Shareholders of Hindustan Unilever(NSE: HINDUNILVR), one of the world’s largest FMCG companies, are once again in high spirits.
This time, the company’s ice cream business is the reason. It is expected that this ice cream business can take the company’s stock to a new height.
Due to this expectation, there was a lot of buying in it and after a long time, this stock became the top gainer of Nifty. It also touched its new 52-week high in intraday. So let’s know why HUL shareholders are looking so eager to eat ice cream
HUL is a brand that is deeply connected to our lives. But a large part of it is owned by an international giant Unilever. Due to this, sometimes HUL has to look towards Unilever for its small wishes and has to match its global strategies.
Recently, when Unilever decided to exit the tea business, a similar situation had arisen. However, later on, the company reaffirmed its decision not to sell its tea company to India or Indonesia.
This was a relief news for HUL investors. Because tea is a big market in India, its growth prospects in India are still very strong.
Now another similar turn has come in HUL’s ice cream business. In March, 2024. Unilever has announced that it will be separating its ice cream business across the globe.
After this announcement, HUL has also formed a committee of independent directors for this, which will evaluate the prospects of this business and make suggestions to the board.
Now you must be wondering why the ice cream business is so important. Anyway, the ice cream business accounts for only 3 percent of HUL’s total sales.
The reason behind this is that even though the ice cream business is not as big as HUL’s tea business right now, it has a lot of growth potential.
The ice cream market in India has been growing at a rate of 15 percent in recent years.
Rapid urbanization, entry into new markets, greater availability of electricity, and the entry of quick commerce companies have increased the demand for ice cream significantly.
Till a few years ago, no one would have thought that ice cream could be delivered to your home in just 10-15 minutes?
That too without any hassle. But today quick commerce companies like Blinkit and Zepto have made it a reality.
This is why HUL CEO and MD, Rohit Java said that quick commerce is one of the most important channels for their ice cream business.
In India, the number of people who go out of the house to eat ice cream is still around 93-95 percent. Whereas in other countries this figure is 70-80 percent.
This means that there is still a lot of potential for home delivery of ice cream in India, which can make its market even bigger.
Now talking about the competition in the ice cream market, it is very tough. Amul is at the number 1 position in this market and HUL is at the second position.
Along with this, many regional players and D2C brands have also dominated this market. HUL bought Aditya Milk’s ice cream business in 2016, which shows that the company is bullish about the growth of this segment.
Now it will be interesting to see what steps HUL takes to take this business forward. The committee formed by HUL is considering all the possibilities related to this business.
However, mainly 2 options are seen here. If Unilever separates its global ice cream business, then HUL’s ice cream business in India can also become a separate publicly listed company.
This will give HUL shareholders a chance to make a decision – they can continue investing or sell it if they want.
The second option is that HUL transfers its ice cream business to a new subsidiary and it will then be sold to a company of Unilever.
This will give HUL cash, which it can either invest in another business or distribute to shareholders in the form of a special dividend. The next question is, which one will HUL pick?
Investors’ hopes are pinned on the first option, in which they will get an opportunity to invest in a high-growth and high-potential business. This is why HUL’s shares have seen a surge.
Quick Fact
| Company name | Hindustan Unilever |
|---|---|
| Industry | FMCG |
| Key business | Ice cream, tea |
| Ice cream sales % | 3% of total sales |
| Market position | 2nd in the ice cream market |
| Key competitor | Amul |
| Ice cream market growth | 15% annual growth |
| Recent news | Unilever to separate global ice cream business |
| Potential decision | Separate HUL’s ice cream business or sell to Unilever |
| Possible outcomes | Public listing or transfer to Unilever |
| Future potential | High, due to home delivery growth |
| CEO statement | Quick commerce key to ice cream business |
| Acquisitions | Bought Aditya Milk ice cream in 2016 |
| Home delivery % | 5-7% (India), 20-30% (other countries) |
Disclaimer: The website and its content are for informational purposes only and should not be considered investment advice.
