Hindustan Unilever steps up capex to 3 per cent of turnover to accelerate growth

MUMBAI: Hindustan Unilever is opening its wallet a little wider as it looks to chase growth beyond its traditional consumer categories.

Hindustan Unilever plans to increase productive capital expenditure to 3 per cent of turnover from around 2 per cent, as the FMCG major steps up investment in existing businesses and explores newer growth opportunities.

The higher capex will form part of a broader capital allocation framework covering business investment, portfolio reshaping and shareholder payouts, while the company continues to target 100 per cent cash conversion.

HUL has already been reshaping its portfolio through a series of transactions, including the sale of Pureit, the demerger of its ice cream business and the divestment of Nutritionalab.

The company is also keeping bolt-on acquisitions in play as a route into high-growth consumer categories. Its expansion strategy combines existing brand extensions, brands from parent company Unilever and acquisitions.

Potential categories include male grooming, masstige skincare, fragrances, vitamins and minerals, healthy snacking, protein, hydration, ready-to-drink products and functional deodorants.

HUL plans to assess these opportunities against three criteria: its right to win, the size of the profit pool and the potential for sustainable growth. The approach indicates that acquisitions are likely to be targeted towards categories where HUL can leverage its brands, distribution network and capabilities rather than simply pursue scale.

The increased investment comes as HUL seeks to drive volume-led growth through four key levers: increasing consumption, premiumisation, bringing more consumers into existing categories and entering new spaces.

The company is also directing more investment towards premium brands, which receive twice the investment, while more than 60 per cent of its media spending is now digital. HUL is simultaneously building specialised channels to reach consumers through more targeted routes.

Its recent acquisitions of OZiva and Minimalist are part of the same broader strategy of reshaping the portfolio and increasing exposure to faster-growing consumer segments.

With higher capex, selective acquisitions and a sharper focus on premiumisation, HUL is seeking to balance investment in its core businesses with expansion into categories that could provide the next leg of growth.