Unilever Seeks to Sharpen Focus on Key Markets
February 04 2021 - 11:15AM
Dow Jones News
By Saabira Chaudhuri
The owner of Dove soap and Ben & Jerry's ice cream wants to
up its game in the U.S., India and China.
Unilever PLC on Thursday said it would sharpen its focus on
those three countries as part of a new strategy aimed at driving
sales growth. It also plans to invest more in e-commerce and
prioritize fast-growing categories including skin care, nutrition
and plant-based foods.
The consumer-goods giant said the U.S., India and China already
make up nearly 35% of its sales and are forecast to account for 60%
of global economic growth by 2030.
To capitalize, Unilever said it would seek acquisitions in those
countries, redeploy marketing and R&D staff, and boost spending
on developing new products targeted at those markets.
The company also plans to accelerate investments in e-commerce,
which it said had grown strongly through the pandemic and now makes
up 9% of sales.
In the U.S., Unilever said it sees hair care, beauty products
and its vitamins, minerals and supplements businesses as areas
where it can accelerate growth. It said the performance of its
dressings business, which includes Hellmann's mayonnaise, had
improved, but that it continues to work on hair care, where it has
been battling rival Procter & Gamble Co. in shampoo.
"We're not yet where we want to be in the U.S., that's the main
call out, " Chief Financial Officer Graeme Pitkethly said.
His remarks come as Unilever reported a 2.5% fall in annual
sales to 50.72 billion euros ($61.04 billion), hurt by currency
changes, and a 0.8% fall in net profit to EUR5.58 billion.
Underlying sales growth, which strips out currency changes and
M&A, came in at 1.9%. That was helped by a 7.7% rise in North
America, driven by consumers buying food ingredients to cook at
home, ice cream to eat at home, and hand wash.
However, the company's adjusted operating margin dropped by 0.6
percentage point, worse than the 0.1 percentage-point drop analysts
had expected. Unilever shares were down 5% in afternoon trading in
London.
Unilever attributed the weaker profit margin to lower sales of
more lucrative lines like hair-styling products, deodorant and
out-of-home ice cream as consumers stayed in more during the
pandemic. The company also faced higher costs to clean its
factories and hire temporary workers among other measures driven by
Covid-19.
U.S.-focused rival P&G, by contrast, last month said its
quarterly gross margin increased by 1.7 percentage points from a
year earlier. P&G said it sold more high-priced items in home
care and appliances as well as in North America.
Unilever said it expects pandemic-related costs to continue to
weigh on its gross margin this year, while warning that the
performance of its higher-margin product categories depends on how
the pandemic progresses.
Still, the company said growth in beauty and personal-care
products had climbed in markets such as China, India and parts of
Latin America where restrictions to curb the virus have been
eased.
Looking ahead, Mr. Pitkethly warned that raising prices could be
tricky. Unilever expects mid- to high-single-digit commodity
inflation this year, driven by food ingredients, palm oil and tea,
he said, but also expects cash-strapped consumers to opt for
cheaper products.
Already in India, consumers have switched to cheaper laundry
brands such as Wheel from pricier ones such as Surf Excel as they
launder fewer office shirts and school uniforms, Mr. Pitkethly
said.
"We will have to be on top of our game on pricing," he said.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
(END) Dow Jones Newswires
February 04, 2021 11:00 ET (16:00 GMT)
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