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“Zindagi ke safar main guzar jaate hain jo makaam, wo phir nahi aate,” Kishore Kumar sang for the movie Aap Ki Kasam nearly four decades back, roughly meaning, the milestones we leave behind never come back. The song has since been an anthem for melancholic souls and jilted lovers alike.

But it could as well be the anthem for Hindustan Unilever Ltd (HUL), once the largest company by market capitalisation in India.

The company’s stock price has gone nowhere in the last 10 years. It touched an all time high of Rs302.04 on February 24, 2000 and has never been able to beat that. The reason, of course, is the continued moribund performance of the company.

For the quarter ended June 30, the company posted an 8.3% growth in revenues to Rs4,876.2 crore. But its net profit fell 1.84% to Rs533.2 crore. The operating profit too was flat at Rs741.5 crore.

One reason for the poor showing could be the price cuts the company had to effect in a bid to fend off competition and boost market share. It has been facing huge competition in its detergent business from a reinvigorated Procter & Gamble, leave alone others like like Nirma and newer players such as Ghadi detergent in the lower price segments. In a bid to counter competition, HUL had cut prices of Rin powder detergent and Surf Excel Blue in January by as much as 29%.

It is hard to say if the price cuts helped boost its market share, but the company’s revenues from the home and personal care division certainly increased during the quarter ended June. Home & personal care revenues grew 5.2% to Rs3,583.17 crore even as revenue from the food division grew 13.4% to Rs842.06 crore.

On the flipside, though, advertising expenditure increased by a whopping 34% to Rs751.2 crore.

What gives? HUL’s problems go back to it’s heydays in the late 1990s, when it was the darling of both the stock market as well as the masses who bought its products. The company, however, got caught in playing up to the stock market. As a fund manager pointed out to this writer recently, “the company deteriorated the quality of its products and made so much profits that it allowed competition to come in.”

HUL’s strategy was to constantly jack up margins. The management graduates who run the company probably forgot a basic lesson in economics. When a company makes ‘abnormal profits’, new competitors enter the arena and drive away margins. Smaller companies like the detergent maker Ghadi saw the kind of money HUL was making and started to offer products at lower prices in a bid to garner market share.

In mid-2000, after MS Banga took over the reins at HUL, the company decided it would focus on 30 odd ‘Power Brands’ and carefully plan its entry into new businesses. The move had its benefits —- instead of spreading your resources all over the place, concentrate on a few brands. But it also meant that the power brands had to grow at higher rates to compensate for the loss of sales from other brands. Unfortunately, the other brands shrunk faster than the rate at which the power brands grew.

Also, the ‘power brand’ strategy prompted HUL to withdraw from a large number of small markets, again giving an opportunity to small players. These smaller companies got the space they needed to establish themselves in the smaller markets and are now in a position to move into the big league.

With little upside visible in the near to medium term, it may be reasonable that those still invested in the stock should look to exit. If exposure to FMCG stocks is indeed what they want, smaller players like Marico and Godrej Consumers could be the counters to look at.