Unilever India highlights tea rebound and health food innovation to fight inflation challenges

HUL recently announced its financial results for the second quarter of fiscal 2022 and revealed healthy overall growth, including net profit of INR 22.9 billion (US$290 million), growth of 11% in year-on-year; as well as a 23.2% EBITDA margin – but much of the discussion focused on the inflationary challenges the company is currently facing.

According to HUL CEO and Managing Director Sanjiv Mehta, various key commodities that HUL uses to manufacture its products and packaging, including barley, palm oil and polyethylene, are all experiencing record inflation.

“Compared to 10-year median prices [crucial commodities such as barley and polyethylene have all inflated by more than 50% and the prices are at an historic high,”​ Mehta said during an investor and press event announcing HUL’s financial results.

“Palm oil [has] saw more than 100% inflation [and] has softened in recent days since its peak [but is still not at normal levels]and even tea which experienced extremely high inflation in 2021 and has [since] cooled from this peak is still at relatively high levels [of inflation].

“Another source of inflation [in India] has been the depreciation of the currency, with the dollar strengthening and USD-INR rates which were previously relatively stable around 74-75 now hovering around 80.”

HUL’s Chief Financial Officer and Executive Director of Finance and IT, Ritesh Tiwari, further pointed out that this inflation has had an impact on production costs, hinting at possible new pricing measures to ease this pressure. .

“Inflation has certainly worsened further in this quarter [and we are seeing] a 330 basis point year-over-year increase in our cost of goods sold,”said Tiwari.

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