force every brand to have a purpose, which is where I'm going to be a bit harsh on my own profession and say, not every brand needs to have this purpose of we will save the world. And love, beauty and planet, for instance, came from that thought process. And they did it for all the new launches that they tried to. The good thing they did was they didn't touch the surf excels of the world or the broke bonds and the lip tins of the world. All those brands which were going well, they didn't damage it in any way. And even eventually the Unilever CEO himself admitted that perhaps, you know, the extra focus on purpose was not something that was needed. And that coincided with the world economy slowing down as well. So in Europe, bracket, a 4% growth was seen as a great thing. Whereas in India, of course, it was not that number was not that great because India was seen as this bastion of fast growth and fast pace growth. I would argue for Europe, 4% growth for anything is great. Okay, but it's like there. Right. Now, but tell me about this purpose. What does purpose mean when you say that they, they say what you're saying is Hual woke up and then said, oh my god, every brand is a purpose. Sure, they didn't touch the legacy brands. But suppose you're creating a new brand and you say, wow, this brand should have a purpose. What do they do differently with it? A cosmetic brand that says we are here to save the planet. It's a great example of trying to achieve a purpose where there is none. Why should I care? They shouldn't have bought Ben and Jerry's for it. It's turned out to be two counterculture for them, which is the, which is the, which is the, which is the, no, it's a good point because Ben and Jerry's was built by Rebels in the truest sense of the term. I mean, there was a point when you go to their website, the landing page was actually a manifesto for activists on how to behave at protest. So that they could convey their message without getting into riots, a and b, what to do if the police arrested you, right? Who to contact and how to make sure that they will come back and somebody will be there to bail them out. That is not Unilever's culture. That is, that has nothing to do with what Unilever was. And half of the problem that came up when they acquired Ben and Jerry's was Unilever, the PR team and the lawyers tried to, you know, sandpaper away the rough edges of Ben and Jerry's and get them to act normally, which the founders obviously did not agree with. And I understand this process comes from basically creating brand managers. That was the term that's used to use for everybody who gets into Unilever or PNG and gets trained, right? You're, you're trained to manage a brand. You're trained to manage a PNL. You're not really trained to create a brand. Those are very different mindsets. Yes, I'm just trying two things that would just you talked about like, you know, brands and how Unilever, you know, has or supports a certain kind of brands, right? And we should get talked about the whole truth, right? So if hypothetical question would, I mean, obviously, H. We're has the money to buy the whole truth, right? But if it bought the whole truth, would the whole truth continue being the brand it is today? Like this brand that often talks about transparency, they say, or wrong, material prices have gone up, right? Which is why, you know, we're not, we're not going to produce these bars for a while, right? All of those things, right? I'm sure with HUL supply chain, they don't have to worry about a lot of things. But would it be able to have this distinct identity, which is around clean labeling, transparency, right? Would it be possible? Hey, if opening I can buy TBPN, I mean, they can't buy, but I'm seeing what the whole truth continue to be what it is, which is what happened with Ben and Jerry's, right? Yeah, this is this is what Chantanu Deshpande mentioned when he wrote after he wrote a controversial post after minimalist was bought. He said, he's the founder and CEO of Bombay Shaving Company and has strong opinions about the brand to the investor, right? Correct. Yes. So that's also an interesting story. I'll come to that, but not to lose this train of thought. Chantanu's point was within three to five years, the minimalist will cease to exist the way it used to exist because it will have to conform to universe standards. And did that happen? It's not been five years. I'm not sure. So, yeah, the jury's out on that. Oh, the joy of making predictions that are a little more loud. Here's the thing, I tend to agree with both Sita and Chantanu on that front because I know exactly how a lot of creative thinking can get stifled within the largest scheme of things when you're trying to, when you're forced to order a follow a certain SOP. But, but having said that, there's also been this understanding within the PNG's direct kids, the universe, the Derbers and the ITC's of the world over the last four, five years that the way things where are not going to help with the way things are going to be. What I mean by that is back when I was in the record headquarters, there was this literal phrase that was being thrown around asking where is my dollar Shaft Club. There was an entire attempt to rebuild the glory of dollar Shaft Club within a e-commerce structure within the record at the global level and talking about the global headquarters, which means obviously the actual decision makers were sitting there. There was no death of institutional energy to go for it. However, it didn't turn out well for them and they had to then go and invest in a bomb-isshaving company. And that's how that relationship came about. For our list of, let me just give some, sorry, let me just give some context on dollar shift. So this is just how I understand it. I mean, like, Sandipyan Sita can add more. So dollar shift club is this. So this is when I think a unit liver, of course, has does the unit liver have Gillette? It has Gillette. No, PNG has no, that's PNG. That's PNG. Okay. PNG has Gillette. And so basically if you look at, say, shaving brands as a whole, they're extremely high margin. They are like one or two brands. Gillette is of course at the top. And so what ends up happening is dollar shift club launches this subscription product where I think for $1 every week you would get like blades. I mean, you would get one this thing and you just keep getting it for life. So they saw the handles the blades of cosmol. The blades of cosmol. The handles would come, right? So they were like, oh my god, you can do this. I didn't realize you could do this until it comes to a point where you deliver has to buy them for a billion dollars. If I'm not wrong. And it buys them for a billion dollars. And of course, that actually was seen as a validation for the subscription economy. And I'm not just saying that because we are here at the Ken, but that was a validation back then saying that, oh my god, subscription economy is so great. Here is this big behemoth that tried to like, you know, disrupt it, couldn't disrupt it. God disrupted and just said, okay, fine. Consider defeat and had to like acquire it. Right. But we are talking about the reasons why that one player, but I have this larger point about universe. Best. No, but it ended up selling the brand. It ended up selling the brand also. Correct. It ended up selling the brand. And I don't think it sold it for much. What are you doing? I think they lost money. They lost money, right? Exactly. So now you're basically seeing, I mean, through multiple angles, we have come to the same point that buying brands for whatever reason from a universe standpoint has not going to work out really well. Has there been any successful acquisitions that they've made? Non-organic brands that they've bought India or otherwise. I don't think so. I can't think of any. Not that I'm just not just obvious answers. Right. No, no. So it means that whatever you have to do, you have to do it organically. Right. So see, my reason why it's your best days are behind it actually comes down to exactly what Sandeep said earlier, which is about cyclicity. I feel like look, we have had this podcast earlier about I think it was with the healthify CEO to sharp, right? And it was an episode and some And all you have to do is talk about, say, GLPs. Basically, it's a company where you have GLPs hitting it on one side, AI hitting it on the other. How is this company going to figure out the future? And he said something interesting. He said that, look, maybe it's going to be really easy for, you know, people using AI to spin up a health file like app. Maybe GLPs is going to make it very easy for people to lose weight and get fitness. But the one thing that nobody knows is resilience. And the one thing that we know better than anybody else is the value of just staying here. Because different forms of disruptions will come and go. But because you have been here for so long, we have that muscle of resilience and staying over here. That will keep us going no matter what keeps coming. And we will keep reinventing ourselves to get there. For me, if you ask me from an HUL standpoint, I feel it is just that. Yes, all of these D2C brands will come. They will come. They will do something really awesome. They will open an outlet here in Indra Nagar in 100 feet road. They will scale up to 200, 300 crores. Sita will write a trade tricks edition saying that, well, they have plateaued out. This is what happened to them. And there'll be great editions, which I'll really enjoy reading. But I think what will end up happening is, yes, some of them will premiumize, get better, et cetera, et cetera. But I feel like what's going to happen is over time, they will plateau out. Then as, you know, economy shifts, suddenly, there'll be the slight bit of a lift from below. Then your sales of your surf excels and all of these other brands that we talked about, life, boy, et cetera. You're going to start seeing them being advertised in IPL. You're going to start seeing a new class of people figuring out that, you know what? Who cares about these really expensive brands? They don't really matter. This one, in my words, my favorite uncle is going to be quote unquote cheap and best. That's going to happen. That's going to emerge. So that's going to be there. This leads into what I had mentioned at the beginning of the show. The reason why I think this is all going to work out and what we're seeing is a blip. The cyclical part, yes, PGA, I agree with you. For me, right? There are three phases in the growth stages of a brand. There is a 0 to 1 phase where you have to grow and nurture it. Just like you would a kid, we are going to overspend on education, which is very, very close to my heart right now. You are not going to see ROI. You're going to burn money. You're going to have to go begging to retailers to tell them a new trade story, which in nature also, Marikoso, ITC's case is going to be an easier sell than for a new startup. But that 0 to 1 growth phase, growth pain is there. Then there is a phase where it's 1 to 100, where you have to set systems and processes in place. You have to make sure that you are getting the brand ready to grow and go out. That's your college phase, probably, where you have to tease the brand how to stand on it. And then there is the scale of phase, where the brand is going to grow really fast and go national across India, even global perhaps. And Uni Lever is one of the few companies in the world who have seen that scale of phase thousands of times across multiple economies across multiple countries under different political and economic and geopolitical scenarios. There's nobody who knows that playbook better than them. Right now, the problem is the 0 to 1 phase, they are able to launch brands because there are intelligent people. They fail at the systems and processes plays. That's the value of death for them. That is where a lot of these new brands get compressed. Even if they are buying it from outside or trying to build it inside, that's the phase which Shantanu was also probably referring to, which is where Kharit Tuliya, but then will you be able to hold through whatever magic built that brand? See, House of Brands is also something like Mensa or a lot of these companies try to-- Sorry, wait. It used to be Mensa. They've changed their name now. Oh, so is it now? See that, do you remember? Did you write up a V-road about it? Somebody called brand. Brand.me. Brand.me. And I'm very fashionably the A is missing. So it's BRND.me if I'm not wrong. Because walls are optional these days. Sorry, go on. So that's the phase where they were trying to build a House of Brands separately. But nobody has really cracked it. Unilever, PNGs of the world have cracked House of Brands as a concept over centuries, actually, close to a century plus now. So they know that place, where their failing is in the value of death. And here's the kicker. If at least one brand makes it through the value of death, then Unilever knows what to do with it. Then that will be much bigger than any of the startups D2C brands today. And to PGG's point, out of 100 brands, D2C brands that probably launched today, only 2% get to this place where they are even considered for acquisition by the bigger companies. And that is what the VCs are also looking at. The rest are all lying off. Why? So it's not like the D2C industry as a whole has cracked a new organic brand growth idea that the Unilever folks don't know. It's just-- we are playing dice here to a large extent, which is the luck factor. The ones that are lucky enough become darlings of the world, media get saturated with news of that. The survivorship bias and a whole host of other things. So everyone sort of thinks of those brands as the great things to do. But even through acquisition phase, it may be if that is today's world, where acquisition is the way to acquire a brand in the first place, Unilever just needs one of them to come through the value of death. After that, they know what to do with it. So that's why I'm not worried about Unilever. No, I think-- I agree with all that you're saying, what VGK said, all these brands will bounce back, obviously. These are the biggest and the best in their categories. But you will reach a certain point where it's not possible to keep growing the volumes in these categories by 6%, 7%, every quarter. So you need something to offset that. The one good example that I can think of when it comes to blind spots, for instance, Lenskart and Titan. This should have been Titan's market. And now Lenskart is what, like a 6500 crore top line company. And it's profitable, operating margins of 15%. So because Titan has been looking for a plan B, I mean, if jewelry has a downturn, what do you have? Watches are really tiny. They try to out-sorry, that didn't work out right. They need something else. And I where could have been that. So now Titan is for all intents and purposes of jewelry company. But do they want to be a jewelry company? No, they want to be a retail company. But you need something else, right? Even for HUL, is it going to be supplements? Is it going to be some protein foods? Whatever it is, right? So they need something like that. And that's where I think the problem of blind spots could really sort of drag them down. Suppose I said they had to pick something. Imagine you're sitting inside a jewelry. Let's say you're aware of your blind spots. And you're saying, I know this blind spot exists. I have to bet on something, even though I can't see it. I know it's a very paradoxical question. I'm saying, you know your blind spots. So you're saying, OK, where would you bet on? I mean, we've already spoken about whole truth. So let's keep that on the side. Is there, what would it do? What could it potentially acquire? What is that one company, something to your point, that would make it to that value of death? Which is the best bet that it can make. I mean, you don't have to name a specific company, although it'd be nice if you could. But it's like, what kind of a category? What kind? How do they think about it? I think that's the way I'm trying to think about this question. Just a slight aside, before I think of that, Titan did grow a brand organically, which is right now, I think on track to get 1000 grows revenue by 27. Fast track. They grew it in house. And they grew it really well, interestingly well. Which was a surprise, to be honest, something like that, especially if you look at the kind of communication that Fast track has done. So something like that, A.G. Rebellious youth focused brand to come out of Tata's tables was a great surprise back then. But they have done a decent and very, very good job of growing that brand. So it's not like they haven't. And you can't take credit away from Pugebunsel for at least in the initial part of things of growing a brand like Lenskut. So there's always room for growth across the board. Now coming back to this question of what to acquire, that is tricky. I know you asked me to keep the whole truth aside, but I still think Shashank Mehta might be called by his friends back into the fold. He has been on record. He has been on record saying that he couldn't have built something like the whole truth while inside Unilever. Because he is a creator. I think his analogy was Shiva Brahma Vishnu in everyone. There is a Shiva and a Brahma in Vishnu in everyone. So there's a creator, a protector, and a destroyer. He is more of the creator mentality, which needs the space to grow on his own. But I'm sure at some point, some friends from Unilever might pick up the phone to call him. I mean, OK, I get. So what are you really saying is the way to-- but why this particular company? Because of the protein thing, because you think protein is now going to be the future. So you might as well do this. See, that is the key. No, I think-- so that's where I think Unilever might think more in terms of low time preference than high time preference. Because if that is high time-- What does that mean? So high time preference is when you-- focus on the immediate gratification much more than long-term solutions, right? From a consumer standpoint. From your personal standpoint. So from a unit standpoint. From a unit standpoint. From unit standpoint. Oh, okay, fine. Right. So because then if that was the case, then they should have probably gone after turmeric when it was a big thing. Macha when it came, Vatham tea would have been a great source of great acquisition at one point. So I don't think they think in that way. And here it is speculation. It's not like I know what they are trying to do. But what they would want to look at is say help us a space overall space and a combination of as Sita mentioned supplementation plus GLP to some extent and then the kind of you know, supplemental food space is what they would try to go after which means they might look at two to three brands and pick and choose all out of them. So in personal brand space, minimalist I think is the thin end of the wedge. So they are going to go after a few more brands in that space because they always think in portfolio terms, not in single brand terms. So if they bought the minimalist, then it stands to reason that they might go for a few more brands to complete that bouquet. So a minimalist is a great brand, which is completely built on ordinary. We just need to look at if look for a few more brands in the personal care space, which have been built on successful and proven models outside of India and have grown in India. Collect 10 of them. The safe bit would be you never would try to acquire three because they they have a personal brand before they split the healthcare and the personal brand, a personal beauty business aside. They had three brands, I think one of which was love beauty planet. They were also there was also you be squad if I'm not wrong and one more. I could be wrong in that, but there were three brands. They did not do so well combined. ARR was about 100 crores, whereas minimalist by itself in pretty much the same time period grew to 500 crores. So then it was very clear for them, okay fine. It let's grow and let's bring minimalist into the fold. Can we find a few more brands around that? So I think that is how they are going to think portfolio wise not individual brand wise. No I wouldn't even you know I wouldn't even talk about health or I would just talk about foods in general. Right. Yes that's exactly what I was thinking. I was talking about I was thinking about foods, but what are your reasoning for foods? Because I mean I mean it's they do I mean it's personal care home care and food these are the three categories right but the least impressive of the three has to be foods right. Probably obviously they decided to demerge the ice cream business right and so they did that in India's open and they really really struggle. Okay. I think quality walls and Amul launched around the same time. Correct. Correct. Oh by the way speaking of Amul, okay. Did you see today today is a very special day for Amul because Amul I think has one trillion rupees in sales right. Yeah sales. Yeah sales and so. Yeah. We are talking about like quote unquote legacy FMCG brands okay and it's growing at 10% year on year which is nothing to be seen as a whole ice cream business. I think it was in the 90s right. Agreed. I've just since you mentioned Amul I just remembered I saw this today and I was like okay we are talking about actual but here is another company that I'm sure their investors are looking at we know that is a different company. No I'm saying you know I was on history. Yeah I don't care about clean labeling you know healthy food and all of that it can be junk also right. But there is a massive market. So this is a reason why I T.C. paid almost 2500 crore for this spice brand sunrise right. And Darber bought Batsha right and there is this Norwegian private equity firm which owns MTR. It's called what is it called forget the name of the firm it owns MTR and it bought a couple of spice brands in the south. It's a very very lucrative segment okay. So there are snacks all of that right. So why just leave that to the other players. You have you have beverages but that's about it right. So why not I think that's where the biggest opportunity is where you have companies like you know I.T.C. Tata consumer which has become very very aggressive in recent years right. So I think if they turn to that segment and sort of you know put like a few thousand crores there I think that could be that could really come to their rescue. For me the reasoning why I would say food is simply because I think we are at this point like look there are parts in I think we have also done a previous episode with like you know I think the founders of truth and a couple of others about I mean we see that dismissively said I don't care about clean labeling but I think all I will say is that we I feel as a nation we are at this point in India where food habits and consumer habits seem like there seem to be at this inflection point where it's going to change and I think clean labeling is only one part of that story there are multiple parts to that story. So you could say clean labeling you could say things like say sugar you could you are also seen that with protein just open blanket or Insta Mart or Zepto as an example I know that. Like for instance a Tata through Sampan and ITC through Asherwar right they go into staples okay correct there right nothing right Sampan Dal okay Asherwar masala whatever it is right right so the people thought could not be branded yeah exactly simple and this and this goes sort of unbranded to brand it right and the last time that that that truly happened was with Asherwar the Nata which was twenty years ago right completely broke open that market right and now I think you're going to see that with staples thanks to these two players I mean they're not in rice but all kinds of Dal you know you know and spices right and you know ten twenty years down the line these are going to be huge businesses for these companies and now when I don't know like for instance you read something about like you know adulteration in Dal right now there is there is Tata there is an unpolished Dal and the Sampan right and it's only saved fifteen percent price here then the unbranded alternative would you not buy that right now or my kitchen is filled with I mean the spices and the staples are either Sampan or until last year I was buying from my regular he I would just tell him moon Dal what a tool that he'll just send whatever right now I'm very very particular I know that I'm not paying a lot more it's not like you know you're paying like you know twice the price for like cold pressed oil it's not that right which is what I'm saying these are like mass market categories where you don't have to do much and and and people would obviously trust H.U.L. way more than most brands right that is exactly my point which is that because this opportunity exists in the in the food side is completely driven by trust I feel like with things like personal care beauty etc it comes down to a little bit of narrative story aspiration all of the which I don't know if H.U.L. can definitely definitely definitely sell maybe they'll sell some maybe some they will miss etc but this food thing is completely driven by trust and the minute you say trust and you put that uniliver label on it I don't know I just feel like it it just seems like it gives them a natural edge I have a okay now that we went to that space for some reason food hasn't been something that uniliver has really made a very strong play in in a in a very very long time and even yeah I would argue that is partly why they are where they are today I know yes I agree but I think Priya Nair was also focused on sharper acquisitions and more premium acquisitions to some extent I could be wrong in eventually they may be forced to do that but okay here are a couple of things right one there is another brand in the premium beauty space which was built by someone who was who came out of the uniliver's tables and has managed to do a pretty good job of building a brand in and that's plum right so just like it's not as flashy as the whole truth probably probably but plum is also doing well and it's a brand that is sorry what do they make is it wellness no it's a cosmetic product cosmetic product vegan vegan cosmetic products and full disclosure I have consulted for I've been part of a team that consulted for plum some time back but that brand is in the right space for uniliver to think about and they might actually do that right I mean and if you're going to go into the food space it will be interesting because I narrative wise I don't think uniliver will have a problem building a narrative but my sense is that they might try to take whatever they have in house already like say nor and hallix and try and expand it rather than trying to go after new brand acquisitions at this day so nor might go into big other categories hallix might go into functional adult spaces etc now if if they were going to go into acquisition routing food space one interesting choice could be ID interesting go on because it is in a space where it has built the trust already you didn't it didn't have to build the trust like the foot farmer did right it didn't take on the world and try to fight with everyone and become this rebel I'm Glutin. rebel in this space. But it quietly went about its business of building a brand. It is called massive reach and distribution of today. It is interestingly enough for a brand that's been in the market for this long. There are no huge negatives against it. Like nobody really dislikes or hates ID. Yes. I have one. I'm a very regular user of ID products. But I don't think any brand ups prices as frequently as ID does. Every time I get a mic, he's also like, I have no idea. I go ask him. I keep asking the ID guy the same thing because customers ask me. So when I started buying it was 60 bucks, now it's 120 bucks. Everything's expired. And I asked someone in retail this and they said that's because the amount of wastage that they have to deal with. And this is where ID could use the supply chain of a giant like a unit. And that very point ties into what I was talking about a bit earlier about the fact that they're looking at premiumization. I don't think they're given upon premiumization. So a product that's actually priced higher than the market average in that category would be very interesting to you, Nilever. Because for whatever reason, space stage or something else, ID has shown that it has the pricing power in the category it is playing in, which is exactly the same thing that Sita said about what Asher was with. If you really think about it, batter was exactly that. No, you would basically either your parent would make it at home or you'd just go and say, give me batter, you'd get batter, which is like, who tried to brand idly batter? And it's a complementary skill. Unilever does not have coal chain logistics if I'm not wrong. But ID has cracked it. Yes, there is wastage, but that's not because they don't know what to do with it. It's just that they don't have the way with all to do it, which Unilever can bring to the table. Once they have brought in then coal chain logistics is something Unilever would be able to add to its distribution. Yeah. And we briefly touched upon ITC, but as a very personal anecdote, I remember because I was in college when ITC just started doing, you know, foods and ITC would come as recruiters to engineering college to hire like some people to work. And for the most part, they would hire one or two people and everybody works in cigarettes. You end up in like this leaf plant in like Chirala or you end up in the Stobacco plant in like Sarenpur, right? All back of the beyond places. Until they came and they said, we are now hiring someone to go to Haridwar. And everyone was a little surprised because they're like, why are you going to Haridwar of all places? And they didn't really say why? They were just saying, no, no, no, it's a new plant. We're not telling you this thing, etc. It's a little bit, they're being very kigi about it. And later you found out that the reason they were talking about Haridwar is because that is where they started bingo. And bingo chips was coming in Haridwar and they basically made it very hushish about it because they at that time, of course, lays was the number one player. So you wanted to make sure that they don't get to know what exactly you're doing. And while we were talking, I was just looking at the ITC's food part of it. Now, of course, everyone knows that ITC had to do foods because they were really over-reliant on tobacco and cigarette business, which one could argue they still are today. But so they fought for nearly like 20 years, probably longer, to just to make a dent in food so that they de-risk themselves from tobacco. And today, even though ITC does not break out food separately in its filings, I mean, its food brands, which I mean some of it we've already spoken about, Asher Vaj, Sunfee, JP, bingo, maybe Sunrise also is a part of this. They basically contribute to give or take 18,000 to 19,000 crores are roughly 20 to 22 percent of ITC's revenue is the estimate. Now, we may be off-pipe here there. But that being said, that's only revenue. I'm not going down to profits because that'll obviously be cigarettes will be a part of it. Yeah, so we're not going there. But to their credit, they got this much in, they managed to de-risk themselves this much in the revenue side and was almost completely a food for strategy. Remember, they tried other things like Wales lifestyle, they tried to get into all of this apparel and I don't know how I don't think that worked out really well for them. And they've been trying personal care for a while, like the Sableau acquisition. But it is going to be a food first company. And H1 may continue to be a home and personal care first company, but it doesn't hurt to have a much larger food business. For instance, ITC going back to their Masala's and all of that. I swear by their Samba Masala, and my parents did so much, they made me buy them three packets of that. Which they've packed. No, this is Sampun. Ashirwa Samba Masala. They were blown away. And this is a company which is in headquartered in Calcutta, bought a spice company which is unheard of outside Eastern India, and ended up making a fantastic Samba Masala. And everyone knows that if you can impress Tamil moms, Tamil Hussein, like parents like mine and Sita's on Samba Masala. You're one. But they bought Yoga Bar as well. They bought 24-month-old organic, which is the Kappacino crowd stuff. People who drink only Kappacino's outside of Indira Nagar, office spaces. They are the ones who go for these kind of products. So, premiumization. We should spend maybe 10 minutes just talking about ITC, the company in terms of, because I think we touched upon very briefly, which is that, okay, these are all brands on the outside, etc. But tell us something, what is it about ITC's structure, internal structure that prevents, like you touched upon some of these, that brand managers are tasked with managing brand, they're not necessarily tasked with like creating brands. Okay, I understand that. But surely these brand managers are capable of, if you acquire, let's say, hypothetically, I, HUL goes and acquire say, three, four brands. Whether they are in the food space, whether they are around the minimalist side, personal care, whatever it is, like three, four, let's say somebody comes and says, here, take these three, four brands, I've got it for you. These are the fast growing Rituse brands. And let's assume that I'm giving it to really responsible brand managers like you at HUL. What would it, what would happen? Like, do you think there's something in the organization structurally that stands in their way of like scaling this? Is there something in the organization side of it that, so they should change, could change. Right now, I can't talk to ITC, so Unilever's internal structure and the way they operate because obviously I'm not in those companies. Yeah, but I'm saying that, I'm just saying that because you're more familiar with how the FMCG broad structure works, I'm not talking about now currently 2020, that's not necessarily what I'm getting to. I'm just saying, structurally, what is there in those companies that sort of like help or prevent such things from happening? So a typical day in the life of a brand manager, what would revolve around reactive responses and internal narrative management. Reactive responses is what happens when your sales team calls up and tells, you know, in Nandadeh and Parvani and Nakhpur and Nasik, distributors have started giving a competing soap brand at 23% discount versus our existing 15% discount. We need to update to 23% in order to remain competitive. Now, the question is long and short term brand building. In long term brand building would say, look, you don't jump the gun just because somebody updated this month. What you're going to do is communicate more values. You're going to add more value that you can give the consumer. There's a whole host of things that you can do. The problem is none of those will bear fruits in the next monthly result. So in MBR monthly business reviews that happen to us the third week of the fourth week of the month, when you sit in front of the MD and say, look, I have lost three bips of market share and the major reason that's being called out by the sales team is this. Then the question would be then why didn't you run a short term discounting on that SKU in that market. Why didn't you do it? Now that is antithetical to the way a brand should be built. You look at markets and the kind of starboards of this industry who talk about building bands. They're not going to agree with that kind of approach, but that is the reality. And again, when you're sitting in this monthly business review, it's a one day review, maybe two hours where you get 15 minutes or 20 minutes slot unless you're in deep waters and there's a huge problem with the brand in which case everyone's focus will be on you for an hour, which you do not want. It takes one week at least to prepare for that meeting. So that why? Because your career depends on it. If you give a good show at say six consecutive months, then you are in line for a promotion. But if you're if that is the case and it's a month-on-month situation, then you're going to spend that one week preparing for a preparing a deck which you know the MD will be pleased by and hedging your bets and going and looking at all the previous numbers, say one way to deal with it is look five years ago when this same brand increased their discount percentages by so much and we lost market share we bounced back in two months time. Therefore, I expect our market share to bounce back in two months this time as well. But in order to do that, that poor brand manager has spent a week and a half coming through previous numbers where instead of thinking about how to grow the brand over the next six months to a year. This is a structural problem. Then in a lot of cases, at least this is part of the reason why I left FMCG marketing. It was things came to such a pass that distributors and retailers started dictating how a brand should grow because they held the keys to on shelf placement and visibility. So sales becomes a tail that wags the brand's dog. Exactly. Now that entire process has shifted from retailers to quick commerce. Now it's all about, will Zepto ever give me placements? What can I do to please the Zepto God? I'm sorry I'm using Zepto as a stand-in here. It's not like they are bad people. It's just that the way the organization works is. It's absolutely correct. In fact, the Ken did a story on how, I mean, it was actually a story from some time back about how the most sought after people are the category managers at quick commerce companies because and there was this anecdotal story which was about how literally they get caught and accosted in parking lots. In parking lots? In bars. In bars. In bars. Yeah. In the radica bars because what happens is these brands essentially from the actual maybe not the actuals at pages but I was doing D2C brands more than the big ones. They desperately want to get listed on quick commerce. Correct. And they try their best. They call email, call call do everything. Nothing else because these categories are dealing with so many people writing and it's quick commerce. You can only have a certain number of brands listed on on cataloged and you're inventing your docs. So they literally do everything they can to they stock them. They go after them. They find them in parking lots. By the way, bars just say, Hey, can I list my product or your in this? So you're right. And there's another interesting story. A year ago, I actually contacted someone very, very high up in the in Unilever, in the Stan Unilever digital space. I know the person I'm not going to take the names. And I proposed a very simple thing. And it's something that only Unilever can do in my opinion. Build out a e-commerce platform. Pan India e-commerce platform that stocks not just Unilever products but PNG, Dabur, ITC, every single thing. Why are you why did you allow a brand like Zepto to even exist in the first place? Couldn't you have built it on your own? I don't know. I'm very skeptical. Yeah. Also, the actual person may also be very skeptical for their own reason. No, the simple reason why it wouldn't work out is no company. PNG, Unilever, or any of these big companies will ever allow a competitor, competitor product to be sold on their platform. It's an organizational mindset block that will never happen. But had they done it. Also called the blind spot. No, it's not a blind spot. It's not that they don't see it. It's just that they will have a hard time selling it to their, selling it to the Dutch, sorry, it's in the UK now, team and trying to convince them to do this. Right. But the point I was trying to make is, therefore, when the, as you rightly said, the tail waxed the dog, it becomes less about building a brand for in the two decades it takes for an organic brand to actually become sustainable and therefore and grow and start to take off some of the pressure from surf excel, which is now holding up the entire Unilever portfolio on its broad shoulders. It becomes impossible. You are looking at it from a very, very short term perspective, you know, high temporal preference. And therefore, you are not going to be in a space to build a long-lasting brand. So, if they can, I don't, I know, I don't see them moving out of this mentality. No, in no places, Unilever going to say, look, I'm not going to list on sector, right. They have to. But can they provide enough space for an acquisition like same minimalist or if tomorrow they bring in ID into the fold? Can they provide a arm's length distance for that brand to grow the exact same way as they had been doing before with one minor change, which is wherever they had been facing problems with their wastage and supply chain economics, you need to work and step in and solve the problem for them, right. Then they just need that one brand to go through the value of death and get to the scaling point after which Unilever knows exactly what to do with it. So, short answer to the long question is, I don't think Unilever's bad days are behind me. Let's agree to disagree. Thank you for listening to this episode of 2x2. This episode was produced by Udhantika Kashyap and mixed by a resident sound engineer Rajiv CN. If you feel there's something we've missed out in this discussion or feel some numbers or facts thrown at up, you can write to us at [email protected]. And if you're listening to this episode on Apple Podcasts, please show us some love by leaving us a rating. Lastly, if you love the episode, share it with people, your friends, family or colleagues who might find it insightful as well. We'll be back next week with an exciting discussion and at 2x2 for you to think about.