HLL Vs ITC

Its the tragic case of reversal of fortunes for two FMCG companies. A decade or even a few years back, HLL was king and anything that came out of the hallowed stables of HLL was considered sacrosanct - be it products, business vision or even the financials. And ITC was considered the big bad guy of the corporate sector - both ethically & financially - as it was dependent on cigarettes and would succumb to the govt regulations.

But things just dont go the way they are supposed to. A case of what goes up has to come down and vice versa. Its not just the latest quarterly results of the two companies that has prompted this blog, but the overall reversal of fortunes.

HLL BV (before Vindi Banga) and probably during the heydays of Keki Dadiseth was the golden egg with a bouquet of brands that gave nightmares to other FMCG players. The monolith was unshakeable and the BSE swore by HLL.

But what went wrong is the million dollar question?

Its the oft repeated statement of small players taking on the Anglo-Dutch giant. But then how did they allow this guerilla warfare by Cavin Kares and Jyothy Laboratories of the world.
Reason : Sheer lack of vision coupled with a misplaced confidence (or should I say arrogance) on its dominance in brand equity, finance and distribution.

But Banga seems to have done everything to revitalise the company :
- restructuting into two just divisions - Personal products and Food
- pruning the big dhobi list of brands and product extensions to just the 30 power brands
- not to forget the new ventures which seem to be non starters (Ayur seems to be still in the low growth stage and HLL Network which has been bordered on the lines of Amway seems to be a bad idea. Not just that, even e-tailing projects are yet to take off.)

My take (probably not that of an expert but an outsider viewpoint) : The company is spreading itself wide and thin in too many activities when its big bang objective should be to focus on revitalising the exisiting power brands and focusing on getting into the uncharted rural markets to expand its distribution network. Not to forget , launch a focused attack to regain lost marketshare from the smaller regional brands (which it lost out mainly on the price front).

On the other hand, the erstwhile tobacco company was mired in problems with BAT on one hand and the increased pressure from the govt on smoking regulation on the other. It was a company which was headed for more problems, or that was what was portrayed by the market pundits.

Today the company is growing from strength to strength. It is not just a tobacco company. Its a garment retailer, hotelier, food and agri products company, agarbathi and matchbox manufacturer,..it's like the classic case of Tata Steel "We also make cigarettes".

But it's major initiative of e-choupal which seeks to wire the farmers has taken off in a big way with awards coming abegging. But how far will the initiative be really successful in the overall gambit will be seen in the years to come ?

The only difference between HLL and ITC diversification moves is that while HLL is doing it under pressure for survival, ITC is flush with funds and is finding way to invest this money and grow.

But its still not write-off time for HLL...the company will bounce back despite people leaving the company in hordes (I had a boss in my earlier company from HLL..he was a perfect example of a bad HLL guy...guess he is one of my reasons to hate HLL)...
But dont let that make you not buy the HLL shares. Its a vulture capitalist's delight with its attractive pricing.

My bets are always on this gem which was once the cherished dream job for all MBAs (and i lost out in the second stage of selection in campus).

Well the future fortunes of this two behemoths will definitely be tracked with keenness as these two FMCG companies belong to the sacred precincts of the handful MNC FMCG companies which have been successful in India