In yet another move to retain focus on its core business of consumer products, Hindustan Unilever announced a move to license the Lakme and Ayush brands to a subsidiary Lakme Lever Private Limited. The press release does not say it explicitly but clearly HUL seems to think that therapy centres and beauty salons are not its forte.
It says these businesses offer potential –the growing demand for beauty and wellness services- but contribute to insignificant portion of profits and turnover. As Marico’s Kaya business shows, growth potential exists but scaling up is a challenge and takes a toll on margins. HUL’s release also talks about success in this business arising from single-minded focus, dedicated teams and a different business model.
The business will now be looked after the subsdiary and it will evaluate options to develop a unique business model for this business. Both these centres are largely run on a franchised business model. But Marico believed that if its skin clinics had to make a difference, the clinics and employees should both belong to it. In the past, hiving off to a subsidiary has eventually meant a closure or sale of the business, after HUL evaluates all options and decides that this is the best solution for the business. Wonder if the wellness and beauty businesses too will suffer the same fate?