Entrepreneurship lessons from COVID-19 times
Among the early first quarter results of some FMCG companies that have tested the waters during the pandemic, those of Hindustan Unilever (HUL) and Britannia Industries have interesting takeaways. While most companies reported huge losses and hardly any revenue during the April-June quarter, HUL reported a year-on-year 7.18 per cent rise in net profit at Rs 1,881 crore.
Despite the worst ever fall in consumer spending due to the COVID-19 outbreak, the company managed to declare a special interim dividend of Rs 9.50 a share for the current financial year. Similarly, Britannia Industries, selling biscuits and cakes, managed to more than double net profit to Rs 545 crore for the quarter, as compared to Rs 251 crore in the previous year’s quarter. Both companies surprised and beat analyst projections.
Hindustan Unilever had recently acquired the big-selling brand Horlicks. And the company conceded its revenue would have declined 7 per cent instead of showing an increase of 4 per cent had it not been for Horlicks. The strategy of focusing on its ‘essential’ mass brands, like the widely-used Lifebuoy soap, helped it manage a 6 per cent growth for 80 per cent of the business. It was the same story for Britannia. Best-selling MarieGold and Good Day biscuits saw a spike in demand as locked-down families and migrants struggled to sustain themselves during the period of heavy shortages in April and May.
The business lesson is there for those who want to learn: first, even as factories, depots, transport and vendors were in complete disarray, these companies stayed focused and worked their strategy around the sustained demand for mass consumption food and FMCG products that people seek out during shortages. Ironically, the millions of migrants who made their way back home from the cities, on foot and erratic transport services, walked on the sustenance of biscuits and breads manufactured by these firms.
Second, these companies understood that while the cities were in lockdown, the rural economy continued to be relatively active with robust consumer demand. In many segments, Britannia and HUL have shown better sales in rural markets. Pandemic or not, the spirit of entrepreneurship finds a way forward.